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EXHIBIT 99.1
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
STORAGE DIMENSIONS, INC.,
a Delaware corporation;
STORAGE ACQUISITION CORP.,
a California corporation;
and
ARTECON, INC.,
a California corporation;
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Dated as of December 22, 1997
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SECTION 1. DESCRIPTION OF TRANSACTION....................................................1
1.1 Merger of Merger Sub into the Company.........................................1
1.2 Effect of the Merger..........................................................1
1.3 Closing; Effective Time.......................................................1
1.4 Articles of Incorporation and Bylaws; Directors and Officers..................2
1.5 Conversion of Shares..........................................................2
1.6 Closing of the Company's Transfer Books.......................................4
1.7 Exchange of Certificates......................................................4
1.8 Dissenting Shares.............................................................5
1.9 Tax Consequences..............................................................6
1.10 Accounting Treatment..........................................................6
1.11 Further Action................................................................6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................6
2.1 Due Organization; No Subsidiaries; Etc........................................6
2.2 Articles of Incorporation and Bylaws; Records.................................7
2.3 Capitalization................................................................7
2.4 Financial Statements..........................................................8
2.5 Absence of Changes............................................................8
2.6 Title to Assets..............................................................10
2.7 Accounts Receivable; Loans and Advances......................................10
2.8 Equipment; Leasehold.........................................................11
2.9 Proprietary Assets...........................................................11
2.10 Contracts....................................................................12
2.11 No Undisclosed Liabilities...................................................14
2.12 Compliance with Legal Requirements...........................................14
2.13 Governmental Authorizations..................................................14
2.14 Tax Matters..................................................................14
2.15 Employee and Labor Matters; Benefit Plans....................................15
2.16 Environmental Matters........................................................17
2.17 Insurance....................................................................18
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2.18 Related Party Transactions...................................................18
2.19 Legal Proceedings; Orders....................................................18
2.20 Authority; Binding Nature of Agreement.......................................19
2.21 Non-Contravention; Consents..................................................19
2.22 Vote Required................................................................20
2.23 Company Action...............................................................20
2.24 Full Disclosure..............................................................20
2.25 Finder's Fee.................................................................21
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......................21
3.1 Due Organization, Etc........................................................21
3.2 Certificate of Incorporation and Bylaws; Records.............................22
3.3 Capitalization, Etc..........................................................22
3.4 SEC Filings; Financial Statements............................................22
3.5 Absence of Changes...........................................................23
3.6 Title to Assets..............................................................25
3.7 Accounts Receivable; Loans and Advances......................................26
3.8 Equipment; Leasehold.........................................................26
3.9 Proprietary Assets...........................................................26
3.10 Contracts....................................................................27
3.11 No Undisclosed Liabilities...................................................29
3.12 Compliance with Legal Requirements...........................................29
3.13 Governmental Authorizations..................................................29
3.14 Tax Matters..................................................................30
3.15 Employee and Labor Matters; Benefit Plans....................................30
3.16 Environmental Matters........................................................32
3.17 Insurance....................................................................33
3.18 Related Party Transactions...................................................33
3.19 Legal Proceedings; Orders....................................................33
3.20 Authority; Binding Nature of Agreement.......................................33
3.21 Non-Contravention; Consents..................................................34
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3.22 Vote Required................................................................35
3.23 Parent Action................................................................35
3.24 Full Disclosure..............................................................35
3.25 Finder's Fee.................................................................36
3.26 Opinion of Financial Advisor to Parent.......................................36
SECTION 4. CERTAIN COVENANTS OF THE COMPANY.............................................36
4.1 Access and Investigation.....................................................36
4.2 Operation of the Company's Business..........................................36
4.3 Notification; Updates to Company Disclosure Schedule.........................38
4.4 No Solicitation..............................................................39
4.5 Company Shareholders' Meeting................................................40
4.6 Tax Representation Letters; Continuity of Interest Certificates..............41
4.7 Affiliate Agreements.........................................................41
SECTION 5. CERTAIN COVENANTS OF PARENT..................................................41
5.1 Access and Investigation.....................................................41
5.2 Operation of Parent's Business...............................................41
5.3 Notification; Updates to Parent Disclosure Schedule..........................43
5.4 No Solicitation..............................................................44
5.5 Parent Stockholders' Meeting.................................................45
5.6 Tax Representation Letters...................................................45
5.7 Merger Sub Activities........................................................46
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES..........................................46
6.1 Filings and Consents.........................................................46
6.2 Public Announcements.........................................................46
6.3 Reasonable Efforts...........................................................46
6.4 Registration Statement.......................................................46
6.5 Additional Agreements........................................................47
6.6 Regulatory Approvals.........................................................48
6.7 Indemnification..............................................................49
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB.................49
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7.1 Accuracy of Representations..................................................49
7.2 Performance of Covenants.....................................................49
7.3 Effectiveness of Registration Statement......................................49
7.4 Compliance Certificate.......................................................50
7.5 Stockholder Approval.........................................................50
7.6 Consents.....................................................................50
7.7 Legal Opinion................................................................50
7.8 Tax Opinion..................................................................50
7.9 No Restraints................................................................50
7.10 HSR Act......................................................................50
7.11 Termination of Repurchase Agreement..........................................50
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY...........................50
8.1 Accuracy of Representations..................................................51
8.2 Performance of Covenants.....................................................51
8.3 Effectiveness of Registration Statement......................................51
8.4 Nasdaq National Market.......................................................51
8.5 Compliance Certificate.......................................................51
8.6 Stockholder Approval.........................................................51
8.7 Consents.....................................................................51
8.8 Legal Opinion................................................................51
8.9 Tax Opinion..................................................................51
8.10 No Restraints................................................................51
8.11 HSR Act......................................................................52
8.12 Resignations of Certain Directors............................................52
SECTION 9. TERMINATION..................................................................52
9.1 Termination..................................................................52
9.2 Effect of Termination........................................................53
9.3 Fees and Expenses; Termination Fees..........................................53
SECTION 10. MISCELLANEOUS PROVISIONS.....................................................54
10.1 No Survival of Representations and Warranties................................54
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10.2 Further Assurances...........................................................54
10.3 Attorneys' Fees..............................................................54
10.4 Notices......................................................................54
10.5 Time of the Essence..........................................................55
10.6 Governing Law; Venue.........................................................56
10.7 Successors and Assigns.......................................................56
10.8 Remedies Cumulative; Specific Performance....................................56
10.9 Waiver.......................................................................56
10.10 Amendments...................................................................56
10.11 Severability.................................................................56
10.12 Parties in Interest..........................................................57
10.13 Disclosure Schedules.........................................................57
10.14 Entire Agreement.............................................................57
10.15 Construction.................................................................57
10.16 Headings.....................................................................57
10.17 Counterparts.................................................................57
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EXHIBITS
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Exhibit A - Certain Definitions
Exhibit B - Certificate of Amendment
Exhibit C - Directors and Officers of Parent
Exhibit D - Directors and Officers of the Surviving Corporation
Exhibit E - Certain Company Shareholders
Exhibit F - Certain Parent Stockholders
Exhibit G - Company Tax Representation Letter
Exhibit H - Company Continuity of Interest Certificate
Exhibit I - Form of Affiliate Agreement
Exhibit J - Parent Tax Representation Letter
Exhibit K - Capital Partners Standstill Agreement
Exhibit L - Form of Xxxxxx Godward LLP Legal Opinion
Exhibit M - Form of Xxxxxx Godward LLP Tax Opinion
Exhibit N - Form of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx Legal Opinion
Exhibit O - Form of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx Tax Opinion
Exhibit P - Resignations of Certain Directors
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of December 22, 1997, by and among STORAGE DIMENSIONS,
INC., a Delaware corporation ("Parent"), STORAGE ACQUISITION CORP., a California
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and ARTECON,
INC., a California corporation (the "Company"). Certain capitalized terms used
in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub into the Company (the "Merger") in accordance with this Agreement and
the California General Corporation Law (the "CGCL"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger be
treated as a purchase.
C. This Agreement has been adopted and approved by the respective boards
of directors of Parent, Merger Sub and the Company.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the CGCL.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Godward LLP, 0000 Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx
00000 at a time and on a date which shall be promptly (but not more than two (2)
days following) the satisfaction or waiver of the conditions set forth in
Sections 7 and 8 (the "Closing Date"). Contemporaneously with or as promptly as
practicable after the Closing, a properly executed agreement or certificate of
merger conforming to the requirements of the CGCL (the "Certificate of Merger")
shall be filed with the Secretary of State of the State of California. The
Merger shall take effect at the time the Certificate of Merger
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is filed with and accepted by the Secretary of State of the State of California
(the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
otherwise determined by the Company prior to the Effective Time:
(a) effective on or promptly following the Effective Time, by the
filing of a Certificate of Amendment of Certificate of Incorporation with the
Secretary of State of the State of Delaware or as otherwise permitted by the
Delaware General Corporation Law ("DGCL"), Parent shall (i) amend its
Certificate of Incorporation to change its name from "Storage Dimensions, Inc."
to "Artecon, Inc." and (ii) amend its Certificate of Incorporation and Bylaws to
(A) provide for a classified Board of Directors whereby the directors shall be
separated into three classes, with the members of each class serving for a three
year term, (B) provide that a director may not be removed from office without
cause, except by the affirmative vote of 66-2/3% of the outstanding voting stock
of Parent, and (C) provide for a new series of Preferred Stock with certain
rights, preferences and privileges (the "Parent Preferred Stock") all as set
forth in the Certificate of Amendment of Certificate of Incorporation attached
hereto as Exhibit B (the "Certificate of Amendment");
(b) the directors and officers of Parent immediately after the
Effective Time shall be the individuals identified on Exhibit C;
(c) the Articles of Incorporation of the Surviving Corporation shall
be the Articles of Incorporation of Merger Sub; provided, however, that the name
of Merger Sub shall be changed effective on or promptly following the Effective
Time by filing a Certificate of Amendment of the Articles of Incorporation with
the Secretary of State of the State of California or as otherwise permitted by
the CGCL, from "Storage Acquisition Corp." to "Artecon California;"
(c) the Bylaws of the Surviving Corporation shall be the Bylaws of
Merger Sub; and
(e) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
Exhibit D.
1.5 CONVERSION OF SHARES.
(a) Subject to Section 1.7(b) and Section 1.8, at the Effective
Time, by virtue of the Merger and without any further action on the part of
Parent, Merger Sub, the Company or any shareholder of the Company:
(i) each share of Company Common Stock outstanding immediately
prior to the Effective Time shall be converted into the Applicable Multiple (as
defined below) of fully paid and non-assessable shares of Parent Common Stock
(the "Shares");
(ii) each share of Preferred Stock of the Company outstanding
immediately prior to the Effective Time shall be converted into one fully paid
and non-assessable share of Parent Preferred Stock; and
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(iii) each share of the Common Stock, $0.001 par value, of
Merger Sub outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation.
(b) For purposes of this Agreement:
(i) the term "Applicable Multiple" shall mean a fraction the
numerator of which is the number of Merger Shares and the denominator of which
is the number of Company Shares;
(ii) the term "Company Shares" shall mean (A) the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time plus (B) the maximum number of shares of Company Common Stock underlying
instruments convertible into or exchangeable for Company Common Stock (without
regard to vesting or similar restrictions) outstanding immediately prior to the
Effective Time, including shares of Company Preferred Stock other than 2,494,159
shares of Company Preferred Stock held by the Sauey Affiliates (defined in
Section 2.3) immediately prior to Closing; and (III) the term "Merger Shares"
shall mean the shares of Parent Common Stock to be issued to the Company
Shareholders in the Merger and shall be equal to the product of (A) 1.5641 and
(B) the sum of (x) the number of shares of Parent Common Stock outstanding
immediately prior to the Effective Time plus (y) the maximum number of shares of
Parent Common Stock issuable upon exercise, in accordance with their terms but
without regard to any vesting or similar restrictions, of any and all options
outstanding as of the date hereof and that are also outstanding immediately
prior to the Effective Time to purchase Parent Common Stock with option exercise
prices less than the Applicable Price (defined in Section 1.10).
(c) At the Effective Time, all rights with respect to Company Common
Stock under Company Options and Company Warrants that are then outstanding, if
any, shall be converted into and become rights with respect to Parent Common
Stock, and Parent shall assume each Company Option and Company Warrant, if any,
in accordance with the terms (as in effect as of the date hereof) of the stock
option plan or other agreement, as the case may be, under which it was issued
and the stock option agreement or warrant agreement, as the case may be, by
which it is evidenced. From and after the Effective Time, (i) each Company
Option and Company Warrant assumed by Parent may be exercised solely for shares
of Parent Common Stock, (ii) the number of shares of Parent Common Stock subject
to each Company Option and Company Warrant shall be equal to the number of
shares of Company Common Stock subject to such Company Option and Company
Warrant immediately prior to the Effective Time multiplied by the Applicable
Multiple, rounding down to the nearest whole share, (iii) the per share exercise
price under each such Company Option and Company Warrant shall be adjusted by
dividing the per share exercise price under each such Company Option and Company
Warrant by the Applicable Multiple and rounding up to the nearest cent and (iv)
any restriction on the exercise of any Company Option or Company Warrant shall
continue in full force and effect and the term, exercisability, vesting schedule
and other provisions of such Company Option and Company Warrant shall otherwise
remain unchanged; provided, however, that each such Company Option and Company
Warrant shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, subdivision,
reclassification, reorganization,
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stock split, combination or similar transaction subsequent to the Effective
Time. The Company shall take all action that may be necessary (under the stock
option plan or other agreements pursuant to which Company Options and Company
Warrants are outstanding) to effectuate the provisions of this Section 1.5(c)
and to ensure that, from and after the Effective Time, holders of Company
Options and Company Warrants have no rights with respect thereto other than
those specifically provided herein. Parent shall file with the Securities and
Exchange Commission ("SEC"), no later than five (5) business days after
Effective Time, a registration statement on Form S-8 relating to the shares of
Parent Common Stock issuable with respect to the Company Options assumed by
Parent in accordance with this Section 1.5(c). This Section 1.5(c) will survive
the consummation of the Merger and the Effective Time, is intended to benefit
and may be enforced by each of the persons who hold Company Options and/or
Company Warrants and will be binding on all successors and assigns of Parent and
the Surviving Corporation.
(d) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then (unless such
condition terminates by virtue of the Merger pursuant to the express terms of
such agreement) the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take all action that may be necessary to
ensure that, from and after the Effective Time, Parent is entitled to exercise
any such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time, (a)
all certificates representing shares of Company Common Stock outstanding
immediately prior to the Effective Time shall automatically be canceled and
retired and shall cease to exist, and all holders of certificates representing
shares of Company Common Stock that were outstanding immediately prior to the
Effective Time shall cease to have any rights as shareholders of the Company,
and (b) the stock transfer books of the Company shall be closed with respect to
all shares of such Company Common Stock outstanding immediately prior to the
Effective Time. No further transfer of any such shares of Company Common Stock
shall be made on such stock transfer books after the Effective Time. If, after
the Effective Time, a valid certificate previously representing any of such
shares of Company Common Stock (a "Company Stock Certificate") is presented to
the Surviving Corporation or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE PROCEDURES. At or as soon as practicable after the
Closing, the holders of Company Common Stock and Preferred Stock shall surrender
their Company Stock Certificates in exchange for certificates representing
Parent Common Stock or Parent Preferred Stock, as the case may be, pursuant to
this Agreement. Subject to Section 1.7(b), upon such surrender of a Company
Stock Certificate for exchange, (1) the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor a certificate representing the
number of shares of Parent Common Stock that such holder has the right to
receive pursuant to
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Section 1.5(a)(i), and (2) the Company Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.7(a), each Company
Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive shares of Parent Common Stock or Parent
Preferred Stock, as the case may be (and cash in lieu of any fractional share of
Parent Common Stock or Parent Preferred Stock as contemplated by Section
1.7(b)), pursuant to this Agreement. If any Company Stock Certificate shall have
been lost, stolen or destroyed, Parent shall issue a certificate representing
Parent Common Stock or Parent Preferred Stock, as the case may be, with respect
to such lost, stolen or destroyed Company Stock Certificate in accordance with
this Agreement upon delivery by the owner of such lost, stolen or destroyed
Company Stock Certificate to Parent of an appropriate affidavit as indemnity
against any claim that may be made against Parent or the Surviving Corporation
with respect to such Company Stock Certificate.
(b) FRACTIONAL SHARES. No fractional shares of Parent Common Stock
or Parent Preferred Stock shall be issued in connection with the Merger, and no
certificates for any such fractional shares shall be issued. In lieu of such
fractional shares, any holder of Company Common Stock or Company Preferred Stock
who would otherwise be entitled to receive a fraction of a share of Parent
Common Stock or Parent Preferred Stock (after aggregating all fractional shares
of Parent Common Stock and Parent Preferred Stock, respectively, issuable to
such holder) shall, upon surrender of such holder's Company Stock
Certificate(s), be paid in cash the dollar amount (rounded to the nearest whole
cent), without interest, determined by multiplying such fraction by the
Designated Parent Stock Price. The "Designated Parent Stock Price" shall be the
closing sales price of one share of Parent Common Stock as reported on the
Nasdaq National Market on the Closing Date.
(c) NO LIABILITY. Neither Parent nor the Surviving Corporation shall
be liable to any holder or former holder of Company Common Stock for any shares
of Parent Common Stock or Parent Preferred Stock (or dividends or distributions
with respect thereto), or for any cash amounts, delivered to any public official
pursuant to any applicable abandoned property, escheat or similar law.
1.8 DISSENTING SHARES. Notwithstanding anything to the contrary
contained in this Agreement, any shares of Company Common Stock or Company
Preferred Stock outstanding immediately prior to the Effective Time that were
not voted in favor of the Merger and are held by shareholders who have complied
with the applicable provisions of Chapter 13 of the CGCL (the "Dissenting
Shares") shall not be converted into or represent the right to receive Parent
Common Stock or Parent Preferred Stock in accordance with Sections 1.5(a)(i) and
1.5(a)(ii), as the case may be (or cash in lieu of fractional shares in
accordance with Section 1.7(b)), and each holder of Dissenting Shares shall be
entitled only to such rights as may be granted to such holder under Chapter 13
of the CGCL. From and after the Effective Time, a holder of Dissenting Shares
shall not have and shall not be entitled to exercise any of the voting rights or
other rights of a shareholder of the Surviving Corporation. If any holder of
Dissenting Shares shall fail to assert or perfect, or shall waive, rescind,
withdraw or otherwise lose, such holder's right to dissent and obtain payment
under Chapter 13 of the CGCL, then such shares shall automatically be converted
into and shall represent only the right to receive (upon the surrender of
Company Stock Certificate(s) previously representing such shares) Parent Common
Stock or Parent
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Preferred Stock in accordance with Section 1.5(a)(i) (and cash in lieu of any
fractional share in accordance with Section 1.7(b)).
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368(a) of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
1.10 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
intended to be treated as a purchase. For purposes of determining the purchase
price, the measurement date shall be December 18, 1997 based on the average of
the closing bid and ask prices per share of Parent's Common Stock as traded on
the Nasdaq Stock Market on such date (the "Applicable Price").
1.11 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary to carry out the purposes
of this Agreement or to vest the Surviving Corporation or Parent with full
right, title and possession of and to all rights and property of Merger Sub and
the Company, the officers and directors of the Surviving Corporation and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the Company
and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that,
except as set forth in the disclosure schedule prepared by the Company in
accordance with the requirements of Section 10.13 and that has been delivered by
the Company to Parent on the date of this Agreement (the "Company Disclosure
Schedule"):
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) Each of the Company and each other subsidiary of the Company are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation with full corporate
power and authority: (i) to conduct its business in the manner in which it is
now being conducted (ii) to own and use its assets in the manner in which its
assets are currently owned and used and (iii) to perform its obligations under
all Contracts by which is its bound. The Company has no subsidiaries other than
the subsidiaries disclosed in Part 2.1 of the Company Disclosure Schedule
(collectively the "Company Subsidiaries").
(b) The Company and the Company Subsidiaries maintain facilities
and/or employees in each state listed in Part 2.1(b) of the Company Disclosure
Schedule. The Company and each Company Subsidiary is duly qualified to do
business as a foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business requires such qualification
and where the failure to be so qualified would have a Material Adverse Effect on
the Company or on the ability of the Company to consummate the transactions
contemplated hereby.
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2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered or made available to Parent accurate and complete copies of: (1) the
Company's articles of incorporation and bylaws as currently in effect, including
all amendments thereto; (2) the stock records of the Company; and (3) the
minutes and other records of the meetings and other proceedings (including any
actions taken by written consent or otherwise without a meeting) of the
shareholders of the Company, the Board of Directors of the Company and all
committees of the Board of Directors of the Company. The Company is not in
violation of any of the provisions of its articles of incorporation or bylaws.
The books of account, stock records, minute books and other records of the
Company are accurate and complete in all material respects, and have been
maintained in accordance with prudent business practices.
2.3 CAPITALIZATION. The authorized capital stock of the Company consists
of: (i) 20,000,000 shares of Company Common Stock, of which 6,043,990 shares
have been issued and are outstanding as of the date hereof; and (ii) 20,000,000
shares of Company Preferred Stock, no par value, of which (A) 10,000,000 shares
of which have been designated as "Preferred" shares, 1,111,951 shares of which
are issued and outstanding as of the date hereof, and (B) 10,000,000 shares of
which have been designated as "Preferred B" shares, 1,405,208 of which are
issued and outstanding as of the date hereof. As of the date hereof, 1,088,951
shares of Preferred and 1,405,208 shares of Preferred B are collectively held by
X.X. Xxxxx, Flambeau Corporation, Flambeau Products Corporation and Seats
Incorporated (such parties collectively referred to herein as the "Sauey
Affiliates"). The Company Preferred Stock is convertible into Company Common
Stock at the rate of one share of Company Common Stock for each 0.8 of a share
of Company Preferred Stock and such Preferred Stock has the rights, preferences
and privileges set forth in the Company's Articles of Incorporation, as amended.
Part 2.3 of the Company Disclosure Schedule sets forth, as of the date hereof,
the names of the Company's shareholders and the number of shares of Company
Common Stock and Company Preferred Stock owned of record by each of such
shareholders. All of the outstanding shares of Company Common Stock and Company
Preferred Stock have been duly authorized and validly issued, and are fully paid
and non-assessable, and none of such shares is subject to any repurchase option
or restriction on transfer other than restrictions imposed by federal or state
securities laws and other than repurchase options exercisable by the Company
upon termination of employment. Part 2.3 of the Company Disclosure Schedule,
sets forth all outstanding subscriptions, options, calls, warrants or other
rights (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company. All outstanding shares of
Company Common Stock and Company Preferred Stock have been issued in compliance
with all applicable securities laws and other applicable Legal Requirements.
Except for shares repurchased upon termination of employment, the Company has
never repurchased, redeemed or otherwise reacquired any shares of its capital
stock or other securities. Other than the irrevocable proxies set forth on Part
2.3 of the Company Disclosure Schedule, there are no preemptive or similar
rights with respect to the Company's capital stock. There is no Company Contract
(or, to the Company's knowledge, any other agreement or arrangement to which the
Company is not a party) relating to the voting or registration of, or
restricting any Person from purchasing, selling, pledging or otherwise disposing
of (or granting any option or similar right with respect to), any shares of
Company Common Stock. There is no shareholder rights plan (or similar plan
commonly referred to as a "poison pill") or Contract under which Company is or
may become obligated to sell or otherwise issue any shares of its capital stock
or any other securities.
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2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) the audited balance sheets of the Company as of March 29,
1997, March 30, 1996 and March 25, 1995, and the related audited statements of
income, statements of shareholders' equity and statements of cash flows of the
Company for the years then ended, together with the notes thereto and the
unqualified report of an independent auditor relating thereto; and
(ii) The unaudited balance sheet of the Company as of September
27, 1997, and the related unaudited statement of income of the Company for the
six-month period then ended, and the unaudited balance sheets of the Company as
of October 28, 1997 and the related unaudited statements of income of the
Company for the months then ended.
(b) The Company Financial Statements present fairly the financial
position of the Company as of the respective dates thereof and the results of
operations and cash flows of the Company for the periods covered thereby. The
Company Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered (except that the financial statements referred to in Section
2.4(a)(ii) do not contain footnotes and are subject to normal and recurring
year-end audit adjustments, which will not, individually or in the aggregate, be
material in magnitude).
2.5 ABSENCE OF CHANGES. Since September 27, 1997 through the date of
this Agreement:
(a) there has not been any material adverse change in the business,
condition, assets, liabilities, operations or financial performance of the
Company or any of the Company Subsidiaries, and, to the knowledge of the
Company, no event has occurred that could reasonably be expected to have a
Material Adverse Effect on the Company and its subsidiaries taken as a whole;
(b) there has not been any loss, damage or destruction to any of the
Company's assets of the Company or any of the Company Subsidiaries (whether or
not covered by insurance) that could reasonably be expected to have a Material
Adverse Effect on the Company;
(c) neither the Company nor any Company Subsidiaries has declared,
accrued, set aside or paid any dividend stock split, combination or
reclassification or made any other distribution in respect of any shares of
capital stock and has not repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities;
(d) neither the Company nor any Company Subsidiary has sold, issued
or authorized the issuance of (i) any capital stock or other security (except
for Company Common Stock issued upon the exercise of outstanding Company
Options), (ii) any option, call, warrant or right to acquire, or otherwise
relating to, any capital stock or any other security (except for
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Company Options described in Part 2.3 of the Company Disclosure Schedule), or
(iii) any instrument convertible into or exchangeable for any capital stock or
other security;
(e) there has been no amendment to the articles of organization or
bylaws of the Company or any Company Subsidiary, and neither the Company nor any
Company Subsidiary has effected or been a party to any Company Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(f) neither the Company nor any Company Subsidiary has amended or
waived any of its rights under, or permitted the acceleration of vesting under
(i) any provision of any agreement evidencing any outstanding Company Option or
Company Warrant, or (ii) any restricted stock purchase agreement;
(g) neither the Company nor any Company Subsidiary has formed any
subsidiary or acquired any equity interest in any other Entity;
(h) neither the Company nor any Company Subsidiary has made any
capital expenditure which, when added to all other capital expenditures made
since September 27, 1997, exceeds $100,000 in the aggregate;
(i) neither the Company nor any Company Subsidiary has (i) entered
into any Material Company Contract (as defined in Section 2.10(a)), or (ii)
amended or prematurely terminated, or waived any material right or remedy under,
any Material Company Contract to which it is or was a party or under which it
has or had any material rights or obligations;
(j) neither the Company nor any Company Subsidiary has (i) acquired,
leased or licensed any right or other asset from any other Person, (ii) sold or
otherwise disposed of, or leased or licensed, any right or other asset to any
other Person, or (iii) waived or relinquished any right, except for purchases of
inventory and sales of products in the ordinary course of business and except
for immaterial rights or other immaterial assets acquired, leased, licensed or
disposed of in the ordinary course of business and consistent with the Company's
past practices;
(k) neither the Company nor any Company Subsidiary has written off
as uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other indebtedness in excess of $25,000 individually or
$100,000 in the aggregate;
(l) neither the Company nor any Company Subsidiary has made any
pledge of any of its assets or otherwise permitted any of its assets to become
subject to any Encumbrance, except for pledges of assets valued at $100,000 or
less, individually or in the aggregate, made in the ordinary course of business
and consistent with the Company's past practices;
(m) neither the Company nor any Company Subsidiary has (i) lent
money to any Person, or (ii) incurred or guaranteed any indebtedness for
borrowed money;
(n) neither the Company nor any Company Subsidiary has (i)
established, adopted or amended any Employee Benefit Plan, (ii) paid any bonus
or made any profit-sharing or similar payment to, or increased the amount of the
wages, salary, commissions, fringe benefits
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or other compensation or remuneration payable to, any of its directors, officers
or employees, (iii) hired any new employee, in either case except in the
ordinary course of business and consistent with past practices or (iv) entered
into any severance or employment agreement with any person;
(o) neither the Company nor any Company Subsidiary has changed any
of its methods of accounting or accounting practices in any material respect;
(p) neither the Company nor any Company Subsidiary has made any Tax
election;
(q) neither the Company nor any Company Subsidiary has commenced or
settled any Legal Proceeding;
(r) neither the Company nor any Company Subsidiary has entered into
any material transaction or taken any other material action outside the ordinary
course of business or inconsistent with its past practices;
(s) neither the Company nor any Company Subsidiary has made any
material write-down of inventory; and
(t) neither the Company nor any Company Subsidiary has agreed or
committed to take any of the actions referred to in clauses "(c)" through "(s)"
above.
