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EXHIBIT 99.1
AMENDED AND RESTATED AGREEMENT OF PLAN AND MERGER
DATED AUGUST 5, 1999
AMONG
ARIS Corporation,
xxxx.xxx International Corp.,
ARIS Interactive, Inc.,
Xxxxxx X. Fine,
Xxxxx Xxxxx,
and
Xxxxxxx X. Fine
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
Agreement entered into on as of August 5, 1999 by and among ARIS
Corporation, a Washington corporation (the "Acquiror"), ARIS Interactive, Inc.,
a Washington corporation ("Acquiror Sub"), xxxx.xxx International Corp., a
Washington corporation (the "Target"), Xxxxxx X. Fine, Xxxxx Xxxxx and Xxxxxxx
X. Fine (collectively, the "Major Shareholders"). The Acquiror, Acquiror Sub and
the Target are referred to collectively herein as the "Parties." This Agreement
amends and restates in its entirety that certain Agreement and Plan of Merger,
dated as of May 17, 1999, among the Parties and the Major Shareholders.
References herein to "the date of this Agreement" and "the date hereof" refer to
May 17, 1999.
This Agreement contemplates a tax-deferred merger of the Target with and
into the Acquiror Sub in a reorganization pursuant to Internal Revenue Code
Sections 368(a)(1)(A) and 368(a)(2)(D). The Target Shareholders will receive
capital stock in the Acquiror or a combination of cash and stock in exchange for
their capital stock in the Target.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties and the Major Shareholders agree as
follows.
1. Definitions.
"Acquisition Proposal" has the meaning set forth in Section 5(h) below.
"Affiliate" has the meaning set forth in Rule 145 of the regulations
promulgated under the Securities Act.
"Alternative Transaction" has the meaning set forth in Section 7(c)(iii)
below.
"Articles of Merger" has the meaning set forth in Section 2(c) below.
"Average Price" means the average of the per share daily closing prices of
Acquiror Shares as reported by Nasdaq for each trading day during the
Measurement Period.
"Acquiror" has the meaning set forth in the preface above.
"Acquiror-owned Share" means any Target Share that the Acquiror owns
beneficially (except by virtue of having a proxy to vote such Target Share).
"Acquiror Share" means any share of the Common Stock, without par value, of
the Acquiror.
"Acquiror Sub" has the meaning set forth in the preface above.
"Base Consideration" has the meaning set forth in Section 2(d)(v) below.
"Base Share Consideration" has the meaning set forth in Section 2(d)(v)
below.
"Cash Consideration" has the meaning set forth in Section 2(d)(v) below.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b) below.
"Code" has the meaning set forth in Section 3(m) below.
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"Compensation or Benefit Plans" has the meaning set forth in Section
3(m)(i) below.
"Confidential Information" means any information concerning the businesses
and affairs of the Target and its Subsidiaries that is not already generally
available to the public.
"Damages" has the meaning set forth in Section 9(a)(iii) below.
"Definitive Target Materials" means the definitive prospectus/proxy
statement relating to the Special Target Meeting.
"Disclosure Document" means the disclosure document combining the
Prospectus and the Definitive Target Materials.
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"Dissenting Share" means any Target Share as to which any shareholder has
exercised his or its appraisal rights under Section 23B.13.010, et. seq. of the
Washington Business Corporation Act.
"Effective Time" has the meaning set forth in Section 2(d)(i) below.
"ERISA" has the meaning set forth in Section 3(m)(i) below.
"Employees" has the meaning set forth in Section 3(m)(i) below.
"Exchange Agent" has the meaning set forth in Section 2(e)(i) below.
"Fairness Opinion" has the meaning set forth in Section 2(a) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"IRS" means the Internal Revenue Service.
"Knowledge" means actual knowledge of any of the Major Shareholders,
Xxxxxxx X. Xxxxxxx, Xxxxx Xxxxx or Xxxx Xxxxx after reasonable investigation.
"Major Shareholders" means Xxxxxx X. Fine, Xxxxx Xxxxx and Xxxxxxx X. Fine.
"Measurement Period" means the period of ten trading days ending on the
second trading day prior to the Special Target Meeting.
"Merger" has the meaning set forth in Section 2(a) below.
"Merger Consideration" has the meaning set forth in Section 2(d)(v) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3(g)
below.
"Option Conversion Ratio" means (i) the Share Consideration plus (ii) the
Cash Consideration divided by the Average Price.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Pension Plan" has the meaning set forth in Section 3(m)(ii) below.
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"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Plans" has the meaning set forth in Section 3(m)(i) below.
"Products" means any products offered or furnished by the Target or its
Subsidiaries, or any predecessor in interest of the Target or its Subsidiaries,
or any predecessor in interest of the Target or any of its Subsidiaries,
currently or at any time in the past, including, without limitation, each item
of hardware, software, or firmware; any system, equipment, or products
consisting of or containing one or more thereof; and any and all enhancements,
upgrades, customizations, modifications, and maintenance thereto.
"Prospectus" means the final prospectus relating to the registration of the
Acquiror Shares under the Securities Act.
"Public Report" has the meaning set forth in Section 3(e) below.
"Registration Statement" has the meaning set forth in Section 5(c)(i)
below.
"Requisite Target Shareholder Approval" means the affirmative vote of the
holders of a two-thirds majority of the Target Shares in favor of this Agreement
and the Merger.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Services" means any services offered or furnished by the Target or its
Subsidiaries, or any predecessor in interest of the Target, currently or at any
time in the past.
"Share Consideration" has the meaning set forth in Section 2(d)(v) below.
"Special Target Meeting" has the meaning set forth in Section 5(c)(ii)
below, including any postponement or adjournment thereof.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Surviving Corporation" has the meaning set forth in Section 2(a) below.
"Target" has the meaning set forth in the preface above.
"Target Intellectual Property Rights" has the meaning set forth in Section
3(j)(ii) below.
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"Target Option" means options to purchase Target Shares outstanding
immediately prior to the Effective Time under the Target's 1996 Incentive Stock
Option Plan, 1997 Stock Option Plan and 1998 Employee Bonus Plan.
"Target Share" means any share of the Common Stock, par value $.01 per
share, of the Target.
"Target Shareholder" means any Person who or which holds any Target Shares.
"Target Warrant" means warrants granted by Target to purchase Target Shares
outstanding immediately prior to the Effective Time, as described on the
attached Schedule 3(b).
"Third-Party Intellectual Property Rights" has the meaning set forth in
Section 3(j)(ii) below.
"Washington Business Corporation Act" means the Washington business
corporation act, as amended.
2. Basic Transaction.
(a) The Merger. On and subject to the terms and conditions of this
Agreement, the Target will merge with and into Acquiror Sub (the "Merger") at
the Effective Time. Acquiror Sub shall be the corporation surviving the Merger
(the "Surviving Corporation"). The Target hereby represents and warrants to the
Acquiror and Acquiror Sub that its Board of Directors, at a meeting duly called
and held, has (i) unanimously reconfirmed its determination that this Agreement,
as amended and restated as of August 3, 1999, and the transactions contemplated
hereby, including the Merger, are fair to and in the best interest of the
Target's shareholders, (ii) unanimously adopted and approved this Agreement as
so amended and restated and the transactions contemplated hereby, including the
Merger, which approval satisfies in full the requirements of the Washington
Business Corporation Act, including without limitation, the requirements of
Section 23B.08.720 thereof and (iii) unanimously reconfirmed its resolution to
recommend approval of this Agreement as so amended and restated and the Merger
by the Target Shareholders. The Target further represents that (i) the Target's
financial advisor has delivered to the Target's Board of Directors its written
or oral opinion (the "Fairness Opinion") that the consideration to be paid in
the Merger is fair to the holders of Target Shares from a financial point of
view; and (ii) the Target has been advised by each of the Major Shareholders and
each of its directors and executive officers intend to vote his or her Target
Shares to approve the Merger.
(b) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Acquiror in
Bellevue, Washington, commencing at 9:00 a.m. local time on the business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the
"Closing Date"); provided, however, that the Closing Date shall be no earlier
than August 15, 1999.
(c) Actions at the Closing. At the Closing, (i) the Target will deliver to
the Acquiror the various certificates, instruments, and documents referred to in
Section 6(a) below, (ii) the Acquiror will deliver to the Target the various
certificates, instruments, and documents referred to in Section 6(b) below,
(iii) Acquiror Sub and the Target will file
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with the Secretary of State of the State of Washington Articles of Merger
substantially in the form attached hereto as Exhibit A (the "Articles of
Merger"), and (iv) the Acquiror will deliver to the Exchange Agent in the manner
provided below in this Section 2 the certificate evidencing the Acquiror Shares
issued in the Merger.
(d) Effect of Merger.
(i) General. The Merger shall become effective at the time (the
"Effective Time") the Acquiror Sub and the Target file the Articles of
Merger with the Secretary of State of the State of Washington. The Merger
shall have the effect set forth in the Washington Business Corporation Act.
The Surviving Corporation may, at any time after the Effective Time, take
any action (including executing and delivering any document) in the name
and on behalf of either Acquiror Sub or the Target in order to carry out
and effectuate the transactions contemplated by this Agreement.
(ii) Articles of Incorporation. The Articles of Incorporation of
Acquiror Sub in effect at and as of the Effective Time will remain the
Articles of Incorporation of the Surviving Corporation without any
modification or amendment in the Merger.
(iii) Bylaws. The Bylaws of Acquiror Sub in effect at and as of the
Effective Time will remain the Bylaws of the Surviving Corporation without
any modification or amendment in the Merger.
(iv) Directors and Officers. The directors and officers of Acquiror
Sub in office at and as of the Effective Time will remain the directors and
officers of the Surviving Corporation (retaining their respective positions
and terms of office).
(v) Conversion of Target Shares. At and as of the Effective Time:
(A) each Target Share (other than any Dissenting Share or
Acquiror-owned Share) shall be converted into the right to receive the
following consideration (the "Merger Consideration"):
(1) that number of Acquiror Shares equal to the lesser of (x)
.3717 or (y) $4.5531 divided by the Average Price (such lesser
number of Acquiror Shares being hereinafter referred to as the
"Base Share Consideration"), plus
(2) an amount in cash equal to the lesser of (x) $1.1150 or
(y) the amount (if any) by which $4.5531 exceeds the Base Share
Consideration multiplied by the Average Price (such lesser amount
being hereinafter referred to as the "Cash Consideration"), plus
(3) an additional number of Acquiror Shares (if a positive
number) equal to (x) $4.5531 minus the Base Consideration (as
defined below), divided by (y) the Average Price (such additional
number of Acquiror Shares (if any) plus the Base Share
Consideration being hereinafter referred to as the "Share
Consideration"). "Base Consideration" means an amount equal to (x)
the Base Share Consideration multiplied by the Average Price, plus
(y) the Cash Consideration.
