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EXHIBIT 2.1
EXECUTION
COPY
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 31, 1999
BY AND AMONG
ALYDAAR SOFTWARE CORPORATION,
ALYDAAR ACQUISITION CORP.
AND
DATA SYSTEMS NETWORK CORPORATION
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TABLE OF CONTENTS
Article Page
ARTICLE I THE MERGER.......................................................... 1
1.1 The Merger................................................... 1
1.2 Effective Time; Closing...................................... 1
1.3 Effect of the Merger......................................... 2
1.4 Certificate of Incorporation; Bylaws......................... 2
1.5 Directors and Officers....................................... 2
1.6 Effect on Capital Stock...................................... 2
1.7 Stock Options................................................ 5
1.8 Surrender of Certificates.................................... 5
1.9 No Further Ownership Rights in DSNC Common Stock............. 7
1.10 Lost, Stolen or Destroyed Certificates....................... 7
1.11 Tax and Accounting Consequences.............................. 7
1.12 Taking of Necessary Action; Further Action................... 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF DSNC............................. 8
2.1 Organization of DSNC......................................... 8
2.2 DSNC Capital Structure....................................... 8
2.3 Obligations With Respect to Capital Stock.................... 9
2.4 Authority.................................................... 9
2.5 Intentionally reserved....................................... 11
2.6 SEC Filings; DSNC Financial Statements....................... 11
2.7 Absence of Certain Changes or Events......................... 12
2.8 Taxes........................................................ 12
2.9 Intellectual Property........................................ 13
2.10 Compliance; Permits; Restrictions; Insurance................. 14
2.11 Litigation................................................... 15
2.12 Brokers' and Finders' Fees................................... 15
2.13 Employee Benefit Plans....................................... 15
2.14 Title to Properties; Absence of Liens and Encumbrances....... 16
2.15 Environmental Matters........................................ 17
2.16 Employees; Labor Matters..................................... 17
2.17 Agreements, Contracts and Commitments........................ 18
2.18 Purchase Commitments and Outstanding Bids.................... 19
2.19 Customers, Distributors and Suppliers........................ 20
2.20 DSNC Contracts............................................... 20
2.21 Pooling of Interests......................................... 20
2.22 Intentionally reserved....................................... 20
2.23 DSNC Proxy Statement/Prospectus.............................. 20
2.24 Board and Shareholder Approval............................... 21
2.25 Fairness Opinion............................................. 21
2.26 Products and Distribution.................................... 21
2.27 Intentionally reserved....................................... 21
2.28 Year 2000 Compliance......................................... 21
2.29 Inventories.................................................. 22
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2.30 Interested Party Transactions................................ 22
2.31 Disclosure................................................... 22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ALYDAAR AND
MERGER SUB..................................... 23
3.1 Organization of Alydaar and Merger Sub....................... 23
3.2 Alydaar and Merger Sub Capital Structure..................... 23
3.3 Authority.................................................... 23
3.4 SEC Filings; Alydaar Financial Statements.................... 25
3.5 Absence of Certain Changes or Events......................... 26
3.6 Pooling of Interests......................................... 26
3.7 DSNC Proxy Statement/Prospectus.............................. 26
3.8 Board Approval............................................... 26
3.9 Merger Sub. ................................................ 26
3.10 Broker's Fees................................................ 26
3.11 Disclosure................................................... 27
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................................ 27
4.1 Conduct of Business.......................................... 27
ARTICLE V ADDITIONAL AGREEMENTS............................................... 30
5.1 DSNC Proxy Statement/Prospectus; Registration
Statement; Other Filings;
Board Recommendations.......................... 30
5.2 Meeting of Shareholders...................................... 31
5.3 Confidentiality.............................................. 31
5.4 No Solicitation.............................................. 31
5.5 Public Disclosure............................................ 34
5.6 Legal Requirements........................................... 34
5.7 Third Party Consents......................................... 34
5.8 Notification of Certain Matters; Financial Statements........ 34
5.9 Reasonable Best Efforts and Further Assurances............... 35
5.10 Intentionally reserved....................................... 35
5.11 Schedules.................................................... 35
5.12 NMS Listing.................................................. 35
5.13 DSNC Affiliate Agreement..................................... 35
5.14 Tax-Free Merger.............................................. 36
5.15 Pooling Covenant............................................. 36
5.16 Employee Matters............................................. 36
5.17 Director and Officer Liability............................... 36
ARTICLE VI CONDITIONS OF THE MERGER........................................... 37
6.1 Conditions to Obligations of Each Party to................... 37
Effect the Merger
6.2 Additional Conditions to Obligations of DSNC................. 38
6.3 Additional Conditions to the Obligations of.................. 39
Alydaar and Merger Sub
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................. 40
7.1 Termination.................................................. 40
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7.2 Notice of Termination; Effect of Termination................. 42
7.3 Fees and Expenses............................................ 43
ARTICLE VIII GENERAL PROVISIONS............................................... 44
8.1 Non-Survival of Representations and Warranties............... 44
8.2 Notices...................................................... 44
8.3 Interpretation; Knowledge.................................... 45
8.4 Counterparts................................................. 45
8.5 Entire Agreement; Third Party Beneficiaries.................. 45
8.6 Severability................................................. 45
8.7 Other Remedies; Specific Performance......................... 46
8.8 Governing Law................................................ 46
8.9 Rules of Construction........................................ 46
8.10 Assignment................................................... 46
8.11 Waiver of Jury Trial......................................... 46
INDEX OF EXHIBITS
Exhibit A Form of DSNC Voting Agreement
Exhibit B Form of Confidentiality Agreement
Exhibit C Form of DSNC Affiliate Agreement
Exhibit D Form of McGuire, Woods, Battle & Xxxxxx LLP Legal Opinion
Exhibit E Form of Legal Opinion from Counsel to DSNC
INDEX OF SCHEDULES
Schedule 2.1 Organization of DSNC
Schedule 2.2 Outstanding Options
Schedule 2.4 Required Consents
Schedule 2.7 Absence of Certain Changes or Events
Schedule 2.8 Taxes
Schedule 2.9(b) Intellectual Property
Schedule 2.9(c) Form of Confidentiality Agreement
Schedule 2.10(a) Governmental Review
Schedule 2.10(c) Insurance Policies
Schedule 2.11 Litigation
Schedule 2.13(c) Employee Benefit Plans
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Schedule 2.14(a) Property
Schedule 2.14(b) Liens
Schedule 2.16 Employee Matters
Schedule 2.17 Agreements
Schedule 2.18 Merchandise Claims
Schedule 2.19 Customers and Distributors
Schedule 2.20 Material Contracts
Schedule 2.26 Software Products
Schedule 2.26(a) Products
Schedule 2.28(a) Contingency Plans
Schedule 2.29 Inventory
Schedule 3.1(a) Qualification or License to Do Business
Schedule 3.3(a) Required Consents
Schedule 4.1(r) Waiver of Release Claims
Schedule 5.13 DSNC Affiliates
[The exhibits and the schedules have been omitted]
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of January 31, 1999, by and among Alydaar Software Corporation,
a North Carolina corporation ("Alydaar"), Alydaar Acquisition Corp., a North
Carolina corporation and a wholly owned subsidiary of Alydaar ("Merger Sub"),
and Data Systems Network Corporation, a Michigan corporation ("DSNC").
STATEMENT OF PURPOSE
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the North Carolina General Corporation Law ("North Carolina
Law") and the Michigan Business Corporation Act ("Michigan Law"), Alydaar,
Merger Sub and DSNC intend to enter into a business combination transaction.
B. Concurrently with the execution of this Agreement, and as a
condition and inducement to Alydaar's willingness to enter into this Agreement,
certain shareholders of DSNC are entering into a Voting Agreement (the "Voting
Agreement") in substantially the form attached hereto as Exhibit A.
C. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
D. It is also intended by the parties hereto that the Merger (as
defined below) shall qualify for accounting treatment as a pooling of interests.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of North Carolina Law and Michigan Law, Merger Sub shall
be merged with and into DSNC (the "Merger"), the separate corporate existence of
Merger Sub shall cease and DSNC shall continue as the surviving corporation.
DSNC as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger with the Secretary of State of the State of North
Carolina in accordance with the relevant provisions of
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North Carolina Law (the "Certificate of Merger") and the filing of a Certificate
of Merger with the Michigan Department of Consumer and Industry Services -
Corporation; Securities and Land Development Bureau (the "Michigan Department")
in accordance with the relevant provisions of Michigan Law (the time of such
filing (or such later time as may be agreed in writing by the parties and
specified in the Certificate of Merger) being the "Effective Time") as soon as
practicable on or after the Closing Date (as herein defined). The closing of the
Merger (the "Closing") shall take place at the offices of McGuire, Woods, Battle
& Xxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxx Xxxxxxxx
00000, at a time and date to be specified by the parties, which shall be no
later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
North Carolina Law and Michigan Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of DSNC and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of DSNC and Merger
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
At the Effective Time, the separate existence of Merger Sub will cease and
Merger Sub will be merged with and into DSNC.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall
be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of
Incorporation of the Surviving Corporation; provided, however, that at
the Effective Time, the Certificate of Incorporation of the Surviving
Corporation shall be amended so that the name of the Surviving
Corporation shall be Data Systems Network Corporation.
(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be, at the Effective Time, the Bylaws of
the Surviving Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of DSNC immediately prior to the Effective Time, until their respective
successors are duly appointed.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, DSNC or the holders of
any of the following securities:
(a) Conversion of DSNC Common Stock. Subject to Section
1.6(b), each share of Common Stock, $.01 par value per share, of DSNC
(the "DSNC Common
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Stock") issued and outstanding immediately prior to the Effective Time,
will be canceled and extinguished and automatically converted (subject
to Sections 1.6(b), (e) and (f)) into the number of shares (the
"Exchange Ratio") of Common Stock of Alydaar (the "Alydaar Common
Stock") equal to the quotient obtained by dividing 1,611,047 by the
total number of shares of DSNC Common Stock outstanding at Closing
(taking into account shares issued pursuant to the exercise of stock
options as included in the formula set forth below) (the "DSNC
Outstanding Shares"), which shall be deemed to include, without
limitation:
(A) the portion of each share of DSNC Common Stock, whether
issued or issuable pursuant to the exercise of either stock
options under the Option Plan or warrants to purchase DSNC
Common Stock held as of the date hereof, which is equal to the
product obtained by multiplying each such share by the
quotient obtained by dividing:
(x) the result of subtracting the exercise price of
such option or warrant from the quotient obtained by
dividing (1) the actual number of shares of DSNC
Common Stock issued and outstanding immediately prior
to Closing into (2) the product obtained by
multiplying the aggregate number of shares of Alydaar
Common Stock into which the DSNC Outstanding Shares
are to be converted pursuant to the terms and
provisions hereof, by 10.8625 (such quotient being
referred to as the "DSNC Stock Price"), by
(y) the DSNC Stock Price;
provided that if the amount obtained from the
subtraction specified in the preceding clause (x) is
not a positive number, no portion of such share shall
be included in the DSNC Outstanding Shares; and
(B) any shares of DSNC Common Stock issued or issuable
pursuant to the resolution or settlement of In Re: DSNC
Systems Network Corporation Securities Litigation (including
pursuant to any indemnity obligations of DSNC with respect
thereto).