2.6 TITLE TO ASSETS.
(a) The Company and each Company Subsidiary owns, and has good and
valid title to all assets purported to be owned by it, including all of the
assets reflected in the Company Financial Statements and all other assets
reflected in the Company's books and records as being owned by the Company. All
of said assets are owned by the Company and each Company Subsidiary free and
clear of any liens or other Encumbrances, except for (i) any lien for current
taxes not yet due and payable, and (ii) minor liens that have arisen in the
ordinary course of business and that would not (in any case or in the aggregate)
have a Material Adverse Effect on the Company.
(b) Part 2.6(b) of the Company Disclosure Schedule identifies all
assets that are being leased or licensed to the Company and each Company
Subsidiary that involve obligations of the Company in excess of $100,000 on an
individual basis.
2.7 ACCOUNTS RECEIVABLE; LOANS AND ADVANCES.
(a) All accounts receivable of the Company and each Company
Subsidiary that are reflected in the Company Financial Statements or in the
accounting records of the Company as of the date hereof (collectively, the
"Company Accounts Receivable") represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business.
The Company Accounts Receivable are current and collectible net of any
respective reserves shown in the Company Financial Statements or on the
accounting records of the Company as of the date hereof (which reserves are
adequate and calculated consistent with
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past practice). There is no contest, claim, or right of set-off, other than
returns in the ordinary course of business, under any Contract with any obligor
of any Company Accounts Receivable relating to the amount or validity of such
Company Accounts Receivable.
(b) Part 2.7(b) of Company Disclosure Schedule contains an accurate
and complete list of all loans and advances made by the Company or any Company
Subsidiary (and pursuant to which amounts are outstanding as of the date of this
Agreement) to any employee, director, consultant or independent contractor of
Company or any Company Subsidiary, other than routine travel advances made to
employees in the ordinary course of business.
2.8 EQUIPMENT; LEASEHOLD. The real property leased by and other tangible
assets leased or owned by the Company and each Company Subsidiary are adequate
for the uses to which they are being put, are in good condition and repair
(ordinary wear and tear excepted) and are adequate for the conduct of the
Company's business in the manner in which such business is now being conducted.
(a) Neither the Company nor any Company Subsidiary owns any real
property or any material interest in real property. Part 2.8(b) of the Company
Disclosure Schedule describes all leases of real property held by the Company
and each Company Subsidiary.
2.9 PROPRIETARY ASSETS.
(a) To the knowledge of the Company, the Company has good and valid
title to all Company Proprietary Assets free and clear of all liens and other
Encumbrances, and has a valid right to use all Proprietary Assets. Neither the
Company nor any Company Subsidiary is obligated to make any payment to any
Person for the use of any Company Proprietary Asset. To the knowledge of the
Company, the Company and each Company Subsidiary is free to use, modify, copy,
distribute, sell, license or otherwise exploit each of the Company Proprietary
Assets on an exclusive basis. Part 2.9 of the Company Disclosure Schedule lists
all patents held by and patent applications filed by the Company. The Company is
the valid assignee of record and owner of each of such patents and patent
applications and all such patent applications are being actively prosecuted and
none of such patents or patent applications have been abandoned.
(b) The Company and each Company Subsidiary has taken reasonable
measures and precautions necessary to protect and maintain the confidentiality
and secrecy of all Company Proprietary Assets (except Company Proprietary Assets
whose value would be unimpaired by public disclosure) and otherwise to maintain
and protect the value of all Company Proprietary Assets. Neither the Company nor
any Company Subsidiary has disclosed or delivered or permitted to be disclosed
or delivered to any Person, and no Person (other than the Company) has access to
or has any rights with respect to any Company Proprietary Asset, in either case
except pursuant to a valid non-disclosure agreement.
(c) To the knowledge of the Company, none of the Company Proprietary
Assets infringes or conflicts with any Proprietary Asset owned or used by any
other Person. To the knowledge of the Company, the Company nor any Company
Subsidiary is infringing, misappropriating or making any unlawful use of, and
the Company has not at any time infringed, misappropriated or made any unlawful
use of, or received any notice or other communication of
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any actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To the
knowledge of the Company, no other Person is infringing, misappropriating or
making any unlawful use of, and no Proprietary Asset owned or used by any other
Person infringes or conflicts with, any Company Proprietary Asset.
(d) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been conducted. Neither the Company nor any Company
Subsidiary has licensed any of the Company Proprietary Assets to any Person on
an exclusive basis, and neither the Company nor any Company Subsidiary has
entered into any covenant not to compete or Contract limiting its ability to
exploit fully any of its Proprietary Assets or to transact business in any
market or geographical area or with any Person.
(e) No shareholder, officer or director of the Company has title to
any Company Proprietary Asset which would be necessary to enable the Company to
conduct its business in the manner in which such business is currently being
conducted.
2.10 CONTRACTS.
(a) Part 2.10(a) of the Company Disclosure Schedule identifies each
Company Contract that constitutes a "Material Company Contract." For purposes of
this Agreement, a "Material Company Contract" shall be deemed to be any Company
Contract:
(i) relating to the employment or engagement of, or the
performance of services by, any employee, consultant or independent contractor
which involves a potential commitment of the Company in excess of $60,000 per
year, including any Company Contract involving severance payments or
acceleration benefits upon a Company Acquisition Transaction;
(ii) relating to the acquisition, transfer, use, development,
sharing or license of any Company Proprietary Asset (except in the ordinary
course of business and except for any Company Proprietary Asset that is licensed
to the Company under any third party software license agreement generally
available to the public at a cost of less than $50,000);
(iii) imposing any material restriction on the Company's or any
Company Subsidiary's right or ability (A) to compete with any other Person, (B)
to acquire any product or other asset or any services from any other Person, to
sell any product or other asset to or perform any services for any other Person
or to transact business or deal in any other manner with any other Person, or
(C) to develop or distribute any Company Proprietary Asset;
(iv) creating or involving any agency relationship, distribution
arrangement or franchise relationship involving payments to or from the Company
or obligations in excess of $100,000 per year;
(v) relating to the acquisition, issuance or transfer of any
securities of the Company or any Company Subsidiary under which the Company has
any current rights or obligations;
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(vi) creating or relating to the creation of any Encumbrance
with respect to any asset owned or used by the Company or any Company Subsidiary
having a value in excess of $100,000;
(vii) involving or incorporating any guaranty, any pledge, any
performance or completion bond, any indemnity, any right of contribution or any
surety arrangement in excess of $100,000 per year;
(viii) creating or relating to any partnership or joint venture
or any material sharing of revenues, profits, losses, costs or liabilities;
(ix) relating to the purchase or sale of any product or other
asset by or to, or the performance of any services by or for, any Related Party
(as defined in Section 2.18);
(x) entered into outside the ordinary course of business;
(xi) that may not be terminated by the Company or any Company
Subsidiary (without penalty) within 120 days after the delivery of a termination
notice by the Company or any Company Subsidiary and which involves payments or
commitments of $25,000 or more; and
(xii) contemplating or involving (A) the payment or delivery of
cash or other consideration in an amount or having a value in excess of $100,000
in the aggregate, or (B) the performance of services having a value in excess of
$100,000 in the aggregate.)
(b) The Company has delivered to Parent accurate and complete copies
of all Material Company Contracts identified in Part 2.10(a) of the Company
Disclosure Schedule, including all amendments thereto. Each Contract identified
in Part 2.10(a) of the Company Disclosure Schedule is valid and in full force
and effect, and is enforceable by the Company in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(c) Neither the Company nor any Company Subsidiary nor, to the
Company's knowledge, any other party, has materially violated or breached, or
committed any material default under, any Material Company Contract;
(i) to the knowledge of the Company, no event has occurred, and
no circumstance or condition exists, that (with or without notice or lapse of
time) will, or could reasonably be expected to, (A) result in a violation or
breach of any of the provisions of any Material Company Contract, (B) give any
Person the right to declare a default or exercise any remedy under any Material
Company Contract, (C) give any Person the right to accelerate the maturity or
performance of any Material Company Contract, or (D) give any Person the right
to cancel, terminate or modify any Material Company Contract;
(ii) since September 27, 1997, neither the Company nor any
Company Subsidiary has received any notice or other communication regarding (i)
any actual or possible
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violation or breach of, or default under, any Material Company Contract, or (ii)
any actual or possible termination of any Material Company Contract; and
(iii) neither the Company nor any Company Subsidiary has waived
any of its material rights under any Material Company Contract.
2.11 NO UNDISCLOSED LIABILITIES. Except as set forth in the Company
Financial Statements and except for current liabilities incurred in the ordinary
course of business since October 28, 1997, neither the Company nor any Company
Subsidiary has accrued, contingent or other liabilities of any nature, either
matured or unmatured.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company and each Company
Subsidiary is, and has at all times been, in compliance with all applicable
Legal Requirements, except where the failure to comply with such Legal
Requirements has not had and will not have a Material Adverse Effect on the
Company. Neither the Company nor any Company Subsidiary has received any notice
or other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement;
provided, however, that this representation shall not apply to the matters
covered by the representations contained in Sections 2.14, 2.15 and 2.16.
2.13 GOVERNMENTAL AUTHORIZATIONS. The Company and each Company
Subsidiary has all Governmental Authorizations necessary to enable the Company
and such Company Subsidiary to conduct its business in the manner in which its
business is currently being conducted, except for Governmental Authorizations
the failure of which to obtain would not have a Material Adverse Effect on the
Company. The Company and each Company Subsidiary is, and at all times has been,
in compliance with the material terms and requirements of such Governmental
Authorizations, except for any noncompliance which would not have a Material
Adverse Effect on the Company. Neither the Company nor any Company Subsidiary
has received any notice or other communication from any Governmental Body
regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.14 TAX MATTERS.
(a) All Material Tax Returns required to be filed by or on behalf of
the Company with any Governmental Body with respect to any transaction occurring
or any taxable period ending on or before the date hereof (the "Company
Returns") (i) have been filed when due, and (ii) have been accurately and
completely prepared in compliance with all applicable Legal Requirements. The
Company and each Company Subsidiary has, within the time (including any
extensions of applicable due dates) and in the manner prescribed by law, paid
all Taxes that are due and payable, except Taxes that, individually and in the
aggregate, are not material. The Company Financial Statements fully accrue all
actual and contingent liabilities for Taxes with respect to all periods through
the dates thereof in accordance with generally accepted accounting principles.
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(b) No claim or Legal Proceeding is pending or has been threatened
against or with respect to the Company or any Company Subsidiary in respect of
any Tax. There are no unsatisfied liabilities for Taxes (including liabilities
for interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by the Company
or any Company Subsidiary. There are no liens for Taxes upon any of the assets
of the Company or any Company Subsidiary, except liens for current Taxes not yet
due and payable.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Company Disclosure Schedule contains a list
of all salaried employees of the Company as of the date of this Agreement whose
annual salaries are greater than $60,000, and correctly reflects their salaries,
any other compensation payable to them (including compensation payable pursuant
to bonus, deferred compensation or commission arrangements), their dates of
employment and their positions. Neither the Company nor any Company Subsidiary
is a party to any collective bargaining contract or other Contract with a labor
union involving any of its employees.
(b) Part 2.15(b) of the Company Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, health,
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (individually referred to as a "Company
Plan" and collectively referred to as the "Company Plans") sponsored,
maintained, contributed to or required to be contributed to by the Company or
any Company Subsidiary for the benefit of any current or former employee of the
Company or any Company Subsidiary.
(c) Neither the Company nor any Company Subsidiary maintains,
sponsors or contributes to, and, to the knowledge of the Company, neither the
Company nor any Company Subsidiary has at any time in the past maintained,
sponsored or contributed to, any employee pension benefit plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), subject to Title IV of ERISA for the benefit of employees or former
employees of the Company (a "Company Defined Benefit Plan").
(d) Neither the Company nor any Company Subsidiary maintains,
sponsors or contributes to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA, whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of employees or former
employees of the Company or any Company Subsidiary.
(e) With respect to each Company Plan, the Company has made
available to Parent:
(i) an accurate and complete copy of such Company Plan
(including all amendments thereto);
(ii) an accurate and complete copy of the annual report (if
required under ERISA) with respect to such Company Plan for the three most
recent plan years;
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(iii) an accurate and complete copy of (A) the most recent
summary plan description, together with each summary of material modifications
thereto (if required under ERISA) with respect to such Company Plan, and (B)
each material employee communication relating to such Company Plan;
(iv) if such Company Plan is funded through a trust or any third
party funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and complete
copies the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Company Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment management
agreements, subscription and participation agreements and recordkeeping
agreements; and
(vi) an accurate and complete copy of the most recent
determination, notification, advisory and/or opinion letter received from the
Internal Revenue Service with respect to such Company Plan (if such Company Plan
is intended to be qualified under Section 401(a) of the Code).
(f) Neither the Company nor any Company Subsidiary is required to
be, and, to the best of the knowledge of the Company, the Company has never been
required to be, treated as a single employer with any other Person under Section
4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code. Neither the
Company nor any Company Subsidiary has ever been a member of an "affiliated
service group" within the meaning of Section 414(m) of the Code. To the of the
knowledge of the Company, neither the Company nor any Company Subsidiary has
ever made a complete or partial withdrawal from a "multiemployer plan" (as
defined in Section 3(37) of ERISA) resulting in "withdrawal liability" (as
defined in Section 4201 of ERISA), without regard to subsequent reduction or
waiver of such liability under either Section 4207 or 4208 of ERISA.
(g) Neither the Company nor any Company Subsidiary has any plan or
commitment to create any additional Company employee benefit plan within the
meaning of ERISA, or to modify or change any such plan (other than to comply
with applicable law).
(h) No Company Welfare Plan provides death, medical or health
benefits (whether or not insured) with respect to any current or former employee
of the Company after any such employee's termination of service (other than (i)
benefit coverage mandated by applicable law, including coverage provided
pursuant to Section 4980B of the Code, (ii) deferred compensation benefits
accrued as liabilities on the balance sheet as of September 27, 1997, or (iii)
benefits the full cost of which are borne by current or former employees of the
Company or any Company Subsidiary (or their beneficiaries)).
(i) With respect to each of the Company Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA") have been complied with in all material respects.
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(j) Each of the Company Plans has been operated and administered in
all material respects in accordance with applicable Legal Requirements,
including ERISA and the Code.
(k) Each of the Company Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and the Company is not aware of any reason why any such
determination letter should be revoked.
(l) Neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any bonus payment, golden
parachute payment, severance payment or other payment to any current or former
employee or director of the Company or any Company Subsidiary (whether or not
under any Company Plan), or materially increase the benefits payable under any
Company Plan, or result in any acceleration of the time of payment or vesting of
any such benefits.
(m) The Company and each Company Subsidiary is in compliance in all
material respects with all applicable Legal Requirements and Contracts relating
to employment, employment practices, employee compensation, wages, bonuses and
terms and conditions of employment.
2.16 ENVIRONMENTAL MATTERS. The Company and each Company Subsidiary is
and has at all times been in compliance, in all material respects, with all
applicable Environmental Laws. The Company and each Company Subsidiary possesses
all permits and other Governmental Authorizations required under applicable
Environmental Laws, and the Company and each Company Subsidiary is and has at
all times been in compliance with the terms and requirements of all such
Governmental Authorizations, except where the failure to possess such
Governmental Authorizations or failure to be in compliance would not have a
Material Adverse Effect on the Company. Neither the Company nor any Company
Subsidiary has received any notice or other communication (whether from a
Governmental Body, citizens group, employee or otherwise) that alleges that the
Company or any Company Subsidiary is not in compliance with any Environmental
Law. To the knowledge of the Company, no current or prior owner of any property
leased or owned by the Company or any Company Subsidiary has received any notice
or other communication (whether from a Governmental Body, citizens group,
employee or otherwise) that alleges that such current or prior owner or the
Company is not or was not in compliance with any Environmental Law. (For
purposes of this Section 2.16 and Section 3.16: (i) "Environmental Law" means
any federal, state, local or foreign Legal Requirement relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern; and (ii) "Materials of
Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now or in the future regulated by any Environmental Law or that is otherwise
a danger to health, reproduction or the environment.)
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2.17 INSURANCE. The business and properties of the Company and each
Company Subsidiary are insured for the benefit of the Company and each Company
Subsidiary in amounts deemed adequate by the Company's management against risks
usually insured against by persons operating businesses similar to those of the
Company in the localities where such properties are located. The Company has
received no notice of cancellation or refusal of coverage and copies of all of
such insurance policies have been delivered to Parent.
2.18 RELATED PARTY TRANSACTIONS. (a) No Related Party has, and no
Related Party has at any time since March 31, 1995 had, any direct or indirect
interest in any material asset used in or otherwise relating to the business of
the Company or any Company Subsidiary in a manner that would be required to be
disclosed under Item 404 of Regulation S-K promulgated by the SEC; (b) no
Related Party is, or has at any time since March 31, 1995 been, indebted to the
Company or any Company Subsidiary in a manner that would be required to be
disclosed under Item 404 of Regulation S-K promulgated by the SEC; (c) since
March 31, 1995, no Related Party has entered into, or has had any direct or
indirect financial interest in, any Material Company Contract, transaction or
business dealing involving the Company or any Company Subsidiary in a manner
that would be required to be disclosed under Item 404 of Regulation S-K
promulgated by the SEC; (d) no Related Party is competing, or has at any time
since March 31, 1995 competed, directly or indirectly, with the Company; and (e)
no Related Party has any claim or right against the Company or any Company
Subsidiary (other than rights to receive compensation for services performed as
an employee of the Company or any Company Subsidiary). (For purposes of this
Section 2.18, each of the following shall be deemed to be a "Related Party": (i)
each individual who is, or who has at any time since March 31, 1995 been, an
officer or director of the Company or any Company Subsidiary; (ii) each
individual who is, or who at any time since March 31, 1995 been, a member of the
immediate family of any of the individuals referred to in clause "(i)" above;
(iii) any shareholder of the Company or any Company Subsidiary, provided,
however, that with respect to shareholders who hold less than 5% of the
outstanding Common Stock of the Company or any Company Subsidiary determined on
a as-if-converted basis, such representations are made only to the knowledge of
the Company or any Company Subsidiary, and (iv) any trust or other Entity (other
than the Company or any Company Subsidiary) in which any one of the individuals
referred to in clauses "(i)," "(ii)" and "(iii)" above holds (or in which more
than one of such individuals collectively hold), beneficially or otherwise, a
material voting, proprietary or equity interest.)
2.19 LEGAL PROCEEDINGS; ORDERS. There is no pending Legal Proceeding,
and, to the knowledge of the Company, no Person has threatened to commence any
Legal Proceeding that: (i) may have a Material Adverse Effect on the Company,
any Company Subsidiaries or their respective businesses; or (ii) challenges, or
that may have the effect of preventing, delaying, making illegal or otherwise
interfering with, the Merger or any of the other transactions contemplated by
this Agreement. To the knowledge of the Company, no event has occurred, and no
claim, dispute or other condition or circumstance exists that could reasonably
be expected to give rise to or serve as a basis for the commencement of any such
Legal Proceeding. There is no order, writ, injunction, judgment or decree to
which the Company or any Company Subsidiary, or any of the assets owned or used
by the Company or any Company Subsidiary, is subject. To the knowledge of the
Company, no officer or other employee of the Company or any Company Subsidiary
is subject to any order, writ, injunction, judgment or decree that prohibits
such officer or other employee from engaging in or continuing any conduct,
activity or practice relating to the
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Company's or such Company Subsidiary's business. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company or any Company Subsidiary intends to initiate.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has full
corporate power and authority to enter into and to perform its obligations under
this Agreement; and the execution, delivery and performance by the Company of
this Agreement have been duly authorized by all necessary action on the part of
the Company, its Board of Directors and its shareholders. This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforcement thereof
may be limited by (i) laws of general application relating to bankruptcy,
insolvency, moratorium, reorganization or other similar laws, both state and
federal, affecting the enforcement of creditors' rights or remedies in general,
and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies.
2.21 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of any of
the provisions of the Company's or any Company Subsidiary's articles of
organization or bylaws;
(b) with respect to the Company or any Company Subsidiary,
contravene, conflict with or result in a violation of, or give any Governmental
Body or other Person the right to challenge any of the transactions contemplated
by this Agreement or to exercise any remedy or obtain any relief under, any
Legal Requirement or any order, writ, injunction, judgment or decree to which
the Company or any Company Subsidiary, or any of the assets owned or used by the
Company or any Company Subsidiary, is subject;
(c) with respect to the Company or any Company Subsidiary,
contravene, conflict with or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is
held by the Company or any Company Subsidiary or that otherwise relates to the
Company's or any Company Subsidiary's business or to any of the assets owned or
used by the Company or any Company Subsidiary;
(d) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Material Company
Contract, or give any Person the right to (i) declare a default or exercise any
remedy under any Material Company Contract, (ii) accelerate the maturity or
performance of any Material Company Contract, or (iii) cancel, terminate or
modify any Material Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company or
any Company Subsidiary (except for minor liens that will not, in any case or in
the aggregate, materially detract from the value of the assets subject thereto
or would have a Material Adverse Effect on the Company).
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Except as may be required by the CGCL and state securities or blue sky laws, and
except as set forth in Part 2.21 of the Company Disclosure Schedule, the Company
is not and will not be required to make any filing with or give any notice to,
or to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
2.22 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the outstanding shares of Common Stock and Preferred Stock of the Company
outstanding as of the record date of the Company Shareholders' Meeting (as
defined below), voting as separate classes (the "Requisite Company Vote"), is
the only vote of the holders of any class or series of Company's capital stock
necessary to adopt and approve this Agreement, the Merger and the transactions
contemplated thereby.
2.23 COMPANY ACTION. The Board of Directors of Company (at a meeting
duly called and held) has (a) unanimously determined that the Merger is
advisable and fair and in the best interests of Company and its shareholders,
(b) unanimously approved this Agreement and the Merger in accordance with the
applicable provisions of the CGCL, (c) unanimously recommended the adoption and
approval of this Agreement and the Merger by the holders of Company Common Stock
and Preferred Stock and directed that this Agreement and the Merger be submitted
for consideration by the Company's shareholders at the Company Shareholders'
Meeting, and (d) adopted a resolution having the effect of causing Company not
to be subject, to the extent permitted by applicable law, to any state takeover
law that may purport to be applicable to the Merger and the transactions
contemplated thereby. Prior to the execution of those certain Voting Agreements
of even date herewith between the Company and each of the individuals identified
on Exhibit E, the Board of Directors of the Company approved said Voting
Agreements and the transactions contemplated thereby.
2.24 FULL DISCLOSURE.
(a) To the Company's knowledge, all documents, contracts,
instruments, certificates, notices, consents, affidavits, letters, telegrams,
telexes, written statements, schedules (including the Company Disclosure
Schedule), exhibits (including the Exhibits to this Agreement) and any other
papers whatsoever (excluding in all cases drafts and interim versions marked as
such or apparent as such on their face) delivered to Parent by the Company in
connection with this Agreement and the transactions contemplated thereby, are
true and complete copies thereof. The representations and warranties of the
Company contained in this Agreement, as modified by the Company Disclosure
Schedule, contain no untrue statements of any material fact or omit to state any
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 false or
misleading.
(b) The information supplied by the Company for inclusion in the
Joint Proxy Statement (including the Company Financial Statements) will not, as
of the date of the Joint Proxy Statement or as of the date of the Parent
Stockholders' Meeting (as defined in Section 5.5), and in each case, as of the
date such information is prepared or presented, contain
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any statement that is inaccurate or misleading with respect to any material
fact, or (ii) omit to state any material fact necessary in order to make such
information not false or misleading.
2.25 FINDER'S FEE. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the Merger
or any of the other transactions contemplated thereby based upon arrangements
made by or on behalf of the Company.
SECTION 3.REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that, except
as set forth in the disclosure schedule prepared by Parent in accordance with
the requirements of Section 10.13 and that has been delivered by Parent to the
Company on the date of this Agreement (the "Parent Disclosure Schedule"):
3.1 DUE ORGANIZATION, ETC.
(a) Each of Parent, Merger Sub and each other subsidiary of Parent
are corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation, and each of them have
full corporate power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Contracts by which it is bound. Parent has no
subsidiaries other than Merger Sub and the subsidiaries disclosed in Part 3.1 of
the Parent Disclosure Schedule (collectively, the "Parent Subsidiaries").
(b) Parent and the Parent Subsidiaries maintain facilities and/or
employees in each state listed in Part 3.1(b) of the Parent Disclosure Schedule.
Each of Parent, Merger Sub and each Parent Subsidiary is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified would have a Material Adverse Effect on Parent or on the ability of
Parent or Merger Sub to consummate the transactions contemplated hereby.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. Parent has
delivered or made available to Company accurate and complete copies of: (1)
Parent's certificate of incorporation and bylaws as currently in effect,
including all amendments thereto; (2) the stock records of Parent; and (3) the
minutes and other records of the meetings and other proceedings (including any
actions taken by written consent or otherwise without a meeting) of the
stockholders of Parent, the Board of Directors of Parent and all committees of
the Board of Directors of Parent. Parent is not in violation of any of the
provisions of its certificate of incorporation or bylaws. The books of account,
stock records, minute books and other records of Parent are accurate and
complete in all material respects, and have been maintained in accordance with
prudent business practices.