At the Effective Time and without any action on the part of the holder, Target
Shares held by such holder shall cease to be outstanding and shall constitute
only the right to
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receive without interest, the Merger Consideration multiplied by the number of
Target Shares held by such holder and cash in lieu of a fractional share.
(B) each Dissenting Share shall be converted into the right to
receive payment from the Surviving Corporation with respect thereto in
accordance with the provisions of the Washington Business Corporation
Act, and
(C) each Acquiror-owned Share shall be canceled; provided, however,
that the Merger Consideration shall be subject to equitable adjustment
in the event of any stock split, stock dividend, reverse stock split, or
other change in the number of Target Shares outstanding. No Target Share
shall be deemed to be outstanding or to have any rights other than those
set forth above in this Section 2(d)(v) after the Effective Time.
(vi) Replacement of Target Options. At the Effective Time and without
any action on the part of the holder, all Target Options shall terminate
and cease to be exercisable, no Target Option shall be accelerated in
vesting (other than Target Options held by employees that Acquiror notifies
Target will not be continued as employees of the Surviving Corporation, and
Target Options held by Xxxxxxx X. Xxxxxxx that vest automatically pursuant
to his employment agreement), and the Target's Board of Directors shall
take or cause to be taken such actions as may be required to cause such
result. The Acquiror shall cause to be granted under the Acquiror's Stock
Option Plan to each holder of Target Options, options to purchase a number
of Acquiror Shares equal to that number of Target Shares issuable upon
exercise of such holder's Target Options multiplied by the Option
Conversion Ratio at an exercise price per Acquiror Share equal to the
exercise price per Target Share of such outstanding Target Option divided
by the Option Conversion Ratio, and having the same vesting schedule as the
Target Options replaced.
(vii) Replacement of Target Warrants. At the Effective Time and
without any action on the part of the holder, each outstanding Target
Warrant shall be converted into the right to purchase the Merger
Consideration in lieu of each Target Share issuable upon exercise of such
Target Warrant upon payment of the exercise price per Target Share of such
outstanding Target Warrant.
(viii) Shares of Acquiror Sub. Each issued and outstanding share of
capital stock of Acquiror Sub at and as of the Effective Time will remain
issued and outstanding and held by the Acquiror.
(e) Procedure for Payment.
(i) Immediately after the Effective Time, (A) the Acquiror will
furnish to ChaseMellon Shareholder Services (the "Exchange Agent") a stock
certificate (issued in the name of the Exchange Agent or its nominee)
representing that number of Acquiror Shares equal to the product of (I) the
Share Consideration times (II) the number of outstanding Target Shares
(other than any Dissenting Shares and Acquiror-owned Shares) and cash in
the amount equal to the product of (III) the Cash Consideration (if any)
times (IV) the number of outstanding Target Shares (other than any
Dissenting Shares and Acquiror-owned Shares), and (B) the Acquiror will
cause the Exchange Agent to mail a letter of transmittal (with instructions
for its use) in customary form reflecting the terms of the Merger to each
record holder of outstanding Target Shares for the holder to use in
surrendering the certificates which represented his or its Target Shares in
exchange for a certificate
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representing the number of Acquiror Shares and a check for the amount of
cash (if any) to which he or it is entitled, plus cash in lieu of
fractional shares (if any). Certificates representing securities held by an
Affiliate of the Target shall not be exchanged until the Acquiror has
received an agreement from such Affiliate in the form of Exhibit B hereto.
(ii) The Acquiror will not pay any dividend or make any distribution
on Acquiror Shares (with a record date at or after the Effective Time) to
any record holder of outstanding Target Shares until the holder surrenders
for exchange his or its certificates which represented Target Shares. The
Acquiror instead will pay the dividend or make the distribution to the
Exchange Agent in trust for the benefit of the holder pending surrender and
exchange. The Acquiror may cause the Exchange Agent to invest any cash the
Exchange Agent receives from the Acquiror as a dividend or distribution in
one or more of the permitted investments designated by the Acquiror;
provided, however, that the terms and conditions of the investments shall
be such as to permit the Exchange Agent to make prompt payments of cash to
the holders of outstanding Target Shares as necessary. The Acquiror may
cause the Exchange Agent to pay over to the Acquiror any net earnings with
respect to the investments, and the Acquiror will replace promptly any cash
which the Exchange Agent loses through investments. In no event, however,
will any holder of outstanding Target Shares be entitled to any interest or
earnings on the dividend or distribution pending receipt.
(iii) No fractional shares shall be issuable by the Acquiror pursuant
hereto. In lieu of issuing fractional shares, a cash adjustment will be
paid equal to the fraction of one Acquiror Share that would otherwise be
issuable, multiplied by the Average Price.
(iv) The Acquiror may cause the Exchange Agent to return any Acquiror
Shares and dividends and distributions thereon and any cash remaining
unclaimed 180 days after the Effective Time, and thereafter each remaining
record holder of outstanding Target Shares shall be entitled to look to the
Acquiror (subject to abandoned property, escheat, and other similar laws)
as a general creditor thereof with respect to the Acquiror Shares and
dividends and distributions thereon and any cash to which he or it is
entitled upon surrender of his or its certificates.
(v) Notwithstanding anything in this Agreement to the contrary, Target
Shares that are Dissenting Shares immediately prior to the Effective Time
shall not be converted into Acquiror Shares and cash (if any) pursuant to
the Merger, and the holders of such Dissenting Shares shall be entitled to
receive payment of the fair value of their Dissenting Shares in accordance
with the provisions of the Washington Business Corporation Act; unless and
until such holders shall fail to perfect, lose, or withdraw their rights
thereunder. If, after the Effective Time, any holder of Dissenting Shares
shall fail to perfect, lose or withdraw his or its right to be paid fair
value, then such Dissenting Shares no longer shall be deemed to be
Dissenting Shares, and shall be treated as if they had been converted at
the Effective Time into the right to receive the consideration being paid
for Target Shares in the Merger, without any interest, and the Acquiror
shall take all necessary action to effect the exchange of Acquiror Shares
and cash (if any) for the Target Shares. The Target shall give the Acquiror
prompt written notice of any demands for payment of fair value for any
Target Shares, and the Acquiror shall have the right to participate in all
negotiations or proceedings with respect to such demands. Without the prior
written consent of the
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Acquiror, the Target shall not settle, offer to settle or make any payment
with respect to any such demands.
(vi) The Acquiror shall pay all charges and expenses of the Exchange
Agent.
(f) Closing of Transfer Records. After the close of business on the Closing
Date, transfers of Target Shares outstanding prior to the Effective Time shall
not be made on the stock transfer books of the Surviving Corporation.
3. Representations and Warranties of the Target and the Major
Shareholders. The Target and each of the Major Shareholders, jointly and
severally, represent and warrant to the Acquiror that the statements contained
in this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3), except as set forth in the disclosure schedule
accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Section 3.
(a) Organization, Qualification, and Corporate Power. Each of the Target
and its Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each
Subsidiary is identified by name and jurisdiction of incorporation in the
Disclosure Schedule. Each of the Target and its Subsidiaries is duly authorized
to conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required except where the failure to be so qualified
would not have a material adverse effect on the Target and its Subsidiaries
taken as a whole. Each of the Target and its Subsidiaries has full corporate
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it. The Target's Articles of
Incorporation and Bylaws are in the form filed as exhibits to its Public
Reports.
(b) Capitalization. The entire authorized capital stock of the Target
consists of 10,000,000 Target Shares, of which 2,669,590 Target Shares are
issued and outstanding as of the date of this Agreement. All of the issued and
outstanding Target Shares have been duly authorized and are validly issued,
fully paid, and nonassessable. Except as set forth on Disclosure Schedule 3(b),
there are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Target to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Target or any of its Subsidiaries. All of the
outstanding shares of capital stock of each of the Target's Subsidiaries have
been duly authorized and are validly issued, fully paid and nonassessable and
are legally and beneficially owned by the Target or another wholly owned
Subsidiary of the Target, free and clear of all Security Interests or any right
or option of any person to purchase or otherwise acquire any such capital stock.
There are no outstanding or authorized options, warrants, purchase rights,
subscriptions rights, conversion rights, exchange rights or other contracts or
commitments that could require any Subsidiary of the Target to issue, sell or
otherwise cause to become outstanding any of its capital stock, or that could
require the Target or any Subsidiary of the Target to transfer any capital stock
of any Subsidiary of the Target.
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(c) Authorization of Transaction. Subject only to Requisite Target
Shareholder Approval, the Target has full power and authority (including full
corporate power and authority) and has taken all corporate actions necessary to
authorize the execution and delivery of this Agreement and the performance of
its obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Target, enforceable in accordance with its terms and
conditions.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Target and its Subsidiaries or
any of their assets is subject or any provision of the charter or bylaws of any
of the Target and its Subsidiaries or (ii) except as set forth on Disclosure
Schedule 3(d), conflict with, result in a breach of, constitute a default under,
result in the acceleration of, result in a change in the rights or obligations
of any parties to, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument or other arrangement to which any of the Target and its
Subsidiaries is a party or by which any of them is bound or to which any of
their assets is subject (or result in the imposition of any Security Interest
upon any of their assets) except in each case where there would be no material
adverse effect upon the business, assets, financial condition, operations,
results of operations or future prospects of the Target and its Subsidiaries
taken as a whole. Other than in connection with the provisions of the Washington
Business Corporation Act, the Securities Exchange Act, the Securities Act, and
the state securities laws, none of the Target and its Subsidiaries is required
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement.