As an example of the calculation contained in the foregoing
clause (A) relating to the portion of each share of DSNC
Common Stock underlying stock options or warrants to be
included in the number of DSNC Outstanding Shares, the
following calculation would be performed with respect to such
a stock option or warrant to purchase one share of DSNC Common
Stock having an exercise price of $1.50, assuming a DSNC Stock
Price of $3.50:
1 x (3.50 - 1.50) = .57
3.50
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As a result, .57 of the share of DSNC Common Stock underlying
such stock option or warrant would be included in the DSNC
Outstanding Shares.
(b) Adjustment to Exchange Ratio. The Exchange Ratio shall be
subject to adjustment as follows:
(i) if the average closing price per share of Alydaar
Common Stock on the Nasdaq National Market for the 10 trading
day period ending on the trading day immediately preceding the
Effective Time (the "Alydaar Stock Price") is less than $6.00
per share, Alydaar will issue a maximum aggregate number of
shares of Alydaar Common Stock into which the DSNC Outstanding
Shares are to be converted pursuant to the terms and
provisions hereof (the "Maximum Aggregate Number") that is the
quotient obtained by dividing 9,666,282 by the Alydaar Stock
Price; and
(ii) if the Alydaar Stock Price is in excess of
$16.00 per share, Alydaar will issue a Maximum Aggregate
Number of shares of Alydaar Common Stock that is the quotient
obtained by dividing 25,776,752 by the Alydaar Stock Price.
(c) Cancellation of Alydaar-Owned Stock. Each share of DSNC
Common Stock held by DSNC or owned by Merger Sub, Alydaar or any direct
or indirect wholly owned subsidiary of DSNC or of Alydaar immediately
prior to the Effective Time shall be canceled and extinguished without
any conversion thereof.
(d) Capital Stock of Merger Sub. Each share of Common Stock,
$.01 par value per share, of Merger Sub (the "Merger Sub Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share
of Common Stock, $.01 par value per share, of the Surviving Corporation
and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation. Each certificate evidencing ownership of
shares of Merger Sub Common Stock shall evidence ownership of such
shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or similar
distribution of securities convertible into Alydaar Common Stock or
DSNC Common Stock), reorganization, recapitalization, reclassification
or other like change with respect to Alydaar Common Stock or DSNC
Common Stock occurring or having a record date on or after the date
hereof and prior to the Effective Time, which shall not include any
issuance of securities in connection with sales of stock, acquisitions,
financings, etc.
(f) Fractional Shares. No fraction of a share of Alydaar
Common Stock will be issued by virtue of the Merger, but in lieu
thereof each holder of shares of DSNC Common Stock who would otherwise
be entitled to a fraction of a share of Alydaar
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Common Stock (after aggregating all fractional shares of Alydaar Common
Stock that otherwise would be received by such holder) shall receive
from Alydaar an amount of cash (rounded to the nearest whole cent)
equal to the product of (i) such fraction, multiplied by (ii) the
average closing price of one share of Alydaar Common Stock for the five
most recent days that Alydaar Common Stock has traded ending on the
trading day immediately prior to the Effective Time, as reported on the
Nasdaq National Market.
1.7 Stock Options.
(a) Unexercised Options. At the Effective Time, each
outstanding stock option under the Option Plan (an "Outstanding DSNC
Option") shall be assumed by Alydaar. Each Outstanding DSNC Option
shall thereafter be converted into an option, which option shall be
deemed to be vested as of the Effective Time, to purchase the same
number of shares of Alydaar Common Stock as such Outstanding DSNC
Option would have been exchangeable for pursuant to Section 1.6 had
such Outstanding DSNC Option been exercised prior to Closing. The
exercise price for each such converted Outstanding DSNC Option shall be
the quotient obtained by dividing the exercise price of such
Outstanding DSNC Option by the Exchange Ratio.
(b) Exercised Options. Shares issued pursuant to options to
purchase DSNC Common Stock under the Option Plan that are exercised
prior to the date that is three business days prior to the Closing Date
shall be converted into shares of Alydaar Common Stock in accordance
with and subject to the provisions of Section 1.6. In connection with
the exercise of options to purchase DSNC Common Stock under the Option
Plan as contemplated hereby, such options shall be deemed to have
vested not later than the fifth business day prior to the Closing Date.
1.8 Surrender of Certificates.
(a) Exchange Agent. First Union National Bank shall act as the
exchange agent (the "Exchange Agent") in the Merger.
(b) Alydaar to Provide Common Stock. Promptly after the
Effective Time, Alydaar shall make available to the Exchange Agent for
exchange in accordance with this Article I, the shares of Alydaar
Common Stock issuable pursuant to Section 1.6 in exchange for
outstanding shares of DSNC Common Stock, and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section
1.6(f) and any dividends or distributions to which holders of shares of
DSNC Common Stock may be entitled pursuant to Section 1.8(d).
(c) Exchange Procedures. Promptly after the Effective Time,
Alydaar shall cause the Exchange Agent to mail to each holder of record
(as of the Effective Time) of a certificate or certificates (the
"Certificates") that immediately prior to the Effective Time
represented outstanding shares of DSNC Common Stock whose shares were
converted into shares of Alydaar Common Stock pursuant to Section 1.6,
cash in lieu of any fractional shares pursuant to Section 1.6(f) and
any dividends or other distributions pursuant to Section 1.8(d), (i) a
letter of transmittal in customary form (which shall
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specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall contain such other provisions as Alydaar
may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
shares of Alydaar Common Stock, cash in lieu of any fractional shares
pursuant to Section 1.6(f) and any dividends or other distributions
pursuant to Section 1.8(d). Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents as
may be appointed by Alydaar, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions
thereto, the holders of such Certificates shall be entitled to receive
in exchange therefor certificates representing the number of whole
shares of Alydaar Common Stock into which their shares of DSNC Common
Stock were converted at the Effective Time, payment in lieu of
fractional shares which such holders have the right to receive pursuant
to Section 1.6(f) and any dividends or distributions payable pursuant
to Section 1.8(d), and the Certificates so surrendered shall forthwith
be canceled. Until so surrendered, outstanding Certificates will be
deemed from and after the Effective Time, for all corporate purposes,
subject to Section 1.8(d) as to the payment of dividends, to evidence
the ownership of the number of full shares of Alydaar Common Stock into
which such shares of DSNC Common Stock shall have been so converted and
the right to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section 1.6(f) and any dividends
or distributions payable pursuant to Section 1.8(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of
this Agreement with respect to Alydaar Common Stock with a record date
after the Effective Time will be paid to the holders of any
unsurrendered Certificates with respect to the shares of Alydaar Common
Stock represented thereby until the holders of record of such
Certificates shall surrender such Certificates, and no cash payment in
lieu of fractional shares shall be paid to such holder until the holder
of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such
Certificates, the Exchange Agent shall deliver to the record holders
thereof, without interest, certificates representing whole shares of
Alydaar Common Stock issued in exchange therefor along with payment in
lieu of fractional shares pursuant to Section 1.6(f) hereof and the
amount of any such dividends or other distributions with a record date
after the Effective Time payable with respect to such whole shares of
Alydaar Common Stock.
(e) Transfers of Ownership. If certificates representing
shares of Alydaar Common Stock are to be issued in a name other than
that in which the Certificates surrendered in exchange therefor are
registered, it will be a condition of the issuance thereof that the
Certificates so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the persons requesting such exchange
will have paid to Alydaar or any agent designated by it any transfer or
other taxes required by reason of the issuance of certificates
representing shares of Alydaar Common Stock in any name other than that
of the registered holder of the Certificates surrendered, or
established to the satisfaction of Alydaar or any agent designated by
it that such tax has been paid or is not payable.
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(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, Alydaar, the Surviving
Corporation or any party hereto shall be liable to a holder of shares
of Alydaar Common Stock or DSNC Common Stock for any amount properly
paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(g) Termination of Exchange Agent Provisions. On the demand of
Alydaar, any Alydaar Common Stock issuable or cash payable in
accordance with this Agreement that is made available to the Exchange
Agent, if not distributed to the shareholders of DSNC for one year
after the Effective Time, shall no longer be made available to the
Exchange Agent, and any former shareholders of DSNC who have not
theretofore complied with this Section 1.8 shall thereafter look only
to Alydaar for payment of their claim for Alydaar Common Stock, any
cash in lieu of fractional shares of Alydaar Common Stock and any
dividends or distributions with respect to Alydaar Common Stock.
1.9 No Further Ownership Rights in DSNC Common Stock. All shares of
Alydaar Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.6(f) and 1.8(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of DSNC Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of DSNC Common
Stock which were outstanding immediately prior to the Effective Time. If after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Alydaar Common Stock into which the shares of DSNC
Common Stock represented by such Certificates were converted pursuant to Section
1.6, cash for fractional shares, if any, as may be required pursuant to Section
1.6(f) and any dividends or distributions payable pursuant to Section 1.8(d);
provided, however, that Alydaar may, in its discretion and as a condition
precedent to the issuance of such certificates representing shares of Alydaar
Common Stock, require the owner of such lost, stolen or destroyed Certificates
to deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Alydaar, the Surviving Corporation or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.11 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the
Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Income Tax Regulations.
(b) It is intended by the parties hereto that the Merger shall
qualify for accounting treatment as a pooling of interests.
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1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of DSNC and Merger Sub, the officers and directors of DSNC and
Merger Sub will take all such lawful and necessary action. Alydaar shall cause
Merger Sub to perform all of its obligations relating to this Agreement and the
transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF DSNC
DSNC represents and warrants to Alydaar and Merger Sub as follows:
2.1 Organization of DSNC.
(a) DSNC (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the corporate power and authority to own, lease
and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted, and (iii) except as
set forth on Schedule 2.1, is duly qualified or licensed to do business
and is in good standing in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary.
(b) Except as set forth on Schedule 2.1, DSNC has no direct or
indirect subsidiaries (either wholly or partially owned by DSNC) and
other than in the ordinary course of business, DSNC has not made any
advances to or investments in, and does not own any securities of or
other interests in, any person.