3.3 CAPITALIZATION, ETC. The authorized capital stock of Parent consists
of: (i) 40,000,000 shares of Common Stock, $0.005 par value per share, of which
7,932,951 shares have been issued and are outstanding as of the date hereof; and
(ii) 10,000,000 shares of preferred stock, $0.005 par value per share, none of
which are outstanding. All of the
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outstanding shares of Parent, Merger Sub and each Parent Subsidiary capital
stock have been duly authorized and validly issued, and are fully paid and
non-assessable, and none of such shares is subject to any repurchase option or
restriction on transfer other than restrictions imposed by federal and state
securities laws. All outstanding shares of Parent, Merger Sub and Parent
Subsidiaries capital stock have been issued in compliance with all applicable
securities laws and other applicable Legal Requirements. Part 3.3 of the Parent
Disclosure Schedule sets forth, as of the date hereof, (i) the names of each
holder of 5% or more of the outstanding voting stock of Parent together with the
number of shares held by each such holder, and (ii) all outstanding
subscriptions, options, calls, warrants or other rights (whether or not
currently exercisable) to acquire any shares of the capital stock or other
securities of Parent. All of the outstanding shares of capital stock of Merger
Sub and each Parent Subsidiary are owned beneficially and of record by Parent,
free and clear of any Encumbrances. The Shares, when issued by Parent to the
Company's shareholders will be duly authorized, validly issued, fully paid and
non-assessable, will be issued in compliance with applicable federal and state
securities laws and will be free and clear of all Encumbrances as a result of
any actions by Parent. Parent has never repurchased, redeemed or otherwise
reacquired any shares of its capital stock or other securities. Other than the
irrevocable proxies set forth on Part 3.3 of the Parent Disclosure Schedule,
there are no preemptive or similar rights with respect to the Parent's capital
stock. There is no Parent Contract (or, to Parent's knowledge, any other
agreement or arrangement to which Parent is not a party) relating to the voting
or registration of, or restricting any Person from purchasing, selling, pledging
or otherwise disposing of (or granting any option or similar right with respect
to), any shares of Parent Common Stock. There is no stockholder rights plan (or
similar plan commonly referred to as a "poison pill") or Contract under which
Parent is or may become obligated to sell or otherwise issue any shares of its
capital stock or any other securities.
3.4 SEC FILINGS; FINANCIAL STATEMENTS
(a) Parent has delivered to the Company accurate and complete copies
(including unredacted copies of all exhibits) of each report, schedule,
registration statement and definitive proxy statement filed by Parent with the
SEC since January 1, 1997 (the "Parent SEC Documents"), which are all the
reports and documents required to be filed by Parent with the SEC since January
1, 1997. Each of the Parent SEC Documents was timely filed by the Parent in
accordance with the rules and regulations of the SEC and the NASD. As of the
time it was filed with the SEC (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing): (i) each of the
Parent SEC Documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the case may be); and
(ii) none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The consolidated financial statements (including, in each case,
any notes related thereto) contained in the Parent SEC Documents: (i) complied
as to form in all material respects with the published rules and regulations of
the SEC applicable thereto; (ii) were prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered (except as may be indicated in the notes to such financial
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statements and, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC, and except that unaudited financial statements may not contain
footnotes and are subject to year-end audit adjustments); and (iii) fairly
present the consolidated financial position of Parent and its subsidiaries as of
the respective dates thereof and the consolidated results of operations of
Parent and its subsidiaries for the periods covered thereby.
(c) Parent has furnished to the Company a complete and accurate copy
of any amendments, supplements or modifications that have not yet been filed
with the SEC to agreements, documents or other instruments that have been
previously filed by Parent with the SEC pursuant to the Securities Act or the
Exchange Act, if any.
(d) Parent has furnished the Company the unaudited balance sheets of
Parent as of October 31, 1997 and the related unaudited statements of income of
Parent for the months then ended. Such financial statements fairly present the
financial position of Parent as of the respective dates thereof and the results
of operations and cash flows of Parent for the periods covered thereby. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered (except that they do not contain footnotes and are subject to normal and
recurring year-end adjustments, which will not, individually or in the aggregate
by material in magnitude). The financial statements referred to in subsection
(b) and this subsection (d) are hereinafter referred to as the "Parent Financial
Statements."
3.5 ABSENCE OF CHANGES. Since September 30, 1997 through the date of
this Agreement:
(a) there has not been any material adverse change in the business,
condition, assets, liabilities, operations or financial performance of Parent or
any of the Parent Subsidiaries, and, to the knowledge of Parent, no event has
occurred that could reasonably be expected to have a Material Adverse Effect on
Parent and its subsidiaries taken as a whole;
(b) there has not been any loss, damage or destruction to any of the
assets of Parent or any of the Parent Subsidiaries (whether or not covered by
insurance) that could reasonably be expected to have a Material Adverse Effect
on Parent;
(c) neither Parent nor any Parent Subsidiary has declared, accrued,
set aside or paid any dividend, stock split, combination or reclassification or
made any other distribution in respect of any shares of capital stock nor has
repurchased, redeemed or otherwise reacquired any shares of capital stock or
other securities;
(d) neither Parent nor any Parent Subsidiary has sold, issued or
authorized the issuance of (i) any capital stock or other security (except for
Parent Common Stock issued upon the exercise of outstanding Parent Options or
Parent Warrants described in the Parent Disclosure Documents), (ii) any option,
call, warrant or right to acquire, or otherwise relating to, any capital stock
or any other security (except for Parent Options and Parent Warrants described
in the Parent Disclosure Documents), or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
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(e) there has been no amendment to the articles of organization or
bylaws of Parent or any Parent Subsidiary, and neither Parent nor any Parent
Subsidiary has effected or been a party to any Parent Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(f) neither Parent nor any Parent Subsidiary has amended or waived
any of its rights under, or permitted the acceleration of vesting under (i) any
provision of any agreement evidencing any outstanding Parent Option or Parent
Warrant, or (ii) any restricted stock purchase agreement;
(g) neither Parent nor any Parent Subsidiary has formed any
subsidiary or acquired any equity interest or other interest in any other
Entity;
(h) neither Parent nor any Parent Subsidiary has made any capital
expenditure which, when added to all other capital expenditures made since
September 30, 1997, exceeds $100,000 in the aggregate;
(i) neither Parent nor any Parent Subsidiary has (i) entered into
any Material Parent Contract (as defined in Section 3.10(a)), or (ii) amended or
prematurely terminated, or waived any material right or remedy under, any
Material Parent Contract to which it is or was a party or under which it has or
had any material rights or obligations;
(j) neither Parent nor any Parent Subsidiary has (i) acquired,
leased or licensed any right or other asset from any other Person, (ii) sold or
otherwise disposed of, or leased or licensed, any right or other asset to any
other Person, or (iii) waived or relinquished any right, except for purchases of
inventory and sales of products in the ordinary course and except for immaterial
rights or other immaterial assets acquired, leased, licensed or disposed of in
the ordinary course of business and consistent with past practices;
(k) neither Parent nor any Parent Subsidiary has written off as
uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other indebtedness in excess of $25,000 individually or
$100,000 in the aggregate;
(l) neither Parent nor any Parent Subsidiary has made any pledge of
any of its assets or otherwise permitted any of its assets to become subject to
any Encumbrance, except for pledges of assets valued at $100,000 or less,
individually or in the aggregate, made in the ordinary course of business and
consistent with past practices;
(m) neither Parent nor any Parent Subsidiary has (i) lent money to
any Person, or (ii) incurred or guaranteed any indebtedness for borrowed money;
(n) neither Parent nor any Parent Subsidiary has (i) established,
adopted or amended any Employee Benefit Plan, (ii) paid any bonus or made any
profit-sharing or similar payment to, or increased the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees, (iii) hired any new
employee, in either case except in the ordinary course of business and
consistent with past practices or (iv) entered into any severance or employment
agreement with any Person;
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(o) neither Parent nor any Parent Subsidiary has changed any of its
methods of accounting or accounting practices in any material respect;
(p) neither Parent nor any Parent Subsidiary has made any Tax
election;
(q) neither Parent nor any Parent Subsidiary has commenced or
settled any Legal Proceeding;
(r) neither Parent nor any Parent Subsidiary has not entered into
any material transaction or taken any other material action outside the ordinary
course of business or inconsistent with its past practices;
(s) neither Parent nor any Parent Subsidiary has made any material
write-down of inventory; and
(t) neither Parent nor any Parent Subsidiary has agreed or committed
to take any of the actions referred to in clauses "(c)" through "(s)" above.
3.6 TITLE TO ASSETS.
(a) Parent and each Parent Subsidiary owns, and has good and valid
title to, all assets purported to be owned by it, including all of the assets
reflected in the Parent SEC Documents and all other assets reflected in such
entity's books and records as being owned by Parent. All of said assets are
owned by Parent and each Parent Subsidiary free and clear of any Encumbrances,
except for (i) any lien for current taxes not yet due and payable and (ii) minor
liens that have arisen in the ordinary course of business and that would not (in
any case or in the aggregate) have a Material Adverse Effect on Parent.
(b) Part 3.6(b) of the Parent Disclosure Schedule identifies all
assets that are being leased or licensed to Parent and each Parent Subsidiary
that involve obligations in excess of $100,000 on an individual basis, that are
not otherwise disclosed in the Parent SEC Documents.
3.7 ACCOUNTS RECEIVABLE; LOANS AND ADVANCES.
(a) All accounts receivable of Parent and each Parent Subsidiary
that are reflected in Parent SEC Documents or in the accounting records of
Parent as of the date hereof (collectively, the "Parent Accounts Receivable")
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. The Parent Accounts
Receivable are current and collectible net of any respective reserves shown in
the Parent SEC Documents as of the date hereof(which reserves are adequate and
calculated consistent with past practice). There is no contest, claim, or right
of set-off, other than returns in the ordinary course of business, under any
Contract with any obligor of any Parent Accounts Receivable relating to the
amount or validity of such Parent Accounts Receivable.
(b) Part 3.7(b) of Parent Disclosure Schedule contains an accurate
and complete list of all loans and advances made by Parent or any Parent
Subsidiary (and pursuant to which amounts are outstanding as of the date of this
Agreement) to any employee, director,
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consultant or independent contractor of Parent or any Parent Subsidiary, other
than routine travel advances made to employees in the ordinary course of
business.
3.8 EQUIPMENT; LEASEHOLD.
(a) The real property leased by, and other tangible assets leased or
owned by Parent and each Parent Subsidiary are adequate for the uses to which
they are being put, are in good condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of such entity's business in the
manner in which such business is now being conducted.
(b) Neither Parent nor any Parent Subsidiary owns any real property
or any material interest in real property, except as described in the Parent SEC
Documents.
3.9 PROPRIETARY ASSETS.
(a) To the knowledge of Parent, Parent and each Parent Subsidiary
has good and valid title to all Parent Proprietary Assets free and clear of all
Encumbrances, and has a valid right to use all Parent Proprietary Assets.
Neither Parent nor any Parent Subsidiary is obligated to make any payment to any
Person for the use of any Parent Proprietary Asset. To the best knowledge of
Parent, Parent and each Parent Subsidiary is free to use, modify, copy,
distribute, sell, license or otherwise exploit each of the Parent Proprietary
Assets on an exclusive basis. Part 3.9 of the Parent Disclosure Schedule lists
all patents held by and patent applications filed by Parent. Parent is the valid
assignee or record and owner of each of such patents and patent applications and
all of such patent applications are being actively prosecuted and none of such
patents or patent applications have been abandoned.
(b) Parent and each Parent Subsidiary has taken reasonable measures
and precautions necessary to protect and maintain the confidentiality and
secrecy of all Parent Proprietary Assets (except Parent Proprietary Assets whose
value would be unimpaired by public disclosure) and otherwise to maintain and
protect the value of all Parent Proprietary Assets. Neither Parent nor any
Parent Subsidiary has disclosed or delivered or permitted to be disclosed or
delivered to any Person, and no Person (other than Parent or a Parent
Subsidiary) has access to or has any rights with respect to any Parent
Proprietary Asset, in either case except pursuant to a valid non-disclosure
agreement.
(c) To the knowledge of Parent, none of the Parent Proprietary
Assets infringes or conflicts with any Proprietary Asset owned or used by any
other Person. To the knowledge of Parent, neither Parent nor any Parent
Subsidiary is infringing, misappropriating or making any unlawful use of, and
neither Parent nor any Parent Subsidiary has at any time infringed,
misappropriated or made any unlawful use of, or received any notice or other
communication of any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Proprietary Asset owned or used by any
other Person. To the knowledge of Parent, no other Person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset owned
or used by any other Person infringes or conflicts with, any Parent Proprietary
Asset.
(d) Parent Proprietary Assets constitute all the Proprietary Assets
necessary to enable Parent and each Parent Subsidiary to conduct its business in
the manner in which such
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business has been conducted. Neither Parent nor any Parent Subsidiary has
licensed any of the Parent Proprietary Assets to any Person on an exclusive
basis, and neither Parent nor any Parent Subsidiary has entered into any
covenant not to compete or Contract limiting its ability to exploit fully any of
its Proprietary Assets or to transact business in any market or geographical
area or with any Person.
(e) No stockholder, officer or director of Parent has title to any
Parent Proprietary Asset which would be necessary to enable Parent to conduct
its business in the manner in which such business is currently being conducted.
3.10 CONTRACTS.
(a) Part 3.10(a) of the Parent Disclosure Schedule identifies each
Parent Contract that constitutes a "Material Parent Contract." For purposes of
this Agreement, a "Material Parent Contract" shall be deemed to be any Parent
Contract:
(i) relating to the employment or engagement of, or the
performance of services by, any employee, consultant or independent contractor
which involves a potential commitment of Parent in excess of $60,000 per year,
including any Parent Contract involving severance payments or acceleration
benefits upon a Parent Acquisition Transaction;
(ii) relating to the acquisition, transfer, use, development,
sharing or license of any Parent Proprietary Asset (except in the ordinary
course of business and except for any Parent Proprietary Asset that is licensed
to the Parent or any Parent Subsidiary under any third party software license
agreement generally available to the public at a cost of less than $50,000);
(iii) imposing any material restriction on Parent's or any
Parent Subsidiary's right or ability (A) to compete with any other Person, (B)
to acquire any product or other asset or any services from any other Person, to
sell any product or other asset to or perform any services for any other Person
or to transact business or deal in any other manner with any other Person, or
(C) to develop or distribute any Parent Proprietary Asset;
(iv) creating or involving any agency relationship, distribution
arrangement or franchise relationship involving payments to or from Parent or
obligations in excess of $100,000 per year;
(v) relating to the acquisition, issuance or transfer of any
securities of Parent or any Parent Subsidiary;
(vi) creating or relating to the creation of any Encumbrance
with respect to any asset owned or used by Parent or any Parent Subsidiary
having a value in excess of $100,000;
(vii) involving or incorporating any guaranty, any pledge, any
performance or completion bond, any indemnity, any right of contribution or any
surety arrangement in excess of $100,000 per year;
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(viii) creating or relating to any partnership or joint venture
or any material sharing of revenues, profits, losses, costs or liabilities;
(ix) relating to the purchase or sale of any product or other
asset by or to, or the performance of any services by or for, any Related Party
(as defined in Section 3.18);
(x) entered into outside the ordinary course of business;
(xi) that may not be terminated by Parent or such Parent
Subsidiary (without penalty) within 120 days after the delivery of a termination
notice by Parent or such Parent Subsidiary and which involves payments or
commitments of $25,000 or more; and
(xii) contemplating or involving (A) the payment or delivery of
cash or other consideration in an amount or having a value in excess of $100,000
in the aggregate, or (B) the performance of services having a value in excess of
$100,000 in the aggregate.)
(b) Parent has delivered to the Company accurate and complete copies
of all Parent Material Contracts identified in Part 3.10(a) of Parent Disclosure
Schedule, including all amendments thereto. Each Material Parent Contract
identified in Part 3.10(a) of the Parent Disclosure Schedule is valid and in
full force and effect, and is enforceable by Parent or such Parent Subsidiary in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(i) neither Parent nor any Parent Subsidiary (nor, to Parent's
knowledge, any other party) has materially violated or breached, or committed
any material default under, any Parent Material Contract;
(ii) to the best of the knowledge of Parent, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time) will, or could reasonably be expected to, (A) result in a
violation or breach of any of the provisions of any Parent Material Contract,
(B) give any Person the right to declare a default or exercise any remedy under
any Parent Material Contract, (C) give any Person the right to accelerate the
maturity or performance of any Parent Material Contract, or (D) give any Person
the right to cancel, terminate or modify any Parent Material Contract;
(iii) since September 30, 1997, neither Parent nor any Parent
Subsidiary has received any notice or other communication regarding (i) any
actual or possible violation or breach of, or default under, any Parent Material
Contract, or (ii) any actual or possible termination of any Parent Material
Contract; and
(iv) neither Parent nor any Parent Subsidiary has waived any of
its material rights under any Parent Material Contract.
3.11 NO UNDISCLOSED LIABILITIES. Except as set forth in the Parent SEC
Documents and except for current liabilities incurred in the ordinary course of
business since October 31, 1997, neither Parent nor any Parent Subsidiary has
accrued, contingent or other liabilities of any nature, either matured or
unmatured.
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3.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Parent and each Parent
Subsidiary is, and has at all times been, in compliance with all applicable
Legal Requirements, except where the failure to comply with such Legal
Requirements has not had and will not have a Material Adverse Effect on Parent
and its Subsidiaries taken as a whole. Neither Parent nor any Parent Subsidiary
has received any notice or other communication from any Governmental Body
regarding any actual or possible violation of, or failure to comply with, any
Legal Requirement; provided, however, that this representation shall not apply
to the matters covered by the representations contained in Sections 3.14, 3.15
and 3.16.
3.13 GOVERNMENTAL AUTHORIZATIONS. Parent and each Parent Subsidiary has
all Governmental Authorizations necessary to enable Parent and such Parent
Subsidiary to conduct its business in the manner in which its business is
currently being conducted, except for Governmental Authorizations the failure of
which to obtain would not have a Material Adverse Effect on Parent. Parent and
each Parent Subsidiary is, and at all times has been, in compliance with the
material terms and requirements of such Governmental Authorizations, except for
any noncompliance which would not have a Material Adverse Effect on Parent.
Neither Parent nor any Parent Subsidiary has received any notice or other
communication from any Governmental Body regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
3.14 TAX MATTERS.
(a) All Material Tax Returns required to be filed by or on behalf
of Parent with any Governmental Body with respect to any transaction occurring
or any taxable period ending on or before the date hereof (the "Parent Returns")
(i) have been filed when due, and (ii) have been accurately and completely
prepared in compliance with all applicable Legal Requirements. Parent and each
Parent Subsidiary has, within the time (including any extensions of applicable
due dates) and in the manner prescribed by law, paid all Taxes that are due and
payable, except Taxes that, individually and in the aggregate, are not material.
The consolidated financial statements of Parent contained in the Parent SEC
Documents fully accrue all actual and contingent liabilities for Taxes with
respect to all periods through the dates thereof in accordance with generally
accepted accounting principles.
(b) No claim or Legal Proceeding is pending or has been threatened
against or with respect to Parent or any Parent Subsidiary in respect of any
Tax. There are no unsatisfied liabilities for Taxes (including liabilities for
interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by Parent or
any Parent Subsidiary. There are no liens for Taxes upon any of the assets of
Parent or any Parent Subsidiary, except liens for current Taxes not yet due and
payable.
3.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 3.15(a) of the Parent Disclosure Schedule contains a list
of all salaried employees of Parent and each Parent Subsidiary as of the date of
this Agreement whose annual salaries are greater than $60,000, and correctly
reflects their salaries, any other compensation
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payable to them (including compensation payable pursuant to bonus, deferred
compensation or commission arrangements), their dates of employment and their
positions. Neither Parent nor any Parent Subsidiary is a party to any collective
bargaining contract or other Contract with a labor union involving any of its
employees.
(b) Part 3.15(b) of the Parent Disclosure Documents identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, health,
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (individually referred to as a "Parent
Plan" and collectively referred to as the "Parent Plans") sponsored, maintained,
contributed to or required to be contributed to by Parent or any Parent
Subsidiary for the benefit of any current or former employee of Parent or any
Parent Subsidiary.
(c) Neither Parent nor any Parent Subsidiary maintains, sponsors or
contributes to, and, to the knowledge of Parent, neither Parent nor any Parent
Subsidiary has at any time in the past maintained, sponsored or contributed to,
any employee pension benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), subject to Title
IV of ERISA for the benefit of employees or former employees of Parent (a
"Parent Defined Benefit Plan").
(d) Neither Parent or any Parent Subsidiary maintains, sponsors or
contributes to any employee welfare benefit plan (as defined in Section 3(1) of
ERISA, whether or not excluded from coverage under specific Titles or Merger
Subtitles of ERISA) for the benefit of employees or former employees of Parent
or any Parent Subsidiary.
(e) With respect to each Parent Plan, Parent has made available to
the Company:
(i) an accurate and complete copy of such Parent Plan
(including all amendments thereto);
(ii) an accurate and complete copy of the annual report (if
required under ERISA) with respect to such Parent Plan for the three (3) most
recent plan years;
(iii) an accurate and complete copy of (A) the most recent
summary plan description, together with each summary of material modifications
thereto (if required under ERISA) with respect to such Parent Plan, and (B) each
material employee communication relating to such Parent Plan;
(iv) if such Parent Plan is funded through a trust or any third
party funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and complete
copies the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Parent Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment management
agreements, subscription and participation agreements and recordkeeping
agreements; and
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(vi) an accurate and complete copy of the most recent
determination, notification, advisory and/or opinion letter received from the
Internal Revenue Service with respect to such Parent Plan (if such Parent Plan
is intended to be qualified under Section 401(a) of the Code).
(f) Neither Parent nor any Parent Subsidiary is required to be,
and, to the knowledge of Parent, neither Parent nor any Parent Subsidiary has
ever been required to be, treated as a single employer with any other Person
under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the
Code. Neither Parent nor any Parent Subsidiary has ever been a member of an
"affiliated service group" within the meaning of Section 414(m) of the Code. To
the knowledge of Parent, neither Parent nor any Parent Subsidiary has ever made
a complete or partial withdrawal from a "multiemployer plan" (as defined in
Section 3(37) of ERISA) resulting in "withdrawal liability" (as defined in
Section 4201 of ERISA), without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA.
(g) Neither Parent nor any Parent Subsidiary has any plan or
commitment to create any additional Parent employee benefit plan within the
meaning of ERISA, or to modify or change any such plan (other than to comply
with applicable law).
(h) No Parent Welfare Plan provides death, medical or health
benefits (whether or not insured) with respect to any current or former employee
of Parent or any Parent Subsidiary after any such employee's termination of
service (other than (i) benefit coverage mandated by applicable law, including
coverage provided pursuant to Section 4980B of the Code, (ii) deferred
compensation benefits accrued as liabilities on the consolidated financial
statements included in the Parent SEC Documents, and (iii) benefits the full
cost of which are borne by current or former employees of Parent or any Parent
Subsidiary (or their beneficiaries)).
(i) With respect to each of Parent Welfare Plans constituting a
group health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA") have been complied with in all material respects.
(j) Each of the Parent Plans has been operated and administered in
all material respects in accordance with applicable Legal Requirements,
including ERISA and the Code.
(k) Each of the Parent Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and Parent is not aware of any reason why any such
determination letter should be revoked.
(l) Neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any bonus payment, golden
parachute payment, severance payment or other payment to any current or former
employee or director of Parent or any Parent Subsidiary (whether or not under
any Parent Plan), or materially increase the benefits payable under any Parent
Plan, or result in any acceleration of the time of payment or vesting of any
such benefits.
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(m) Parent and each Parent Subsidiary is in compliance in all
material respects with all applicable Legal Requirements and Contracts relating
to employment, employment practices, employee compensation, wages, bonuses and
terms and conditions of employment.
3.16 ENVIRONMENTAL MATTERS. Parent and each Parent Subsidiary is and has
at all times been in compliance, in all material respects, with all applicable
Environmental Laws. Parent and each Parent Subsidiary possesses all permits and
other Governmental Authorizations required under applicable Environmental Laws,
and Parent and each Parent Subsidiary is and has at all times been in compliance
with the terms and requirements of all such Governmental Authorizations except
where the failure to possess such Governmental Authorizations or failure to be
in compliance would not have a Material Adverse Effect on Parent. Neither Parent
nor any Parent Subsidiary has received any notice or other communication
(whether from a Governmental Body, citizens group, employee or otherwise) that
alleges that Parent or any Parent Subsidiary is not in compliance with any
Environmental Law. To the knowledge of Parent, no current or prior owner of any
property leased or owned by Parent and/or such Parent Subsidiary has received
any notice or other communication (whether from a Governmental Body, citizens
group, employee or otherwise) that alleges that such current or prior owner or
Parent and/or such Parent Subsidiary is not or was not in compliance with any
Environmental Law.
3.17 INSURANCE. The business and properties of Parent and each Parent
Subsidiary are insured for the benefit of Parent and/or such Parent Subsidiary
in amounts deemed adequate by Parent's management against risks usually insured
against by persons operating businesses similar to those of Parent or such
Parent Subsidiary in the localities where such properties are located. Parent
has received no notice of cancellation or refusal of coverage and copies of all
of such insurance policies have been delivered to the Company.
3.18 RELATED PARTY TRANSACTIONS. Except as set forth in the Parent SEC
Documents: (a) no Related Party has, and no Related Party has at any time since
December 31, 1994 had, any direct or indirect interest in any material asset
used in or otherwise relating to the business of Parent or any Parent
Subsidiary; (b) no Related Party is, or has at any time since December 31, 1994
been, indebted to Parent or any Parent Subsidiary; (c) since December 31, 1994,
no Related Party has entered into, or has had any direct or indirect financial
interest in, any Material Parent Contract, transaction or business dealing
involving Parent or any Parent Subsidiary; (d) no Related Party is competing, or
has at any time since December 31, 1994 competed, directly or indirectly, with
Parent or any Parent Subsidiary; and (e) no Related Party has any claim or right
against Parent or any Parent Subsidiary (other than rights to receive
compensation for services performed as an employee of Parent or any Parent
Subsidiary). (For purposes of this Section 3.18, each of the following shall be
deemed to be a "Related Party": (i) each individual who is, or who has at any
time since December 31, 1994 been, an officer or director of Parent or any
Parent Subsidiary; (ii) each individual who is, or who at any time since
December 31, 1994 been, a member of the immediate family of any of the
individuals referred to in clause "(i)" above; (iii) any 5% stockholder of the
Parent; and (iv) any trust or other Entity (other than Parent or a Parent
Subsidiary) in which any one of the individuals referred to in clauses "(i)"
"(ii)" and "(iii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary or
equity interest.)