(e) Filings with the SEC. The Target has made all filings with the SEC that
it has been required to make under the Securities Act and the Securities
Exchange Act (collectively the "Public Reports"). Each of the Public Reports has
complied, and all Public Reports to be filed with the SEC after the date hereof
will comply, with the Securities Act and the Securities Exchange Act in all
material respects. None of the Public Reports, as of its respective date,
contained or will contain any untrue statement of a material fact or omitted or
will omit to state a material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
(f) Financial Statements. Each of the financial statements included in or
incorporated by reference into the Public Reports (including the related notes
and schedules) has been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, presents fairly the financial
condition of the Target and its Subsidiaries as of the indicated dates and the
results of operations, retained earnings and changes in financial position of
the Target and its Subsidiaries for the indicated periods, is correct and
complete in all material respects, and is consistent with the books and records
of the Target and its Subsidiaries; provided, however, that the interim
financial statements are subject to normal year-end adjustments which will not
be material in amount or effect.
(g) Subsequent Events. Since January 31, 1999, excepted as disclosed in the
Public Reports filed prior to the date hereof, the Target and its Subsidiaries
have conducted their businesses only in, and have not engaged in any material
transaction other than in, the Ordinary Course of Business or made any change in
accounting principles, practices and
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methods. Since January 31, 1999, (the "Most Recent Fiscal Year End") there has
not been any material adverse change in the business, assets, financial
condition, operations, results of operations, or future prospects of the Target
and its Subsidiaries taken as a whole.
(h) Undisclosed Liabilities. Except as set forth on Schedule 3(h), none of
the Target and its Subsidiaries has any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due) including any liability for taxes, except for (i) liabilities set forth on
the face of the balance sheet dated as of the Most Recent Fiscal Year End
(including in any notes thereto), (ii) liabilities which have arisen after the
Most Recent Fiscal Year End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law) and (iii) liabilities which in the aggregate are not material to the Target
and its Subsidiaries, taken as a whole.
(i) Litigation. Except as set forth on Schedule 3(i), there is no action,
suit, investigation or proceeding pending against, or to the Knowledge of the
Target threatened against or affecting, the Target or any of its Subsidiaries or
any of their properties (or any basis therefor) before any court or arbitrator
or any governmental body, agency or official which, if determined or resolved
adversely to the Target or any Subsidiary, may have a material adverse effect on
the business, assets, financial condition, operations, results of operations, or
prospects of the Target and its Subsidiaries taken as a whole. Except as set
forth on Schedule 3(i), to the Knowledge of the Target there are no facts or
circumstances that could result in any claims or actions, suits, investigations
or proceedings of the sort described in the preceding sentence.
(j) Intellectual Property.
(i) Except as set forth on Schedule 3(j)(i), the Target and/or each of
its Subsidiaries owns, or is licensed or otherwise possesses legally
enforceable rights to use all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, trade secrets,
technology, know-how, computer software programs or applications, and
tangible or intangible proprietary information or materials that are used
in the business of the Target and its Subsidiaries as currently conducted
or as proposed to be conducted, except where the failure to own, be
licensed or otherwise have such rights would not have a material adverse
effect upon the business, assets, financial condition, operations, results
of operations or future prospect of the Target and its Subsidiaries, taken
as a whole. All patents, trademarks, trade names, service marks and
copyrights held by the Target or any Subsidiary are valid and subsisting.
(ii) Except as disclosed in the Public Reports filed prior to the date
hereof or as set forth on Schedule 3(j)(ii):
(A) neither the Target nor any of its Subsidiaries is, nor will the
Target or any of its Subsidiaries be as a result of the execution and
delivery of this Agreement or the performance of the Target's
obligations hereunder, in violation of any licenses, sublicenses and
other agreement as to which the Target or any of its Subsidiaries is a
party or pursuant to which the Target or any of its Subsidiaries is
authorized to use any third-party patents, trademarks, trade
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names, service marks, copyrights, trade secrets, technology, know-how or
computer software (collectively, "Third-Party Intellectual Property
Rights");
(B) no claims with respect to (I) the patents, registered and
unregistered trademarks and service marks, registered copyrights, trade
names, and any applications therefor, trade secrets, know-how,
technology or computer software owned by the Target or any of its
Subsidiaries (collectively called the "Target Intellectual Property
Rights"); or (II) Third-Party Intellectual Property Rights are currently
pending or, to the Knowledge of the officers of the Target, are
threatened by any person;
(C) to the Knowledge of the Target, there are no valid grounds for
any bona fide claims (I) to the effect that the manufacture, sale,
licensing or use of any product or provision of any service as now used,
sold, licensed or provided or proposed for use, sale, license or to be
provided by the Target or any of its Subsidiaries, infringes on any
copyright, patent, trademark, trade name, service xxxx, copyright,
know-how, technology or trade secret of any person; (II) against the use
by the Target or any of its Subsidiaries, of any Target Intellectual
Property Right or Third-Party Intellectual Property Right used in the
business of the Target or any of its Subsidiaries as currently conducted
or as proposed to be conducted; (III) challenging the ownership,
validity or enforceability of any of the Target Intellectual Property
Rights; or (IV) challenging the license or legally enforceable right to
use of the Third-Party Intellectual Rights by the Target or any of its
Subsidiaries; and
(D) each of the employees and consultants of the Target and its
Subsidiaries has executed and delivered to the Target in connection with
employment or engagement a binding agreement conveying to the Target or
such Subsidiary all rights to any invention, trade secret, or other
intellectual property substantially in the form of agreement provided to
the Acquiror, and to the Knowledge of the Target, there is no
unauthorized use, infringement or misappropriation of any of the Target
Intellectual Property Rights by any third party, including any employee
or consultant of the Target or any of its Subsidiaries.
(k) Product and Service Warranties.
Except as set forth on Schedule 3(k), (i) there are no warranties, express
or implied, written or oral, with respect to the Products or Services; (ii)
there are no pending or, to the Knowledge of the Target, threatened claims with
respect to any such warranty, and neither the Target nor any of its Subsidiaries
has any liability with respect to any such warranty, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due; and
(iii) there are no material product or service liability claims (whether arising
for breach of warranty or contract, or for negligences or other tort, or under
any statute) against or involving the Target or any of its Subsidiaries or any
Product or Service and no such claims have been settled, adjudicated or
otherwise disposed of since January 31, 1996.
(l) Year 2000 Compliance.
(i) Products and Services. All of the Products and Services are Year
2000 Compliant except for any failure to be Year 2000 Compliant which would
not be material to the business, assets, financial condition, operations,
results of operations or
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future prospects of the Target and its Subsidiaries taken as a whole. If
the Target or any of its Subsidiaries is obligated to repair or replace
Products or Services previously provided by the Target or any of its
subsidiaries that are not Year 2000 Compliant in order to meet the Target's
or such Subsidiary's contractual obligations, to avoid personal injury, to
avoid misrepresentation claims, or to satisfy any other contractual or
legal obligations or requirements, to the Target's Knowledge it has
repaired or replaced those Products and Services to make them Year 2000
Compliant. The Target has furnished the Acquiror with true, correct and
complete copies of any customer agreements and other materials and
correspondence in which the Target or any of its Subsidiaries has furnished
(or could be deemed to have furnished) assurances as to the performance
and/or functionally of any Products or Services on or after January 1,
2000, as a result of the occurrence of such date.
(ii) Internal MIS Systems and Facilities. To the Knowledge of the
Target, all Internal MIS Systems and Facilities are Year 2000 Complaint.
(iii) Suppliers. To the Knowledge of the Target, but without any duty
to investigate, all vendors of products or services to the Target and its
Subsidiaries, and their respective products, services and operations, are
Year 2000 Compliant.
(iv) Year 2000 Compliance Investigations and Reports. The Target has
furnished the Acquiror with a true, correct and complete copy of any
written internal investigations, memoranda, budget plans, forecasts, or
reports concerning the Year 2000 Compliance of the products, services,
operations, systems, supplies, and facilities of the Target and its
Subsidiaries and the Target's and its Subsidiaries' vendors.
The terms as used within this Section 3(l) have the following definitions:
"Facilities" means any facilities or equipment used by the Target or
its Subsidiaries in any location, including HVAC systems, mechanical
systems, elevators, security systems, fire suppression systems,
telecommunications systems, fax machines, copy machines, and equipment,
whether or not owned by the Target.
"Internal MIS Systems" means any computer software and systems
(including hardware, firmware, operating systems software, utilities, and
applications software) used in the ordinary course of the Target's or its
Subsidiaries' business by or on behalf of the Target or its Subsidiaries,
including payroll, accounting, billing/receivables, inventory, asset
tracing, customer services, human resources, and e-mail systems.
"Year 2000 Compliant" means that (1) the products, services, or other
items) at issue accurately process, provide and/or receive all date/time
data (including calculating, comparing, sequencing, processing and
outputting) within, from, into, and between centuries (including the
twentieth and twenty-first centuries and the years 1999 and 2000),
including leap year calculations, and (2) neither the performance nor the
functionality nor the Target's provision of the products, services, and
other item(s) at issue will be affected by any dates/times prior to, on,
after, or spanning January 1, 2000. The design of the products, services,
and other item(s) at issue to ensure compliance with the foregoing
warranties and representations includes proper date/time data, century
recognition and recognition of 1999 and 2000, calculations that accommodate
single century and multi-century formulae and date/time values before, on,
after, and spanning January 1, 2000, and date/time data interface values
that reflect the century, 1999, and 2000. In particular, but without
limitation, (i) no value for current date/time will cause any material
error, interruption, or decreased
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performance in or for such product(s), service(s), and other item(s), (ii)
all manipulations of date and time related data (including calculating,
comparing, sequencing, processing, and outputting) will produce correct
results for all valid dates and times when used independently or in
combination with other product, services, and/or items, (iii) date/time
elements in interfaces and data storage will specify the century to
eliminate date ambiguity without human intervention, including leap year
calculations, (iv) where any date/time element is represented without a
century, the correct century will be unambiguous for all manipulations
involving that element, (v) authorization codes, passwords, and zaps (purge
functions) will function normally and in materially the same manner during,
prior to, on and after January 1, 2000, including the manner in which they
function with respect to expiration dates and CPU serial numbers, and (vi)
the Target's or its Subsidiaries' supply of the product(s), service(s), and
other item(s) will not be materially interrupted, delayed, decreased, or
otherwise affected by the advent of the year 2000.
(m) Employee Benefits.