(c) DSNC has delivered or made available to Alydaar a true and
correct copy of the Articles of Incorporation and Bylaws of DSNC and
other governing instruments, each as amended to date, and each such
instrument is in full force and effect. DSNC is not in violation of any
of the provisions of its Articles of Incorporation or Bylaws or other
governing instruments.
(d) When used in connection with an entity, the term "Material
Adverse Effect" means, for purposes of this Agreement, any change,
event or effect that is materially adverse to the business, assets
(including intangible assets), liabilities, prospects, conditions
(financial or otherwise), results of operations, properties, or
ownership of proprietary software of DSNC (including without limitation
with respect to any such change, event or effect relating to any SEC
investigation or proceeding concerning DSNC and any failure by DSNC to
hold annual shareholder meetings), or of Alydaar, as the case may be.
2.2 DSNC Capital Structure. The authorized capital stock of DSNC
consists of 10,000,000 shares of Common Stock, $.01 par value per share, of
which there were 4,859,224
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shares issued and outstanding as of December 31, 1998 and 1,000,000 shares of
Preferred Stock, $.01 par value per share, of which no shares are issued or
outstanding. All outstanding shares of DSNC Common Stock are duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights created by statute, the Articles of Incorporation or Bylaws of DSNC or
any agreement or document to which DSNC is a party or by which it is bound. As
of the date hereof, DSNC had reserved an aggregate of 600,000 shares of DSNC
Common Stock, net of exercises, for issuance to employees, consultants and
nonemployee directors pursuant to the 1994 Option Plan, as amended (the "Option
Plan") under which options are outstanding for an aggregate of 375,823 shares.
All shares of DSNC Common Stock subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Schedule 2.2 lists for each person who held options to acquire
shares of DSNC Common Stock at December 31, 1998, the name of the holder of such
option, the exercise price of such option, the number of shares as to which such
option will have vested at such date, and the vesting schedule for such option.
The maximum number of shares of DSNC Common Stock issued or to be issuable
pursuant to the Option Plan at or prior to Closing shall not exceed 412,500
shares, which amount is within the number of shares reserved under the Option
Plan.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of DSNC, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in Section 2.2, there are no options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which DSNC is a party or by which it is bound obligating DSNC to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition, of any
shares of capital stock, partnership interests or similar ownership interests of
DSNC or obligating DSNC to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or
agreement. Except as set forth in Section 2.2 and the Voting Agreement, there
are no registration rights and, to the knowledge of DSNC, as of the date of this
Agreement, there are no voting trusts, proxies or other agreements or
understandings with respect to any equity security of any class of DSNC.
2.4 Authority.
(a) DSNC has all requisite corporate power and authority to
enter into this Agreement and each other agreement entered into by it
in connection with the transactions contemplated hereby (the "DSNC
Ancillary Agreements") and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and
the DSNC Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of DSNC, subject only to the
approval and adoption of this Agreement and the approval of the Merger
by DSNC's shareholders and the filing and recordation of the
Certificate of Merger pursuant to North Carolina Law and Michigan Law.
A vote of the holders of at least a majority of the outstanding shares
of the DSNC Common Stock is required for DSNC's shareholders to approve
and adopt
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this Agreement and approve the Merger. Each of this Agreement and the
DSNC Ancillary Agreements has been duly executed and delivered by DSNC
and, assuming the due authorization, execution and delivery by Alydaar
and, if applicable, Merger Sub, constitutes a legal, valid and binding
obligation of DSNC, enforceable in accordance with its terms. The
execution and delivery of this Agreement and the DSNC Ancillary
Agreements by DSNC does not, and the performance of this Agreement and
the DSNC Ancillary Agreements by DSNC and the consummation by DSNC of
the transactions contemplated hereby and thereby will not, (i) conflict
with or violate the Articles of Incorporation or Bylaws of DSNC, (ii)
subject to obtaining the approval and adoption of this Agreement and
the approval of the Merger by DSNC's shareholders as contemplated in
Section 5.2 and compliance with the requirements set forth in Section
2.4(b) below, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to DSNC or by which its properties
is bound or affected, or (iii) subject to obtaining such consents and
approvals as are required pursuant to the Foothill Capital Corp. Loan
Security Agreement, conflict with, result in any breach of or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair DSNC's rights or alter
the rights or obligations of any third party under, or give rise to any
rights of in, or result in the creation of a lien or encumbrance on,
any of such properties or result in termination, amendment,
acceleration or cancellation of any obligation contained in, or result
in the creation of a lien or encumbrance on, any of the properties or
assets of DSNC pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which DSNC is a party or by which DSNC or
any of its properties or assets are bound or affected, except with
respect to clause (iii) for any such conflicts, violations, defaults,
rights, liens, encumbrances or other occurrences that would not,
individually or in the aggregate, have a Material Adverse Effect on
DSNC; provided that certain of the DSNC Contracts (as defined herein)
provide for termination upon a change of control of DSNC.
Other than consents relating to such change of control provisions
under such DSNC Contracts, Schedule 2.4 lists all consents,
authorizations, filings, approvals, waivers and registrations required
to be obtained in connection with the consummation of the transactions
contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative
agency or commission or other governmental authority or
instrumentality, foreign or domestic ("Governmental Entity"), is
required to be obtained by DSNC in connection with the execution and
delivery of this Agreement, the DSNC Ancillary Agreements or the
Certificate of Merger or the consummation of the transactions
contemplated hereby or thereby, except for (i) the filing of the
Certificate of Merger with the Michigan Department, (ii) the filing of
the DSNC Proxy Statement (as defined in Section 2.23) with the
Securities and Exchange Commission ("SEC") in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii)
such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal
and state securities laws (including a Form S-4 registration statement
to register the shares of Alydaar Common Stock issued in the Merger),
and the securities or antitrust laws of any foreign country and (iv)
such other consents, authorizations, filings, approvals,
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waivers and registrations set forth on Schedule 2.4, which are required
for the parties to consummate the Merger.
2.5 Intentionally reserved.
2.6 SEC Filings; DSNC Financial Statements.
(a) Except as disclosed in the DSNC SEC Reports (as defined
below), DSNC has filed all forms, reports and documents, together with
all exhibits, required to be filed with the SEC relating to periods
subsequent to January 1, 1994, and has made available to Alydaar all
such forms, reports and documents in the form filed with the SEC. All
such forms, reports and documents (including those that DSNC may file
subsequent to the date hereof) are referred to herein as the "DSNC SEC
Reports." Except as disclosed in the DSNC SEC Reports, the DSNC SEC
Reports (i) as of their respective dates were prepared and filed in
accordance in all material respects with the requirements of the
Securities Act of 1993 (the "Securities Act") or the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder
applicable to such DSNC SEC Reports, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) or, in the case of
DSNC SEC Reports filed under the Securities Act, when such filing
became effective, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the financial statements (including, in each case,
any related notes thereto) contained in DSNC SEC Reports (the "DSNC
Financials"), including any DSNC SEC Reports filed after the date
hereof until the Closing, (x) complied as to form in all material
respects with the published rules and regulations of the SEC with
respect thereto, (y) was prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited interim financial statements, as may be
permitted by the SEC on Form 10-Q under the Exchange Act) and (z)
fairly presented the financial position of DSNC as at the respective
dates thereof and the results of DSNC's operations and cash flows for
the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end
adjustments. The balance sheet of DSNC as of December 31, 1997 is
hereinafter referred to as the "DSNC Balance Sheet." Except as
disclosed in the DSNC Financials, since the date of the DSNC Balance
Sheet through the date of this Agreement, DSNC has no liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the financial
statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or
financial condition of DSNC, except (i) liabilities provided for in the
DSNC Balance Sheet or (ii) net liabilities incurred since the date of
the DSNC Balance Sheet in the ordinary course of business consistent
with past practices,
(c) DSNC has heretofore furnished to Alydaar a complete and
correct copy of any amendments or modifications, which have been
generated and not yet been filed
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with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by DSNC
with the SEC pursuant to the Securities Act or the Exchange Act.
2.7 Absence of Certain Changes or Events. Since the date of the DSNC
Balance Sheet, except as set forth on Schedule 2.7, there has not been: (i) any
Material Adverse Effect on DSNC or any event that could reasonably be expected
to have a Material Adverse Effect on DSNC; (ii) any change by DSNC in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP; (iii) any revaluation by DSNC of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off or assignment or pledge of notes or accounts receivable; (iv) any
declaration, setting aside, payment of a dividend or other distribution with
respect to the shares of DSNC, or any direct or indirect purchase or other
acquisition or any redemption by DSNC of any of its shares of capital stock; (v)
any increase in or modification of the compensation or benefits payable or to
become payable by DSNC to any of its directors, officers or, other than in the
ordinary course of business consistent with past practice, to employees; (vi)
any acquisition or sale of an amount of property or assets of DSNC, other than
in the ordinary course of business consistent with past practice; (vii) any
alteration in the term of any outstanding security of DSNC; (viii) any (A)
incurrence, assumption or guarantee by DSNC of any debt for borrowed money, (B)
issuance or sale of any securities convertible into or exchangeable for debt
securities of DSNC or (C) issuance or sale of options or other rights to acquire
from DSNC, directly or indirectly, debt securities of DSNC or any securities
convertible into or exchangeable for such debt securities; (ix) other than in
the ordinary course of business, any creation or assumption by DSNC of any
mortgage, pledge, security interest or lien or other encumbrance on any asset;
(x) any making of any loan, advance or capital contribution to or investment in
any person other than (A) travel loans or advances made in the ordinary course
of business of DSNC and (B) purchases on the open market of liquid, publicly
traded securities; (xi) any entering into, amendment of, relinquishment,
termination or non-renewal of, or any breach under, any contract, lease
transaction, commitment or other right or obligation other than in the ordinary
course of business which individually or in the aggregate would result in a
Material Adverse Effect on DSNC; or (xii) any transfer or grant of a right under
the DSNC IP Rights (as defined in Section 2.9 below). Except as set forth on
Schedule 2.7, DSNC has not taken any steps, and does not currently intend to
take any steps, to seek protection pursuant to any bankruptcy law nor to DSNC's
knowledge, does any of its creditors intend to initiate involuntary proceedings.