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3.19 LEGAL PROCEEDINGS; ORDERS. There is no pending Legal Proceeding,
and, to the knowledge of Parent, no Person has threatened to commence any Legal
Proceeding that: (i) may have a Material Adverse Effect on Parent, any Parent
Subsidiary or their respective businesses; or (ii) challenges, or that may have
the effect of preventing, delaying, making illegal or otherwise interfering
with, the Merger or any of the other transactions contemplated by this
Agreement. To the knowledge of Parent, no event has occurred, and no claim,
dispute or other condition or circumstance exists, that could reasonably be
expected to give rise to or serve as a basis for the commencement of any such
Legal Proceeding. There is no order, writ, injunction, judgment or decree to
which Parent or any Parent Subsidiary, or any of the assets owned or used by
Parent or any Parent Subsidiary, is subject. To the knowledge of Parent, no
officer or other employee of Parent or any Parent Subsidiary is subject to any
order, writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to Parent's or such Parent Subsidiary's business. There is no action,
suit, proceeding or investigation by Parent or any Parent Subsidiary currently
pending or which Parent or any Parent Subsidiary intends to initiate.
3.20 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; the execution, delivery and performance by
Parent and Merger Sub of this Agreement have been duly authorized by all
necessary action on the part of Parent and Merger Sub and their respective
Boards of Directors, and the execution, delivery and performance of this
Agreement by Merger Sub have been duly authorized by all necessary action on the
part of Parent, as the sole shareholder of Merger Sub. This Agreement consitutes
the legal, valid and binding obligation of Parent and Merger Sub, enforceable
against them in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
3.21 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of any of
the provisions of Parent's or any Parent Subsidiary's articles of organization,
certificate of incorporation or bylaws;
(b) with respect to Parent or any Parent Subsidiary, contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the transactions contemplated by this
Agreement or to exercise any remedy or obtain any relief under, any Legal
Requirement or any order, writ, injunction, judgment or decree to which Parent
or any Parent Subsidiary, or any of the assets owned or used by Parent or any
Parent Subsidiary, is subject;
(c) with respect to Parent or any Parent Subsidiary, contravene,
conflict with or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, any Governmental
Authorization that is held by Parent or any
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Parent Subsidiary or that otherwise relates to Parent's or any Parent
Subsidiary's business or to any of the assets owned or used by Parent or any
Parent Subsidiary;
(d) contravene, conflict with or result in a violation of breach
of, or result in a default under, any provision of any Material Parent Contract,
or give any Person the right to (i) declare a default or exercise any remedy
under any Material Parent Contract, (ii) accelerate the maturity or performance
of any Material Parent Contract, or (iii) cancel, terminate or modify any
Material Parent Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by Parent or any
Parent Subsidiary (except for minor liens that will not, in any case or in the
aggregate, materially detract from the value of the assets subject thereto or
would have a Material Adverse Effect on Parent).
Except as may be required by the Securities Act, the Exchange Act, state
securities or "blue sky" laws, the CGCL, and the NASD Bylaws (as they relate to
the Joint Proxy Statement), neither Parent nor any Parent Subsidiary is nor will
be required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with the execution and delivery of this
Agreement or the consummation of the Merger.
3.22 VOTE REQUIRED. The affirmative vote of a majority of the shares of
Parent Common Stock (the "Requisite Parent Vote") present in person or by proxy
at the Parent Stockholders' Meeting at which a quorum is present is the only
vote of the holders of any class or series of Parent's capital stock necessary
to aprove the issuance of the Merger Shares and to adopt and approve this
Agreement, the Merger and the transactions contemplated thereby, including but
not limited to the Certificate of Amendment.
3.23 PARENT ACTION. The Board of Directors of Parent (at a meeting duly
called and held) has (a) unanimously determined that the Merger is advisable and
fair and in the best interests of Parent and its stockholders, (b) unanimously
approved this Agreement, the Merger and the Certificate of Amendment in
accordance with the applicable provisions of the DGCL, (c) unanimously
recommended the adoption and approval of this Agreement, the Merger and the
Certificate of Amendment by the holders of Parent Common Stock and directed that
this Agreement, the Merger and the Certificate of Amendment be submitted for
consideration by the Parent's stockholders at the Parent Stockholders' Meeting,
and (d) adopted a resolution having the effect of causing Parent not to be
subject, to the extent permitted by applicable law, to any state takeover law
that may purport to be applicable to the Merger and the transactions
contemplated thereby. As of the date hereof and at all times on or prior to the
Effective Time, the restrictions applicable to business combinations contained
in Section 203 of the DGCL are, and will be, inapplicable to the execution,
delivery and performance of this Agreement and to the consummation of the Merger
and the other transactions contemplated by this Agreement, including but not
limited to the Voting Agreements of even date herewith between Parent and each
of the individuals identified on Exhibit F.
3.24 FULL DISCLOSURE.
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(a) To Parent's knowledge, all documents, contracts, instruments,
certificates, notices, consents, affidavits, letters, telegrams, telexes,
written statements, schedules (including the Parent Disclosure Schedule),
exhibits (including the Exhibits to this Agreement) and any other papers
whatsoever (excluding in all cases drafts and interim versions marked as such or
apparent as such on their face) delivered to the Company by Parent in connection
with this Agreement and the transactions contemplated thereby, are true and
complete copies thereof. The representations and warranties of Parent contained
in this Agreement, as modified by the Parent Disclosure Schedule, contain no
untrue statements of any material fact or omit to state any 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 false or misleading.
(b) The information supplied by Parent for inclusion in the Joint
Proxy Statement (including the Parent Financial Statements) will not, as of the
date of the Joint Proxy Statement or as of the date of the Parent Stockholders'
Meeting (as defined in Section 5.5), and in each case, as of the date such
information is prepared or presented, contain any statement that is inaccurate
or misleading with respect to any material fact, or (ii) omit to state any
material fact necessary in order to make such information not false or
misleading.
3.25 FINDER'S FEE. Except for Xxxxx Xxxxxx Inc. (now associated with
Salomon Brothers Inc and with Salomon Brothers Inc collectively doing business
as, and hereinafter referred to as "Xxxxxxx Xxxxx Xxxxxx"), no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or any of the other transactions
contemplated thereby based upon arrangements made by or on behalf of Parent or
any of its subsidiaries. A true and correct copy of Parent's agreement with
Xxxxxxx Xxxxx Barney has been delivered to the Company.
3.26 OPINION OF FINANCIAL ADVISOR TO PARENT. The Board of Directors of
Parent has received the written opinion of Xxxxxxx Xxxxx Xxxxxx, financial
advisor to Parent, dated the date of this Agreement, to the effect that the
Applicable Multiple is fair to Parent from a financial point of view.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company and each
Company Subsidiary and (b) provide Parent and Parent's Representatives with such
copies of the existing books, records, Tax Returns, work papers and other
documents and information relating to the Company and each Company Subsidiary,
and with such additional financial, operating and other data and information
regarding the Company and each Company Subsidiary, as Parent may reasonably
request.
4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period,
the Company shall, and shall causes each Company Subsidiary to:
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(a) conduct its business and operations in the ordinary course and
in substantially the same manner as such business and operations have been
conducted prior to the date of this Agreement;
(b) use reasonable efforts to preserve intact its current business
organization, keep available the services of its current officers and employees
and maintain its relations and goodwill with all suppliers, customers,
landlords, creditors, employees and other Persons having business relationships
with the Company or any Company Subsidiary;
(c) keep in full force all insurance policies in effect as of the
date of this Agreement;
(d) cause its officers to report regularly to Parent concerning the
status of the Company's and the Company Subsidiaries' businesses;
(e) not declare, accrue, set aside or pay any dividend or make any
other distribution in respect of any shares of capital stock, and shall not
repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities (other than repurchases of unvested shares from employees upon
termination of employment);
(f) not sell, issue or authorize the issuance of (i) any capital
stock or other security, (ii) any option, call, warrant or right to acquire, or
relating to, any capital stock or other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security (except
that the Company shall be permitted to issue Company Common Stock upon the
exercise of outstanding Company Options or upon conversion of convertible
securities outstanding on the date hereof) and the Company may continue to grant
stock options in the ordinary course and consistent with past practice, provided
that any such options shall be subject to the Company's standard vesting
schedule (but such options shall not vest more than 25% per year following the
grant thereof) and in no event shall any such options contain any provisions
pursuant to which the vesting of such options may or would be accelerated in any
respect upon any change in control transaction or any other transaction
(including without limitation the Merger) or any similar provision;
(g) not amend or waive any of its rights under, or permit the
acceleration of vesting under any provision of any agreement evidencing any
outstanding Company Option or Company Warrant;
(h) not amend or permit the adoption of any amendment to the
Company's articles of incorporation or bylaws, or effect or permit the Company
or any Company Subsidiary to become a party to any Company Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(i) not form any subsidiary or acquire any equity interest or other
interest in any other Entity;
(j) not make any capital expenditure, except for capital
expenditures that, when added to all other capital expenditures made by the
Company or any Company Subsidiary during the Pre-Closing Period, do not exceed
$300,000 in the aggregate;
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(k) not (i) enter into or become bound by, or permit any of the
assets owned or used by it to become bound by, any Material Company Contract
except in the ordinary course of business, or (ii) amend or prematurely
terminate, or waive any material right or remedy under, any Material Company
Contract;
(l) not (i) acquire, lease or license any material right or other
material asset from any other Person, (ii) sell or otherwise dispose of, or
lease or license, any material right or other material asset to any other
Person, or (iii) waive or relinquish any material right, other than in the
ordinary course of business and except for immaterial assets acquired, leased,
licensed or disposed of by the Company pursuant to Contracts that are not
Material Company Contracts;
(m) not (i) lend money to any Person, or (ii) incur or guarantee any
indebtedness, except for routine advances of expenses to employees in the
ordinary course of business and except that the Company and each Company
Subsidiary may make routine borrowings in the ordinary course of business under
its existing bank lines of credit;
(n) not (i) pay any bonus or make any profit-sharing or similar
payment to, or increase the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees, other than in the ordinary course of business and solely
with respect to non-officers and non-directors or (ii) establish, adopt or amend
any Employee Benefit Plan;
(o) not change any of its methods of accounting or accounting
practices in any respect;
(p) not make any Tax election;
(q) not commence or settle any Legal Proceeding not disclosed in the
Company Disclosure Schedule;
(r) not enter into any material transaction or take any other
material action outside the ordinary course of business or inconsistent with its
past practices; and
(s) not agree or commit to take any of the actions described in
clauses "(e)" through "(r)" of this Section 4.2.
4.3 NOTIFICATION; UPDATES TO COMPANY DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:
(i) the discovery by the Company of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or
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breach of any representation or warranty made by the Company in this Agreement
if (A) such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of the Company
hereunder; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 7 or
Section 8 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 4.3(a) requires any change in the Company
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Company Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then the Company shall promptly deliver to Parent an
update to the Company Disclosure Schedule specifying such change. No such update
shall be deemed to supplement or amend the Company Disclosure Schedule for the
purpose of (i) determining the accuracy of any of the representations and
warranties made by the Company in this Agreement, or (ii) determining whether
any of the conditions set forth in Section 7 has been satisfied.
4.4 NO SOLICITATION. During the Pre-Closing Period:
(a) Company shall not directly or indirectly, and shall not
authorize or permit any Company Subsidiary or Representative of Company directly
or indirectly to, (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal or take any action
(excluding any press releases issued in connection with the announcement of the
execution of this Agreement) that could reasonably be expected to lead to an
Acquisition Proposal, (ii) furnish any information regarding Company or any
Company Subsidiary to any Person in connection with or in response to an
Acquisition Proposal, (iii) continue or engage in discussions with any Person
with respect to any Acquisition Proposal, (iv) approve, endorse or recommend any
Acquisition Proposal or (v) enter into any letter of intent or similar document
or any Contract contemplating or otherwise relating to any Company Acquisition
Transaction; provided, however, that this Section 4.4(a) shall not prohibit
Company from furnishing information regarding the Company or any Company
Subsidiary to, or entering into discussions with, any Person in response to a
Superior Company Proposal if (1) the Board of Directors of Company concludes in
good faith, based upon the written advice of its outside legal counsel, that
such action is required in order for the Board of Directors of Company to comply
with its fiduciary obligations to Company's shareholders under applicable law,
(2) prior to furnishing any such information to, or entering into discussions
with, such Person, Company gives Parent written notice of the identity of such
Person and of Company's intention to furnish information to, or enter into
discussions with, such Person, and Company receives from such Person an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all written and oral information furnished to such Person by or on
behalf of Company, (3) prior to furnishing any such information to such Person,
Company furnishes such
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information to Parent (to the extent such information has not been previously
furnished by Company to Parent) and (4) neither the Company nor any
Representative of the Company shall have violated any of the restrictions set
forth in this Section 4.4. Without limiting the generality of the foregoing,
Company acknowledges and agrees that any violation of any of the restrictions
set forth in the preceding sentence by any Representative of Company or any
Company Subsidiary, whether or not such Representative is purporting to act on
behalf of Company or any Company Subsidiary, shall be deemed to constitute a
breach of this Section 4.4 by Company.
(b) The Company shall promptly advise Parent orally and in writing
of any Acquisition Proposal (including the identity of the Person making or
submitting such Acquisition Proposal and the term thereof) that is made or
submitted by any Person during the Pre-Closing Period. The Company shall keep
Parent fully informed with respect to the status of any such Acquisition
Proposal and any modifications or proposed modifications thereto.
(c) The Company shall immediately cease and cause to be terminated
any existing discussions with any Person that relate to any Acquisition
Proposal.
4.5 COMPANY SHAREHOLDERS' MEETING.
(a) The Company shall take all action necessary under all applicable
Legal Requirements to call, give notice of, convene and duly hold a meeting of
the holders of Company Common Stock and Company Preferred Stock (the "Company
Shareholders' Meeting") to consider, act upon and vote upon the adoption and
approval of this Agreement and approval of the Merger. The Company Shareholders'
Meeting will be held as promptly as practicable and within 45 days
after the S-4 Registration Statement (as defined below) is declared effective
under the Securities Act (which 45-day period shall be extended on a day-for-day
basis if and for so long as any stop order or other similar action is in place,
pending or threatened by the SEC). The Company's obligation to call, give notice
of, convene and hold the Company Shareholders' Meeting in accordance with this
Section 4.5(a) shall not be limited or otherwise affected by the commencement,
disclosure, announcement or submission of any Superior Company Offer or other
Company Acquisition Transaction, or by any withdrawal, amendment or modification
of the recommendation of the Board of Directors of the Company with respect to
the Merger.
(b) Subject to Section 4.5(c): (i) the Board of Directors of the
Company shall unanimously recommend that the Company's shareholders vote in
favor of and adopt and approve this Agreement and approve the Merger at the
Company Shareholders' Meeting; (ii) the Joint Proxy Statement shall include a
statement to the effect that the Board of Directors of the Company has
unanimously recommended that the Company's shareholders vote in favor of and
adopt and approve this Agreement and approve the Merger at the Company
Shareholders' Meeting; and (iii) neither the Board of Directors of the Company
nor any committee thereof shall withdraw, amend or modify, or propose or resolve
to withdraw, amend or modify, in a manner adverse to Parent, the unanimous
recommendation of the Board of Directors of the Company that the Company's
shareholders vote in favor of the adoption and approval this Agreement and the
approval of the Merger. For purposes of this Agreement, said recommendation of
the Board of Directors shall be deemed to have been modified in a manner adverse
to Parent if said recommendation shall no longer be unanimous.
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(c) Nothing in Section 4.5(b) shall prevent the Board of Directors
of the Company from withdrawing, amending or modifying its unanimous
recommendation in favor of the Merger if (i) a Superior Company Proposal is made
to the Company and is not withdrawn, (ii) neither the Company nor any of its
Representatives shall have violated any of the restrictions set forth in Section
4.4, and (iii) the Board of Directors of the Company concludes in good faith,
based upon the written advice of its outside counsel, that the withdrawal,
amendment or modification of such recommendation is required in order for the
Board of Directors of the Company to comply with its fiduciary obligations to
the Company's shareholders under applicable law. Nothing contained in this
Section 4.5 shall limit the Company's obligation to call, give notice of,
convene and hold the Company Shareholders' Meeting (regardless of whether the
unanimous recommendation of the Board of Directors of the Company shall have
been withdrawn, amended or modified).
4.6 TAX REPRESENTATION LETTERS; CONTINUITY OF INTEREST CERTIFICATES. As
soon as practicable after the execution of this Agreement, the Company shall
deliver to Xxxxxx Godward LLP and Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, tax
representation letters substantially in the form of Exhibit G (which will be
used and relied upon by such firms in connection with the legal opinions
contemplated by Section 7.8 and Section 8.9) and the Company shall use its
reasonable efforts to obtain and deliver to Parent, Continuity of Interest
Certificates in the form of Exhibit H signed by each shareholder of the Company
holding in excess of 1% of the capital stock of the Company.
4.7 AFFILIATE AGREEMENTS. The Company shall use all reasonable efforts
to cause each Person who could reasonably be deemed to be an "affiliate" of the
Company to execute and deliver to Parent, prior to the Closing, an Affiliate
Agreement in the form of Exhibit I.
SECTION 5.CERTAIN COVENANTS OF PARENT
5.1 ACCESS AND INVESTIGATION. During the Pre-Closing Period, Parent
shall, and shall cause its Representatives to: (a) provide the Company and the
Company's Representatives with reasonable access to Parent's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to Parent and each Parent
Subsidiary; and (b) provide the Company and the Company's Representatives with
such copies of the existing books, records, Tax Returns, work papers and other
documents and information relating to Parent and each Parent Subsidiary, and
with such additional financial, operating and other data and information
regarding Parent and each Parent Subsidiary, as the Company may reasonably
request.
5.2 OPERATION OF PARENT'S BUSINESS. During the Pre-Closing Period,
Parent shall, and shall cause each Parent Subsidiary to:
(a) conduct its business and operations in the ordinary course and
in substantially the same manner as such business and operations have been
conducted prior to the date of this Agreement;
(b) use reasonable efforts to preserve intact its current business
organization, keep available the services of its current officers and employees
and maintain its relations and
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goodwill with all suppliers, customers, landlords, creditors, employees and
other Persons having business relationships with Parent or any Parent
Subsidiary;
(c) keep in full force all insurance policies in place as of the
date of this Agreement;
(d) cause its officers to report regularly to the Company concerning
the status of Parent's and the Parent Subsidiaries' businesses, taken as a
whole;
(e) not declare, accrue, set aside or pay any dividend or make any
other distribution in respect of any shares of capital stock, and shall not
repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities;
(f) not, without the written consent of the Company, sell, issue or
authorize the issuance of (i) any capital stock or other security, (ii) any
option, call, warrant or right to acquire, or relating to, any capital stock or
other security, or (iii) any instrument convertible into or exchangeable for any
capital stock or other security (except that Parent shall be permitted to issue
Parent Common Stock upon the exercise of Parent Options outstanding as of the
date hereof and sell shares of Parent Common Stock under its 1996 Employee Stock
Purchase Plan in accordance with the terms of such plan);
(g) not amend or waive any of its rights under, or (except pursuant
to the express terms of Parent Options outstanding on the date hereof and listed
on Part 3.3 of the Parent Disclosure Schedule which provide for automatic
acceleration upon consummation of the Merger) permit the acceleration of vesting
under, (i) any provision of its Parent Stock Plans, (ii) any provision of any
agreement evidencing any outstanding Parent Option or Parent Warrant, or (iii)
any provision of any restricted stock purchase agreement;
(h) not amend or permit the adoption of any amendment to its
certificate of incorporation or bylaws, or effect or permit Parent or any Parent
Subsidiary to become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(i) not form any subsidiary or acquire any equity interest or other
interest in any other Entity;
(j) not make any capital expenditure, except for capital
expenditures that, when added to all other capital expenditures made by Parent
or any Parent Subsidiary during the Pre-Closing Period, do not exceed $100,000
in the aggregate;
(k) not (i) enter into or become bound by, or permit any of the
assets owned or used by it to become bound by, any Material Parent Contract
except in the ordinary course of business, or (ii) amend or prematurely
terminate, or waive any material right or remedy under, any Material Parent
Contract;
(l) not (i) acquire, lease or license any material right or other
material asset from any other Person, (ii) sell or otherwise dispose of, or
lease or license, any material right or other material asset to any other
Person, or (iii) waive or relinquish any material right, other than
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in the ordinary course of business and except for immaterial assets acquired,
leased, licensed or disposed of by Parent pursuant to Contracts that are not
Material Parent Contracts;
(m) not (i) lend money to any Person, or (ii) incur or guarantee any
indebtedness, except for routine advances of expenses to employees in the
ordinary course of business and except that Parent and each Parent Subsidiary
may make routine borrowings in the ordinary course of business under its
existing bank lines of credit disclosed in the Parent SEC Documents;
(n) not (i) pay any bonus or make any profit-sharing or similar
payment to, or increase the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees other than in the ordinary course of business and solely
with respect to non-officers and non-directors, or (ii) establish, adopt or
amend any Employee Benefit Plan;
(o) not change any of its methods of accounting or accounting
practices in any respect;
(p) not make any Tax election;
(q) not commence or settle any Legal Proceeding;
(r) not enter into any material transaction or take any other
material action outside the ordinary course of business or inconsistent with its
past practices; and
(s) not agree or commit to take any of the actions described in
clauses "(e)" through "(r)" of this Section 5.2.
5.3 NOTIFICATION; UPDATES TO PARENT DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, Parent shall promptly notify the
Company in writing of:
(i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes an inaccuracy in or breach of any representation
or warranty made by Parent in this Agreement or an inaccuracy in the Parent SEC
Documents;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
Parent in this Agreement or inaccuracy in the Parent SEC Documents; if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of Parent
hereunder; and
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(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 7 or
Section 8 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 5.3(a) requires any change in the Parent
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Parent Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Parent shall promptly deliver to the Company an
update to the Parent Disclosure Schedule specifying such change. No such update
shall be deemed to supplement or amend the Parent Disclosure Schedule for the
purpose of (i) determining the accuracy of any of the representations and
warranties made by Parent in this Agreement, or (ii) determining whether any of
the conditions set forth in Section 8 has been satisfied.
5.4 NO SOLICITATION. During the Pre-Closing Period:
(a) Parent shall not directly or indirectly, and shall not authorize
or permit any Parent Subsidiary or any Representative of Parent directly or
indirectly to, (i) solicit, initiate, encourage or induce the making, submission
or announcement of any Acquisition Proposal or take any action (excluding any
press releases issued in connection with the execution of this Agreement or
action in compliance with Parent's required disclosure obligations under the
Exchange Act) that could reasonably be expected to lead to an Acquisition
Proposal, (ii) furnish any information regarding Parent or any Parent Subsidiary
to any Person in connection with or in response to an Acquisition Proposal,
(iii) continue or engage in discussions with any Person with respect to any
Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
Contract contemplating or otherwise relating to any Parent Acquisition
Transaction; provided, however, that this Section 5.4(a) shall not prohibit
Parent from furnishing information regarding Parent or any Parent Subsidiary to,
or entering into discussions with, any Person in response to a Superior Parent
Proposal if (1) the Board of Directors of Parent concludes in good faith, based
upon the written advice of its outside legal counsel, that such action is
required in order for the Board of Directors of Parent to comply with its
fiduciary obligations to Parent's stockholders under applicable law, (2) prior
to furnishing any such information to, or entering into discussions with, such
Person, Parent gives the Company written notice of the identity of such Person
and of Parent's intention to furnish information to, or enter into discussions
with, such Person, and Parent receives from such Person an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all written and oral information furnished to such Person by or on
behalf of Parent, (3) prior to furnishing any such information to such Person,
Parent furnishes such information to the Company (to the extent such information
has not been previously furnished by Parent to the Company) and (4) neither
Parent nor any Representative of Parent shall have violated any of the
restrictions set forth in this Section 5.4. Without limiting the generality of
the foregoing, Parent acknowledges and agrees that any violation of any of the
restrictions set forth in the preceding sentence by any Representative of
Parent, whether or not such Representative is purporting to act on behalf of
Parent, shall be deemed to constitute a breach of this Section 5.4 by Parent.
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(b) Parent shall promptly advise the Company orally and in writing
of any Acquisition Proposal (including the identity of the Person making or
submitting such Acquisition Proposal and the term thereof) that is made or
submitted by any Person during the Pre-Closing Period. Parent shall keep the
Company fully informed with respect to the status of any such Acquisition
Proposal and any modifications or proposed modifications thereto.
(c) Parent shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition Proposal.
5.5 PARENT STOCKHOLDERS' MEETING.
(a) Parent shall take all action necessary under all applicable
Legal Requirements to call, give notice of, convene and duly hold a meeting of
the holders of Parent Common Stock (the "Parent Stockholders' Meeting") to
consider, act upon and vote upon the approval of the issuance of the Merger
Shares, the adoption and approval of this Agreement, the Merger and the
Certificate of Amendment. The Parent Stockholders' Meeting will be held as
promptly as practicable and in any event within 45 days after the S-4
Registration Statement is declared effective under the Securities Act (which
45-day period shall be extended on a day-for-day basis if and for so long as any
stop order or other similar action is in place, pending or threatened by the
SEC). Parent's obligation to call, give notice of, convene and hold the Parent
Stockholders' Meeting in accordance with this Section 5.5(a) shall not be
limited or otherwise affected by the commencement, disclosure, announcement or
submission of any Superior Parent Offer or other Parent Acquisition Transaction,
or by any withdrawal, amendment or modification of the recommendation of the
Board of Directors of Parent with respect to the Merger.
(b) Subject to Section 5.5(c): (i) the Board of Directors of Parent
shall unanimously recommend that Parent's stockholders vote in favor of and
approve the issuance of the Merger Shares and adopt and approve this Agreement,
the Merger and the Certificate of Amendment; (ii) the Joint Proxy Statement
shall include a statement to the effect that the Board of Directors of Parent
has unanimously made such recommendation; and (iii) neither the Board of
Directors of Parent nor any committee thereof shall withdraw, amend or modify,
or propose or resolve to withdraw, amend or modify, in a manner adverse to the
Company, such unanimous recommendation. For purposes of this Agreement, said
recommendation of the Board of Directors shall be deemed to have been modified
in a manner adverse to the Company if said recommendation shall no longer be
unanimous.
(c) Nothing in Section 5.5(b) shall prevent the Board of Directors
of Parent from withdrawing, amending or modifying its unanimous recommendation
in favor of the Merger if (i) a Superior Parent Proposal is made to Parent and
is not withdrawn, (ii) neither Parent nor any of its Representatives shall have
violated any of the restrictions set forth in Section 5.4, and (iii) the Board
of Directors of Parent concludes in good faith, based upon the written advice of
its outside counsel, that the withdrawal, amendment or modification of such
recommendation is required in order for the Board of Directors of Parent to
comply with its fiduciary obligations to Parent's stockholders under applicable
law. Nothing contained in this Section 5.5 shall limit Parent's obligation to
call, give notice of, convene and hold the Parent Stockholders' Meeting
(regardless of whether the unanimous recommendation of the Board of Directors of
Parent shall have been withdrawn, amended or modified).