(i) All bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock and stock option plans, all employment,
termination, severance, welfare, fringe benefit, compensation, medical or
health contract or other plan, contract, policy or arrangement which covers
employees or former employees (the "Employees") and current and former
directors of the Target or its Subsidiaries or their respective
predecessors (the "Compensation and Benefit Plans" or "Plans"), including,
but not limited to, "employee benefit plans" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") are listed in Schedule 3(m)(i) of the Disclosure Schedule and any
"change in control" or similar provisions therein are specifically
identified in such Schedule. Schedule 3(m)(i) contains a complete and
accurate list of all current Employees of the Target and its Subsidiaries.
True and complete copies of all Compensation and Benefit Plans, including,
but to limited to, any trust instruments and/or insurance contracts, if
any, forming a part of any such plans and agreements, and all amendments
thereto, have been made available to the Acquiror.
(ii) All Compensation and Benefit Plans have been administered in
accordance with their terms and such Plans are in compliance with all
applicable laws, including, without limitation, as applicable, ERISA and
the Internal Revenue Code of 1986, as amended (the "Code"). Each Plan which
is an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA ("Pension Plan") and which is intended to be qualified under Section
401(a) of the Code, has received a favorable determination letter from the
Internal Revenue Service, and the Target is not aware of any circumstances
likely to result in revocation of any such favorable determination letter.
There is no pending or, to the Knowledge of the Target, threatened
litigation relating to the Compensation and Benefit Plans. Neither the
Target nor any of its Subsidiaries has engaged in a transaction with
respect to any Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject the Target or any of its
Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code
or Section 502(i) of ERISA in an amount which would be material.
(iii) None of the Compensation and Benefit Plans or any other employee
benefit plan within the meaning of Section 3(3) of ERISA under which the
Target (or its Subsidiaries) has or could have any liability (a)
constitutes a "multiemployer plan,"
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as defined in Section 3(37) of ERISA; or (b) is subject to Title IV of
ERISA, Section 302 of ERISA, or Section 412 of the Code.
(iv) Neither the Target nor any of its Subsidiaries have any
obligations for retiree health or life benefits under any Plan, except as
set forth on Schedule 3(m)(iv). There are no restrictions on the rights of
the Target or any of its Subsidiaries to amend or terminate any such Plan
without incurring any liability thereunder.
(v) All Compensation and Benefit Plans covering foreign employees
comply with applicable local law. Neither the Target nor any of its
Subsidiaries has any unfunded liabilities with respect to any Pension Plan
which covers foreign Employees.
(vi) Except as set forth in Schedule 3(m)(vi), the consummation of the
transactions contemplated by this Agreement will not (x) entitle any
employees of the Target or any of its Subsidiaries to severance pay, (y)
accelerate the time of payment or vesting or trigger any payment of
compensation or benefits under, increase the amount payable or trigger any
other material obligation pursuant to, any of the Compensation and Benefit
Plans or (z) result in any breach or violation of, or a default under, any
of the Compensation and Benefit Plans.
(vii) No payment (or acceleration of benefits) required to be made to
any Employee as a result of the transactions contemplated by this Agreement
under any Compensation and Benefit Plan or otherwise will, if made,
constitute an "excess parachute payment" within the meaning of Section 280G
of the Code.
(n) Employees. As of the date hereof and except as set forth on Schedule
3(n), no executive or technical employee of the Target or any of its
Subsidiaries has terminated employment with the Target or such Subsidiary since
May 1, 1999. As at the date hereof, except as set forth in Schedule 3(n), to the
Knowledge of the Target no executive or technical employee of the Target or any
of its Subsidiaries has indicated the intention to terminate employment with the
Target or such Subsidiary, materially reduce his or her time commitment to such
employment, or given any indication that he or she may do so.
(o) Customers. Except as set forth on Schedule 3(o), since January 31,
1999, no existing customer of the Target or any Subsidiary has cancelled any
agreement for Products and Services, reduced the quantity of Products and
Services required from the Target or any Subsidiary, advised the Target that it
will not continue to purchase Products or Services, amended its agreements or
business arrangements with the Target or any of its Subsidiaries to the
disadvantage of the Target or such Subsidiary or, to the Knowledge of the
Target, indicated its intention to do any of the foregoing or the possibility
that it will seek to do any of the foregoing.
(p) Brokers' Fees. None of the Target and its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement, except
for up to $150,000 plus expenses payable to Xxxxx XxxXxxxxx, the Target's
financial advisor.
(q) Continuity of Business Enterprise. The Target operates at least one
significant historic business line, or owns at least a significant portion of
its historic business assets, in each case within the meaning of Reg. Section
1.368-1(d).
(r) Affiliate Agreements. Disclosure Schedule 3(r) lists all Affiliates of
the Target who beneficially own Target Shares. The Target has obtained and
delivered to the
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Acquiror agreements in the form of Exhibit B hereto executed by each of its
Affiliates with respect to transactions in Target Shares and Acquiror Shares.
(s) Taxation of the Merger. The representations and warranties set forth in
Exhibit D hereto are true and correct.
(t) Agreement of Executive Officers and Directors. The Target has obtained
from each of the Major Shareholders and from each of its directors and delivered
to the Acquiror an agreement in the form of Exhibit C hereto to the effect that
all Target Shares held by such person will be voted in favor of the Merger and
with respect to certain other matters.
(u) Disclosure. The Definitive Target Materials will comply with the
Securities Act and the Securities Exchange Act in all material respects. The
Definitive Target Materials will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they will be made,
not misleading; provided, however, that the Target and the Major Shareholders
make no representation or warranty with respect to any information that the
Acquiror will supply specifically for use in the Definitive Target Materials.
None of the information that the Target will supply specifically for use in the
Registration Statement, or the Prospectus will contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they will
be made, not misleading.
4. Representations and Warranties of the Acquiror and Acquiror Sub. The
Acquiror and Acquiror Sub each represents and warrants to the Target that the
statements contained in this Section 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 4), except as set forth in the Disclosure
Schedule. The Disclosure Schedule will be arranged in paragraphs corresponding
to the numbered and lettered paragraphs contained in this Section 4.
(a) Organization. The Acquiror and Acquiror Sub are each corporations duly
organized and validly existing under the laws of the jurisdictions of their
incorporation.
(b) Capitalization. The entire authorized capital stock of the Acquiror
consists of 100,000,000 Acquiror Shares, of which 10,950,617 Acquiror Shares are
issued and outstanding at April 30, 1999, and 5,000,000 shares of preferred
stock, without par value, none of which are issued and outstanding. All of the
Acquiror Shares to be issued in the Merger have been duly authorized and, upon
consummation of the Merger, will be validly issued, fully paid, and
nonassessable. The entire authorized capital stock of Acquiror Sub consists of
100,000 shares of common stock, without par value, of which 100 shares are
issued and outstanding.
(c) Authorization of Transaction. The Acquiror and Acquiror Sub each has
full power and authority (including full corporate power and authority) and has
taken all corporate action necessary to authorize the execution and delivery of
this Agreement and the performance of their respective obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Acquiror and Acquiror Sub, enforceable in accordance with its terms and
conditions.
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(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Acquiror or Acquiror Sub is subject
or any provision of the charter or bylaws of the Acquiror or Acquiror Sub or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument or other arrangement to which the Acquiror or Acquiror Sub
is a party or by which it is bound or to which any of its assets is subject.
Other than in connection with the provisions of the Washington Business
Corporation Act, the Securities Exchange Act, the Securities Act, and the state
securities laws, neither the Acquiror nor Acquiror Sub needs to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
(e) Brokers' Fees. Neither the Acquiror or Acquiror Sub has any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which any of
the Target and its Subsidiaries could become liable or obligated.
(f) Continuity of Business Enterprise. It is the present intention of the
Acquiror and Acquiror Sub to continue at least one significant historic business
line of the Target, or to use at least a significant portion of the Target's
historic business assets in a business, in each case within the meaning of Reg.
Section 1.368-1(d).
(g) Disclosure. The Registration Statement and the Prospectus will comply
with the Securities Act and the Securities Exchange Act in all material
respects. The Registration Statement and the Prospectus will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they will be made, not misleading; provided, however, that the
Acquiror makes no representation or warranty with respect to any information
that the Target will supply specifically for use in the Registration Statement
and the Prospectus. None of the information that the Acquiror will supply
specifically for use in the Definitive Target Materials will contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in the light of the circumstances under
which they will be made, not misleading.
(h) Litigation. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of the executive officers of Acquiror
threatened against Acquiror or any of its Subsidiaries or any of their
properties before any court or arbitrator or any governmental body, agency or
official which is required by Instructions 1, 2 and 3 to Item 103 of Regulation
S-K of the SEC to be disclosed in Acquiror's filings with the SEC that it has
been required to make under the Securities Act or the Securities Exchange Act
that is not disclosed in the Acquiror's report on Form 10-Q for the quarter
ended March 31, 1999.
5. Covenants. The Parties agree as follows with respect to the period from
and after the execution of this Agreement.
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make
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effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 6
below).
(b) Notices and Consents. The Target will give any notices (and will cause
each of its Subsidiaries to give any notices) to third parties, and will use its
best efforts to obtain (and will cause each of its Subsidiaries to use its best
efforts to obtain) any third party consents, that the Acquiror may request in
connection with the matters referred to in Section 3(d) above.
(c) Regulatory Matters and Approvals. Each of the Parties will (and the
Target will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use its best efforts to obtain any authorizations, consents,
and approvals of governments and governmental agencies in connection with the
matters referred to in Section 3(d) and Section 4(d) above. Without limiting the
generality of the foregoing:
(i) Securities Act, Securities Exchange Act, and State Securities
Laws. The Target will prepare and file with the SEC in compliance with
Section 14(a) of the Securities Exchange Act, proxy materials including a
proxy statement relating to the Special Target Meeting which will also
serve as a prospectus relating to the Acquiror Shares under the Securities
Act. The Acquiror will prepare and file with the SEC a registration
statement under the Securities Act relating to the offering and issuance of
the Acquiror Shares (the "Registration Statement"). The filing Party in
each instance will use its best efforts to respond to the comments of the
SEC thereon and will make any further filings (including amendments and
supplements) in connection therewith that may be necessary, proper, or
advisable, provided that the Target will not file any materials with the
SEC without the prior consent of the Acquiror, which will not be
unreasonably withheld or delayed. The Acquiror and the Target will
cooperate fully in the preparation of the Disclosure Materials, and the
Acquiror will provide the Target, and the Target will provide the Acquiror,
with whatever information and assistance in connection with the foregoing
filings that the filing Party may request. The Acquiror will take all
actions that may be necessary, proper, or advisable under state securities
laws in connection with the offering and issuance of the Acquiror Shares.