2.8 Taxes. Except as set forth on Schedule 2.8, DSNC, and any
consolidated, combined, unitary or aggregate group for Tax (as defined below)
purposes of which DSNC is or has been a member, has timely filed all Returns (as
defined below) required to be filed by it and all such Returns properly reflect
the liabilities of DSNC for Taxes for periods, property or events covered
thereby, has paid all Taxes shown thereon to be due and has provided adequate
accruals in accordance with GAAP in its financial statements for any Taxes that
have not been paid, whether or not shown as being due on any returns. In
addition, except as set forth on Schedule 2.8 (i) no claim for unpaid Taxes has
become a lien (other than statutory liens with respect to payments not yet
delinquent) against the property of DSNC or is being asserted against DSNC, (ii)
no audit of any Tax Return of DSNC is being conducted by a Tax authority as of
the date of this Agreement, (iii) DSNC has not received any notice of assessment
or proposed assessment in connection with any Tax Returns, and there are no
pending tax
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examinations of or tax claims asserted against DSNC or any of its assets or
properties or, to the best knowledge of DSNC, threatened against DSNC, (iv) no
extension of the statute of limitations on the assessment of any Taxes has been
granted by DSNC and is currently in effect as of the date of this Agreement and
(v) there is no agreement, contract or arrangement to which DSNC is a party that
may result in the payment of any amount that would not be deductible pursuant to
Sections 280G, 162 or 404 of the Code. As used herein, "Taxes" shall mean all
taxes of any kind, including, without limitation, those on or measured by or
referred to as income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes, customs,
duties or similar fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or additional amounts
imposed by any governmental authority, domestic or foreign. As used herein,
"Return" shall mean any return, report or statement required to be filed with
any governmental authority with respect to taxes.
2.9 Intellectual Property.
(a) Except as individually or in aggregate would not have a
Material Adverse Effect, DSNC owns, or has a valid license under, all
patents, trademarks, trade names, service marks, copyrights, any
applications for all of the foregoing, trade secrets and know-how that
are required for the conduct of business of DSNC (including, without
limitation, the development, production and marketing of DSNC's
products) as currently conducted (the "DSNC IP Rights"), with
sufficient rights for the conduct of DSNC's business as currently
conducted.
(b) Schedule 2.9(b) sets forth a complete list of all patents
and patent rights, trademarks and trademark rights, trade names and
trade name rights, service marks and service xxxx rights, service names
and service name rights, copyrights and copyright rights and any
applications for all of the foregoing, included in DSNC IP Rights, and
specifies, where applicable, the jurisdictions in which each such DSNC
IP Right has been issued or registered or in which an application for
such issuance and registration has been filed, including the respective
registration or application numbers and the names of all registered
owners. Schedule 2.9(b) sets forth the list of all material licenses,
sublicenses and other agreements to which DSNC is a party and pursuant
to which DSNC or any other person is licensed or otherwise has rights
under any DSNC IP Right (excluding licenses granted by DSNC in the
ordinary course of business that permit use of software products
without a right to modify, distribute or sublicense the same and
excluding standard licenses granted to DSNC by software vendors
covering software which is broadly distributed by such licensors). The
execution and delivery of this Agreement and the DSNC Ancillary
Agreements by DSNC, and the consummation of the transactions
contemplated hereby, will neither cause DSNC to be in violation or
default under any such license, sublicense or other agreement, nor
entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement.
(c) Neither the manufacture, marketing, license, sale or
intended use of any product or technology currently licensed or sold or
under development by DSNC violates
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any license or agreement between DSNC and any third party or, to the
knowledge of DSNC, infringes any intellectual property right of any
other party; and there is no pending or, to the knowledge of DSNC,
threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any DSNC IP Rights, nor has
DSNC received any notice asserting that any DSNC IP Rights or the
proposed use, sale, license or disposition thereof conflicts or will
conflict with the rights of any other party. To DSNC's knowledge, there
is no unauthorized use, infringement or misappropriation under any DSNC
IP Rights by any third party, including any employee or former employee
of DSNC. No DSNC IP Right or product of DSNC is subject to any
outstanding decree, order, judgment, or stipulation restricting in any
manner the licensing thereof by or to DSNC. It is DSNC's policy to have
each employee of DSNC execute a proprietary information and
confidentiality agreement substantially in the form of the agreement
attached hereto as Exhibit B, and, except as set forth on Schedule
2.9(c), all of DSNC's employees, have executed such an agreement.
(d) DSNC has taken all necessary action to maintain the
secrecy and confidentiality of, and its proprietary rights in, all DSNC
IP Rights and the intellectual property rights of third parties
entrusted to it.
2.10 Compliance; Permits; Restrictions; Insurance.
(a) DSNC is not in conflict with, or in default or violation
of any law, rule, regulation, ordinance, order, judgment or decree
applicable to DSNC or by which DSNC or any of its properties is bound
or affected. Except as set forth on Schedule 2.10(a), to the knowledge
of DSNC, no investigation or review by any Governmental Entity is
pending, threatened or contemplated against DSNC. Except as would not,
individually or in the aggregate, have a Material Adverse Effect, there
is no agreement, judgment, injunction, order or decree binding upon
DSNC which has or, to the knowledge of DSNC, is reasonably likely to
have, the effect of prohibiting or impairing any business practice of
DSNC, any acquisition of property by DSNC or the conduct of business by
DSNC as currently conducted.
(b) DSNC holds all permits, licenses, variances, exemptions,
orders and approvals from governmental authorities which are necessary
for the operation of the business of DSNC (collectively, the "DSNC
Permits"). DSNC is in compliance in all material respects with the
terms of the DSNC Permits.
(c) DSNC maintains and at all times since January 1, 1994 has
maintained fire and casualty, directors and officers, errors and
omissions, workers' compensation and general liability insurance with
respect to its business. Set forth on Schedule 2.10(c) is a complete
and correct list of all policies of insurance relating to the business
of DSNC, or covering the assets of DSNC, indicating for each policy the
risks insured against, coverage limits, premium rate, expiration date,
all outstanding claims in excess of $200,000 individually thereunder
and whether the terms of such policy provide for retrospective premium
adjustments. All such policies are outstanding and in full force and
effect. Copies of all such policies have been provided or made
available to Alydaar or its counsel. The coverages provided by such
policies are comparable to the coverages
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customarily maintained by companies in similar lines of businesses. All
premiums to date with respect to such policies have been paid. Except
as would not, individually or in the aggregate, have a Material Adverse
Effect, there is no default with respect to any provision contained in
any such policy, nor to the knowledge of DSNC has there been any
failure to give any notice or present any claim known to DSNC under any
such policy in a timely fashion or in the manner or detail required by
the policy.
2.11 Litigation. Except as disclosed in the DSNC SEC Reports or as set
forth on Schedule 2.11, there is no action, suit, proceeding, claim, demand,
arbitration or investigation pending, or as to which DSNC has received any
notice of assertion nor, to DSNC's knowledge, is there a threatened action,
suit, proceeding, claim, arbitration or investigation against DSNC. DSNC has no
knowledge of any unasserted claim, the assertion of which is likely, and which,
if asserted, will seek damages, an injunction or other legal, equitable,
monetary or nonmonetary relief, which claim individually or collectively with
other such unasserted claims if granted could have a Material Adverse Effect on
DSNC. DSNC has delivered or made available to Alydaar or its counsel complete
and correct copies of all correspondence prepared by its counsel for DSNC's
auditors in connection with the last two completed audits of DSNC's financial
statements and any such correspondence since the date of the last such audit.
2.12 Brokers' and Finders' Fees. Except for fees payable to Xxxxxxxxx
and Company, Inc., whose fees will be paid by DSNC, pursuant to an engagement
letter dated April 23, 1998, as amended, a copy of which has been provided to
Alydaar, DSNC has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.13 Employee Benefit Plans.
(a) With respect to each employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), maintained or
contributed to by DSNC or any trade or business (a "DSNC Affiliate")
which is under common control with DSNC within the meaning of Section
414 of the Code (the "DSNC Employee Plans"), DSNC has made available to
Alydaar a true and complete copy of, to the extent applicable, (i) such
DSNC Employee Plan, (ii) the most recent annual report (Form 5500),
(iii) each trust agreement related to such DSNC Employee Plan, (iv) the
most recent summary plan description for each DSNC Employee Plan for
which such a description is required, (v) the most recent actuarial
report relating to any DSNC Employee Plan subject to Title IV of ERISA
and (vi) the most recent United States Internal Revenue Service ("IRS")
determination letter issued with respect to any DSNC Employee Plan.
(b) Each DSNC Employee Plan which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination
from the IRS covering the provisions of the Tax Reform Act of 1986
stating that such DSNC Employee Plan is so qualified and to the
knowledge of DSNC nothing has occurred since the date of such letter
that could reasonably be expected to affect the qualified status of
such plan.
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Each DSNC Employee Plan has been operated in accordance with its terms
and the requirements of applicable law. Neither DSNC nor any DSNC
Affiliate has incurred, and no facts exist which would be likely to
cause, any liability under Title IV of ERISA in connection with any
DSNC Employee Plan. All contributions due from DSNC or any DSNC
Affiliate with respect to any DSNC Employee Plan have been made or
accrued on DSNC's financial statements, and no further contributions
will be due or will have accrued thereunder as of the Effective Date,
except contributions that are consistent with the Employee Plans and
past practices of DSNC. The group health plans, as defined in Section
4980B(g) of the Code, that benefit employees of DSNC and DSNC
Affiliates are in compliance with the continuation coverage
requirements of subsection 4980B of the Code. There are no outstanding
violations of Section 4980B of the Code with respect to any DSNC
Employee Plan, covered employees or qualified beneficiaries.
(c) Except as set forth on Schedule 2.13(c), neither the
execution and delivery of this Agreement or the DSNC Ancillary
Agreements nor the consummation of the transactions contemplated hereby
or thereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director or employee of DSNC
from DSNC, under any DSNC Employee Plan or otherwise, (ii) increase any
benefits otherwise payable under any DSNC Employee Plan or otherwise or
(iii) result in the acceleration of the time of payment or vesting of
any such benefits.
(d) DSNC has made available to Alydaar a list of all employees
of DSNC and their salaries as of the date of this Agreement.
2.14 Title to Properties; Absence of Liens and Encumbrances.
(a) DSNC owns no real property. Schedule 2.14(a) lists each
real or personal property lease (excluding software leases) to which
DSNC is a party, including without limitation as lessor or lessee, and
each amendment thereto. All such current leases are in full force and
effect, are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing default
or event of default (or event which with notice or lapse of time, or
both, would constitute a default).
(b) DSNC has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held
for use in its business, free and clear of any liens, pledges, charges,
claims, security interests or other encumbrances of any sort, except as
reflected in the DSNC Financials, the DSNC SEC Reports or in Schedule
2.14(b) and except for liens for taxes not yet delinquent or liens
imposed by law and incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen, laborers, materials
men and the like and such imperfections of title and encumbrances, if
any, which are not material in character, amount or extent, and which
do not materially detract from the value, or materially interfere with
the present use, of the property subject thereto or affected thereby.