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5.6 TAX REPRESENTATION LETTERS. As soon as practicable after the
execution of this Agreement, Parent shall deliver to Xxxxxx Godward LLP and
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, tax representation letters in the form of
Exhibit J (which will be used and relied upon in connection with the legal
opinions contemplated by Section 7.8 and Section 8.9).
5.7 MERGER SUB ACTIVITIES. During the Pre-Closing Period, Merger Sub
shall not engage in any activities of any nature except as provided in or
contemplated by this Agreement. Parent shall take all actions necessary to cause
Merger Sub to perform its obligations under this Agreement and to consummate the
Merger on the terms and conditions set forth herein.
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES
6.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use his or its reasonable efforts to obtain each
Consent (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger or any of the other transactions contemplated by this Agreement. Each
party shall promptly deliver to the other party a copy of each such filing made,
each such notice given and each such Consent obtained by such parties during the
Pre-Closing Period.
6.2 PUBLIC ANNOUNCEMENTS. The parties shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the Merger and the transactions contemplated thereby. Without
limiting the generality of the foregoing, neither party shall (and neither party
shall permit any of its Representatives to) issue any press release or make any
public statement regarding this Agreement or the Merger, or regarding any of the
other transactions contemplated by this Agreement, without the other party's
prior consent, except that either party shall be permitted, without the consent
of the other party, to make such disclosures as are required to be made under
applicable law.
6.3 REASONABLE EFFORTS. During the Pre-Closing Period, (a) the Company
shall use its reasonable efforts to cause the conditions set forth in Section 7
to be satisfied on a timely basis, and (b) Parent and Merger Sub shall use their
reasonable efforts to cause the conditions set forth in Section 8 to be
satisfied on a timely basis.
6.4 REGISTRATION STATEMENT.
(a) As promptly as practicable after the date of this Agreement,
Parent shall prepare and cause to be filed with the SEC a preliminary Joint
Proxy Statement to be sent to the stockholders of Parent and the shareholders of
the Company in connection with the Parent Stockholders' Meeting and the Company
Shareholders' Meeting, respectively. Parent and the Company shall use all
reasonable efforts to cause the Joint Proxy Statement to comply with the rules
and regulations promulgated by the SEC, to respond promptly to any comments of
the SEC or its staff and to have the Joint Proxy Statement cleared by the SEC
for distribution to the Parent stockholders and the Company shareholders. Parent
shall prepare and cause to be filed with the SEC a registration statement on
Form S-4 concerning the Parent Common Stock to be issued
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upon the Merger (the "S-4 Registration Statement") after the Company's financial
statements for the nine months ended December 31, 1997 have been audited by the
Company's independent auditors and such auditors' report is available. The S-4
Registration Statement shall contain or incorporate by reference the Joint Proxy
Statement (which shall include such Company December 31, 1997 financial
statements) as a prospectus, and any other documents required by the Securities
Act or the Exchange Act in connection with the Merger. The parties acknowledge
and agree that the foregoing arrangements may be altered by mutual consent of
the parties as reasonably necessary to respond to any comments or requests
received from the SEC. Parent shall use all reasonable efforts to cause the S-4
Registration Statement (including the Joint Proxy Statement) to comply with the
rules and regulations promulgated by the SEC, to respond promptly to any
comments of the SEC or its staff and to have the S-4 Registration Statement
declared effective under the Securities Act as promptly as practicable after it
is filed with the SEC. Parent will use all reasonable efforts to cause the Joint
Proxy Statement to be mailed to Parent's stockholders, and the Company will use
all reasonable efforts to cause the Joint Proxy Statement to be mailed to the
Company's shareholders, as promptly as practicable after the S-4 Registration
Statement is declared effective under the Securities Act. The Company shall
promptly furnish to Parent all information concerning the Company and the
Company's shareholders that may be required or reasonably requested in
connection with any action contemplated by this Section 6.4 (including, without
limitation, the Company Financial Statements). In addition, the Company shall
promptly furnish to Parent all information concerning the Company and the
Company shareholders that may be required or reasonably requested in connection
with any pre- or post-effective amendment to the S-4 Registration Statement. If
the Company becomes aware of any information that should be set forth in an
amendment or supplement to the S-4 Registration Statement or the Joint Proxy
Statement, then the Company shall promptly inform Parent thereof and shall
cooperate with Parent in filing such amendment or supplement with the SEC and,
if appropriate, in mailing such amendment or supplement to the shareholders of
the Company.
(b) Prior to the Effective Time, Parent shall make all required
filings with state regulatory authorities and the NASD, and shall ensure that
the Parent Common Stock to be issued in the Merger will be qualified under the
securities or "blue sky" law of every jurisdiction of the United States in which
any registered stockholder of the Company has an address of record on the record
date for determining the stockholders entitled to notice of and to vote on the
Merger (other than qualifying to do business in a state in which it is not now
qualified).
(c) Parent shall amend its 1996 Employee Stock Purchase Plan to
provide that Company employees will be eligible to participate in such plan
effective no later than five (5) days following the Closing and that the
Offering Period with respect to such employees under such Plan shall commence as
of such day (and shall have purchase dates and otherwise end consistent with
those for Parent employees). To the extent required by the rules and regulations
of the SEC, the amendment to the Parent's 1996 Employee Stock Purchase Plan
shall be reflected in the Joint Proxy Statement.
6.5 ADDITIONAL AGREEMENTS.
(a) Subject to Section 6.5(b), Parent and the Company shall use all
reasonable efforts to take, or cause to be taken, all actions necessary to
consummate the Merger and make
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effective the other transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, but subject to Section 6.5(b), each
party to this Agreement shall use all reasonable efforts to lift any restraint,
injunction or other legal bar to the Merger. Each party shall promptly deliver
to the other, to the extent material, a copy of each such filing made, each such
notice given and each such Consent obtained by such party during the Pre-Closing
Period.
(b) Notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor the Company shall have any obligation under this
Agreement to do any of the following (or cause the other to do any of the
following): (i) to dispose or cause any of its subsidiaries to dispose of any
assets; (ii) to discontinue or cause any of its subsidiaries to discontinue
offering any product; (iii) to license or otherwise make available, or cause any
of its subsidiaries to license or otherwise make available, to any Person, any
technology, software or other Proprietary Asset; (iv) to hold separate or cause
any of its subsidiaries to hold separate any assets or operations (either before
or after the Closing Date); or (v) to make or cause any of its subsidiaries to
make any commitment (to any Governmental Body or otherwise) regarding its future
operations.
6.6 REGULATORY APPROVALS. The Company and Parent shall use all
reasonable efforts to file, as soon as practicable after the date of this
Agreement, all notices, reports and other documents required to be filed with
any Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. Without limiting the
generality of the foregoing, the Company and Parent shall, promptly after the
date of this Agreement, prepare and file the notifications, if any, required
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), in connection with the Merger. The Company and Parent shall respond
as promptly as practicable to (i) any inquiries or requests received from the
Federal Trade Commission or the Department of Justice for additional information
or documentation and (ii) any inquiries or requests received from any state
attorney general or other Governmental Body in connection with antitrust or
related matters. Each of the Company and Parent shall (1) give the other party
prompt notice of the commencement of any Legal Proceeding by or before any
Governmental Body with respect to the Merger or any of the other transactions
contemplated by this Agreement, (2) keep the other party informed as to the
status of any Legal Proceeding, and (3) promptly inform the other party of any
communication to or from the Federal Trade Commission, the Department of Justice
or any other Governmental Body regarding the Merger. The Company and Parent will
consult and cooperate with one another, and will consider in good faith the
views of one another, in connection with any analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal made or submitted in connection
with any Legal Proceeding under or relating to the HSR Act of any other federal
or state antitrust or fair trade law. In addition, except as may be prohibited
by the HSR Act of any Governmental Body or by any Legal Requirement, in
connection with any Legal Proceeding under or relating to any other federal or
state antitrust or fair trade law or any other similar Legal Proceeding, each of
the Company and Parent agrees to permit authorized Representatives of the other
party to be present at each meeting or conference relating to any such Legal
Proceeding and to have access to and be consulted in connection with any
document, opinion or proposal made or submitted to any Governmental Body in
connection with any such Legal Proceeding.
6.7 INDEMNIFICATION.
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(a) From and after the consummation of the Merger, Parent will
fulfill and honor in all material respects the obligations of the Parent and the
Company pursuant to (i) each indemnification agreement in effect at such time
between the Parent and each person who is or was a director or officer of Parent
and the Company at or prior to the Effective Time and (ii) any indemnification
provisions under Parent's and the Company's Certificate of Incorporation or
Articles of Incorporation, as the case may be or Bylaws, as each is in effect on
the date hereof (the persons to be indemnified pursuant to this agreement and
provisions referred to in clauses (i) and (ii) of this Section 6.7 shall be
referred to individually, the "Indemnified Party"). The Certificate of
Incorporation or Articles of Incorporation, as the case may be, and the Bylaws
of the Parent and the Company shall continue to contain the provisions with
respect to indemnification and exculpation from liability set forth in such
documents as of the date of this Agreement and such provisions shall not be
amended, repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect the rights thereunder
of any Indemnified Party.
(b) This Section 6.7 shall survive the consummation of the Merger at
the Effective Time, is intended to be for the benefit of the Parent and the
Company and each Indemnified Party and such Indemnified Party's heirs and
representatives, and shall be binding on all successors and assigns of Parent
and the Surviving Corporation.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
7.1 ACCURACY OF REPRESENTATIONS. The representations and warranties made
by the Company in this Agreement shall have been accurate in all material
respects as of the date of this Agreement; provided, however, that any
representations or warranties of the Company that are qualified as to
materiality or "Material Adverse Effect" shall have been true and correct in all
respects as of the date of this Agreement.
7.2 PERFORMANCE OF COVENANTS. Each material covenant or obligation
contained in this Agreement that the Company is required to comply with or to
perform at or prior to the Closing shall have been complied with and performed
in all material respects.
7.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
7.4 COMPLIANCE CERTIFICATE. The Company shall have delivered to Parent a
certificate of the Chief Executive Officer of the Company evidencing compliance
with the conditions set forth in Sections 7.1 and 7.2.
7.5 STOCKHOLDER APPROVAL. The issuance of the Merger Shares, this
Agreement, the Merger and the Certificate of Amendment shall have been adopted
and approved by the Requisite Parent Vote and this Agreement and the Merger
shall have been adopted and approved by the Requisite Company Vote.
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7.6 CONSENTS. All Consents listed in Part 2.21 of the Company Disclosure
Schedule and Part 3.21 of the Parent Disclosure Schedule shall have been
obtained and shall be in full force and effect.
7.7 LEGAL OPINION. Parent shall have received a legal opinion of Xxxxxx
Godward LLP, in substantially the form of Exhibit L, dated as of the Closing
Date;
7.8 TAX OPINION. Company shall have received a legal opinion of Xxxxxx
Godward LLP in substantially the form of Exhibit M, dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code (it being understood that, in rendering
such opinion, Xxxxxx Godward LLP may rely upon the tax representation letters
and Continuity of Interest Certificates referred to in Section 4.6).
7.9 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.10 HSR ACT. If applicable, the waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
7.11 TERMINATION OF REPURCHASE AGREEMENT. That certain Agreement for
Repurchase of Preferred Shares of Stock at Artecon, Inc. dated December 22, 1994
by and among Artecon, Inc., Flambeau Corporation, Flambeau Products Corporation,
Seats, Inc. and X.X. Xxxxx shall have been terminated.
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
8.1 ACCURACY OF REPRESENTATIONS. The representations and warranties made
by Parent and Merger Sub in this Agreement shall have been accurate in all
material respects as of the date of this Agreement; provided, however, that any
representations or warranties of Parent or Merger Sub that are qualified as to
materiality or "Material Adverse Effect" shall have been true and correct in all
respects as of the date of this Agreement.
8.2 PERFORMANCE OF COVENANTS. Each material covenant or obligation
contained in this Agreement that Parent and/or Merger Sub is required to comply
with or to perform at or prior to the Closing shall have been complied with and
performed in all material respects.
8.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
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8.4 NASDAQ NATIONAL MARKET. The shares of Parent Common Stock to be
issued in the Merger shall have been approved for quotation (subject to notice
of issuance) on the Nasdaq National Market.
8.5 COMPLIANCE CERTIFICATE. Parent shall have delivered to the Company a
certificate of the Chief Executive Officer of the Parent evidencing compliance
with the conditions set forth in Sections 8.1 and 8.2.
8.6 STOCKHOLDER APPROVAL. The issuance of the Merger Shares and this
Agreement, the Merger and the Certificate of Amendment shall have been adopted
and approved by the Requisite Parent Vote and this Agreement and the Merger
shall have been adopted and approved by the Requisite Company Vote.
8.7 CONSENTS. All Consents listed in Part 2.21 of the Company Disclosure
Schedule and Part 3.21 of the Parent Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
8.8 LEGAL OPINION. The Company shall have received a legal opinion of
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, dated as of the Closing Date, in substantially
the form of Exhibit N;
8.9 TAX OPINION. Parent shall have received a legal opinion of Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx in substantially the form of Exhibit O, dated as of
the Closing Date, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code (it being understood that, in
rendering such opinion, Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx may rely upon the tax
representation letters and Continuity of Interest Certificates referred to in
Section 4.6);
8.10 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
8.11 HSR ACT. If applicable, the waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
8.12 RESIGNATIONS OF CERTAIN DIRECTORS. The Company shall have received
the written resignations of the directors of Parent listed on Exhibit P hereto,
effective as of the Effective Time.
SECTION 9. TERMINATION
9.1 TERMINATION. This Agreement may be terminated prior to the Effective
Time (whether before or after approval of the Merger by the Requisite Company
Vote and/or the Requisite Parent Vote):
(a) by mutual written consent of Parent and the Company;
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(b) by either Parent or the Company if the Merger shall not have
been consummated by May 31, 1998 (unless the failure to consummate the Merger is
attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Effective Time);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(d) by either Parent or the Company if (i) the Parent Stockholders'
Meeting (including any adjournments thereof) shall have been held and completed
and Parent's stockholders shall have taken a final vote on a proposal to approve
the issuance of the Merger Shares and to approve and adopt this Agreement, the
Merger and the Certificate of Amendment and (ii) this Agreement, the Merger and
the Certificate of Amendment shall not have been adopted and approved at such
meeting by the Requisite Parent Vote; provided, however, that Parent shall not
be permitted to terminate this Agreement pursuant to this Section 9.1(d) if the
failure of Parent's stockholders to approve the issuance of the Merger Shares
and to adopt and approve this Agreement, the Merger and the Certificate of
Amendment at the Parent Stockholders' Meeting is attributable to a failure on
the part of Parent to perform any material obligation required to have been
performed by Parent under this Agreement; and provided, further, that Parent
shall not be permitted to terminate this Agreement pursuant to this Section
9.1(d) unless Parent shall have paid the fee referred to in Section 9.3(b);
(e) by either Parent or the Company if (i) the Company Shareholders'
Meeting (including any adjournments thereof) shall have been held and completed
and the Company's shareholders shall have taken a final vote on a proposal to
approve and adopt this Agreement and the Merger and (ii) this Agreement and the
Merger shall not have been adopted and approved at such meeting by the Requisite
Company Vote; provided, however, that Company shall not be permitted to
terminate this Agreement pursuant to this Section 9.1(e) if the failure of the
Company's shareholders to adopt and approve this Agreement and the Merger at the
Company Shareholders' Meeting is attributable to a failure on the part of the
Company to perform any material obligation required to have been performed by
the Company under this Agreement; and provided, further, that the Company shall
not be permitted to terminate this Agreement pursuant to this Section 9.1(e)
unless the Company shall have paid the fee referred to in Section 9.3(b);
(f) at any time prior to the adoption and approval of this Agreement
and the Merger by the Requisite Parent Vote and the Requisite Company Vote, by
the Company if a Parent Triggering Event shall have occurred or by Parent if a
Company Triggering Event shall have occurred; or
(g) by either party if any of the other party's covenants contained
in this Agreement shall have been breached in any material respect; provided,
however, that if a breach of a covenant by a party is curable by such party and
such party is continuing to exercise all reasonable efforts to cure such breach,
then the other party may not terminate this Agreement under this Section 9.1(g)
on account of such breach and provided, further, that a party may not
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terminate this Agreement pursuant to this Section 9.1(g) if it shall have
materially breached this Agreement.
9.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 9.1, this Agreement shall be of no further
force or effect; provided, however, that (i) this Section 9.2, Section 9.3,
Section 6.2 and Section 10 shall survive the termination of this Agreement and
shall remain in full force and effect, and (ii) the termination of this
Agreement shall not relieve any party from any liability for any breach of this
Agreement.
9.3 FEES AND EXPENSES; TERMINATION FEES.
(a) Except as set forth in this Section 9.3, each party to this
Agreement shall bear and pay all fees, costs and expenses (including legal fees
and accounting fees) that have been incurred or that are incurred in the future
by such party in connection with the transactions contemplated by this
Agreement, including all fees, costs and expenses incurred by such party in
connection with or by virtue of (a) the investigation and review conducted by
such party (or its Representatives) with respect to the other party's business
(and the furnishing of information to the other party and its Representatives in
connection with such investigation and review), (b) the negotiation, preparation
and review of this Agreement and all agreements, certificates, opinions and
other instruments and documents delivered or to be delivered in connection with
the transactions contemplated by this Agreement, (c) the preparation and
submission of any filing or notice required to be made or given in connection
with any of the transactions contemplated by this Agreement, and the obtaining
of all Consents and Governmental Authorizations required to be obtained in
connection with any of such transactions, and (d) the consummation of the Merger
("Out of Pocket Costs").
(b) If this Agreement is terminated by Parent or the Company
pursuant to Section 9.1(d), or if this Agreement is terminated by the Company
pursuant to Section 9.1(f), Parent shall pay to the Company, in cash (at the
time specified in Section 9.3(c)), a nonrefundable fee in the amount of
$1,500,000, along with the Company's Out of Pocket Costs through the date of
such termination.
(c) In the case of termination of this Agreement by Parent pursuant
to Section 9.1(d), the fee referred to in Section 9.3(b) shall be paid by Parent
prior to such termination, and in the case of termination of this Agreement by
the Company pursuant to Section 9.1(d) or Section 9.1(f), the fee referred to in
Section 9.3(b) shall be paid by Parent within three (3) business days after such
termination.
(d) If this Agreement is terminated by Parent or the Company
pursuant to Section 9.1(e), or if this Agreement is terminated by Parent
pursuant to Section 9.1(f), the Company shall pay to Parent, in cash (at the
time specified in Section 9.3(e)), a nonrefundable fee in the amount of
$1,500,000, along with Parent's Out of Pocket Costs through the date of such
termination.
(e) In the case of termination of this Agreement by the Company
pursuant to Section 9.1(e), the fee referred to in Section 9.3(d) shall be paid
by the Company prior to such termination, and in the case of termination of this
Agreement by Parent pursuant to
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Section 9.1(e) or Section 9.1(f), the fee referred to in Section 9.3(d) shall be
paid by the Company within three (3) business days after such termination.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Merger.
10.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 ATTORNEYS' FEES. Subject to Section 9.3(b), if any action at law or
suit in equity to enforce this Agreement or the rights of any of the parties
hereunder is brought against any party hereto, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).
10.4 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Parent or Merger Sub:
Storage Dimensions, Inc.
0000 XxXxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
if to the Company:
Artecon, Inc.
0000 Xx Xxxxxx Xxxx
Xxxxxxxx, XX 00000-0000
Attention: Chief Executive Officer
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Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Cooley Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of a telecopy, when the party receiving such telecopy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally recognized, overnight courier, on the business day following dispatch
and (d) in the case of mailing, on the fifth business day following such
mailing.
10.5 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
10.6 GOVERNING LAW; VENUE. This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of California (without giving effect to principles of conflicts of laws).
10.7 SUCCESSORS AND ASSIGNS. Except as provided in Section 10.8, this
Agreement shall be binding upon and shall be enforceable by and inure solely to
the benefit of, the parties hereto and their successors and assigns; provided,
however, that this Agreement may not be assigned by any party without the
written consent of the other parties, and any attempted assignment without such
consent shall be void and of no effect.
10.8 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
10.9 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
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(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given. 10.10 AMENDMENTS.
This Agreement may not be amended, modified, altered or supplemented other than
by means of a written instrument duly executed and delivered on behalf of all of
the parties hereto.
10.10 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.11 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.12 PARTIES IN INTEREST. None of the provisions of this Agreement is
intended to provide any rights or remedies to any Person other than the parties
hereto and their respective successors and assigns (if any); provided, however,
that the provisions of Section 1.5(c) shall inure to the benefit of and may be
enforced by holders of Company Options and/or Company Warrants, and the
provisions of Section 6.7 shall inure to the benefit of and may be enforced by
the Indemnified Parties.
10.13 DISCLOSURE SCHEDULES. The disclosure schedules shall be arranged
in separate parts corresponding to the numbered and lettered sections contained
in Section 2 or in Section 3, as the case may be. The information disclosed in
any numbered or lettered part shall be deemed to be disclosed and incorporated
in any other numbered or lettered part where the relevance of such disclosure to
another numbered or lettered part would be reasonably apparent from such
disclosure.
10.14 ENTIRE AGREEMENT. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and supersede all prior and contemporaneous agreements
and understandings among or between any of the parties relating to the subject
matter hereof.
10.15 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
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(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
10.16 HEADINGS. The bold-faced section headings contained in this
Agreement are for convenience of reference only, shall not be deemed to be a
part of this Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.
10.17 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one and the same instrument.
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The parties hereto have caused this Agreement to be executed and
delivered as of December 22, 1997.
STORAGE DIMENSIONS, INC.,
a Delaware corporation
By: /s/ XXXXX X. EEG
-------------------------------------
Name: Xxxxx X. Eeg
Title: President and CEO
STORAGE ACQUISITION CORP.,
a California corporation
By: /s/ XXXXX X. XXXXXXX
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
ARTECON, INC.,
a California corporation
By: /s/ XXXXX X. XXXXXXX
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
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EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer or
proposal (other than an offer or proposal by Parent or the Company, as the case
may be) contemplating or otherwise relating to any Company Acquisition
Transaction or Parent Acquisition Transaction, as the case may be.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including all other
exhibits), as it may be amended from time to time.
COMPANY ACQUISITION TRANSACTION. "Company Acquisition Transaction" shall
mean any transaction involving:
(a) any sale, lease exchange, transfer or other disposition of the
assets of Company or any Company Subsidiary constituting more than 10% of the
consolidated assets of Company or accounting for more than 10% of the
consolidated revenues of Company in any one transaction or in a series of
related transactions.
(b) any offer to purchase, tender offer, exchange offer or any
similar transaction or series of related transactions made by any Person
involving more than 10% of the outstanding shares of the capital stock of the
Company or any shares of the capital stock of any Company Subsidiary.
(c) any merger, consolidation, business combination, share
exchange, reorganization or other similar transaction or series of related
transactions involving Company or any Company Subsidiary.
(d) any assignment, transfer or licensing or other disposition of,
in whole or in part, the Company Proprietary Assets, other than in the ordinary
course of business.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY DISCLOSURE SCHEDULE. "Company Disclosure Schedule" shall mean
the schedule (dated as of the date of the Agreement) delivered to Parent by the
Company.
COMPANY OPTION. "Company Option" shall mean any option to purchase
capital stock of the Company held by any director, officer or employee of, or
consultant to, the Company.
A-1
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COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or any Company Subsidiary
or otherwise used by the Company or any Company Subsidiary.
COMPANY SHAREHOLDERS. "Company Shareholders" shall mean those holders of
Company Common Stock entitled to receive shares of Parent Common Stock pursuant
to Section 1.5.
COMPANY TRIGGERING EVENT. A "Company Triggering Event" shall be deemed
to have occurred if: (i) the Board of Directors of Company shall have failed to
recommend, or shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent its unanimous recommendation in favor of,
the Merger or approval or adoption of this Agreement; (ii) Company shall have
failed to include in the Joint Proxy Statement the unanimous recommendation of
the Board of Directors of Company in favor of approval and adoption of this
Agreement and the Merger; (iii) the Board of Directors of Company shall have
approved, endorsed or recommended any Acquisition Proposal; (iv) Company shall
have entered into any letter of intent or similar document or any Contract
relating to any Acquisition Proposal; (v) Company shall have failed to hold the
Company Shareholders' Meeting as promptly as practicable and in any event within
45 days after the definitive Proxy Statement was filed with the SEC; (vi) a
tender or exchange offer relating to securities of Company shall have been
commenced and Company shall not have sent to its securityholders, within five
business days after the commencement of such tender or exchange offer, a
statement disclosing that Company recommends rejection of such tender or
exchange offer; (vii) an Acquisition Proposal is publicly announced, and Company
(A) fails to issue a press release announcing its opposition to such Acquisition
Proposal within five business days after such Acquisition Proposal is announced
or (B) otherwise fails to actively oppose such Acquisition Proposal; or (viii) a
person or group (as defined in the Exchange Act and the rules promulgated
thereunder) shall have acquired more than fifty percent (50%) of the Company's
voting securities (excluding persons and groups that, as of the date of this
Agreement, hold more than fifty percent (50%) of the Company's voting securities
or that may be deemed to have acquired such percentage upon execution of the
Voting Agreements).
COMPANY WARRANT. "Company Warrant" shall mean any warrant granted by the
Company to any Person to purchase capital stock of the Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan, or legally binding commitment or undertaking of
any nature.
EMPLOYEE BENEFIT PLAN. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) of ERISA.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first
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refusal, preemptive right, community property interest or restriction of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company, limited liability company,
joint stock company, firm or other enterprise, association, organization or
entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
JOINT PROXY STATEMENT. "Joint Proxy Statement" shall mean that proxy
statement to be prepared by Parent with the cooperation of the Company to be
filed with the SEC and to be included or incorporated by reference into the Form
S-4 registration statement to be filed by Parent with the SEC.
KNOWLEDGE. "Knowledge" shall mean, as it relates to either the Company
or Parent with respect to any matter in question, that any of the Chief
Executive Officer, Chief Financial Officer or any other executive officers of
the Company or Parent, as the case may be, has actual knowledge of such matter.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
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MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company or Parent, as the case may be,
if such violation or other matter would have a material adverse effect on the
business, condition, assets, liabilities, operations, financial performance or
prospects of the Company and its subsidiaries or the Parent and its subsidiaries
taken as a whole, as the case may be.
PARENT ACQUISITION TRANSACTION. "Parent Acquisition Transaction" shall
mean any transaction involving:
(a) any sale, lease exchange, transfer or other disposition of the
assets of Parent or any Parent Subsidiary constituting more than 10% of the
consolidated assets of Parent or accounting for more than 10% of the
consolidated revenues of Parent in any one transaction or in a series of related
transactions.