(ii) Washington Business Corporation Act. The Target will call a
special meeting of its shareholders (the "Special Target Meeting") as soon
as practicable in order that the shareholders may consider and vote upon
the approval of the Merger in accordance with the Washington Business
Corporation Act. The Target will mail the Disclosure Document to its
shareholders and as soon as practicable. The Disclosure Document will
contain the affirmative recommendation of the board of directors of the
Target in favor of the approval of the Merger.
(d) Listing of Acquiror Shares. The Acquiror will use its best efforts to
cause the Acquiror Shares that will be issued in the Merger to be approved for
listing on the Nasdaq National Market, subject to official notice of issuance,
prior to the Effective Time.
(e) Operation of Business. The Target will not (and will not cause or
permit any of its Subsidiaries to) engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business, other than
with the prior written consent of the Acquiror. Without limiting the generality
of the foregoing:
(i) none of the Target and its Subsidiaries will authorize or effect
any change in its charter or bylaws;
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(ii) none of the Target and its Subsidiaries will grant (except as set
forth on Schedule 5(e)(ii)) or accelerate or permit the acceleration of the
vesting of any options, warrants, or other rights to purchase or obtain any
of its capital stock or issue, sell, or otherwise dispose of any capital
stock of the Target or any Subsidiary (except upon the conversion or
exercise of options, warrants, and other rights to acquire shares of
capital stock of the Target currently outstanding and disclosed in this
Agreement) except that (i) vesting of Target Options held by Xxxxxxx X.
Xxxxxxx will be accelerated at the Effective Time pursuant to his
employment agreement and (ii) the Target may accelerate the vesting of
Target Options for employees of the Target that the Acquiror notifies the
Target will not be continued as employees of the Surviving Corporation
after the Effective Time;
(iii) none of the Target and its Subsidiaries will declare, set aside,
or pay any dividend or distribution with respect to its capital stock
(whether in cash or in kind), or redeem, repurchase, or otherwise acquire
any of its capital stock;
(iv) none of the Target and its Subsidiaries will issue any note,
bond, or other debt security or create, incur, assume, or guarantee any
obligation of any third party or any indebtedness for borrowed money or
capitalized lease obligation outside the Ordinary Course of Business;
(v) none of the Target and its Subsidiaries will sell or dispose of
material assets or will impose any Security Interest upon any of its assets
outside the Ordinary Course of Business;
(vi) none of the Target and its Subsidiaries will make any capital
investment in, make any loan to, or acquire the securities or assets of any
other Person outside the Ordinary Course of Business;
(vii) none of the Target and its Subsidiaries will make any change in
employment terms for any of its directors, officers, and employees outside
the Ordinary Course of Business;
(viii) none of the Target and its Subsidiaries will take any action
that will preclude the Merger from being treated as a tax-free
reorganization pursuant to Internal Revenue Code Sections 368(a)(1)(A) and
368(a)(2)(D);
(ix) none of the Target and its Subsidiaries will amend any employment
agreement or increase the compensation of directors, officers or employees
outside the Ordinary Course of Business; and
(x) none of the Target and its Subsidiaries will commit to any of the
foregoing.
(f) Full Access. The Target will (and will cause each of its Subsidiaries
to) permit representatives of the Acquiror to have full access to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to each of the Target and its Subsidiaries. The
Acquiror will treat and hold as such any Confidential Information it receives
from any of the Target and its Subsidiaries in the course of the reviews
contemplated by this Section 5(f), will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement is
terminated for any reason whatsoever, agrees to return to the Target all
tangible embodiments (and all copies) thereof which are in its possession.
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(g) Notice of Developments. Each Party will give prompt written notice to
the other Parties and the Major Shareholders, and each of the Major Shareholders
will give prompt written notice to the Parties, of any material development that
would, if not corrected by the Closing Date, result in any of its own
representations and warranties in Section 3 and Section 4 above being incorrect
at the Closing Date. No disclosure by any Party or Major Shareholder pursuant to
this Section 5(g), however, shall be deemed to amend or supplement the
Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
(h) Acquisition Proposals. The Target and each Major Shareholder agree that
neither the Target nor any of its Subsidiaries nor any of the respective
officers, directors, agents, employees or representatives of the Target or any
of its Subsidiaries (including, without limitation, any investment banker,
attorney or accountant retained by the Target or any of its Subsidiaries) nor
any of the Major Shareholders (whether or not acting on behalf of the Target)
shall initiate, solicit or encourage, directly or indirectly, any inquiries or
the making of any proposal or offer to the Target or any Subsidiary or any of
the shareholders of the Target with respect to a merger, consolidation or
similar transaction involving, or any purchase of all or any significant portion
of the assets or any equity securities of, the Target or any of its Subsidiaries
(any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or, except to the extent legally required for the discharge by the
board of directors of the Target of its fiduciary duties as advised in writing
by counsel, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. The Target shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. The Target
shall take the necessary steps to promptly inform the individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 5(h). The Target will notify the Acquiror immediately if any inquiries
or proposals relating to an actual or potential Acquisition Proposal are
received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with the Target or any of
its Subsidiaries. The Target also will promptly request each person which has
heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Target and/or any of its Subsidiaries to return
all Confidential Information heretofore furnished to such person by or on behalf
of the Target.
(i) Indemnification. The Acquiror will observe any indemnification
provisions now existing in the articles of incorporation or bylaws of the Target
for the benefit of any individual who served as a director or officer of the
Target at any time prior to the Effective Time. The Acquiror shall obtain
directors' and officers' liability insurance covering each individual who served
as an officer or director of the Target at any time prior to the Effective Time
for a period of 24 months after the Effective Time for an amount and coverage
not less than that in effect for such directors and officers of the Target
immediately prior to the Effective Time.
(j) Continuity of Business Enterprise. The Acquiror will cause the
Surviving Corporation to continue at least one significant historic business
line of the Target, or use at least a significant portion of the Target's
historic business assets in a business, in each case within the meaning of Reg.
Section 1.368-1(d).
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(k) Target's Compensation and Benefit Plans. The Target will take such
actions as the Acquiror reasonably requests with respect to the Target's
Compensation and Benefit Plans, it being understood that the purpose of the
covenant contained in this Section 5(k) is to conform the Target's Compensation
and Benefit Plans to applicable legal requirements and to minimize any future
liabilities of the Acquiror, Acquiror Sub and the Surviving Corporation in
respect of the Target's Compensation and Benefit Plans.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Acquiror. The obligation of the
Acquiror to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the Requisite
Target Shareholder Approval and the number of Dissenting Shares shall not
exceed 10% of the number of outstanding Target Shares;
(ii) the Target and its Subsidiaries shall have procured all of the
third party consents specified in Section 5(b) above, unless, in the
opinion of the Acquiror, acting reasonably, the
failure to obtain such consents would not have a material adverse effect on the
operations of the Surviving Corporation;
(iii) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the Closing
Date;
(iv) the Target shall have performed and complied with all of its
covenants and obligations hereunder in all material respects through the
Closing;
(v) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) affect adversely the right of
the Surviving Corporation to own the former assets, to operate the former
businesses, and to control the former Subsidiaries of the Target, or (D)
affect adversely the right of any of the former Subsidiaries of the Target
to own its assets and to operate its businesses (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(vi) since the date of this Agreement, there shall have been no
material adverse change in the business, assets, financial condition,
operations, results of operations or prospects of the Target and its
Subsidiaries taken as a whole, it being understood that a material adverse
change in the employee base of the Target and its Subsidiaries may
constitute such a material adverse change;
(vii) the Target shall have delivered to the Acquiror a certificate of
its Chief Executive Officer and Chief Financial Officer to the effect that
each of the conditions specified above in Section 6(a)(i)-(vi) is satisfied
in all respects;
(viii) the Registration Statement shall have become effective under
the Securities Act prior to the mailing of the Disclosure Document to
Target Shareholders;
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(ix) the Acquiror Shares that will be issued in the Merger shall have
been approved for listing on the Nasdaq National Market, subject to
official notice of issuance;
(x) the Acquiror shall have received an opinion from Xxxxxx & Xxxxxxx
LLP, dated as of the Effective Time, substantially to the effect that, on
the basis of the facts, representations and assumptions set forth in such
opinions which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated for Federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code and
that accordingly:
(A) No gain or loss will be recognized by the Acquiror, Acquiror
Sub or the Target as a result of the Merger.
(B) No gain or loss will be recognized by the shareholders of
Target who exchange Target Shares for Acquiror Shares pursuant to the
Merger, except with respect to any cash received by such Target
shareholders in the Merger.
(C) Gain, if any, but not loss, will be recognized by Target
shareholders upon the exchange of Target Shares for cash pursuant to the
Merger. Such gain will be recognized, but not in excess of the amount of
cash, in an amount equal to the difference, if any, between (a) the fair
market value of the Acquiror Shares and cash received and (b) the Target
shareholder's adjusted tax basis in the Target Shares surrendered in
exchange therefor pursuant to the Merger. If the receipt of cash
payments has the effect of a distribution of a dividend to a Target
Shareholder, some or all of the gain recognized will be treated as a
dividend taxed as ordinary income. If the exchange does not have the
effect of a distribution of a dividend, all of the gain recognized would
be a capital gain, provided the Target Shares are a capital asset in the
hands of the Target shareholder at the time of the Merger.
(D) The aggregate tax basis of the Acquiror Shares received by a
Target Shareholder who exchanges Target Shares in the Merger will be the
same as the aggregate tax basis of the Target Shares surrendered in
exchange therefor, decreased by the amount of any cash received by such
Target Shareholder which is treated as a redemption rather than a
dividend and increased by the amount of any non-dividend gain recognized
by such Target Shareholder in connection with the Merger.
(E) The holding period of the Acquiror Shares received by a Target
Shareholder pursuant to the Merger will include the period during which
the Target Shares surrendered therefor were held, provided the Target
Shares are a capital asset in the hands of the Target shareholder at the
time of the Merger.
In rendering such opinion, such counsel may require and rely upon
representations and covenants including those contained in certificates
of officers of the Acquiror, Acquiror Sub and the Target and others,
including certain Target shareholders who are parties to this Agreement.