DSNC is not in violation of any zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to the
operation of owned or leased properties, nor has it received any notice
of violation with
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which it has not complied, except where such violation individually or
in the aggregate would not reasonably be expected to have a Material
Adverse Effect on DSNC.
2.15 Environmental Matters.
(a) Hazardous Material. No underground storage tanks and no
amount of any substance that has been designated by any Governmental
Entity or by applicable federal, state or local law to be radioactive,
toxic, hazardous or otherwise a danger to health or the environment,
including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste
pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said
laws, (a "Hazardous Material"), but excluding office and janitorial
supplies, are present, as a result of the actions of DSNC or any
affiliate of DSNC, or, to DSNC's knowledge, as a result of any actions
of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water
thereof, that DSNC has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. DSNC has not transported,
stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in
effect on or before the Closing Date, nor has DSNC disposed of,
transported, sold, used, released, exposed its employees or others to
or manufactured any product containing a Hazardous Material
(collectively "Hazardous Materials Activities") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental
Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits. DSNC currently holds all environmental approvals,
permits, licenses, clearances and consents which are necessary for the
conduct of DSNC's Hazardous Material Activities and other businesses of
DSNC as such activities and businesses are currently being conducted.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim
is pending or, to DSNC's knowledge, threatened concerning any DSNC
Environmental Permit, Hazardous Material or any Hazardous Materials
Activity of DSNC. DSNC is not aware of any fact or circumstance which
could involve DSNC in any environmental litigation or impose upon DSNC
any environmental liability.
2.16 Employees; Labor Matters. Except as disclosed on Schedule 2.16,
between January 1, 1996 and the date of this Agreement, to DSNC's knowledge, no
employee of DSNC has violated, in any material respect, any employment contract,
patent disclosure agreement, confidentiality agreement or noncompetition
agreement between such employee and any former employer of such employee due to
such employee being employed by DSNC or disclosing to DSNC trade secrets or
proprietary information of such employer. Except as set forth on Schedule 2.16,
between January 1, 1998 and the date of this Agreement, no employee of DSNC
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has given notice to DSNC that such employee intends to terminate his or her
employment with DSNC except for terminations of a nature and number that are
consistent with DSNC's prior experience. To DSNC's knowledge, there are no
activities or proceedings of any labor union to organize any employees of DSNC
and there are no strikes, or slowdowns, work stoppages or lockouts, or threats
thereof by or with respect to any employees of DSNC. DSNC is not, and has never
been, a party to any collective bargaining agreement. Except for failures to be
in compliance which would not individually or in aggregate have a Material
Adverse Effect, DSNC is, and since January 1, 1996, DSNC has been in compliance
with all applicable laws regarding employment practices, terms and conditions of
employment, and wages and hours (including, without limitation, ERISA, WARN or
any similar state or local law).
2.17 Agreements, Contracts and Commitments. Except as set forth in
Schedule 2.17, as of the date hereof, DSNC is not a party to, is not bound by,
and none of its properties are subject to:
(a) any employment or consulting agreement, contract or
commitment with any officer, employee, consultant or member of DSNC's
Board of Directors, other than those that are terminable by DSNC on no
more than thirty days notice without liability or financial obligation,
except to the extent general principles of wrongful termination law may
limit DSNC's ability to terminate employees at will;
(b) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, or pursuant to which any amounts
may become payable (whether currently or in the future) to current or
former employees, consultants, officers and directors of DSNC by the
occurrence of any of the transactions contemplated by this Agreement,
or the value of any of the benefits of which will be calculated on the
basis of or in connection with any of the transactions contemplated by
this Agreement;
(c) any agreement of indemnification or guaranty not entered
into in the ordinary course of business other than indemnification
agreements between DSNC and any of its officers or directors;
(d) any agreement, contract or commitment containing any
covenant limiting the freedom of DSNC to engage in any line of business
or compete with any person or granting any exclusive distribution
rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the
ordinary course of business or any ownership interest in any
corporation, partnership, joint venture or other business enterprise;
(f) any joint marketing or development agreement currently in
force;
(g) any agreement, contract or commitment currently in force
to provide source code to any third party for any product or
technology, except for (i) any
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agreement, contract or commitment pursuant to which source code is
provided for maintenance of the source code or for development of
modifications thereto only, and not for distribution of source or
object code to third parties and (ii) any source code escrow agreement
entered into in the ordinary course of business that contains
provisions relating to the release of source code if DSNC ceases to do
business or fails to provide appropriate maintenance;
(h) any agreement, contract or commitment currently in force
to license any third party to manufacture or reproduce any DSNC
product;
(i) any continuing contract for the future purchase, sale or
manufacture of products, material, supplies, equipment or services
requiring payment to or from DSNC in an amount in excess of $25,000 per
annum which is not terminable on 30 days' or less notice without cost
or other liability at or at any time after the Effective Time or in
which DSNC has granted or received manufacturing rights, most favored
nation pricing provisions relating to any product, group of products or
territory;
(j) any contract providing for the development of software
(other than contracts with consultants) for, or license of software to,
DSNC, which software is used or incorporated in any DSNC Product (as
defined in Section 2.26);
(k) any indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money,
for a line of credit or for a leasing transaction of a type required to
be capitalized in accordance with Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board; or
(l) any written agreement regarding intercompany loans,
revenue or cost sharing, ownership or license of DSNC IP Rights,
intercompany royalties or dividends or similar matters.
Any agreement, contract or commitment described in clauses (a) through
(1) above shall be referred to as a "DSNC Contract." Neither DSNC, nor to DSNC's
knowledge any other party to a DSNC Contract (as defined below), is in material
breach, violation or default under, and DSNC has not since January 1, 1997
received notice that it has materially breached, violated or defaulted under,
and there exists no event, condition or occurrence which, after notice or lapse
of time, or both, would constitute such a material default by DSNC under, any of
the DSNC Contracts.
2.18 Purchase Commitments and Outstanding Bids. All accepted and
unfulfilled orders for the sale of merchandise received by DSNC, and all DSNC
Contracts or commitments for the purchase of supplies by it, were made in the
ordinary course of business consistent with past practice. Except as set forth
on Schedule 2.18, there are no claims in excess of $50,000 against DSNC to
return merchandise by reason of alleged overshipments, defective merchandise or
otherwise. To the knowledge of DSNC, there is no outstanding bid, proposal or
unfilled order which relates to the business of DSNC which is or would, if
accepted, reasonably be expected to result in a net loss to DSNC. Except as
reflected on Schedule 2.18, DSNC has no
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prepayments or deposits from customers for products to be shipped, or services
to be performed, by DSNC after the Closing Date.
2.19 Customers, Distributors and Suppliers. Schedule 2.19 sets forth a
complete and accurate list of the names and addresses and nature of the
relationship between DSNC and (i) customers, distributors and other agents and
representatives of the business of DSNC with annual sales greater than $100,000
during DSNC's last fiscal year, showing the approximate total sales in dollar
amount by DSNC to each such customer during such fiscal year, and (ii) suppliers
of DSNC with purchases by DSNC greater than $100,000 during DSNC's last fiscal
year, showing the approximate total purchases in dollars by DSNC from each
supplier during such fiscal year. Except as set forth on Schedule 2.19 (i) since
December 31, 1997, there has been no material adverse change in the business
relationship of DSNC with any customer, distributor or supplier named in
Schedule 2.19, and (ii) DSNC has not received any communication from any
customer, distributor or supplier named in Schedule 2.19 which has a contract
with DSNC or which represented 5% or more of DSNC's revenues for 1998 of any
intention to terminate or materially reduce purchases from or supplies to DSNC.
As a result of the transactions contemplated hereby, and to the knowledge of
DSNC, no payment, penalty, other obligation or remuneration may be required by
any such customer, distributor, agent or other representative. Except as set
forth on Schedule 2.19, DSNC (A) has no obligation with respect to
representations or warranties relating to the products and services it provides;
and (B) provides no warranties with respect to work performed relating to year
2000 compliance and remediation.
2.20 DSNC Contracts. Except as described on Schedule 2.20, DSNC has no
material customer contracts relating to its business.
2.21 Pooling of Interests. Neither DSNC nor any of its directors,
officers, affiliates or shareholders has taken, agreed to take or to DSNC's
knowledge, failed to take any action which would preclude Alydaar's ability to
account for the Merger as a pooling of interests in accordance with Accounting
Principles Board Opinion No. 16, the interpretive releases issued pursuant
thereto and the pronouncements of the Commission (including Staff Accounting
Bulletin 76) (collectively, "APB Opinion No. 16").
2.22 Intentionally reserved.
2.23 DSNC Proxy Statement/Prospectus. The information supplied by DSNC
for inclusion in the Form S-4 registration statement filed by Alydaar relating
to the issuance of Alydaar Common Stock in the Merger (together with all
amendments thereto and any information incorporated therein by reference, the
"Registration Statement") shall not at the time the Registration Statement is
filed with the SEC, at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by DSNC for inclusion in the
proxy statement/prospectus to be sent to the shareholders of DSNC in connection
with the meeting of DSNC's shareholders to consider the approval and adoption of
this Agreement and the approval of the Merger (the "DSNC Shareholders' Meeting")
(such proxy statement/prospectus as amended or supplemented is referred to
herein as the "DSNC Proxy Statement") shall not, on the date the DSNC Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
DSNC's
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shareholders, at the time of the DSNC Shareholders' Meeting and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the DSNC Shareholders' Meeting which has become false or misleading.
The DSNC Proxy Statement will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder. If
at any time prior to the Effective Time, any event relating to DSNC or any of
its affiliates, officers or directors should be discovered by DSNC which should
be set forth in an amendment to the Registration Statement or a supplement to
the DSNC Proxy Statement, DSNC shall promptly inform Alydaar and shall assist
Alydaar in appropriately amending or supplementing the Registration Statement.
Notwithstanding the foregoing, DSNC makes no representation or warranty with
respect to any information supplied by Alydaar or Merger Sub which is contained
in any of the foregoing documents.
2.24 Board and Shareholder Approval. The Board of Directors of DSNC
has, as of the date of this Agreement, unanimously (i) approved this Agreement
and the Merger, (ii) determined that the Merger is fair to, and in the best
interests of, DSNC and its shareholders and (iii) determined to recommend that
the shareholders of DSNC approve and adopt this Agreement and approve the
Merger. The affirmative vote of the holders of a majority of the outstanding
shares of DSNC Common Stock is the only vote of the holders of any class or
series of capital stock of DSNC necessary to approve the Merger.
2.25 Fairness Opinion. DSNC has received a written opinion from
Xxxxxxxxx & Company, Inc., dated as of the date hereof, to the effect that as of
the date hereof, the Exchange Ratio is fair to DSNC's shareholders from a
financial point of view and has delivered to Alydaar a copy of such opinion.