(b) any offer to purchase, tender offer, exchange offer or any
similar transaction or series of related transactions made by any Person
involving more than 10% of the outstanding shares of the capital stock of Parent
or any shares of the capital stock of any Parent Subsidiary.
(c) any merger, consolidation, business combination, share
exchange, reorganization or other similar transaction or series of related
transactions involving Parent or any Parent Subsidiary.
(d) any assignment, transfer or licensing or other disposition of,
in whole or in part, the Parent Proprietary Assets, other than in the ordinary
course of business.
PARENT CONTRACT. "Parent Contract" shall mean any Contract: (a) to which
Parent is a party; (b) by which Parent or any of its assets is or may become
bound or under which Parent has, or may become subject to, any obligation; or
(c) under which Parent has or may acquire any right or interest.
PARENT DISCLOSURE SCHEDULE. "Parent Disclosure Schedule" shall mean the
schedule (dated as of the date of the Agreement) delivered to the Company by
Parent.
PARENT PROPRIETARY ASSET. "Parent Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to Parent or any Parent Subsidiary or
otherwise used by Parent or any Parent Subsidiary.
PARENT TRIGGERING EVENT. A "Parent Triggering Event" shall be deemed to
have occurred if: (i) the Board of Directors of Parent shall have failed to
recommend, or shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to the Company its unanimous recommendation in
favor of, the Merger or approval or adoption of this Agreement; (ii) Parent
shall have failed to include in the Joint Proxy Statement the unanimous
recommendation of the Board of Directors of Parent in favor of approval and
adoption of this Agreement and the Merger; (iii) the Board of Directors of
Parent shall have approved, endorsed or recommended any Acquisition Proposal;
(iv) Parent shall have entered into any letter of intent or similar document or
any Contract relating to any Acquisition Proposal; (v) Parent shall have failed
to hold the Parent Stockholders' Meeting as promptly as practicable and in any
event
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within 45 days after the definitive Proxy Statement was filed with the SEC; (vi)
a tender or exchange offer relating to securities of Parent shall have been
commenced and Parent shall not have sent to its securityholders, within five
business days after the commencement of such tender or exchange offer, a
statement disclosing that Parent recommends rejection of such tender or exchange
offer; (vii) an Acquisition Proposal is publicly announced, and Parent (A) fails
to issue a press release announcing its opposition to such Acquisition Proposal
within five business days after such Acquisition Proposal is announced or (B)
otherwise fails to actively oppose such Acquisition Proposal; or (viii) a person
or group (as defined in the Exchange Act and the rules promulgated thereunder)
shall have acquired more than fifty percent (50%) of Parent's voting securities
(excluding persons and groups that, as of the date of this Agreement, hold more
than fifty percent (50%) of Parent's voting securities or that may be deemed to
have acquired such percentage upon execution of the Voting Agreements).
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, source code, computer program, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset; or (b) right to use or exploit
any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
SUPERIOR COMPANY PROPOSAL. "Superior Company Proposal" shall mean an
unsolicited, bona fide written proposed Acquisition Proposal submitted by a
third party that the Board of Directors of the Company determines, in good
faith, based upon the written advice of its financial advisor, to be more
favorable from a financial point of view to the Company's shareholders than the
terms of the Merger; provided, however, that any such Acquisition Proposal shall
not be deemed to be a "Superior Company Proposal" if any financing required to
consummate the transaction contemplated by such offer is not committed at the
time such Acquisition Proposal is made.
SUPERIOR PARENT PROPOSAL. "Superior Parent Proposal" shall mean an
unsolicited, bona fide written proposed Acquisition Proposal submitted by a
third party that the Board of Directors of Parent determines, in good faith,
based upon the written advice of its financial advisor, to be more favorable
from a financial point of view to the Parent's stockholders than the terms of
the Merger; provided, however, that any such Acquisition Proposal shall not be
deemed to be a "Superior Parent Proposal" if any financing required to
consummate the transaction contemplated by such offer is not committed at the
time such Acquisition Proposal is made.
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TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
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EXHIBIT B
CERTIFICATE OF AMENDMENT
72
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
STORAGE DIMENSIONS, INC.
A DELAWARE CORPORATION
Storage Dimensions, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
FIRST: The name of the Corporation is Storage Dimensions, Inc.
SECOND: The original Certificate of Incorporation of the Corporation was filed
with the Secretary of State of Delaware on November 25, 1992 under the name SDI
Acquisition Corporation.
THIRD: The Board of Directors of the Corporation, acting in accordance with the
provisions of Sections 141 and 242 of the General Corporation Law of the State
of Delaware, adopted resolutions amending its Second Amended and Restated
Certificate of Incorporation as follows:
ARTICLE I shall be amended and restated to read in its entirety as
follows:
"The name of the Corporation is Artecon, Inc. (hereinafter sometimes
referred to as the "Corporation")."
ARTICLE IV shall be amended and restated to read in its entirety as
follows:
"1. The Corporation is authorized to issue a total of Fifty Million (50,000,000)
shares of stock in two classes designated respectively "Preferred Stock" and
"Common Stock." The total number of shares of Preferred Stock the Corporation
shall have authority to issue is Ten Million (10,000,000), par value one-half of
one cent ($.005) per share, and the total number of shares of Common Stock the
Corporation shall have authority to issue is Forty Million (40,000,000), par
value one-half of one cent ($.005) per share.
2. The preferences, privileges and restrictions granted to or imposed on the
respective classes and series of shares of Common Stock and Preferred Stock are
as follows:
(a) DESIGNATION OF SERIES OF PREFERRED STOCK. The Preferred Stock may be
issued from time to time in one or more series. The Board of Directors is hereby
authorized, within the limitations and restrictions stated in this Certificate
of Incorporation,
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to fix or alter the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them; and to increase or
decrease the number of shares of any series subsequent to the issuance of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
(b) DESIGNATION OF SERIES A PREFERRED STOCK. Two Million Four Hundred
Ninety-Four Thousand One Hundred Fifty-Nine (2,494,159) of the shares of
Preferred Stock are hereby designated "Series A Preferred Stock" ("Series A
Stock"). The rights, preferences and privileges of the Series A Stock are as
specified in this Section 2 of Article IV.
(c) DIVIDEND RIGHTS. The holders of record of Preferred Stock and Common
Stock shall be entitled to receive dividends on a non-cumulative basis when and
as declared by the Board of Directors out of funds legally available therefor.
No right shall accrue to the holders of the Series A Stock by reason of the fact
that dividends are not declared and thereafter paid in any year.
(d) PREFERENCE ON LIQUIDATION.
(i) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the Series A Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets or surplus funds of the Corporation to the holders of the Common
Stock or any other class or series of stock of the Corporation, an amount equal
to two dollars ($2.00) per share (as adjusted for any stock dividends,
combinations or splits, reclassifications or the like with respect to such
shares) plus all accrued, accumulated or declared but unpaid dividends on each
share of Series A Stock held by such holders. If upon the occurrence of any
liquidation, dissolution or winding up of the Corporation, either voluntary or
involuntary, the assets and funds to be distributed among the holders of Series
A Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amount, the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A Stock in proportion to the preferential amount each such
holder is otherwise entitled to receive.
(ii) After payment to the holders of the Series A Stock of the amount set
forth in subsection (i), the entire remaining assets and funds of the
Corporation legally
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available for distribution, if any, shall be distributed ratably among the
holders of the Common Stock in proportion to the number of shares then held by
such holders.
(iii) For purposes of this subsection (d), a merger or consolidation of
the Corporation with or into any other corporation or corporations, or the
merger of any other corporation or corporations into the Corporation in which
the holders of the Corporation's outstanding Common Stock immediately prior to
the effective date of such transaction do not hold at least fifty percent (50%)
of all outstanding voting securities of the surviving entity, or a sale of all
or substantially all of the assets of the Corporation, shall be treated as a
liquidation, dissolution or winding up of the Corporation.
(e) VOTING RIGHTS. Except as otherwise required by law, the shares of the
Series A Stock shall be voted together with this Corporation's Common Stock as a
single class at any annual or special meeting of stockholders of this
Corporation, or may act by written consent in the same manner as this
Corporation's Common Stock. Each share of Common Stock shall be entitled to one
vote. The holder of each share of Series A Stock shall be entitled to the number
of votes equal to the number of shares of Common Stock into which such share of
Series A Stock could be converted on the record date for the vote or, if no such
record date is established, at the date such vote is taken or any written
consent is solicited (in each case assuming such share is convertible as of such
date notwithstanding the time limitation on any such conversion set forth in
Section 2(f)(i)), shall have voting rights and powers equal to the voting rights
and powers of the Common Stock, and shall be entitled to notice of any
stockholders meeting in accordance with the Bylaws of this Corporation in the
same manner and to the same extent as holders of the Common Stock. Fractional
votes shall not be permitted, however, and any fractional voting rights
resulting from the above formula (after aggregating all shares into which shares
of Series A Stock held by each holder could be converted) shall be rounded to
the nearest whole number (with one-half being rounded upward.)
(f) CONVERSION. The holders of the Series A Stock shall have the following
rights and shall be subject to the following restrictions with respect to the
conversion of the Series A Stock into shares of Common Stock:
(i) CONVERSION AT THE OPTION OF THE HOLDER. Each share of Series A Stock
shall be convertible, at the option of the holder thereof, without the payment
of additional consideration, at any time after January 1, 1999, at the office of
the Corporation or any transfer agent for the Series A Stock, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing two dollars ($2.00) by the greater of (A) $6.00 and (B) the then
applicable Conversion Price, determined as provided in subsection (f)(iii).
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(ii) AUTOMATIC CONVERSION. Each share of Series A Stock shall
automatically be converted into fully paid and nonassessable shares of Common
Stock effective as of 5:30 p.m. East Coast Time on the earlier of:
(1) at the close of business on the day on which the Board of
Directors shall have duly and unanimously adopted a resolution requesting such
conversion, in which case the number of shares of Common Stock issuable upon
conversion of each Share of Series A Stock shall be determined by dividing two
dollars ($2.00) by the then applicable Conversion Price, determined as provided
in subsection (f)(iii); and
(2) at the close of business on the first business day following the
date on which the average of the closing per share sales price of the Common
Stock as reported on the Nasdaq National Market (or any other U.S. securities
market or exchange on which the Common Stock may trade) for twenty (20)
consecutive trading days equals or exceeds nine dollars ($9.00) per share
(subject to adjustment for any stock splits, stock dividends, stock
consolidations or the like) (the "Average Price"), in which case the number of
shares of Common Stock issuable upon conversion of each such share of Series A
Stock shall be determined by dividing two dollars ($2.00) by the Average Price.
(iii) CONVERSION PRICE. In the case of conversion under subsections
(f)(i) and (f)(ii)(1), the conversion price for the Series A Stock shall be
equal to the average of the closing sales prices of the Common Stock as traded
on the Nasdaq National Market (or any other U.S. securities market or exchange
on which the Common Stock may trade) during the twenty (20) trading day period
ending on the day that is two (2) days prior to the date on which conversion is
requested by the Company or the holder, as the case may be (the "Conversion
Price"). Such Conversion Price shall be adjusted from time to time in accordance
with this subsection (f). All references to the Conversion Price herein shall
mean the Conversion Price as so adjusted.
(iv) MECHANICS OF CONVERSION. No fractional shares of Common Stock shall
be issu ed upon conversion of Series A Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the then effective Conversion Price. Before
any holder of Series A Stock shall be entitled to convert the same into full
shares of Common Stock pursuant to subsection (f)(i), it shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series A Stock, and shall give
written notice to the Corporation at such office that it elects to convert the
same. Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares of Series A Stock
to be converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common
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Stock on such date. In the event of a conversion pursuant to subsection (f)(ii),
such conversion shall be deemed to have occurred automatically without any
further action by the Corporation or the holder as of the day specified in
subsection (f)(ii), and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date;
provided, however, that before any holder of Series A Stock shall be entitled to
receive a certificate representing the shares of Common Stock into which such
holder's shares of Series A Stock have been converted into pursuant to
subsection (f)(ii), it shall surrender the certificate or certificates
representing such shares of Series A Stock, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series A Stock. The Corporation
shall, as soon as practicable after receipt of such surrendered certificates and
notice, if applicable, issue and deliver at such office to such holder of Series
A Stock a certificate or certificates, registered in such names as specified by
the holder, for the number of shares of Common Stock to which he shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common Stock.
(v) ADJUSTMENTS TO CONVERSION PRICE.
(1) In the event the Corporation shall at any time or from time to
time make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation or any of its subsidiaries other than shares of
Common Stock, then in each such event provision shall be made so that the
holders of Series A Stock shall receive, upon the conversion thereof, the
securities of the Corporation which they would have received had their stock
been converted into Common Stock on the date of such event.
(2) If there occurs any capital reorganization or any
reclassification of the capital stock of the Corporation (other than any event
provided for in subsection (f)(v)(1) above), each share of Series A Stock shall
thereafter be convertible into the same kind and amounts of securities or other
assets, or both, that were issuable or distributable to the holders of shares of
outstanding Common Stock upon such reorganization or reclassification, in
respect of that number of shares of Common Stock into which such shares of
Series A Stock might have been converted immediately prior to such
reorganization or reclassification; and in any such case, appropriate
adjustments (as determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of Series A Stock to the end that the
provisions of this Article IV shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or other assets thereafter
deliverable upon the conversion of the Series A Stock.
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(3) Upon the occurrence of each adjustment or readjustment of the
number or kind of shares issuable upon conversion of a share of Series A Stock
pursuant to this subsection (f)(v), the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Series A Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of any holder of Series A Stock, furnish or
cause to be furnished to such holder a like certificate prepared by the
Corporation setting forth (i) such adjustments and readjustments, and (ii) the
number of shares and the amount, if any, of other property which at the time
would be received upon the conversion of Series A Stock.
(vi) NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive additional
shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property, or
to receive any other right, the Corporation shall mail to each holder of Series
A Stock at least 30 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution, security or right, and the amount and character of
such dividend, distribution, security or right.
(vii) ISSUE TAXES. The holders of Series A Stock shall pay any and all
issue, transfer and other taxes that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of Series A Stock
pursuant hereto.
(viii) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to the Articles of
Incorporation.
(ix) NOTICES. Any notice required by the provisions of this Section 2 to
be given to the holders of shares of Series A Stock shall be deemed given if
deposited in the
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United States mail, postage prepaid, and addressed to each holder of record at
its address appearing on the books of the Corporation.
(g) NO REISSUANCE OF SERIES A STOCK. No share or shares of Series A Stock
acquired by the Corporation by reason of conversion or otherwise shall be
reissued. In the event of any such conversion or other acquisition, the shares
so issued or acquired shall revert to the status of authorized but unissued
shares of Preferred Stock."
ARTICLE VII shall be amended and restated to read in its entirety as
follows:
"1. The number of directors which shall constitute the whole Board of Directors
shall be fixed exclusively by one or more resolutions adopted by a majority of
the total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any such resolution
is presented to the Board for adoption).
2. Subject to the rights of the holders of any series of Preferred Stock (other
than the Series A Stock) to elect additional directors under specified
circumstances, the directors shall be divided into three classes as nearly equal
in size as practicable designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first annual
meeting of stockholders following the adoption and filing of this Certificate of
Amendment of Certificate of Incorporation, the term of office of the Class I
directors shall expire and Class I directors shall be elected for a full term of
three years. At the second annual meeting of stockholders following the adoption
and filing of this Certificate of Amendment of Certificate of Incorporation, the
term of office of the Class II directors shall expire and Class II directors
shall be elected for a full term of three years. At the third annual meeting of
stockholders following the adoption and filing of this Certificate of Amendment
of Certificate of Incorporation (the "First Class Three Meeting"), the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. The Board of Directors or any individual director may be removed from office
at any time (i) with cause by the affirmative vote of the holders of a majority
of the voting power of all the then-outstanding shares of voting stock of the
Corporation entitled to vote at an election of directors (the "Voting Stock") or
(ii) without cause by (1) until the First
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Class III Meeting, the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all the then-outstanding shares of the
Voting Stock, and (2) after the First Class III Meeting, the affirmative vote of
at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all
the then-outstanding shares of the Voting Stock."
FOURTH: Thereafter, pursuant to a resolution of the Board of Directors, this
Certificate of Amendment was submitted to the stockholders of the Corporation
for their approval, and was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
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IN WITNESS WHEREOF, the undersigned, ____________ and ___________, have
signed this Certificate of Amendment as President and Secretary, respectively,
of the Corporation, this ___ day of __________, 1998.
__________________________________
___________, President
__________________________________
___________, President
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EXHIBIT C
DIRECTORS AND OFFICERS OF PARENT
DIRECTORS:
CLASS I DIRECTORS - TO SERVE UNTIL THE 1999 ANNUAL MEETING
Outside Director mutually acceptable to Parent and Company
Outside Director mutually acceptable to Parent and Company*
CLASS II DIRECTORS - TO SERVE UNTIL THE 2000 ANNUAL MEETING
Xxxxx Xxxxx
Xxxxx Sup Park
CLASS III DIRECTORS - TO SERVE UNTIL THE 2001 ANNUAL MEETING
X.X. Xxxxx**
Xxxxx Xxxxxxx
*Xxxxx Xxxxxxxxxx**
OFFICERS
Xxxxx Xxxxxxx Chief Executive Officer
Xxxxxxx Xxxxxxxxxxxx Chief Financial Officer and Treasurer
Xxxx Xxxxxxxxxxx Secretary
Other executive officers to be determined by Parent and Company
* Member of Audit Committee
** Member of Compensation Committee
82
EXHIBIT D
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
DIRECTORS:
Xxxxx Xxxxxxx
X.X. Xxxxx
OFFICERS
To be determined by Parent and Company
83
EXHIBIT E
CERTAIN COMPANY SHAREHOLDERS
NO. OF PERCENT OF NO. OF PERCENT OF NO. OF PERCENT OF
SHARES OF OUTSTANDING SHARES OF OUTSTANDING SHARES OF OUTSTANDING
COMMON STOCK COMMON HELD PREFERRED PREFERRED PREFERRED B PREFERRED B
STOCKHOLDER NAME: HELD (1) HELD HELD (2) HELD HELD (3)
----------------------- -------------- ------------- -------------- ------------- -------------- -------------
X. X. Xxxxx 1,409,205 23.5% 247,877 22.3% - -
Xxxxx Xxxxxxx(2) 1,450,000 24.2% 2,500 * - -
Flambeau Corp. 407,760 6.8% 336,000 30.2% 702,604 50%
Flambeau Products Corp. 107,760 1.8% 336,000 30.2% 702,604 50%
Xxxx Xxxxxxxxxxx 632,031 10.5% - - - -
Seats Incorporated 17,540 * 169,074 15.2% - -
TOTAL 4,024,296 66.6% 1,091,451 98.2% 1,405,208 100%
* Less than 1%
(1) Based on 6,043,990 shares of Common Stock outstanding as of December 22,
1997.
(2) Based on 1,111,951 shares of Preferred outstanding as of December 22, 1997.
(3) Based on 1,405,208 shares of Preferred B outstanding as of December 22,
1997.
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EXHIBIT F
CERTAIN PARENT STOCKHOLDERS
NO. OF SHARES OF COMMON PERCENT OF OUTSTANDING
STOCKHOLDER NAME: STOCK HELD COMMON STOCK HELD:
----------------------------------------------- --------------------------- -------------------------
Maxtor Corporation 1,600,000 20.2%
CP Acquisition, L.P. No. 4A 1,676,440 21.1%
CP Acquisition, L.P. No. 4B 926,790 11.7%
Capital Partners, Inc. 3,612 --
FGS, Inc. 293,781 03.7%
TOTAL 4,500,623 56.7%
85
EXHIBIT G
COMPANY TAX REPRESENTATION LETTER
86
TAX REPRESENTATION LETTER
ARTECON, INC.
_____________, 1998
Xxxxxx Godward LLP Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
One Maritime Plaza, 20th Floor 000 Xxxx Xxxx Xxxx
Xxx Xxxxxxxxx, XX 00000-0000 Xxxx Xxxx, XX 00000
RE: MERGER PURSUANT TO THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF DECEMBER 22, 1997, AMONG STORAGE DIMENSIONS, INC., A
DELAWARE CORPORATION ("PARENT"), STORAGE ACQUISITION CORP., A CALIFORNIA
CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF PARENT ("MERGER SUB"), AND
ARTECON, INC., A CALIFORNIA CORPORATION (THE "COMPANY")
(THE "REORGANIZATION AGREEMENT").
Ladies and Gentlemen:
This letter is supplied to you in connection with your rendering of
opinions regarding certain federal income tax consequences of the Merger. Unless
otherwise indicated, capitalized terms not defined herein have the meanings set
forth in the Reorganization Agreement.
After consulting with its counsel and auditors regarding the meaning of
and factual support for the following representations, the undersigned hereby
certifies and represents that the following statements are accurate as of the
Effective Time:
1. Pursuant to the terms of the Reorganization Agreement and the
Certificate of Merger to be filed by Merger Sub and the Company with the
Secretary of State of the State of California on the Closing Date, Merger Sub
will merge with and into the Company, and the Company will acquire (by operation
of law) all of the assets and liabilities of Merger Sub. Specifically, at least
ninety percent (90%) of the fair market value of the net assets and at least
seventy percent (70%) of the fair market value of the gross assets held by the
Company immediately prior to the Merger will continue to be held by the Company
immediately after the Merger. For the purpose of determining the percentage of
the Company's net and gross assets held by the Company immediately after the
Merger, the following assets will be treated as property held by the Company
immediately prior but not subsequent to the Merger: (a) assets disposed of by
the Company prior to or subsequent to the Merger and in contemplation thereof
(including, without limitation, any asset disposed of by the Company, other than
in the ordinary course of business, pursuant to a plan or intent existing during
the period beginning with the commencement of negotiations (whether formal or
informal) with Parent regarding the Merger and ending at the Effective Time (the
"Pre-Merger Period")); (b) assets used by the Company to pay the shareholders of
the Company in connection with the exercise of dissenters' rights or to
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pay other expenses or liabilities incurred in connection with the Merger; and
(c) assets used to make distribution, redemption or other payments in respect of
shares of Company Common Stock or Company Preferred Stock (collectively,
"Company Stock") or rights to acquire such stock (including payments treated as
such for tax purposes) that are made in contemplation of the Merger or that are
related thereto.
2. Other than in the ordinary course of business or pursuant to its
obligations under the Reorganization Agreement, the Company has made no transfer
of any of its assets (including any distribution of assets with respect to, or
in redemption of, stock) (a) in contemplation of the Merger or (b) during the
Pre-Merger Period.
3. The Company's principal reasons for participating in the Merger are
bona fide business purposes not related to taxes.
4. At the Effective Time, the Company will have no outstanding equity
interests other than those disclosed in Section 2.3 of the Reorganization
Agreement. At the Effective Time, the Company will have no outstanding warrants,
options, or convertible securities or any other type of right outstanding
pursuant to which any person could acquire shares of Company Stock, or any other
equity interest in the Company other than those disclosed in Section 2.3 of the
Reorganization Agreement or the Company Disclosure Schedule with respect
thereto.
5. Upon consummation of the Merger, shares of Company Stock representing
"Control" of the Company will be exchanged solely for shares of Parent Common
Stock and Parent Preferred Stock (collectively, "Parent Stock"). At the
Effective Time, there will exist no rights to acquire Company Stock or to vote
(or restrict or otherwise control the vote of) shares of Company Stock which, if
exercised, would affect Parent's acquisition and retention of Control of the
Company. (For purposes of the preceding sentence, shares of Company Stock
exchanged in the Merger for cash and other property (including, without
limitation, cash paid to shareholders of the Company in connection with the
exercise of dissenters' rights or in lieu of fractional shares of Parent Stock
will be treated as shares of Company Stock outstanding at the Effective Time but
not exchanged for shares of Parent Stock.) As used in this letter, "Control" of
a corporation shall consist of direct ownership of shares of stock possessing at
least eighty percent (80%) of the total combined voting power of shares of all
classes of stock of such corporation entitled to vote and at least eighty
percent (80%) of the total number of shares of all other classes of stock of
such corporation. For purposes of determining Control, a person shall not be
considered to own shares of voting stock if rights to vote such shares (or
rights to restrict or otherwise control the voting of such shares) are held by a
third party (including a voting trust) other than an agent of such person.
6. The total fair market value of all consideration other than shares of
Parent Stock to be received by shareholders of the Company in the Merger
(including, without limitation, cash paid to shareholders of the Company in
connection with the exercise of dissenters' rights or in lieu of fractional
shares of Parent Stock) will be less than ten percent (10%) of the aggregate
fair market value of all Company Common Stock outstanding immediately prior to
the Merger and
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will be less than ten percent (10%) of the aggregate fair market value of all
Company Preferred Stock outstanding immediately prior to the Merger.
7. The Company has no plan or intention to issue additional shares of
capital stock after the Merger, or take any other action that would result in
Parent not being in Control of the Company.
8. Except for transfers described in both Section 368(a)(2)(C) of the
Code and Treasury Regulation Section 1.368-2(j)(4), the Company has no plan or
intention to sell or otherwise dispose of any of its assets or of any of the
assets acquired from Merger Sub in the Merger except for dispositions made in
the ordinary course of business.
9. The Company intends to continue its historic business or use a
significant portion of its historic business assets in a business following the
Merger.
10. The liabilities of the Company have been incurred by the Company in
the ordinary course of its business.
11. The fair market value of the Company's assets will, at the Effective
Time, exceed the aggregate liabilities of the Company plus the amount of
liabilities, if any, to which such assets are subject.
12. The Company is not, and will not be at the Effective Time, an
"investment company" within the meaning of Section 368(a)(2)(F)(iii) and (iv) of
the Code.
13. The Company is not, and will not be at the Effective Time, 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.
14. After due inquiry with its officers and directors, the Company has
no knowledge of, and believes that there does not exist, any plan or intention
on the part of the shareholders (or any shareholder) of the Company to engage in
a sale, exchange, transfer, distribution, pledge, disposition or any other
transaction which would result in a reduction in the risk of ownership or a
direct or indirect disposition (a "Sale") of shares of Parent Stock to be
received in the Merger that would reduce the Company's shareholders' ownership
of such Parent Stock to a number of shares having an aggregate fair market
value, as of the Effective Time, of less than fifty percent (50%) of the
aggregate fair market value of the Company Stock outstanding immediately prior
to the consummation of the Merger. (For purposes of the preceding sentence,
shares of Company Stock (a) with respect to which a shareholder of the Company
receives consideration in the Merger other than shares of Parent Stock
(including, without limitation, cash received in connection with the exercise of
dissenters' rights or in lieu of fractional shares of Parent Stock) and/or (b)
with respect to which a Sale occurs prior to and in contemplation of the Merger,
shall be considered outstanding shares of Company Stock, as the case may be,
exchanged for shares of Parent Stock in the Merger and then disposed of pursuant
to a plan.)