(xi) the Acquiror shall have received the resignations, effective as
of the Closing, of each director and officer of the Target and its
Subsidiaries other than those whom the Acquiror shall have specified in
writing at least four business days prior to the Closing;
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(xii) all actions to be taken by the Target in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance
to the Acquiror, acting reasonably; and
(xiii) Xxxxxx X. Fine shall have entered into an employment agreement
with the Acquiror in form and substance acceptable to the Acquiror and
Xxxxxx X. Fine.
The Acquiror may waive any condition specified in this Section 6(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Target. The obligation of the Target to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the Registration Statement shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued or proceedings therefor
initiated or threatened by the SEC;
(ii) the Acquiror Shares that will be issued in the Merger shall have
been approved for listing on the Nasdaq National Market, subject to
official notice of issuance;
(iii) the representations and warranties set forth in Section 4 above
shall be true and correct in all material respects at and as of the Closing
Date;
(iv) since August 5, 1999, there shall have been no material adverse
change in the business, assets, financial condition, operations, results of
operations or future prospects of the Acquiror and its Subsidiaries, taken
as a whole, which the Disclosure Document does not (i) disclose has
occurred, (ii) disclose may occur (other than in the "Risk Factors"
section) or (iii) disclose may occur under a caption in the "Risk Factors"
section that is referred to in the Disclosure Document other than in the
"Risk Factors" section;
(v) each of the Acquiror and Acquiror Sub shall have performed and
complied with all of its covenants and obligations hereunder in all
material respects through the Closing;
(vi) each of the Acquiror and Acquiror Sub shall have delivered to the
Target a certificate of its Chief Executive Officer and its Chief Financial
Officer or general counsel to the effect that each of the conditions
specified above in Section 6(b)(i)-(v) is satisfied in all respects;
(vii) this Agreement and the Merger shall have received the Requisite
Target Shareholder Approval;
(viii) the Target shall have received a favorable opinion from Xxxxxx
& Whitney LLP, dated as of the Effective Time, as to the matters set forth
in Section 4(a) (other than as to outstanding shares), (b), and (c) hereof
and as to the valid issuance and listing on Nasdaq of the Acquiror Shares
being issued in the Merger and the effectiveness of the Registration
Statement;
(ix) Target shall have received an opinion from Xxxxxx & Xxxxxxx LLP,
dated as of the Effective Time, substantially to the effect that, on the
basis of the facts, representations and assumptions set forth in such
opinions which are consistent with
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the state of facts existing at the Effective Time, the Merger will be
treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that accordingly:
(A) No gain or loss will be recognized by the Acquiror, Acquiror
Sub or Target as a result of the Merger.
(B) No gain or loss will be recognized by the shareholders of
Target who exchange Target Shares for Acquiror Shares pursuant to the
Merger, except with respect to any cash received by such Target
shareholders in the Merger.
(C) Gain, if any, but not loss, will be recognized by Target
Shareholders upon the exchange of Target Shares for cash pursuant to the
Merger. Such gain will be recognized, but not in excess of the amount of
cash, in an amount equal to the difference, if any, between (a) the fair
market value of the Acquiror Shares and cash received and (b) the Target
Shareholder's adjusted tax basis in the Target Shares surrendered in
exchange therefor pursuant to the Merger. If the receipt of cash
payments has the effect of a distribution of a dividend to a Target
Shareholder, some or all of the gain recognized will be treated as a
dividend taxed as ordinary income. If the exchange does not have the
effect of a distribution of a dividend, all of the gain recognized would
be a capital gain, provided the Target Shares are a capital asset in the
hands of the Target Shareholder at the time of the Merger.
(D) The aggregate tax basis of the Acquiror Shares received by a
Target Shareholder who exchanges Target Shares in the Merger will be the
same as the aggregate tax basis of the Target Shares surrendered in
exchange therefor, decreased by the amount of any cash received by such
Target Shareholder which is treated as a redemption rather than a
dividend and increased by the amount of any non-dividend gain recognized
by such Target Shareholder in connection with the Merger.
(E) The holding period of the Acquiror Shares received by a Target
Shareholder pursuant to the Merger will include the period during which
the Target Shares surrendered therefor were held, provided the Target
Shares are a capital asset in the hands of the Target Shareholder at the
time of the Merger.
In rendering such opinion, such counsel may require and rely upon
representations and covenants including those contained in certificates
of officers of the Acquiror, Acquiror Sub and the Target and others,
including certain Target shareholders who are parties to this Agreement.
Failure of the Target or Majority Shareholders to provide such
certificates shall constitute a waiver by the Target of the requirement
for this opinion.
(x) all actions to be taken by the Acquiror or Acquiror Sub in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be satisfactory in form
and substance to the Target, acting reasonably.
The Target may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
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7. Termination of Agreement. This Agreement may be terminated with the
prior authorization of the board of directors of the Party terminating the
Agreement (whether before or after shareholder approval) as provided below:
(a) the Acquiror and the Target may terminate this Agreement by mutual
written consent at any time prior to the Effective Time;
(b) the Acquiror may terminate this Agreement by giving written notice
to the Target at any time prior to the Effective Time if:
(i) the Target or any Major Shareholder shall have breached any
material representation, warranty, covenant or obligation contained in
this Agreement in any material respect, the Acquiror has notified the
Target of the breach, and the breach has continued without cure for a
period of 20 days after the notice of breach;
(ii) the Closing shall not have occurred on or before December 31,
1999, by reason of the failure of any condition precedent under Section
6(a) hereof (unless the Target has breached any material representation,
warranty, covenant or failure results primarily from the Acquiror
breaching any representation, warranty, covenant or obligation contained
in this Agreement);
(iii) the Target or any person described in Section 5(h) shall have
taken any action proscribed by Section 5(h), or any action that would
have been proscribed by Section 5(h) but for the exception thereto
allowing certain activity to be taken if required by fiduciary
obligations as advised in writing by counsel;
(iv) the board of directors of Target shall have withdrawn or
modified in a manner adverse to the Acquiror or Acquiror Sub its
approval or recommendation of the Merger or this Agreement, or fails to
reaffirm such approval or recommendation when requested by the Acquiror
(c) the Target may terminate this Agreement by giving written notice
to the Acquiror at any time prior to the Effective Time if:
(i) the Acquiror has breached any material representation,
warranty, covenant or obligation contained in this Agreement in any
material respect, the Target has notified the Acquiror of the breach,
and the breach has continued without cure for a period of 20 days after
the notice of breach;
(ii) the Closing shall not have occurred on or before December 31,
1999, by reason of the failure of any condition precedent under Section
6(b) hereof (unless the failure results primarily from the Target
breaching any representation, warranty, covenant or obligation contained
in this Agreement);
(iii) the Target is not in material breach of its representations,
warranties, covenants or obligations under the Agreement and the board
of directors of the Target receives an unsolicited written offer with
respect to an Acquisition Proposal, or an unsolicited tender offer for
Target Shares is commenced, and the board of directors of the Target
determines that such transaction (the "Alternative Transaction") is more
favorable to the shareholders of the Target than the Merger, provided
the Target has given the Acquiror five business days prior notice of its
intention to terminate this Agreement to accept the Alternative
Transaction and the Acquiror shall have failed to offer to amend this
Agreement
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so that it is at least as favorable to the shareholders of the Target as
the Alternative Transaction.
(d) The Acquiror or the Target may terminate this Agreement by giving
written notice to the other Parties at any time after the Special Target
Meeting in the event this Agreement and the Merger fail to receive the
Requisite Target Shareholder Approval, and the Acquiror may terminate this
Agreement if the number of Dissenting Shares exceeds 10% of the outstanding
Target Shares.
8. Effect of Termination.
(a) Liabilities Upon Termination. If this Agreement is terminated
pursuant to Xxxxxxx 0, xxxx of the Acquiror, Acquiror Sub or the Target
(nor any of their officers or directors) shall have any liability or
further obligation to any other Party or its shareholders except as
provided in Sections 8(b) and 8(c) below, as liquidated damages and in lieu
of all other liabilities to any person for breach of this Agreement,
provided that the confidentiality provisions of Section 9(b) and 5(f) shall
survive termination of this Agreement.
(b) Acquiror's Break-up fee. If:
(i) this Agreement shall have been terminated by the Acquiror
pursuant to Section 7(b)(i), 7(b)(iii) or 7(b)(iv) hereof;
(ii) this Agreement is terminated by the Target pursuant to Section
7(c)(iii); or
(iii) this Agreement is terminated pursuant to Section 7(d) hereof;
then, in any such event, the Target shall promptly, but in no event
later than five business days after a request from the Acquiror for
payment (other than a termination pursuant to Section 7(c)(iii), in
which case payment shall be made upon giving notice of termination), pay
to the Acquiror (A) a fee equal to $500,000, which amount shall be
payable in same day funds; plus, (B) upon receipt of an invoice or
invoices therefor an amount equal to out-of-pocket expenses, including
fees and expenses paid to investment bankers, lawyers, accountants and
other service providers, incurred in connection with the transactions
contemplated by this Agreement. If not paid when due, amounts payable
pursuant to this Section 8(b) shall bear interest at the rate of ten
percent (10%) per annum. The Target acknowledges that the agreements
contained in this Section 8(b) (i) reflect reasonable compensation to
the Acquiror for undertaking the Merger and risking the loss of the
benefits of the Merger under the circumstances contemplated by this
Section 8(b), (ii) were agreed to by the Target for the purpose of
inducing the Acquiror and Acquiror Sub to execute this Agreement and
undertake their obligations hereunder, and (iii) are an integral part of
the transactions contemplated by the Parties in this Agreement, and that
without these agreements, the Acquiror and Acquiror Sub would not have
entered into this Agreement.
(c) Target's Breakup Fee. If the Acquiror shall terminate this
Agreement under circumstances other than those permitted in Section 7(a),
(b) or (d) hereof, or if the Target terminates pursuant to Section 7(c)(i)
(other than for breaches of the representations and warranties set forth in
Section 4(g) or 4(h)), the Acquiror shall promptly pay to the Target (A) a
fee equal to $500,000, which amount shall be
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payable in same day funds; plus (B) upon receipt of an invoice or invoices
therefor an amount equal to out-of-pocket expenses, including fees and
expenses paid to investment bankers, lawyers, accountants, and other
service providers, incurred in connection with the transactions
contemplated by the Agreement. If not paid when due, amounts payable
pursuant to this Section 8(c) shall bear interest at the rate of 10% per
annum. The Acquiror acknowledges that the agreements contained in this
Section 8(c) (i) reflect reasonable compensation to the Target for
undertaking the Merger and risking the loss of benefits of the Merger under
the circumstances contemplated by this Section 8(c), (ii) were agreed for
the purpose of inducing the Target to execute this Agreement and undertake
its obligations hereunder, and (iii) are an integral part of the
transactions contemplated by the Parties in this Agreement, and without
these agreements, the Target would not have entered into this Agreement.