2.26 Products and Distribution. Schedule 2.26 contain a complete list
of the proprietary software products distributed or installed by DSNC (the "DSNC
Published Products"). Schedule 2.26(a) sets forth, for each DSNC Product, the
following (to the extent not already listed on another Schedule to this
Agreement): (i) a list of all contracts and agreements (including without
limitation all development, trademark license, technology license, distribution
or other agreements) relating to the DSNC Products; (ii) the identity of the
significant independent contractors and a list of the agreements with such
independent contractors; (iii) the advances paid or payable, and the royalties
payable, to any third parties with respect to such DSNC Product; and (iv) a list
of the third parties with significant distribution rights to such DSNC Product.
2.27 Intentionally reserved.
2.28 Year 2000 Compliance. DSNC has performed a systems inventory and
assessment of potential year 2000 remediation and testing costs for all
hardware, software, and embedded microprocessors in non-computer equipment used
in connection with DSNC's business to ensure, other than such as would not have
a Material Adverse Effect, that such items shall be century compliant for the
year 2000 and beyond. In order to be century compliant, DSNC agrees that such
items must be capable of accounting for all calculations using a century and
date
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sensitive algorithm for the year 2000 and beyond. DSNC agrees that Alydaar may
request one or more test scripts from DSNC to validate that such items are
century compliant and to determine the latest future date such items are able to
process. Set forth on Schedule 2.28(a) are DSNC's contingency plans for year
2000 compliance and remediation of current equipment. DSNC expects to incur no
material liability in connection with the year 2000 issue, provided that
additional expenditures will need to be made with respect to Year 2000
remediation as described in DSNC's quarterly report on Form 10Q for the period
ended September 30, 1998.
2.29 Inventories. Any and all inventory relating to the business of
DSNC (the "Inventory") is properly valued at the lower of cost (first-in,
first-out) or market in accordance with generally accepted accounting principles
consistently applied, and except for items sold in the ordinary course of
business, consists of and will, at the Effective Time, consist of items of a
quality and quantity currently usable and saleable in the ordinary course of
business without markdown or discount. With respect to Inventory in the hands of
suppliers for which DSNC is committed as of the date hereof or as of the
Effective Time, such Inventory is described in Schedule 2.29 and is reasonably
expected to be usable in the ordinary course of business as the business of DSNC
is presently being conducted. All items included in the Inventory are the
property of DSNC, except for those items sold in the ordinary course of the
business of DSNC; for each of these sales either the purchaser has made full
payment therefore or the purchaser's liability to make payment is reflected in
the books of DSNC. Except as set forth on Schedule 2.29, no items included in
the Inventory have been pledged as collateral or are held by DSNC on consignment
from others. The Inventory is free of defects to the knowledge of DSNC and, to
the extent that it consists of finished or semi-finished goods, complies with
any specifications submitted by the purchasers thereof.
2.30 Interested Party Transactions. Except as disclosed in the DSNC SEC
Reports filed prior to the date of this Agreement, since the date of DSNC's last
proxy statement to its shareholders, no event has occurred that would be
required to be reported by DSNC as a Certain Relationship or Related
Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.
2.31 Disclosure. No representation or warranty by DSNC contained in
this Agreement (including the Schedules referred to herein), or in any
certificate furnished or to be furnished by DSNC to Alydaar in connection with
the transactions contemplated hereby contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
required to make the statements herein or therein not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ALYDAAR AND MERGER SUB
Alydaar and Merger Sub represent and warrant to DSNC as follows:
3.1 Organization of Alydaar and Merger Sub.
(a) Each of Alydaar and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized; has the corporate power and
authority to own, lease and operate its assets and property and to
carry on its business as now being conducted; and, except as set forth
on Schedule 3.1(a), is duly qualified or licensed to do business and is
in good standing in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except
where the failure to be so qualified would not have a Material Adverse
Effect on Alydaar.
(b) Alydaar has delivered or made available to DSNC a true and
correct copy of the charter and bylaws of Alydaar and Merger Sub, each
as amended to date, and each such instrument is in full force and
effect. Neither Alydaar nor Merger Sub is in violation of any of the
provisions of its respective articles of incorporation or bylaws.
3.2 Alydaar and Merger Sub Capital Structure. The authorized capital
stock of Alydaar consists of 50 million shares of Common Stock, par value $.001
per share, of which there were 17,516,230 shares issued and outstanding as of
the date hereof. The authorized capital stock of Merger Sub consists of 1,000
shares of Common Stock, par value $0.01 per share, all of which, as of the date
hereof, are issued and outstanding and are held by Alydaar. Merger Sub was
formed in January, 1999 for the purpose of consummating the Merger and has no
material assets or liabilities except as necessary for such purpose. All
outstanding shares of Alydaar Common Stock are duly authorized, validly issued,
fully paid and nonassessable and are not subject to preemptive rights created by
statute, the Articles of Incorporation or Bylaws of Alydaar or any agreement or
document to which Alydaar is a party or by which it is bound. Alydaar has
reserved a sufficient number of shares of Common Stock for the issuance of
shares to the shareholders of DSNC in the Merger. The shares of Alydaar Common
Stock to be issued pursuant to the Merger will be duly authorized and validly
issued and at the Effective Time will be fully paid, nonassessable and free of
pre-emptive rights.
3.3 Authority.
(a) Each of Alydaar and Merger Sub (as applicable) has all
requisite corporate power and authority to enter into this Agreement
and each other agreement entered into by it in connection with the
transactions contemplated hereby (the "Alydaar Ancillary Agreements")
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Alydaar Ancillary
Agreements and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action
on the part of Alydaar and, in the case of
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this Agreement, Merger Sub, subject only to the filing and recordation
of the Certificate of Merger pursuant to North Carolina Law. Each of
this Agreement and the Alydaar Ancillary Agreements has been duly
executed and delivered by each of Alydaar and Merger Sub (as
applicable) and, assuming the due authorization, execution and delivery
by DSNC, constitutes the legal, valid and binding obligation of Alydaar
and Merger Sub enforceable in accordance with its terms. The execution
and delivery of this Agreement and the Alydaar Ancillary Agreements by
each of Alydaar and Merger Sub (as applicable) does not, and the
performance of this Agreement and the Alydaar Ancillary Agreements by
each of Alydaar and Merger Sub (as applicable) and consummation by
Alydaar and Merger Sub of the transactions contemplated hereby and
thereby will not (i) conflict with or violate the Articles of
Incorporation or Bylaws of Alydaar or the Certificate of Incorporation
or Bylaws of Merger Sub or the equivalent organizational documents of
any of Alydaar's other subsidiaries, (ii) subject to compliance with
the requirements set forth in Section 3.3(b) below, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable
to Alydaar or any of its subsidiaries (including Merger Sub) or by
which its or any of their respective properties is bound or affected,
or (iii) conflict with, result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a
default) under, or impair Alydaar's rights or alter the rights or
obligations of any third party under, or give rise to any rights of
termination, amendment, acceleration or cancellation of any obligation
contained in, or result in the creation of a lien or encumbrance on any
of the properties or assets of Alydaar or any of its subsidiaries
(including Merger Sub) pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Alydaar or any of its
subsidiaries (including Merger Sub) is a party or by which Alydaar or
any of its subsidiaries or its or any of their respective properties or
assets is bound or affected, except with respect to clause (iii) for
any such conflicts, violations, defaults, rights, liens, encumbrances
or other occurrences that would not, individually or in the aggregate,
have a Material Adverse Effect on Alydaar. Schedule 3.3(a) lists all
consents, waivers and approvals under any of Alydaar's or any of its
subsidiaries' agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions
contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is
required to be obtained by Alydaar or Merger Sub in connection with the
execution and delivery of this Agreement, the Alydaar Ancillary
Agreements or the consummation of the Merger, except for (i) the filing
of the Registration Statement relating to the issuance of Alydaar
Common Stock in the Merger with the SEC in accordance with the
Securities Act, (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of North Carolina, (iii) such consents,
approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state
securities laws and the securities or antitrust laws of any foreign
country, and (iv) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not
have a Material Adverse Effect on Alydaar or a material adverse effect
on the ability of the parties to consummate the Merger.
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3.4 SEC Filings; Alydaar Financial Statements.
(a) Alydaar has filed all forms, reports and documents,
together with all exhibits, required to be filed with the SEC since
December 31, 1997, and has made available to DSNC all forms, reports
and documents in the form filed with the SEC. All such forms, reports
and documents (including those that Alydaar may file subsequent to the
date hereof) are referred to herein as the "Alydaar SEC Reports." The
Alydaar SEC Reports (i) as of their respective dates were prepared and
filed in accordance in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Alydaar
SEC Reports and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) or, in the case of Alydaar SEC Reports filed
under the Securities Act, when such filing became effective, contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in Alydaar SEC
Reports (the "Alydaar Financials"), including any Alydaar SEC Reports
filed after the date hereof until the Closing, (x) complied as to form
in all material respects with the published rules and regulations of
the SEC with respect thereto, (y) was prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto or, in the case of unaudited
interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (z) fairly presented the consolidated
financial position of Alydaar and its subsidiaries as at the respective
dates thereof and the consolidated results of Alydaar's operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring
year-end adjustments. The balance sheet of Alydaar contained in Alydaar
SEC Reports as of September 30, 1998 is hereinafter referred to as the
"Alydaar Balance Sheet." Except as disclosed in the Alydaar Financials,
since the date of the Alydaar Balance Sheet through the date of this
Agreement neither Alydaar nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to
the consolidated financial statements prepared in accordance with GAAP
which are, individually or in the aggregate, material to the business,
results of operations or financial condition of Alydaar and its
subsidiaries taken as a whole, except liabilities (i) provided for in
the Alydaar Balance Sheet, or (ii) incurred since the date of the
Alydaar Balance Sheet in the ordinary course of business consistent
with past practices that would not have a Material Adverse Effect on
Alydaar.
(c) Alydaar has heretofore furnished to DSNC a complete and
correct copy of any amendments or modifications, which have not yet
been filed with the SEC but which are required to be filed, to
agreements, documents or other instruments which previously had been
filed by Alydaar with the SEC pursuant to the Securities Act or the
Exchange Act.
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3.5 Absence of Certain Changes or Events. Since the date of the Alydaar
Balance Sheet through the date of this Agreement, there has not been any
Material Adverse Effect on Alydaar or any event that would reasonably be likely
to have a Material Adverse Effect on Alydaar.
3.6 Pooling of Interests. Neither Alydaar nor any of its directors,
officers, affiliates or shareholders has taken, agreed to take or to Alydaar's
knowledge, failed to take any action which would preclude Alydaar's ability to
account for the Merger as a pooling of interests in accordance with the APB
Opinion No. 16.