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15. Except with respect to (a) payments of cash to shareholders of the
Company in connection with the exercise of dissenters' rights, and (b) payments
of cash to shareholders of the Company in lieu of fractional shares of Parent
Stock, one hundred percent (100%) of the Company Stock outstanding immediately
prior to the Merger will be exchanged solely for shares of Parent Stock. Thus,
except as set forth in the preceding sentence, the Company intends that no
consideration be paid or received (directly or indirectly, actually or
constructively) for shares of Company Stock other than shares of Parent Stock.
16. The fair market value of the shares of Parent Stock received by each
shareholder of the Company will be approximately equal to the fair market value
of the shares of Company Stock surrendered in exchange therefor and the
aggregate consideration received by shareholders of the Company in exchange for
their shares of Company Stock will be approximately equal to the fair market
value of all of the outstanding shares of Company Stock immediately prior to the
Merger.
17. Each of Merger Sub, Parent, the Company and each shareholder of the
Company will pay separately his, her or its own expenses relating to the Merger.
18. There is no intercorporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired or
will be settled at a discount as a result of the Merger; Parent will assume no
liabilities of the Company or any shareholder of the Company in connection with
the Merger.
19. The terms of the Reorganization Agreement and of the other
agreements relating thereto are the product of arm's length negotiations.
20. None of the compensation received or to be received by any
shareholder-employee of the Company will be separate consideration for, or
allocable to, any of such shareholder-employee's shares of Company Stock, none
of the shares of Parent Stock to be received by any shareholder-employee of the
Company in the Merger will be separate consideration for, or allocable to, any
employment agreement or any covenant not to compete; and the compensation paid
or to be paid to any shareholder-employee of the Company will be for services
actually rendered and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
21. With respect to each instance, if any, in which shares of Company
Stock have been purchased by a stockholder of Parent (a "Stockholder") during
the Pre-Merger Period (a "Stock Purchase"): (a) to the best knowledge of the
Company, (i) the Stock Purchase was made by such Stockholder on its own behalf,
rather than as a representative, or for the benefit, of Parent, (ii) the Stock
Purchase was entered into solely to satisfy the separate interests of such
Stockholder and the seller, and (iii) the purchase price paid by such
Stockholder pursuant to the Stock Purchase was the product of arm's length
negotiations; and (b) the Stock Purchase was not a formal or informal condition
to the consummation of the Merger.
22. The Company is authorized to make all of the representations set
forth herein.
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The undersigned recognizes that (i) your opinions will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Reorganization Agreement and the various other
documents related thereto, and (ii) your opinions will be subject to certain
limitations and qualifications including that they may not be relied upon if any
such representations or warranties are not accurate or if any of such covenants
or obligations are not satisfied in all material respects.
Notwithstanding anything herein to the contrary, the undersigned makes
no representations regarding any actions or conduct of the Company pursuant to
Parent's exercise of control over the Company after the Merger.
The undersigned recognizes that your opinions will not address any tax
consequence of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Very truly yours,
ARTECON, INC.,
A CALIFORNIA CORPORATION
By: __________________________________
Name: ________________________________
Title: _______________________________
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EXHIBIT H
COMPANY CONTINUITY OF INTEREST CERTIFICATE
92
CONTINUITY OF INTEREST CERTIFICATE
_______________________________________ ("Shareholder") is aware that,
pursuant to that certain Agreement and Plan of Merger and Reorganization (the
"Reorganization Agreement") dated as of December __, 1997 among STORAGE
DIMENSIONS, INC., a Delaware corporation ("Parent"), STORAGE ACQUISITION CORP.,
a California corporation and a wholly owned subsidiary of Parent ("Merger Sub"),
and ARTECON, INC., a California corporation (the "Company"), it is contemplated
that Merger Sub will be merged into the Company (the contemplated merger of
Merger Sub into the Company being referred to in this Certificate as the
"Merger"). As a result of the Merger, it is contemplated that holders of the
common stock of the Company ("Company Common Stock") will receive shares of
common stock of Parent ("Parent Common Stock") in exchange for their shares of
Company Common Stock, that holders of the preferred stock of the Company
("Company Preferred Stock") will receive shares of "qualifying" preferred stock
of Parent ("Parent Preferred Stock"), and that the Company will become a wholly
owned subsidiary of Parent.
1. Shareholder represents, warrants and certifies to Parent, Merger Sub
and the Company as follows:
(a) Shareholder currently is the holder of the number of shares of
Company Common Stock and Company Preferred Stock set forth beneath Shareholder's
signature on the signature page hereof (the "Shares"), and did not acquire any
of the Shares in contemplation of the Merger.
(b) Shareholder has not engaged in a Sale (as defined below) of any
shares of Company capital stock in contemplation of the Merger.
(c) Shareholder has no plan or intention to engage in a sale,
exchange, transfer, distribution, redemption or reduction in any way of
Shareholder's risk of ownership (by short sale or otherwise), or other
disposition, directly or indirectly (such actions being collectively referred to
herein as a "Sale") of more than fifty percent (50%) of the shares of Parent
Common Stock and Parent Preferred Stock (collectively, "Parent Stock") to be
received by Shareholder in the Merger. (For purposes of the preceding sentence,
shares of Company capital stock (or the portion thereof) (i) with respect to
which Shareholder will receive consideration in the Merger other than shares of
Parent Stock (including cash to be received in lieu of any fractional share of
Parent Stock) and/or (ii) with respect to which a Sale (A) occurred in
contemplation of the Merger or (B) will occur prior to the Merger, shall be
considered shares of Company Common Stock or Company Preferred Stock, as the
case may be, exchanged for shares of Parent Stock in the Merger and then
disposed of pursuant to a plan.)
(d) Shareholder will not exercise dissenters' rights in connection
with the Merger.
93
(e) Shareholder is not aware of, or participating in, any plan or
intention on the part of the shareholders of the Company to engage in a Sale or
Sales of more than fifty percent (50%) of the shares of Parent Stock to be
received in the Merger. (For purposes of the preceding sentence, shares of
Company capital stock (or the portion thereof) (i) with respect to which a
shareholder of the Company receives consideration in the Merger other than
shares of Parent Stock (including, without limitation, cash received pursuant to
the exercise of dissenters' rights or in lieu of a fractional share of Parent
Stock) or (ii) with respect to which a Sale occurs prior to and in contemplation
of the Merger, shall be considered shares of outstanding Company Common Stock or
Company Preferred Stock, as the case may be, exchanged for shares of Parent
Stock in the Merger and then disposed of pursuant to a plan.)
(f) Except to the extent written notification to the contrary is
received by Parent and the Company from Shareholder prior to the consummation of
the Merger, the representations, warranties and certifications contained herein
shall be accurate at all times from the date hereof through the date on which
the Merger is consummated.
(g) Shareholder has consulted with such legal counsel and financial
advisors as Shareholder has deemed appropriate in connection with the execution
of this Certificate.
2. Shareholder understands that Parent, Merger Sub, the Company, and the
Company's shareholders, as well as legal counsel to Parent, Merger Sub and the
Company (in connection with rendering their opinions that the Merger will be a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended) will be relying on the accuracy of the
representations, warranties and certifications contained herein.
[Remainder of this page intentionally left blank.]
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Shareholder has executed this Continuity of Interest Certificate on
_____________, 199__.
Signature: ______________________________
Number of shares of Company Common
Stock owned: __________
Number of shares of Company Preferred
Stock owned: __________
[Signature Page to Continuity of Interest Certificate]
95
EXHIBIT I
FORM OF AFFILIATE AGREEMENT
96
AFFILIATE AGREEMENT
This Affiliate Agreement (this "Agreement") is entered into as of
December 22, 1997, by and between STORAGE DIMENSIONS, INC., a Delaware
corporation ("Parent"), and the undersigned affiliate ("Affiliate") of ARTECON,
INC., a California corporation (the "Company").
RECITALS
A. Pursuant to that certain Agreement and Plan of Merger and
Reorganization, dated as of December 22, 1997 (the "Merger Agreement"), by and
among Parent, STORAGE ACQUISITION CORP., a California corporation and wholly
owned subsidiary of Parent ("Merger Sub"), and the Company, Merger Sub will
merge with and into the Company (the "Merger").
B. As a result of the Merger and certain related transactions, the
shareholders of the Company will receive shares of Common Stock of Parent (the
"Shares"). Affiliate understands that he may, upon the effectiveness of the
Merger, be deemed (but does not hereby admit to be) an "affiliate" of Parent as
such term is defined in paragraphs (c) and (d) of Rule 145 ("Rule 145") under
the Securities Act of 1933, as amended (the "Act"), and as such, Affiliate may
only transfer, sell or dispose of the Shares in accordance with Rule 145 and
this Agreement.
C. Affiliate understands that the representations, warranties and
covenants set forth herein will be relied upon by Parent, Merger Sub and the
Company, and their respective counsel and accounting firms.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. Capitalized terms used in this Agreement and not otherwise defined shall have
the meanings given them in the Merger Agreement.
2. Affiliate represents, warrants, understands and agrees that:
(a) Affiliate has full power and capacity to execute and deliver this
Agreement and to make the representations, warranties and agreements herein and
to perform his obligations hereunder.
(b) Affiliate has carefully read this Agreement and has discussed with
counsel, to the extent Affiliate felt necessary, the requirements, limitations
and restrictions on his ability to sell, transfer or otherwise dispose of the
Shares he may receive in connection
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with the Merger and fully understands the requirements, limitations and
restrictions this Agreement places upon Affiliate's ability to transfer, sell or
otherwise dispose of such Shares.
(c) If Affiliate has executed a Continuity of Interest Certificate and/or any
other agreement in connection herewith (the "Other Agreements"), he understands
and agrees to abide by all restrictions contained therein.
(d) Affiliate will not offer, sell, pledge, transfer or otherwise dispose of
any of the Shares held by Affiliate unless at such time either (i) such transfer
shall be in conformity with the provisions of Rule 145(d) (or any successor rule
then in effect), (ii) Affiliate shall have furnished to Parent an opinion of
counsel reasonably satisfactory to Parent, or a no action letter from the
Securities and Exchange Commission, to the effect that no registration under the
Act would be required in connection with the proposed offer, sale, pledge,
transfer or other disposition or (iii) a registration statement under the Act
covering the proposed offer, sale, pledge, transfer or other disposition shall
be effective under the Act.
3. Parent will use commercially reasonable efforts to comply with the public
reporting requirements set forth in Rule 144(c) under the Securities Act.
4. Affiliate understands and agrees Parent is under no obligation to register
the sale, transfer or other disposition of the Shares by the Affiliate or to
take any other action necessary in order to make compliance with an exemption
from registration available.
5. Affiliate further represents that he is the beneficial owner of the Company
Common Stock and Company Preferred Stock set forth below, or, if not set forth
below, that he is not the beneficial owner of any Company Common Stock or
Company Preferred Stock, as applicable.
6. Each party hereto acknowledges that (i) it will be impossible to measure in
money the damage to Parent if Affiliate fails to comply with any of the
obligations imposed by this Agreement, (ii) every such obligation is material
and (iii) in the event of any such failure, Parent will not have an adequate
remedy at law or damages and, accordingly, each party hereto agrees that
injunctive relief or other equitable remedy, in addition to remedies at law or
damages, is an appropriate remedy for any such failure.
7. This Agreement shall be deemed a contract made under, and for all purposes
shall be construed in accordance with, the laws of the State of California.
8. This Agreement shall be binding upon, enforceable by and inure to the benefit
of the parties named herein and their respective successors. This Agreement may
not be
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assigned by any party without the prior written consent of Parent. Any attempted
assignment not in compliance with this Section 8 shall be void and have no
effect.
9. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same agreement.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
STORAGE DIMENSIONS, INC.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
AFFILIATE
_________________________________________
Print Name:
Address: ________________________________
________________________________
Shares of Company Common Stock
Beneficially Owned:
Shares of Company Preferred Stock
Beneficially Owned: _________________
{Signature Page to Affiliate Agreement]
100
EXHIBIT J
PARENT TAX REPRESENTATION LETTER
101
TAX REPRESENTATION LETTER
OF STORAGE DIMENSIONS, INC. AND
STORAGE ACQUISITION CORP.
_________________, 1998
Xxxxxx Godward LLP Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
One Maritime Plaza, 20th Floor 000 Xxxx Xxxx Xxxx
Xxx Xxxxxxxxx, XX 00000-0000 Xxxx Xxxx, XX 00000
RE: MERGER PURSUANT TO THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF DECEMBER 22, 1997, AMONG STORAGE DIMENSIONS, INC., A
DELAWARE CORPORATION ("PARENT"), STORAGE ACQUISITION CORP., A CALIFORNIA
CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF PARENT ("MERGER SUB"), AND
ARTECON, INC., A CALIFORNIA CORPORATION (THE "COMPANY")
(THE "REORGANIZATION AGREEMENT").
Ladies and Gentlemen:
This letter is supplied to you in connection with your rendering of
opinions regarding certain federal income tax consequences of the Merger. Unless
otherwise indicated, capitalized terms not defined herein have the meanings set
forth in the Reorganization Agreement.
After consulting with their counsel and auditors regarding the meaning
of and factual support for the following representations, the undersigned hereby
certify and represent to you that the following statements are accurate as of
the Effective Time:
1. Pursuant to the terms of the Reorganization Agreement and the
Certificate of Merger to be filed by Merger Sub and the Company with the
Secretary of State of the State of California on the Closing Date, Merger Sub
will merge with and into Company, and the Company will acquire (by operation of
law) all of the assets and liabilities of Merger Sub. Specifically, the assets
transferred to the Company pursuant to the Merger will represent at least ninety
percent (90%) of the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets held by Merger Sub
immediately prior to the Merger. In addition, at least ninety percent (90%) of
the fair market value of the net assets and at least seventy percent (70%) of
the fair market value of the gross assets held by the Company immediately prior
to the Merger will continue to be held by the Company immediately after the
Merger. For the purpose of determining the percentage of the Company's and
Merger Sub's net and gross assets held by the Company immediately after the
Merger, the following assets will be treated as property held by the Company or
Merger Sub, as the case may be, immediately prior
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but not subsequent to the Merger: (a) assets disposed of by the Company or
Merger Sub (other than assets transferred from Merger Sub to the Company in the
Merger) prior to or subsequent to the Merger and in contemplation thereof
(including, without limitation, any asset disposed of by the Company, other than
in the ordinary course of business, pursuant to a plan or intent existing during
the period beginning with the commencement of negotiations (whether formal or
informal) with Parent regarding the Merger and ending at the Effective Time (the
"Pre-Merger Period")); (b) assets used by the Company to pay shareholders of the
Company in connection with the exercise of dissenters' rights or to pay other
expenses or liabilities incurred in connection with the Merger; and (c) assets
used to make distribution, redemption or other payments in respect of stock of
the Company or rights to acquire such stock (including payments treated as such
for tax purposes) that are made in contemplation of the Merger or that are
related thereto.
2. Parent's principal reasons for participating in the Merger are bona
fide business purposes not related to taxes.
3. Prior to the Merger, Parent will be in "Control" of Merger Sub. As
used in this letter, "Control" of a corporation shall consist of direct
ownership of shares of stock possessing at least eighty percent (80%) of the
total combined voting power of all classes of stock of such corporation entitled
to vote and at least eighty percent (80%) of the total number of shares of all
other classes of stock of such corporation. For purposes of determining Control,
a person shall not be considered to own shares of voting stock if rights to vote
such shares (or rights to restrict or otherwise control the voting of such
shares) are held by a third party (including a voting trust) other than an agent
of such person.
4. In the Merger, stock of the Company representing Control of the
Company will be exchanged solely for shares of voting stock of Parent. For
purposes of this paragraph, stock of the Company exchanged in the Merger for
cash and other property (including, without limitation, cash paid to
shareholders of the Company in connection with the exercise of dissenters'
rights or in lieu of fractional shares of Parent Common Stock or Parent
Preferred Stock (collectively, "Parent Stock")) will be treated as shares of
stock of the Company outstanding at the Effective Time but not exchanged for
Parent Stock.
5. Parent has no plan or intention to cause Company to issue additional
shares of capital stock after the Merger, or take any other action that would
result in Parent not being in Control of Company.
6. Other than with respect to shares to be acquired from individuals
whose employment with Parent or Company is terminated in the ordinary course of
business, Parent has no plan or intention to reacquire any shares of Parent
Stock to be issued pursuant to the Merger.
7. Except for transfers described in both Section 368(a)(2)(C) of the
Code and Treasury Regulation Section 1.368-2(j)(4), Parent has no plan or
intention to: (a) liquidate the Company; (b) merge the Company with or into
another corporation, including Parent or its affiliates; (c) sell, distribute or
otherwise dispose of any capital stock of the Company; (d) cause
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the Company to sell or otherwise dispose of any of its assets or of any assets
acquired from Merger Sub, except for dispositions made in the ordinary course of
business.
8. Following the Merger, Parent intends that the Company will continue
the Company's historic business or use a significant portion of the Company's
historic business assets in a business.
9. In the Merger, Merger Sub will have no liabilities assumed by the
Company and will not transfer to the Company any assets subject to liabilities,
except to the extent incurred in connection with the transactions contemplated
by the Reorganization Agreement.
10. During the past five (5) years, none of the outstanding shares of
capital stock of the Company, including the right to acquire or vote any such
shares have, directly or indirectly, been owned by Parent or affiliates of
Parent;
11. Neither Parent nor Merger Sub is an investment company within the
meaning of Section 368(a)(2)(F)(iii) and (iv) of the Code.
12. No shareholder of the Company is acting as an agent for Parent in
connection with the Merger or the approval thereof. Parent will not reimburse
any shareholder of the Company for any shares of Company Common Stock or Company
Preferred Stock (collectively, "Company Stock") such shareholder may have
purchased or for other obligations such shareholder may have incurred.
13. Neither Parent nor Merger Sub is, or will be at the Effective Time,
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.
14. Merger Sub and Parent have no knowledge of, and believe that there
does not exist, any plan or intention on the part of the shareholders (or any
shareholder) of the Company to engage in a sale, exchange, transfer,
distribution, pledge, disposition or any other transaction which would result in
a reduction in the risk of ownership or a direct or indirect disposition (a
"Sale") of shares of Parent Stock to be received in the Merger that would reduce
the Company's shareholders' ownership of such Parent Stock to a number of shares
having an aggregate fair market value, as of the Effective Time, of less than
fifty percent (50%) of the aggregate fair market value of all of the shares of
Company Stock outstanding immediately prior to the consummation of the Merger.
(For purposes of the preceding sentence, shares of Company capital stock (or the
portion thereof) (a) with respect to which a shareholder of the Company receives
consideration in the Merger other than shares of Parent Stock (including,
without limitation, cash received pursuant to the exercise of dissenters' rights
or in lieu of fractional shares of Parent Stock) and/or (b) with respect to
which a Sale occurs prior to and in contemplation of the Merger, shall be
considered shares of Company Stock exchanged for shares of Parent Stock in the
Merger and then disposed of pursuant to a plan).
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15. Except with respect to: (a) payments of cash to shareholders of the
Company in connection with the exercise of dissenters' rights and (b) payments
of cash to shareholders of the Company in lieu of fractional shares of Parent
Stock, one hundred percent (100%) of the Company Stock outstanding immediately
prior to the Merger will be exchanged solely for shares of Parent Stock. Thus,
except as set forth in the preceding sentence, Merger Sub and Parent intend that
no consideration be paid or received (directly or indirectly, actually or
constructively) for shares of Company Stock other than shares of Parent Stock.
16. The total fair market value of all consideration other than Parent
Stock received by shareholders of the Company in the Merger in exchange for
their stock of the Company (including, without limitation, cash paid to
shareholders of the Company in connection with the exercise of dissenters'
rights) will be less than ten percent (10%) of the aggregate fair market value
of all Company Common Stock outstanding immediately prior to the Merger and will
be less than ten percent (10%) of the aggregate fair market value of all Company
Preferred Stock outstanding immediately prior to the Merger.
17. The fair market value of the shares of Parent Stock received by each
shareholder of the Company will be approximately equal to the fair market value
of the shares of Company Stock surrendered in exchange therefor and the
aggregate consideration received by the shareholders of the Company in exchange
for their shares of Company Stock will be approximately equal to the fair market
value of all of the outstanding shares of Company Stock immediately prior to the
Merger.
18. Each of Merger Sub, Parent, the Company and each shareholder of the
Company will pay separately his, her or its own expenses relating to the Merger.
19. There is no intercorporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired or
will be settled at a discount as a result of the Merger, and Parent will assume
no liabilities of the Company or any shareholder of the Company in connection
with the Merger.
20. The terms of the Reorganization Agreement and of the other
agreements relating thereto are the product of arm's length negotiations.
21. None of the compensation, if any, received or to be received from
Parent or Merger Sub by any shareholder-employee of the Company will be separate
consideration for, or allocable to, any of such shareholder-employee's shares of
Company Stock and the compensation, if any, paid or to be paid by Parent or
Merger Sub to any shareholder-employee of the Company will be for services
actually rendered and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
22. With respect to each instance, if any, in which shares of Company
Stock have been purchased by a stockholder of Parent (a "Stockholder") during
the Pre-Merger Period (a "Stock Purchase"): (i) the Stock Purchase was not made
by such Stockholder as a representative, or for the benefit, of Parent; (ii) the
purchase price paid by such Stockholder pursuant to the
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Stock Purchase was the product of arm's length negotiations, was funded by such
Stockholder's own assets and was not advanced, and will not be reimbursed,
either directly or indirectly, by Parent; (iii) at no time was such Stockholder
or any other party required or obligated to surrender to Parent the shares of
Company Stock acquired in the Stock Purchase, and neither such Stockholder nor
any other party will be required to surrender to Parent the shares of Parent
Stock for which such shares of Company Stock will be exchanged in the Merger;
and (iv) the Stock Purchase was not a formal or informal condition to the
consummation of the Merger and was entered into solely to satisfy the separate
interests of such Stockholder and the seller.
23. The Parent Preferred Stock to be issued by Parent to the Company
shareholders in the Merger in exchange for their shares of Company Preferred
Stock will not be preferred stock where: (i) either the holder of such stock has
the right to require Parent or a related person to redeem or purchase the stock;
(ii) Parent or a related person has the right or is required to redeem or
purchase such stock; or (iii) the dividend rate on such stock varies in whole or
in part (directly or indirectly) with reference to interest rates, commodity
prices, or other similar indices.
24. Parent and Merger Sub are authorized to make all of the
representations set forth herein.
The undersigned recognize that (i) your opinions will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Reorganization Agreement and the various other
documents related thereto, and (ii) your opinions will be subject to certain
limitations and qualifications including that they may not be relied upon if any
such representations or warranties are not accurate or if any of such covenants
or obligations are not satisfied in all material respects.
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The undersigned recognize that your opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Very truly yours,
STORAGE DIMENSIONS, INC.
A DELAWARE CORPORATION
By: ___________________________________
Name: _________________________________
Title: ________________________________
STORAGE ACQUISITION CORP.,
A CALIFORNIA CORPORATION
By: ___________________________________
Name: _________________________________
Title: ________________________________
107
EXHIBIT K
CAPITAL PARTNERS STANDSTILL AGREEMENT
108
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT is entered into as of December 22, 1997 (the
"Effective Date") by and among ARTECON, INC., a California corporation
("Company"), STORAGE DIMENSIONS, INC., a Delaware corporation ("Parent"), and CP
ACQUISITION, L.P. NO. 4A, a Delaware limited partnership, CP ACQUISITION, L.P.
NO. 4B, a Delaware limited partnership, CAPITAL PARTNERS, INC., a Connecticut
corporation, and FGS, INC., a Delaware corporation (each a "Stockholder" and
collectively the "Stockholders").
RECITALS
A. Company, Parent and Storage Acquisition Corp., a California
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), are entering
into an Agreement and Plan of Merger and Reorganization of even date herewith
(the "Merger Agreement"); capitalized terms used but not otherwise defined in
this Agreement shall have the meanings assigned to such terms in the Merger
Agreement, which provides for, among other things, the Merger on the terms set
forth therein.
B. As of the date hereof, the Stockholders are the record and beneficial
holders of an aggregate of 2,900,623 shares of Common Stock of Parent, which
shares represent all of the Parent Securities (as defined herein) held of record
or beneficially by the Stockholders and their affiliates.
C. As a condition to the willingness of the Company to enter into the
Merger Agreement, the Company has required that each Stockholder agree, and in
order to induce the Company to enter into the Merger Agreement each Stockholder
has agreed, to enter into and be bound by the terms of this Agreement.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
1.1 "Parent Securities" shall mean all shares of any class of capital
stock of Parent and any other Parent securities entitled to vote generally for
the election of directors or on any other matter submitted to a vote of
securityholders, outstanding before and/or after the Merger, and any rights to
acquire Parent Securities or other Parent Securities or rights convertible into
or exchangeable or exercisable for the purchase of Parent Common Stock or such
other Parent voting securities.
1.2 "affiliate" shall mean present or future affiliates within the
meaning of Rule 405 of the Securities Act of 1933, as amended (the "Securities
Act").
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1.3 "beneficially owned" shall have the meaning set forth in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended.
SECTION 2. STANDSTILL BY STOCKHOLDERS
2.1 RESTRICTIONS ON ACTIONS OF PARENT SECURITIES. Except as permitted by
Section 2.2 and subject to the terms of this Agreement, each Stockholder agrees
that, from the date hereof until the earlier to occur of (i) the date that is
five (5) years from the Closing Date, and (ii) the date on which the
Stockholders and their affiliates beneficially hold in the aggregate less than
five percent (5%) of the outstanding voting stock of Parent (such earlier date
being referred to as the "Termination Date"), it shall not (acting individually
or in conjunction with one or more other Stockholders) nor shall it permit any
of its affiliates to:
(a) acquire or offer to acquire or agree to acquire, directly or
indirectly, by purchase or otherwise, any Parent Securities not already owned,
beneficially or of record, by the Stockholders as of the date hereof, except for
Parent Securities issued to the Stockholders in connection with any stock split
or other reclassification affecting the outstanding securities of Parent or
stock dividend or other pro rata distribution by Parent to holders of its
outstanding securities;
(b) solicit proxies or become a "participant" in a "solicitation"
(as such terms are defined in Regulation 14A under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) with respect to any matter involving
Parent or otherwise initiate, propose or solicit any stockholder, or induce any
other person to initiate any stockholder proposal or a tender offer for shares
of Parent Securities or any change of control of Parent, or for the purpose of
convening a stockholders' meeting of Parent;
(c) deposit any Parent Securities in any voting trust or subject
them to any voting agreement or other agreement of similar effect (other than
the Voting Agreements entered into in connection with the Merger Agreement);
(d) join any partnership, limited partnership, syndicate, or other
group for the purpose of acquiring, holding or disposing of Parent Securities
within the meaning of Section 13(d) of the Exchange Act;
(e) acquire or offer to acquire or hold, or agree to acquire or
hold, directly or indirectly or permit any person or entity under any
Stockholder's control to acquire, offer to acquire or hold, or agree to acquire
or hold, directly or indirectly, by purchase or otherwise, more than five
percent (5%) of any class of equity securities of any entity which is the
beneficial owner of more than five percent (5%) of the outstanding voting power
of Parent Securities; or
(f) otherwise take any action individually or jointly with any
partnership, limited partnership, syndicate, or other group or assist any other
person, corporation, entity or group in taking any action it could not
individually take under this Agreement.