9. Miscellaneous.
(a) Survival and Indemnity.
(i) Except as set forth in Section 9(a)(ii), none of the
representations, warranties, and covenants of the Parties (other than
the provisions in Section 2 above concerning issuance of the Acquiror
Shares and the provisions in Section 5(i) above concerning
indemnification) will survive the Effective Time;
(ii) The representations and warranties of the Major Shareholders
in Section 3 hereof shall survive the Effective Time for a period of one
year, provided that (i) the representations and warranties set forth in
Sections 3(b), (i), (j) and (l) hereof and any representation and
warranty as to which any of Major Shareholders had actual knowledge of
the facts which a reasonable person in such Major Shareholder's
circumstances should have concluded would constitute an inaccuracy or
breach shall survive for two years; and (ii) the representations and
warranties set forth in Section 3(s) hereof shall survive until all
applicable statutes of limitations, including waivers and extensions,
have expired with respect to each matter addressed therein.
Notwithstanding the preceding sentence, any representation or warranty
for which indemnity may be sought pursuant to this Section 9(a) shall
survive the time it would otherwise terminate pursuant to the preceding
sentence, if notice of the inaccuracy or breach thereof shall have been
given to the Major Shareholder against whom indemnity may be sought.
(iii) The Major Shareholders agree, jointly and severally, to
indemnify the Acquiror, Acquiror Sub and the Surviving Corporation
against, and agrees to hold each of them harmless from, any and all
damage, loss, liability and expense (including, without limitation,
costs of investigation and reasonable attorneys' fees in connection with
any claim, action, suit or proceeding) (collectively, "Damages")
incurred or suffered by the Acquiror, the Acquiror Sub or the Surviving
Corporation arising out of:
(A) any misrepresentation or breach of any warranty made by
Major Shareholders in Section 3 hereof; or
(B) any claim by any holder or former holder of Target Shares
against Target or its officers, directors, or controlling persons
alleging violations of Sections 5, 11, or 12 of the Securities Act
or Section 10(b) or 14(a) (other
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than with respect to the Definitive Target Materials) of the
Exchange Act, intentional or negligent misrepresentation, breach of
fiduciary duty, or any misstatement of material fact or omission to
state a fact that is required to be stated or necessary to make the
statements made, in the light of the circumstances under which they
were made, not misleading.
Provided, however, that the Major Shareholders shall be not liable
for indemnity under this Section 9(a)(iii) unless the aggregate
Damages exceed $50,000, in which event the Major Shareholders shall
be liable for all Damages, subject to Section 9(a)(iv).
(iv) The aggregate indemnification obligations of the Majority
Shareholders under Section 9(a) shall not exceed:
(A) With respect to Damages arising out of misrepresentations
and breaches of warranties set forth in Section 3 hereof which
shall survive for one year pursuant to Section 9(a)(ii) hereof, an
amount equal to ten percent (10%) of (i) the aggregate number of
Acquiror Shares multiplied by the Average Price plus (ii) the
aggregate amount of cash, received by the Major Shareholders (and
any transferees of any Target Shares held by the Major Shareholders
on the date hereof) pursuant to the Merger; provided that Damages
claimed under Section 9(a)(iv)(B) shall count toward the foregoing
limitation;
(B) With respect to Damages arising out of misrepresentations
and breaches of warranties set forth in Section 3 hereof which
shall survive for two years pursuant to Section 9(a)(ii) hereof and
Damages recoverable under Section 9(a)(iv)(B) hereof, an amount
equal to $1,000,000; provided that Damages claimed under Section
9(a)(iv)(A) shall count toward the $1,000,000 limitation.
Provided further, that if and to the extent any Damages are paid by
insurance, the Major Shareholders shall not have any
indemnification obligations hereunder (and the insurance provider
shall not have any rights of subrogation hereunder), it being
understood that the Acquiror, Acquiror Sub and the Surviving
Corporation shall use commercially reasonable efforts to pursue
recovery against an insurer under insurance coverage, but none of
them shall be required to commence litigation or otherwise expend
significant resources pursuing collection in the event of a dispute
with the insurer.
(v) No investigation or knowledge by or on behalf of the Acquiror
or Acquiror Sub or the Surviving Corporation (whether before or after
the Effective Time) shall in any way limit the representations and
warranties set forth in Section 3 or the right of indemnity set forth in
this Section 9(a).
(b) Press Releases and Public Announcements. Neither the Acquiror nor
the Target shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the other; provided, however, that the Acquiror or the Target
may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
best efforts to advise the other Party and its counsel at least one day
prior to making
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the disclosure). No Party other then the Acquiror or the Target shall issue
any press release or make any public disclosure concerning the subject
matter of this Agreement, or otherwise disclose any information concerning
the subject matter of this Agreement to any person that has not previously
been made public by the Acquiror or the Target.
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that (i)
the provisions in Section 2 above concerning issuance of the Acquiror
Shares are intended for the benefit of the Target Shareholders and (ii) the
provisions in Section 5(i) above concerning indemnification are intended
for the benefit of the individuals specified therein and their respective
legal representatives.
(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof, except that the prior confidentiality
agreement executed by the Acquiror and the Target shall remain in effect
until the Effective Time or termination of this Agreement.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written approval of the Acquiror and the Target.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Target or Major Shareholders:
Xxx Fine
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Copy to:
Xxxxxx Xxxxxx, Esq.
Cairncross & Hempelmann, P.S.
70th Floor Columbia Center
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
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If to the Acquiror or Acquiror Sub:
ARIS Corporation
Attn: General Counsel
0000 000xx Xxxxxx XX
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Copy to:
Xxxxx Xxxxx
Xxxxxx & Whitney LLP
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Any Party or Major Shareholder may send any notice, request, demand,
claim, or other communication hereunder to the intended recipient at the
address set forth above using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party or Major
Shareholder may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving
the other Parties and the Major Shareholders notice in the manner herein
set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Washington without
giving effect to any choice or conflict of law provision or rule (whether
of the State of Washington or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Washington.
(j) Amendments and Waivers. The Acquiror, Acquiror Sub and the Target
may mutually amend any provision of this Agreement at any time prior to the
Effective Time with the prior authorization of their respective boards of
directors; provided, however, that any amendment effected subsequent to
shareholder approval will be subject to the restrictions contained in the
Washington Business Corporation Act, and provided further that no amendment
may increase the obligations of any Major Shareholder with respect to any
representation or warranty without such Major Shareholder's written
consent. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by the Acquiror, Acquiror
Sub, the Target and any Major Shareholder required to be a party thereto by
the previous sentence. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
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(l) Expenses. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) Construction. The Parties and Major Shareholders have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the Parties and Major
Shareholders and no presumption or burden of proof shall arise favoring or
disfavoring any Party or Major Shareholder by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context
otherwise requires. The word "including" shall mean including without
limitation.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
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IN WITNESS WHEREOF, the Parties and the Major Shareholders have executed
this Agreement as of the date first above written.
ARIS CORPORATION
By: /s/ XXXXXX X. XXXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: V.P. Finance and CFO
ARIS INTERACTIVE, INC.
By: /s/ XXXXXX X. XXXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: V.P. Finance and CFO
XXXX.XXX INTERNATIONAL CORP.
By: /s/ XXXXXX X. FINE
-----------------------------------
Name: Xxxxxx X. Fine
Title: President
Major Shareholders:
/s/ XXXXXX X. FINE
--------------------------------------
Xxxxxx X. Fine
/s/ XXXXX XXXXX
--------------------------------------
Xxxxx Xxxxx
/s/ XXXXXXX X. FINE
--------------------------------------
Xxxxxxx X. Fine
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EXHIBIT A
ARTICLES OF MERGER
XXXX.XXX INTERNATIONAL CORP.,
A WASHINGTON CORPORATION
WITH AND INTO
ARIS INTERACTIVE, INC.,
A WASHINGTON CORPORATION
In accordance with RCW 23B.11.050
The undersigned, , being the of xxxx.xxx
International Corp., a Washington corporation ("Target") and ,
being the of ARIS Interactive, Inc., a Washington
corporation ("Acquiror Sub") DO HEREBY CERTIFY as follows:
(1) the constituent corporations in the merger (the "Merger") are
xxxx.xxx International Corp., a Washington corporation, and ARIS
Interactive, Inc., a Washington corporation; the name of the surviving
corporation is ARIS Interactive, Inc., a Washington corporation.
(2) an Agreement and Plan of Merger dated as of (the
"Merger Agreement") has been approved, adopted, and executed by each of the
constituent corporations in accordance with RCW 23B.11.010. The Merger
Agreement is attached hereto as Exhibit A and incorporated herein by
reference.
(3) The Merger Agreement was duly approved by the shareholders of each
of the constituent corporations in accordance with Section 23B.011.030 of
the Washington Business Corporation Act.
The Merger shall become effective on the date on which these Articles of
Merger are filed with the Secretary of State of the State of Washington.
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IN WITNESS WHEREOF, the parties hereto have caused these Articles of Merger
to be duly executed as of this day of , 1999.
XXXX.XXX INTERNATIONAL CORP.,
a Washington corporation
By:
-----------------------------------
Name:
Title:
ARIS INTERACTIVE, INC.,
a Washington corporation
By:
-----------------------------------
Name:
Title:
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00
XXXXXXX X
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the day
of , 1999 by and between xxxx.xxx International Corp., a Washington
corporation ("Target"), and ARIS Interactive, Inc., a Washington corporation
("Acquiror Sub") (collectively, the "Constituent Corporations"), with reference
to the following facts:
A. Each of the Constituent Corporations has, subject to approval by
their respective shareholders, adopted the plan of merger embodied in this
Agreement, and the Constituent Corporations and their respective boards of
directors deem it advisable and in the best interest of each of the
Constituent Corporations that Target be merged with and into Acquiror Sub
pursuant to the applicable laws of Washington and Section 368 of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, the Constituent Corporations do hereby agree to merge, on
the terms and conditions herein provided, as follows:
1. The Merger.
1.1 Governing Law. Target shall be merged into Acquiror Sub in
accordance with the applicable laws of the State of Washington (the
"Merger"). Acquiror Sub shall be the surviving corporation and shall be
governed by the laws of the State of Washington.