3.7 DSNC Proxy Statement/Prospectus. The information supplied by
Alydaar for inclusion in the Registration Statement filed by Alydaar shall not
at the time the Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information supplied by Alydaar for inclusion in the DSNC Proxy Statement shall
not, on the date the DSNC Proxy Statement (or any amendment or supplement
thereto) is first mailed to DSNC's shareholders, at the time of the DSNC
Shareholders' Meeting and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the DSNC
Shareholders' Meeting which has become false or misleading. The DSNC Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder. If at any time prior
to the Effective Time, any event relating to Alydaar or any of its affiliates,
officers or directors should be discovered by Alydaar which should be set forth
in an amendment to the Registration Statement or a supplement to the DSNC Proxy
Statement, Alydaar shall promptly inform DSNC. Notwithstanding the foregoing,
Alydaar makes no representation or warranty with respect to any information
supplied by DSNC which is contained in any of the foregoing documents.
3.8 Board Approval. The Board of Directors of Alydaar has (i)
determined that the Merger is fair to, and in the best interests of, Alydaar and
its shareholders and (ii) approved the Merger.
3.9 Merger Sub. As of the date hereof and the Effective Time of the
Merger, except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement, Merger Sub has not and will not have incurred, directly or
indirectly, through any affiliate, any material obligations or liabilities or
engaged in any material business activities of any type or kind whatsoever or
entered into any material agreement or arrangements with any person.
3.10 Broker's Fees. Except for First Albany Corporation, neither
Alydaar nor, to the knowledge of Alydaar, any of its directors, officers or
employees has employed any person or entity as a broker, finder or agent or
incurred any liability for any broker's fees, finder's fees
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or other commission in connection with the Merger or the related transactions
contemplated by this Agreement.
3.11 Disclosure. No representation or warranty by Alydaar contained in
this Agreement (including the Schedules referred to herein), or in any
certificate furnished or to be furnished by Alydaar to DSNC in connection with
the transactions contemplated hereby contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
required to make the statements herein or therein not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, DSNC shall, except as permitted by
the terms of this Agreement, carry on and use reasonable best efforts to
preserve its business, in all material respects, in the usual, regular and
ordinary course, and in compliance with all applicable laws and regulations, pay
its debts and taxes when due subject to good faith disputes over such debts or
taxes, pay or perform other obligations when due, and use its reasonable best
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and employees and (iii) preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others with which it has
business dealings.
In addition, except as permitted by the terms of this Agreement, during
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement pursuant to its terms and the Effective Time,
DSNC shall not do any of the following:
(a) waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or restricted stock, or
reprice options granted under any employee, consultant or director
stock plans or authorize cash payments in exchange for any options
granted under any of such plans;
(b) grant any severance or termination pay to any officer or
employee except payments in amounts consistent with policies and past
practices or pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or
made available to Alydaar, or adopt any new severance plan;
(c) transfer or license to any person or entity or otherwise
extend the term of any agreement with respect to, amend or modify any
rights (including without limitation distribution rights) to the DSNC
IP Rights or enter into assignments of future patent rights, other than
licenses and distribution rights in the ordinary course of business;
(d) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or
property) in respect of any capital stock or
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split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(e) repurchase or otherwise acquire, directly or indirectly,
any shares of capital stock of DSNC;
(f) except for any shares of DSNC Common Stock issued pursuant
to the resolution or settlement of In Re: DSNC Systems Network
Corporation Securities Litigation (including pursuant to any indemnity
obligations of DSNC with respect thereto), issue, deliver, sell,
authorize or propose the issuance, delivery or sale of, any shares of
capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any
character obligating it to issue any such shares or convertible
securities, or accelerate the vesting of any outstanding option or
other security, other than the issuance, delivery and/or sale of (i)
shares of DSNC Common Stock pursuant to the exercise of outstanding
stock options or warrants, (ii) shares of DSNC Common Stock issuable to
participants in the DSNC ESPP consistent with the terms thereof and
(iii) options to purchase DSNC Common Stock granted at fair market
value, consistent with past practice and in accordance with the Option
Plan;
(g) cause, permit or propose any amendments to any charter
document or bylaw;
(h) acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a material portion of
the assets of, or by any other manner, any business or any corporation,
partnership interest, association or other business organization or
division thereof or joint venture or strategic partnerships, or, except
for transactions in the ordinary course of business consistent with
past practice (i) otherwise acquire or agree to acquire any assets
which are material, individually or in the aggregate, to the business
of DSNC or (ii) enter into any alliances;
(i) sell, lease, encumber or otherwise dispose of any
properties or assets which are material, individually or in the
aggregate, to the business of DSNC, except in the ordinary course of
business consistent with past practice;
(j) incur any indebtedness for borrowed money except pursuant
to existing funded debt agreements disclosed on Schedule 2.17, or
guarantee any indebtedness of any person for borrowed money;
(k) intentionally reserved;
(l) make any payments outside of the ordinary course of
business in excess of $25,000 individually or $100,000 in aggregate for
purposes of settling any dispute other than payments not in excess of
amounts reserved or accrued on the audited DSNC Financials for the
period ended 12-31-97;
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(m) take any action, or permit any of its affiliates to take
any action, that would be reasonably likely to interfere with Alydaar's
ability to account for the Merger as a pooling of interests whether or
not otherwise permitted by the provisions of this Section 4.1;
(n) pay (or make any oral or written commitments or
representations to pay) any bonus, increased salary or wage rate or
special remuneration to any director, officer, employee or consultant
(except (i) for normal salary increases consistent with past practices
not to exceed 10% per year, (ii) pursuant to existing arrangements
previously disclosed to Alydaar and (iii) for reasonable bonuses to
encourage retention of employees after the announcement of a Superior
Proposal (as defined below)) or enter into (except as specifically set
forth herein) or vary the terms of any employment, consulting or
severance agreement with any such person, adopt or amend any employee
benefit plan or employee stock purchase or employee stock option plan,
pay any severance or termination pay (other than payments made in
accordance with plans or agreements existing on the date hereof), grant
any stock option (except for normal grants to newly hired employees or
newly promoted employees consistent with past practices) or issue any
restricted stock, or enter into or modify any agreement or plan or
increase benefits of the type described in Section 2.13;
(o) change its accounting methods, principles or practices,
except as required by concurrent changes in GAAP;
(p) amend or terminate any contract, agreement or license to
which it is a party except those amended or terminated in the ordinary
course of its business, consistent with past practice;
(q) lend any amount to any person or entity, other than
advances for travel and expenses which are incurred in the ordinary
course of business;
(r) except as set forth on Schedule 4.1(r) and in amounts not
to exceed those set forth on such Schedule, waive or release any right
or claim except for the waiver or release of non-material claims in the
ordinary course of business, consistent with past practice;
(s) split or combine the outstanding shares of its capital
stock of any class or enter into any recapitalization or agreement
affecting the number or rights of outstanding shares of its capital
stock of any class or affecting any other of its securities;
(t) agree to any audit assessment by any Tax authority in
excess of $100,000;
(u) change any insurance coverage;
(v) enter into any contract or agreement material to the
business, results or operations or financial condition of DSNC other
than in the ordinary course of business, consistent with past
practices;
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(w) (i) take or agree or commit to take any action that would
make any representation and warranty of DSNC hereunder inaccurate at,
or as of any time prior to, the Effective Time, or (ii) omit or agree
or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate at any such time; or
(x) agree in writing or otherwise to take any of the actions
described in Section 4.1 (a) through (w) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 DSNC Proxy Statement/Prospectus; Registration Statement; Other
Filings; Board Recommendations.
(a) As promptly as practicable after the execution of this
Agreement, DSNC and Alydaar will prepare, and file with the SEC, the
DSNC Proxy Statement, and Alydaar will prepare and file with the SEC
the Registration Statement in which the DSNC Proxy Statement will be
included as a prospectus. Each of DSNC and Alydaar will respond to any
comments of the SEC, will use its respective reasonable best efforts to
have the Registration Statement declared effective under the Securities
Act and the DSNC Proxy Statement to be cleared by the SEC as promptly
as practicable after such filing and, to the extent that presenting
this Agreement and the Merger to DSNC's shareholders for their approval
and adoption would not violate applicable law, DSNC will cause the DSNC
Proxy Statement to be mailed to the DSNC shareholders at the earliest
practicable time after the Registration Statement is declared effective
by the SEC. As promptly as practicable after the date of this
Agreement, each of DSNC and Alydaar will prepare and file any other
filings required to be filed by it under the Exchange Act, the
Securities Act or any other Federal, foreign or Blue Sky or related
laws relating to the Merger and the transactions contemplated by this
Agreement (the "Other Filings"). Each of DSNC and Alydaar will notify
the other promptly upon the receipt of any comments from the SEC or its
staff or any other government officials and of any request by the SEC
or its staff or any other government officials for amendments or
supplements to the Registration Statement, the DSNC Proxy Statement or
any Other Filing or for additional information and will supply the
other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff or any
other government officials, on the other hand, with respect to the
Registration Statement, the DSNC Proxy Statement, the Merger or any
Other Filing. Each of DSNC and Alydaar will cause all documents that it
is responsible for filing with the SEC or other regulatory authorities
under this Section 5.1(a) to comply in all material respects with all
applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever DSNC or Alydaar obtains knowledge of
the occurrence of any event which is required to be set forth in an
amendment or supplement to the DSNC Proxy Statement, the Registration
Statement or any Other Filing, DSNC or Alydaar, as the case may be,
will promptly inform the other of such occurrence and cooperate in
filing with the SEC
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or its staff or any other government officials, and/or mailing to
shareholders of DSNC, such amendment or supplement.
(b) Subject to the provisions of Section 5.4(b), the DSNC
Proxy Statement will include the recommendation of the Board of
Directors of DSNC in favor of adoption and approval of this Agreement
and approval of the Merger (except that notwithstanding anything to the
contrary contained in this Agreement, the Board of Directors of DSNC
may withdraw, modify or refrain from making such recommendation to the
extent that the Board determines, in good faith, after consultation
with outside legal counsel, that compliance with the Board's fiduciary
duties would require it to do so).
5.2 Meeting of Shareholders. Promptly after the date hereof, DSNC will
take all action necessary in accordance with Michigan Law and its Articles of
Incorporation and Bylaws to convene the DSNC Shareholders' Meeting to be held as
promptly as practicable, and in any event (to the extent permissible under
applicable law) within 45 days after the declaration of effectiveness of the
Registration Statement, for the purpose of voting upon this Agreement. For so
long as the Board of Directors of DSNC continues to make the recommendation set
forth in Section 5.1, DSNC will use its best efforts to solicit from its
shareholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger and will take all other action necessary or advisable
to secure the vote or consent of its shareholders required by the rules of the
National Association of Securities Dealers, Inc. or Michigan Law to obtain such
approvals.