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110
2.2 PERMITTED ACQUISITIONS.
(a) Notwithstanding the limitations imposed on the Stockholders and
their affiliates under Section 2.1 of this Agreement, one or more Stockholders
or their affiliates may acquire from time to time up to that number of Parent
Securities such that immediately following each such acquisition, the total
number of Parent Securities owned beneficially or of record by all Stockholders
and all of their respective affiliates together does not exceed that percentage
of the Common Stock of Parent (the "Maximum Percentage"), calculated after
giving pro forma effect to the exercise of all outstanding options and warrants
and the conversion of all outstanding securities convertible into Common Stock
of Parent, held by all Stockholders and their affiliates immediately after the
Effective Time. Any Stockholder or its affiliates that acquire shares of Parent
Securities under this Section 2 shall, promptly following such acquisition,
provide written notice of such acquisition to Parent or, if such acquisition is
prior to the Closing Date, to the Company.
(b) If, as a result of any purchase or other acquisition of
securities of Parent other than pursuant to the provisions set forth above in
Section 2(a), any Stockholder or affiliate thereof shall at any time own any
Parent Securities such that the total number of Parent Securities owned by all
Stockholders and their affiliates together exceeds the maximum percentage
permitted by this Section 2 (such excess securities so purchased or otherwise
acquired shall be referred to as "Prohibited Securities"), subject to the
provisions of all applicable securities laws, such Stockholder shall sell as
promptly as practicable Parent Securities having voting power at least equal to
the voting power of the Prohibited Securities. Prior to such sale, each
Stockholder agrees, and hereby grants Parent its irrevocable proxy, to vote the
Prohibited Securities in accordance with the recommendation of the Parent's
management in any matter submitted to a vote of the stockholders of Parent
(provided, however, that the foregoing paragraph shall not be deemed to limit
Parent's remedies in the event that Prohibited Securities were acquired in
violation of this Section 2). Notwithstanding the foregoing, if the aggregate
beneficial ownership of the Stockholders and their affiliates exceeds the
Maximum Percentage solely as a result of any stock repurchase or other action
effected by Parent or the Company which has the effect of reducing the number of
outstanding Parent capital stock, then securities of Parent held by the
Stockholders shall not be deemed to be Prohibited Securities and the provisions
of this Section 2.2(b) shall not be applicable to any such excess holdings.
SECTION 3. WAIVER OF RESTRICTIONS. The provisions of this Agreement may be
waived with respect to any proposed acquisition or transfer of Parent Securities
solely (i) after the Closing Date by Parent and (ii) prior to the Closing Date
by Parent and the Company, upon duly authorized action of their respective
Boards of Directors.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Each Stockholder hereby represents and warrants to Parent and the
Company as follows:
4.1 DUE AUTHORIZATION. Each Stockholder has full power and capacity to
execute and deliver this Agreement and to make the representations, warranties
and agreements herein
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and to perform such Stockholder's obligations hereunder. The Stockholders that
are parties to this Agreement represent all of the current affiliates of Capital
Partners, Inc. who own, beneficially or of record, Parent Securities.
4.2 ACKNOWLEDGMENT. Each Stockholder has carefully read this Agreement
and has discussed with counsel, to the extent such Stockholder felt necessary,
the requirements, limitations and restrictions on its ability to sell, transfer
or otherwise dispose of its Parent Securities and fully understands the
requirements, limitations and restrictions this Agreement places upon such
Stockholder's ability to transfer, sell or otherwise dispose of such Parent
Securities.
4.3 NO CONFLICTS. The execution and delivery of this Agreement by
Stockholder do not, and the performance of this Agreement by Stockholder will
not: (i) conflict with or violate any current law, order, decree or judgment
applicable to Stockholder or its affiliates or by which Stockholder, its
affiliates or any of their properties is bound or affected; or (ii) result in
any breach of or constitute a default (with notice or lapse of time, or both)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of any indenture or other loan document provisions or other
Contract, license, franchise, permit or other instrument or obligation to which
such Stockholder or any of its affiliates is a party or by which Stockholder,
its affiliate or any of their properties is bound or affected.
4.4 TITLE TO PARENT SECURITIES. Each Stockholder further represents that
it is the beneficial owner of the number of shares of Parent Securities set
forth below, which Parent Securities represent all Parent Securities owned
beneficially or of record by such Stockholder.
4.5 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Agreement are accurate in all respects as of the date of this
Agreement, will be accurate in all respects at all times through the
consummation of the Merger, and will be accurate in all material respects as of
the date of the consummation of the Merger as if made on that date.
Notwithstanding the previous sentence, the representations and warranties
contained in this Agreement shall expire on the Closing Date.
SECTION 5. MISCELLANEOUS
5.1 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such costs and expenses.
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5.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given by delivery in person, by facsimile,
cable, telegram, telex or other standard form of telecommunications, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows (or such other address for a party as shall be specified in
a notice given in accordance with this Section 5.2) and shall be deemed to have
been given one business day after transmission by facsimile, cable, telegram,
telex of other standard form of telecommunications or four days after deposit in
the U.S.
mail:
if to Stockholder:
Capital Partners, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxx 000 Xxxxxxxxx, XX 00000
if to Parent:
Storage Dimensions, Inc.
0000 XxXxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
if to Company:
Artecon, Inc.
0000 Xx Xxxxxx Xxxx
Xxxxxxxx, XX 00000-0000
with a copy to:
Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
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113
5.3 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable 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.
5.4 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto. This Agreement
shall terminate in the event the Merger Agreement is validly terminated pursuant
to its terms so long as any termination does not occur by reason of any breach
by Parent.
5.5 ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of
Stockholder's rights, interests or obligations hereunder shall be assigned by
Stockholder (whether by operation of law or otherwise) without the prior written
consent of the Company and Parent. The Company and Parent may assign all or any
of their rights and obligations hereunder without the consent of any Person.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to confer
on any Person other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
5.6 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
5.7 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California, as applied to contracts entered into and to
be performed entirely within the State of California.
5.8 COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
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IN WITNESS WHEREOF, the Company, Parent and each Stockholder have caused
this Agreement to be executed, as of the date first written above.
ARTECON, INC.
By: /s/ XXXXX X. XXXXXXX
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
STORAGE DIMENSIONS, INC.
By: /s/ XXXXX X. EEG
------------------------------------
Name: Xxxxx X. Eeg
Title: President and CEO
STOCKHOLDERS:
CP ACQUISITION, L.P. NO. 4A
By: /s/ A. XXXXXX XXXXXXX
------------------------------------
Name:
Title:
Parent Securities owned as of the
date of this Standstill Agreement:
1,676,440 shares of Common Stock
CP ACQUISITION, L.P. NO. 4B
By: /s/ A. XXXXXX XXXXXXX
------------------------------------
Name:
Title:
Parent Securities owned as of the
date of this Standstill Agreement:
926,790 shares of Common Stock
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115
CAPITAL PARTNERS, INC.
By: /s/ A. XXXXXX XXXXXXX
------------------------------------
Name:
Title:
Parent Securities owned as of the
date of this Standstill Agreement:
3,612 shares of Common Stock
FGS, INC.
By: /s/ A. XXXXXX XXXXXXX
------------------------------------
Name:
Title:
Parent Securities owned as of the
date of this Standstill Agreement:
293,781 shares of Common Stock
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EXHIBIT L
FORM OF XXXXXX GODWARD LLP LEGAL OPINION
117
PROPOSED FORM OF OPINION LETTER
OF XXXXXX GODWARD LLP
[the final legal opinion shall contain customary assumptions and qualifications]
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of California.
2. The Company has the requisite corporate power to own, operate and lease its
property and assets and to conduct its business as it is currently being
conducted. To the best of counsel's knowledge, the Company is qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
in the United States in which the ownership of its property or the conduct of
its business requires such qualification except where the failure to so qualify
would not materially and adversely affect the Company's business, financial
condition and results of operations, taken as a whole.
3. All corporate action on the part of the Company, its Board of Directors and
its shareholders necessary for the authorization, execution and delivery of the
Merger Agreement by the Company and the performance of the Company's obligations
under the Merger Agreement has been taken. The Merger Agreement has been duly
and validly authorized, executed and delivered by the Company and constitutes a
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting creditors' rights, and subject to general equity principles and
to limitations on availability of equitable relief, including specific
performance.
4. The authorized capital stock of the Company consists of (i) 20,000,000 shares
of Common Stock, no par value, of which [___________] shares have been issued
and are outstanding immediately prior to the Closing, (ii) 20,000,000 shares of
Preferred Stock, no par value, (A) 10,000,000 of which have been designated as
"Preferred" shares, [__________] of which are outstanding immediately prior to
the Closing, and (B) 10,000,000 of which have been designated "Preferred B"
shares, [___________] of which are outstanding immediately prior to the Closing.
To counsel's knowledge, except as expressly set forth in the Merger Agreement
(including the Company's Disclosure Schedule), there are no options, warrants,
conversion privileges, or other rights presently outstanding to purchase any
authorized but unissued capital stock of the Company. Except for the Voting
Agreements and the irrevocable proxies set forth in Part 2.3 of the Company
Disclosure Schedule, there are no voting agreements, co-sale rights or rights of
first refusal applicable to any of the Company's outstanding capital stock under
the Company's Articles of Incorporation, Bylaws or any Material Company Contract
disclosed in Part 2.10(a) of the Company Disclosure Schedule.
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5. The execution, delivery and performance by the Company of the Merger
Agreement and the consummation by the Company of the Merger as provided therein
will not violate any provision of the Company's Articles of Incorporation or
Bylaws, and do not constitute a material default (or give rise to any right of
termination, cancellation or acceleration) under any provision of Material
Company Contract disclosed in Part 2.10(a) of the Company Disclosure Schedule
and do not violate or contravene (A) any governmental statute, rule or
regulation applicable to the Company or (B) any order, writ, judgment,
injunction, decree, determination or award which has been entered against the
Company and of which we are aware, the violation or contravention of which would
have a material adverse effect on the Company's business, financial condition
and results of operations, taken as a whole.
6. To counsel's knowledge, there is no action, proceeding or investigation
pending or threatened in writing against the Company before any court or
administrative agency that questions the validity of the Merger Agreement or
might result in a material adverse change in the Company's business, financial
condition and results of operations, taken as a whole.
7. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or governmental
body in the United States required to be obtained prior to the Closing in
connection with the Company's execution, delivery and performance of the Merger
Agreement and the consummation by the Company and the Shareholder of the Merger
as contemplated therein have been made or obtained, other than the filing of the
Agreement of Merger with the Secretary of State of the State of California as
contemplated by Section 1.3 of the Merger Agreement.
8. The Certificate of Merger has been duly authorized by the Company's Board of
Directors and its shareholders and, assuming due approval by the Boards of
Directors and stockholders of Parent and Merger Sub, respectively, and
compliance by Parent and Merger Sub with all requirements of applicable law and
the Merger Agreement necessary to effect the Merger, upon its filing with and
acceptance by the Secretary of State of the State of California, the Merger will
be effective.
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EXHIBIT M
FORM OF XXXXXX GODWARD LLP TAX OPINION
120
[XXXXXX GODWARD LLP LETTERHEAD]
__________________, 1998
Artecon, Inc.
0000 Xx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Ladies and Gentlemen:
This opinion is being delivered to you in accordance with Section 7.8 of the
Agreement and Plan of Merger and Reorganization dated as of December , 1997 (the
"Reorganization Agreement") by and among Storage Dimensions, Inc., a Delaware
corporation ("Parent"), Storage Acquisition Corp., a California corporation and
wholly owned subsidiary of Parent ("Merger Sub"), and Artecon, Inc., a
California corporation (the "Company").
Except as otherwise provided, capitalized terms used but not defined herein
shall have the meanings set forth in the Reorganization Agreement. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
We have acted as counsel to the Company in connection with the Merger. As such,
and for the purpose of rendering this opinion, we have examined, and are relying
upon (without any independent investigation or review thereof) the truth and
accuracy, at all relevant times, of the statements, covenants, representations
and warranties contained in, the following documents (including all exhibits and
schedules attached thereto):
(a) the Reorganization Agreement;
(b) those certain tax representation letters dated ____________, 1998
delivered to us by Parent, Merger Sub and the Company containing certain
representations of Parent, Merger Sub and the Company (the "Tax Representation
Letters");
(c) Continuity of Interest Certificates dated ____________, 199__ by
certain shareholders of the Company in favor of Parent, Merger Sub and the
Company (the "Continuity of Interest Certificates"); and
(d) such other instruments and documents related to the formation,
organization and operation of Parent, Merger Sub and the Company and related to
the consummation of the Merger and the other transactions contemplated by the
Reorganization Agreement as we have deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof) that:
121
[XXXXXX GODWARD LLP LETTERHEAD]
Artecon, Inc.
_________________, 1998
Page Two
1. Original documents submitted to us (including signatures thereto) are
authentic, documents submitted to us as copies conform to the original
documents, and that all such documents have been (or will be by the Effective
Time) duly and validly executed and delivered where due execution and delivery
are a prerequisite to the effectiveness thereof;
2. All representations, warranties and statements made or agreed to by
Parent, Merger Sub and the Company, their managements, employees, officers,
directors and shareholders in connection with the Merger, including, but not
limited to, those set forth in the Reorganization Agreement (including the
exhibits thereto), the Tax Representation Letters and the Continuity of Interest
Certificates are true and accurate at all relevant times;
3. All covenants contained in the Reorganization Agreement (including
exhibits thereto), the Tax Representation Letters and the Continuity of Interest
Certificates are performed without waiver or breach of any material provision
thereof;
4. There is no plan or intention on the part of the shareholders of the
Company to engage in a sale, exchange, transfer, distribution, pledge, or other
disposition or any transaction which results in a reduction of risk of
ownership, or a direct or indirect disposition of shares of Parent Common Stock
and Parent Preferred Stock (collectively, "Parent Stock") to be received in the
Merger that would reduce the Company's shareholders' ownership of Parent Stock
to a number of shares having an aggregate fair market value, as of the Effective
Time, of less than fifty percent (50%) of the aggregate fair market value of all
of the Company capital stock outstanding immediately prior to the Effective
Time. (For purposes of the preceding sentence, shares of Company capital stock
pursuant to which shareholders of the Company exercise dissenters' rights in the
Merger, which are exchanged for consideration in the Merger other than shares of
Parent Stock, including being exchanged for cash in lieu of fractional shares of
Parent Stock or are sold, redeemed or disposed of in a transaction that is in
contemplation of or related to the Merger, shall be considered shares of the
Company capital stock held by shareholders of the Company immediately prior to
the Merger which are exchanged for shares of Parent Stock in the Merger and then
disposed of pursuant to a plan);
5. Any representation or statement made "to the best of knowledge" or
similarly qualified is correct without such qualification; and
6. The opinion, dated , 1998, from Wilson, Sonsini, Xxxxxxxx & Xxxxxx,
P.C. to Parent and Merger Sub in satisfaction of Section 8.9 of the
Reorganization Agreement has been delivered and has not been withdrawn.
Based on our examination of the foregoing items and subject to the limitations,
qualifications, assumptions and caveats set forth herein, we are of the opinion
that, for federal income tax purposes, the Merger will be a reorganization
within the meaning of Section 368(a)(1) of the Code.
122
[XXXXXX GODWARD LLP LETTERHEAD]
Artecon, Inc.
_________________, 1998
Page Three
This opinion does not address the various state, local or foreign tax
consequences that may result from the Merger or the other transactions
contemplated by the Reorganization Agreement. In addition, no opinion is
expressed as to any federal income tax consequence of the Merger or the other
transactions contemplated by the Reorganization Agreement except as specifically
set forth herein, and this opinion may not be relied upon except with respect to
the consequences specifically discussed herein. Further, no opinion is expressed
as to the federal income tax treatment with respect to holders of Company
Warrants.
No opinion is expressed as to any transaction other than the Merger as described
in the Reorganization Agreement, or as to any other transaction whatsoever,
including the Merger, if all of the transactions described in the Reorganization
Agreement are not consummated in accordance with the terms of the Reorganization
Agreement and without waiver of any material provision thereof. To the extent
that any of the representations, warranties, statements and assumptions material
to our opinion and upon which we have relied are not accurate and complete in
all material respects at all relevant times, our opinion would be adversely
affected and should not be relied upon.
This opinion only represents our best judgment as to the federal income tax
consequences of the Merger and is not binding on the Internal Revenue Service or
any court of law, tribunal, administrative agency or other governmental body.
The conclusions are based on the Code, existing judicial decisions,
administration regulations and published rulings. No assurance can be given that
future legislative, judicial or administrative changes or interpretations would
not adversely affect the accuracy of the conclusions stated herein.
Nevertheless, by rendering this opinion, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
This opinion is being delivered solely in connection with Section 7.8 of the
Reorganization Agreement. It is intended for the benefit of the Company and its
shareholders and may not be relied upon or utilized for any other purpose or by
any other person and may not be made available to any other person without our
prior written consent.
Sincerely,
XXXXXX GODWARD LLP
Xxxxx Xxxxxx Xxxxxxx
SCP:dp
123
EXHIBIT N
FORM OF XXXXXX XXXXXXX XXXXXXXX & XXXXXX LEGAL OPINION
124
PROPOSED FORM OF OPINION LETTER
OF XXXXXX XXXXXXX XXXXXXXX & XXXXXX
[the final legal opinion shall contain customary assumptions and qualifications]
1. Each of Parent and Merger Sub have been duly incorporated and are validly
existing corporations in good standing under the laws of the jurisdictions of
their respective incorporations.
2. Parent has the requisite corporate power to own, operate and lease its
property and assets and to conduct its business as it is currently being
conducted. To counsel's knowledge, Parent is qualified as a foreign corporation
to do business and is in good standing in each jurisdiction in the United States
in which the ownership of its property or the conduct of its business requires
such qualification except where the failure to so qualify would not materially
and adversely affect Parent's business, financial condition and results of
operations, taken as a whole.
3. All corporate action on the part of Parent and Merger Sub, their respective
Boards of Directors and stockholders necessary for the authorization, execution
and delivery of the Merger Agreement by Parent and Merger Sub and the
performance of Parent's and Merger Sub's obligations under the Merger Agreement
has been taken. The Merger Agreement has been duly and validly authorized,
executed and delivered by 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 as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance.
4. The authorized capital stock of Parent consists of (i) 40,000,000 shares of
Common Stock, $.005 par value, of which ____________ shares have been issued and
are outstanding immediately prior to the Closing, and (ii) 10,000,000 shares of
Preferred Stock, $.005 par value, none of which are issued and outstanding
immediately prior to the Closing. The shares of Common Stock of Parent to be
issued to the shareholders of the Company in connection with the Merger (the
"Merger Shares") have been duly authorized and, when issued pursuant to the
terms of the Merger Agreement, will be validly issued, outstanding, fully paid
and nonassessable. To counsel's knowledge, except as expressly set forth in the
Merger Agreement (including the Parent Disclosure Documents), there are no
options, warrants, conversion privileges or other rights presently outstanding
to purchase any authorized but unissued capital stock of Parent. Except for the
Voting Agreements and the irrevocable proxies set forth in Part 3.3 of the
Parent Disclosure Schedule, there are no voting agreements, co-sale rights or
rights of first refusal applicable to any of Parent's
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outstanding capital stock under Parent's Certificate of Incorporation, Bylaws or
any Material Parent Contract disclosed in Part 3.10(a) of the Parent Disclosure
Schedule.
5. The Merger Shares and the shares of Parent Common Stock issuable upon
conversion of the Parent Preferred Stock issuable in the Merger have been
registered under the Securities Act of 1933, as amended (the "Act"), pursuant to
a registration statement on Form S-4 (the "Registration Statement"). The
Registration Statement became effective under the Act by order of the Securities
and Exchange Commission (the "SEC") on _______, 1998, and, to counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act.
6. The execution, delivery and performance by Parent of the Merger Agreement and
the consummation by Parent and Merger Sub of the Merger as provided therein will
not violate any provision of Parent's or Merger Sub's Certificate of
Incorporation or Articles of Incorporation as the case may be, or Bylaws, and do
not constitute a material default (or give rise to any right of termination,
cancellation or acceleration) under any provision of any Parent Material
Contract disclosed in Part 3.10(a) of the Parent Disclosure Schedule, and do not
violate or contravene (A) any governmental statute, rule or regulation
applicable to Parent or Merger Sub or (B) any order, writ, judgment, injunction,
decree, determination or award which has been entered against Parent or Merger
Sub and of which counsel is aware, the violation or contravention of which would
have a material adverse effect on Parent's business, financial condition and
results of operations, taken as a whole.
7. To counsel's knowledge, there is no action, proceeding or investigation
pending or threatened in writing against Parent before any court or
administrative agency that questions the validity of the Merger Agreement or
might result in any material adverse change in Parent's business, financial
condition and results of operations, taken as a whole.
8. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or governmental
body in the United States required to be obtained prior to the Closing in
connection with Parent's and Merger Sub's execution, delivery and performance of
the Merger Agreement and the consummation by Parent and Merger Sub of the Merger
as provided therein have been made or obtained, other than the filing of the
Merger Agreement with the Secretary of State of the State of California as
contemplated by Section 1.3 of the Merger Agreement.
9. The Certificate of Merger has been duly approved by Parent's and Merger Sub's
respective Boards of Directors and stockholders and, assuming due approval by
the Board of Directors and shareholders of the Company and compliance by the
Company with all requirements of applicable law and the Merger Agreement
necessary to effect the Merger,
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upon its filing with and acceptance by the Secretary of State of the State of
California, the Merger will be effective.
3
127
EXHIBIT O
FORM OF XXXXXX XXXXXXX XXXXXXXX & XXXXXX TAX OPINION
128
December ______ , 1997
Storage Dimensions, Inc.
___________________________
___________________________
Ladies and Gentlemen:
We have acted as counsel for Storage Dimensions, Inc., a Delaware
corporation ("Storage") in connection with the preparation and execution of the
Agreement and Plan of Merger and Reorganization dated as of December __, 1997
(the "Reorganization Agreement") among Storage, Storage Acquisition Corp., a
wholly-owned subsidiary of Storage incorporated in California ("Merger Sub"),
and Artecon, Inc., a California corporation ("Artecon"). Pursuant to the
Reorganization Agreement, Merger Sub will merge with and into Artecon (the
"Merger"), and Artecon will become a wholly-owned subsidiary of Storage. Unless
otherwise defined, capitalized terms referred to herein have the meanings set
forth in the Reorganization Agreement. All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended (the "Code").
You have requested our opinion regarding certain United States federal
income tax consequences of the Merger. In delivering this opinion, we have
reviewed and relied upon the facts, statements, descriptions and representations
set forth in the Reorganization Agreement (including Exhibits) and such other
documents pertaining to the Merger as we have deemed necessary or appropriate.
We have also relied upon certificates of officers of Storage and Artecon
respectively (the "Officers' Certificates") and Continuity of Interest
Certificates executed by certain shareholders of Artecon.
In connection with rendering this opinion, we have also assumed (without
any independent investigation) that:
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has been
(or will be by the Effective Time) due execution and delivery of all documents
where due execution and delivery are prerequisites to the effectiveness thereof;
2. Any statement made in any of the documents referred to herein, "to
the best of the knowledge" of any person or party is correct without such
qualification;
3. All statements, descriptions and representations contained in any of
the documents referred to herein or otherwise made to us are true and correct in
all material respects and no actions have been (or will be) taken which are
inconsistent with such representations;
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Storage Dimensions, Inc.
December __, 1997
Page 2
4. The Merger will be reported by Storage and Artecon on their
respective federal income tax returns in a manner consistent with the opinion
set forth below;
5. The Merger will be consummated pursuant to the Reorganization
Agreement and will be effective under the laws of the States of Delaware and
California.
6. The shareholders of Artecon do not, and will not on or before the
Effective Time, have an existing plan or intent to dispose of an amount of
Storage common stock and Storage preferred stock to be received in the Merger
(or to dispose of Artecon capital stock in anticipation of the Merger) such that
the shareholders of Artecon will not receive and retain a meaningful continuing
equity ownership in Storage that is sufficient to satisfy the continuity of
interest requirement as specified in Treas. Reg. ss. 1.368-1(b) and as
interpreted in certain Internal Revenue Service rulings and federal judicial
decisions; and
7. The opinion, dated ______________, 1998, from Xxxxxx Godward LLP to
Artecon in satisfaction of Section 7.8 of the Reorganization Agreement has been
delivered and has not been withdrawn.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, if the Merger is consummated in accordance with the
Reorganization Agreement (and without any waiver, breach or amendment of any of
the provisions thereof) and the statements set forth in the Officers'
Certificates and the Continuity of Interest Certificates are true and correct as
of the Effective Time, then for federal income tax purposes, the Merger will
qualify as a "reorganization" as defined in Section 368(a) of the Code.
This opinion represents and is based upon our best judgment regarding
the application of federal income tax laws arising under the Code, existing
judicial decisions, administrative regulations and published rulings and
procedures. Our opinion is not binding upon the Internal Revenue Service or the
courts, and there is no assurance that the Internal Revenue Service will not
successfully assert a contrary position. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code, and does not address any other
federal state, local or foreign tax consequences that may result from the Merger
or any other transaction (including any transaction undertaken in connection
with the Merger).
No opinion is expressed as to any transaction other than the Merger as
described in the Reorganization Agreement or to any transaction whatsoever,
including the Merger, if all the transactions described in the Reorganization
Agreement are not consummated in accordance with the terms of such
Reorganization Agreement and without waiver or breach of any material
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Storage Dimensions, Inc.
December __, 1997
Page 3
provision thereof or if all of the representations, warranties, statements and
assumptions upon which we relied are not true and accurate at all relevant
times. In the event any of the statements, representations, warranties or
assumptions upon which we have relied to issue this opinion is incorrect, our
opinion might be adversely affected and may not be relied upon.
This opinion has been delivered to you for the purpose of satisfying the
requirements of Section 8.9 of the Reorganization Agreement. It may not be
relied upon for any other purpose or by any other person or entity and may not
be made available to any other person or entity without our prior written
consent.
Very truly yours,
XXXXXX XXXXXXX XXXXXXXX & XXXXXX
Professional Corporation
131
EXHIBIT P
RESIGNATIONS OF CERTAIN DIRECTORS
Xxxxx X. Eeg
Xxxxxx X. Xxxxxxx
Xxxx X. Xxxxxx