1.2 Effective Time. The "Effective Time" of the Merger shall be, and
such term as used herein shall mean, the time at which Acquiror Sub and
Target file Articles of Merger in substantially the form attached hereto as
Exhibit A in the office of the Secretary of State of the State of
Washington after satisfaction of the requirements of applicable laws
prerequisite to such filing.
2. Share Conversion. On the Effective Date, by virtue of the Merger and
without any action on the part of the holders thereof:
2.1 each share of common stock, par value $.01 per share, of Target
(a "Target Share") (other than any Target Share as to which any shareholder
has exercised his or its appraisal rights under Section 23B.13.010, et.
seq. of the Washington Business Corporation Act (a "Dissenting Share") or
any Target Share that ARIS Corporation (the "Acquiror") owns beneficially
(an "Acquiror-owned Share")) shall be converted into the right to receive
the following consideration (the "Merger Consideration"):
(1) that number of shares of common stock, without par value, of
the Acquiror ("Acquiror Shares") equal to the lesser of (x) .3717 or (y)
$4.5531, divided by the average of the per share daily closing prices of
Acquiror Shares as reported by Nasdaq for each trading day during the
period of ten trading days ending [date that is the second trading day
prior to the Target Special Meeting] (the "Average Price") (such lesser
number of Acquiror Shares being hereinafter referred to as the "Base
Share Consideration"), plus
(2) an amount in cash equal to the lesser of (x) $1.1150 or (y) the
amount (if any) by which $4.5531 exceeds the Share Consideration
multiplied by the
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Average Price (such lesser amount being hereinafter referred to as the
"Cash Consideration"); plus
(3) an additional number of Acquiror Shares (if a positive number)
equal to (x) $4.5531 minus the Base Consideration (as defined below),
divided by (y) the Average Price (such additional number of Acquiror
Shares (if any) plus the Base Share Consideration being hereinafter
referred to as the "Share Consideration"). "Base Consideration" means an
amount equal to (x) the Base Share Consideration multiplied by the
Average Price, plus (y) the Cash Consideration.
At the Effective Time and without any action on the part of the holder,
Target Shares held by such holder shall cease to be outstanding and
shall constitute only the right to receive without interest, the Merger
Consideration multiplied by the number of Target Shares held by such
holder and cash in lieu of a fractional share.
2.2 each Dissenting Share shall be converted into the right to
receive payment from Acquiror Sub with respect thereto in accordance with
the provisions of the Washington Business Corporation Act, and
2.3 each Acquiror-owned Share shall be canceled; provided, however,
that the Merger Consideration shall be subject to equitable adjustment in
the event of any stock split, stock dividend, reverse stock split, or other
change in the number of Target Shares outstanding. No Target Share shall be
deemed to be outstanding or to have any rights other than those set forth
above in this Section 2 after the Effective Time.
2.4 Shares of Acquiror Sub. Each issued and outstanding share of
capital stock of Acquiror Sub at and as of the Effective Time will remain
issued and outstanding and held by the Acquiror.
3. Effect of the Merger.
3.1 Rights, Privileges, Etc. At the Effective Time, Acquiror Sub,
without further act, deed or other transfer, shall retain or succeed to, as
the case may be, and possess and be vested with all the rights, privileges,
immunities, powers, franchises and authority, of a public as well as of a
private nature, of the Constituent Corporations; all property of every
description and every interest therein and all debts and other obligations
of or belonging to or due to the Constituent Corporations on whatever
account shall thereafter be taken and deemed to be held by or transferred
to, as the case may be, or vested in Acquiror Sub without further act or
deed; title to any real estate, or any interest therein, vested in the
Constituent Corporations shall not revert or in any way be impaired by
reason of the Merger; and all of the rights of creditors of the Constituent
Corporations shall be preserved unimpaired, and all liens upon the property
of the Constituent Corporations shall be preserved unimpaired, and such
debts, liabilities, obligations and duties of the Constituent Corporations
shall thenceforth remain with or attach to, as the case may be, Acquiror
Sub and may be enforced against it to the same extent as if all of such
debts, liabilities, obligations and duties had been incurred or contracted
by it.
3.2 Replacement of Target Options. At the Effective Time and without
any action on the part of the holder, all outstanding options ("Target
Options") to
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purchase Target Shares shall terminate and cease to be exercisable, no
Target Option shall be accelerated in vesting (other than Target Options
held by employees that Acquiror notifies Target will not be continued as
employees of Acquiror Sub, and Target Options held by Xxxxxxx X. Xxxxxxx
that vest automatically pursuant to his employment agreement), and the
Target's Board of Directors shall take or cause to be taken such actions as
may be required to cause such result. The Acquiror shall cause to be
granted under the Acquiror's Stock Option Plan to each holder of Target
Options, options to purchase a number of Acquiror Shares equal to that
number of Target Shares issuable upon exercise of such holder's Target
Options multiplied by the Option Conversion Ratio at an exercise price per
Acquiror Share equal to the exercise price per Target Share of such
outstanding Target Option divided by the sum of (i) the Share Consideration
plus (ii) the Cash Consideration divided by the Average Price, and having
the same vesting schedule as the Target Options replaced.
3.3 Replacement of Target Warrants. At the Effective Time and without
any action on the part of the holder, each outstanding warrant (a "Target
Warrant") granted by Target to purchase Target Shares shall be converted
into the right to purchase the Merger Consideration in lieu of each Target
Share issuable upon exercise of such Target Warrant upon payment of the
exercise price per Target Share of such outstanding Target Warrant.
3.4 Articles of Incorporation and Bylaws. The Articles of
Incorporation of Acquiror Sub as in effect at the Effective Time shall,
from and after the Effective Time, be and continue to be the Articles of
Incorporation of Acquiror Sub without change or amendment until thereafter
amended in accordance with the provisions thereof and applicable laws. The
Bylaws of Acquiror Sub as in effect at the Effective Time shall, from and
after the Effective Time, be and continue to be the Bylaws of Acquiror Sub
without change or amendment until thereafter amended in accordance with the
provisions thereof, the Articles of Incorporation of Acquiror Sub and
applicable laws.
3.5 Directors and Officers. The directors and officers of Acquiror
Sub shall be the directors and officers of Acquiror Sub at the Effective
Time, and such directors and officers shall serve until they are removed or
replaced in accordance with the Articles of Incorporation and Bylaws of
Acquiror Sub.
3.6 Further Action. From time to time, as and when requested by
Acquiror Sub, or by its successors or assigns, any party hereto shall
execute and deliver or cause to be executed and delivered all such deeds
and other instruments, and shall take or cause to be taken all such further
or other actions, as Acquiror Sub, or its successors or assigns, may deem
necessary or desirable in order to vest in and confirm to Acquiror Sub, and
its successors or assigns, title to and possession of all the property,
rights, privileges, powers and franchises referred to herein and otherwise
to carry out the intent and purposes of this Agreement.
4. Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, Target Shares that are Dissenting Shares immediately prior to the
Effective Time shall not be converted into Acquiror Shares pursuant to the
Merger, and the holders of such Dissenting Shares shall be entitled to receive
payment of the fair value of their Dissenting Shares in accordance with the
provisions of the Washington Business Corporation Act; unless and until such
holders shall fail to perfect, lose, or withdraw their rights thereunder. If,
after the Effective Time, any holder of Dissenting Shares shall fail to perfect,
lose or
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withdraw his or its right to be paid fair value, then such Dissenting Shares no
longer shall be deemed to be Dissenting Shares, and shall be treated as if they
had been converted at the Effective Time into the right to receive the
consideration being paid for Target Shares in the Merger, without any interest,
and Acquiror shall take all necessary action to effect the exchange of Acquiror
Shares for the Target Shares. Target shall give Acquiror prompt written notice
of any demands for payment of fair value for any Target Shares, and Acquiror
shall have the right to participate in all negotiations or proceedings with
respect to such demands. Without the prior written consent of the Acquiror, the
Target shall not settle, offer to settle or make any payment with respect to any
such demands.
5. Termination; Amendment.
5.1 Termination Provision. Anything contained in this Agreement to
the contrary notwithstanding, this Agreement may be terminated and the
merger abandoned:
(a) Upon written notice at any time prior to the Effective Time by
mutual consent of the Constituent Corporations; or
(b) If holders of at least two-thirds of the outstanding Target
Shares shall not vote in favor of the Merger; or
(c) If there exists a suit, action, or other proceeding commenced,
pending or threatened, before any court or other governmental agency of
the federal or state government, in which it is sought to restrain,
prohibit or otherwise adversely affect the consummation of the Merger
contemplated hereby.
5.2 Amendment Provisions. Anything contained in this Agreement
notwithstanding, this Agreement may be amended or modified in writing at
any time prior to the Effective Time; provided that, an amendment made
subsequent to the adoption of this Agreement by the shareholders of the
Constituent Corporations shall not (1) alter or change the amount or kind
of shares, securities, cash, property and/or rights to be received in
exchange for or on conversion of all or any of the shares of any class or
series thereof of the Constituent Corporations, (2) alter or change any
terms of the Articles of Incorporation of Acquiror Sub or (3) alter or
change any of the terms and conditions of this Agreement if such alteration
or change would adversely affect the holders of shares of any class or
series thereof of the Constituent Corporations; provided, however, the
Constituent Corporations may by agreement in writing extend the time for
performance of, or waive compliance with, the conditions or agreements set
forth herein.
5.3 Board Action. In exercising their rights under this Section 5,
each of the Constituent Corporations may act by its Board of Directors, and
such rights may be so exercised, notwithstanding the prior approval of this
Agreement by the shareholders of the Constituent Corporations.
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IN WITNESS WHEREOF, this Agreement, having first been duly approved by
resolutions of the Board of Directors of each of the Constituent Corporations,
is hereby executed on behalf of each of the Constituent Corporations by their
respective officers thereunto duly authorized.
XXXX.XXX INTERNATIONAL CORP.
By:
-----------------------------------
Name:
Title:
ARIS INTERACTIVE, INC.
By:
-----------------------------------
Name:
Title:
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