5.3 Confidentiality.
(a) The parties acknowledge that Alydaar and DSNC have
previously executed a letter agreement regarding confidentiality, dated
November 30, 1998 (the "Confidentiality Agreement"), which
Confidentiality Agreement will continue in full force and effect in
accordance with its terms.
(b) Access to Information. Upon reasonable notice, each of
DSNC and Alydaar will afford to the other and its accountants, counsel
and other representatives reasonable access during normal business
hours to its properties, books, records and personnel during the period
prior to the Effective Time to obtain all information concerning the
business, including the status of product development efforts,
properties, results of operations and personnel of such party, as the
other may reasonably request. No information or knowledge obtained in
any investigation pursuant to this Section 5.3 will affect or be deemed
to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
5.4 No Solicitation.
(a) Subject to Section 5.4(b), from and after the date of this
Agreement until the earlier of the Effective Time or termination of
this Agreement pursuant to its terms, DSNC shall not, and will instruct
its directors, officers, employees, representatives, investment
bankers, agents and affiliates (including any subsidiaries) not to,
directly or indirectly, (i) initiate, solicit, encourage, negotiate or
accept the making, submission or
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announcement of, any Acquisition Proposal (as defined below) by any
person, entity or group (other than Alydaar and its affiliates, agents
and representatives), or (ii) participate in any discussions or
negotiations with, or disclose any non-public information concerning
DSNC to, or afford any access to the properties, books or records of
DSNC to, or otherwise assist or facilitate, or enter into any agreement
or understanding with, any person, entity or group (other than Alydaar
and its affiliates, agents and representatives), in connection with any
Acquisition Proposal with respect to DSNC. Without limiting the
generality of the foregoing, DSNC acknowledges and agrees that any
violation of any of the restrictions set forth in the preceding
sentence by any director or officer of DSNC, or by any employee,
representative, investment banker, agent or affiliate of DSNC having
direct or indirect authority from DSNC or any director or officer of
DSNC, shall be deemed to constitute a breach of this Section 5.4 by
DSNC. For the purposes of this Agreement, an "Acquisition Proposal"
with respect to an entity means any proposal, inquiry or offer relating
to or which the entity has reason to believe relates to (i) any merger,
consolidation, combination, sale, dividend or other disposition of
substantial assets or properties or similar transactions or series of
transactions involving the entity or any subsidiaries of the entity,
(ii) sale, dividend, split, or other disposition of 10% or more of
shares of capital stock or other equity interests of the entity
(including without limitation by way of a tender offer or an exchange
offer), (iii) the acquisition by any person of beneficial ownership or
a right to acquire beneficial ownership of, or the formation of any
"group" (as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) which beneficially owns, or has the
right to acquire beneficial ownership of, 10% or more of the then
outstanding shares of capital stock of the entity; or (iv) any public
announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing. As of the
date hereof, DSNC will immediately cease and cause to be terminated any
and all existing activities, discussions or negotiations with any
parties with respect to any Acquisition Proposal. DSNC will (i) notify
Alydaar as promptly as practicable if it receives any proposal or
inquiry or request for DSNC in connection with an Acquisition Proposal
or potential Acquisition Proposal and (ii) as promptly as practicable
deliver to Alydaar a copy of such proposal, inquiry or request if it is
in written form terms and conditions of any such Acquisition Proposal,
as well as the identity of the third party submitting such Acquisition
Proposal. In addition, subject to the other provisions of this Section
5.4(a), from and after the date of this Agreement until the earlier of
the Effective Time or termination of this Agreement pursuant to its
terms, DSNC will not, and will instruct its directors, officers,
employees, representatives, investment bankers, agents and affiliates
(including any subsidiaries) not to, directly or indirectly, make or
authorize any public statement, recommendation or solicitation in
support of any Acquisition Proposal made by any person, entity or group
(other than Alydaar); provided, however, that nothing herein shall
prohibit DSNC's Board of Directors from taking and disclosing to DSNC's
shareholders a position with respect to a tender offer pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
(b) Notwithstanding anything contrary contained in Section
5.4(a) or elsewhere in this Agreement, prior to the Effective Time,
DSNC may, to the extent the Board of Directors of DSNC determines, in
good faith, after consultation with outside legal counsel, that the
Board's fiduciary duties to shareholders under applicable law require
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it to do so, participate in discussions or negotiations with, and,
subject to the requirements of paragraph (c) below, furnish non-public
information, and afford access to the properties, books or records of
DSNC to any person, entity or group after such person, entity or group
has delivered to DSNC in writing, an unsolicited bona fide Acquisition
Proposal (which has not been withdrawn) which the Board of Directors of
DSNC in its good faith reasonable judgment determines, after
consultation with its independent financial advisors, would reasonably
likely to result in a transaction financially more favorable than the
Merger to the shareholders of DSNC (a "Superior Proposal"), provided
that, prior to furnishing such information to, or entering into
discussions or negotiations with, such person, entity or group, DSNC
provides written notice to Alydaar to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such
person, entity or group, and keeps Alydaar informed of the status of
any such discussions or negotiations. In the event DSNC receives a
Superior Proposal, nothing contained in this Agreement (but subject to
the terms of this paragraph (b)) will prevent the Board of Directors of
DSNC from recommending such Superior Proposal to DSNC's shareholders,
if the Board determines, in good faith, after consultation with outside
legal counsel, that such action is required by its fiduciary duties; in
such case, the Board of Directors of DSNC may withdraw, modify or
refrain from making its recommendations set forth in Section 5.1(b),
and, to the extent it does so, DSNC may refrain from soliciting proxies
and taking such other action necessary to secure the affirmative vote
of its shareholders as may be required by Section 5.2; provided that
(to the extent permissible under applicable law governing the Board's
fiduciary duties) DSNC shall remain obligated under Section 5.2 to
convene the DSNC Shareholder Meeting and shall have the vote on the
Merger considered by the shareholders of DSNC prior to the vote (if
any) on the Superior Proposal; and provided, further, that (to the
extent permissible under applicable law governing the Board's fiduciary
duties) DSNC shall not recommend to its shareholders a Superior
Proposal for a period of not less than 48 hours after Alydaar's receipt
of a copy of such Superior Proposal (or a description of the
significant terms and conditions thereof, if not in writing) and the
identity of the third party. Notwithstanding anything elsewhere
contained in Section 5.4(a) or elsewhere in this Agreement, DSNC may,
if its Board of Directors determines, in good faith, after consultation
with outside legal counsel that the Board's fiduciary duties to
shareholders under applicable law require it to do so, enter into an
agreement or understanding relating to a Superior Proposal; provided,
that (i) (to the extent permissible under applicable law governing the
Board's fiduciary duties) such agreement or understanding provides that
the Merger shall be considered by the shareholders of DSNC prior to the
Superior Proposal and (ii) if the Merger is approved by the
shareholders of DSNC, neither DSNC nor Alydaar shall be required to pay
a fee or otherwise incur any liability arising out of the agreement or
understanding relating to the Superior Proposal, including, without
limitation, as a result of the Superior Proposal not being approved.
The performance of such agreement or understanding relating to the
Superior Proposal to the extent necessary to facilitate the due
consideration of such Superior Proposal at the meeting of the
shareholders of DSNC after the Merger shall not constitute a breach of
this Agreement.
(c) Notwithstanding anything to the contrary herein, DSNC will
not provide any non-public information to a third party unless: (x)
DSNC provides such non-public
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information pursuant to a nondisclosure agreement with terms regarding
the protection of oral or written confidential information at least as
restrictive as such terms in the Confidentiality Agreement; and (y)
such non-public information has been previously provided to Alydaar.
5.5 Public Disclosure. (a) DSNC and Alydaar will consult and mutually
agree with each other before issuing any press release or otherwise making any
public statement with respect to the Merger or this Agreement and will not issue
any such press release or make any such public statement prior to such
consultation and agreement, except as may be required by law or any listing
agreement with a national securities exchange or the Nasdaq Stock Market.
(b) DSNC will notify Alydaar before issuing any press release
or otherwise making any public statement with respect to an Acquisition
Proposal.
5.6 Legal Requirements. Each of DSNC, Merger Sub and Alydaar will take
all reasonable actions necessary or desirable to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals by or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such filings with or investigations by any
Governmental Entity, and any other such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. Alydaar will use its commercially
reasonable efforts to take such steps as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable to the
issuance of Alydaar Common Stock pursuant hereto. DSNC will use its commercially
reasonable efforts to assist Alydaar as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of Alydaar Common Stock pursuant hereto.
5.7 Third Party Consents. As soon as practicable following the date
hereof, DSNC and Alydaar will each use its commercially reasonable efforts to
obtain all consents, waivers and approvals under any of its or its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby. Without limiting
the generality of the foregoing, DSNC shall, within twenty days of the date
hereof, provide a complete and accurate list of, and subsequent to such twenty
day period shall use its reasonable best efforts to obtain, all consents,
waivers and approvals relating to any change of control provisions contained in
the DSNC Contracts.
5.8 Notification of Certain Matters; Financial Statements. DSNC and
Merger Sub will give prompt notice to Alydaar, and Alydaar will give prompt
notice to DSNC, after obtaining knowledge of the occurrence, or failure to
occur, of any event, which occurrence or failure to occur would be reasonably
likely to cause (a) any representation or warranty contained in this Agreement
and made by it to be untrue or inaccurate at any time from the date of this
Agreement to the Effective Time such that the conditions set forth in Section
6.2(a) or 6.3(a), as the case may be, would not be satisfied as a result
thereof, (b) any Material Adverse Effect on DSNC or Alydaar or (c) any failure
of DSNC and Merger Sub or Alydaar, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or
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satisfied by it under this Agreement such that the condition set forth in
Section 6.2(b) or 6.3(b), as the case may be, would not be satisfied as a result
thereof. To ensure compliance with this Section 5.8, DSNC shall deliver to
Alydaar as soon as practicable but in any event within thirty days after the end
of each monthly accounting period beginning with the month ended November 30,
1998 and ending with the monthly accounting period occurring before the earlier
of the Closing Date or the termination of this Agreement in accordance with its
terms, an unaudited balance sheet, statement of operations and statement of cash
flows for DSNC, which financial statements shall be prepared in the ordinary
course of business, in accordance with DSNC's books and records and generally
accepted accounting principles and shall fairly present the financial position
of DSNC as of their respective dates and the results of DSNC's operations for
the periods then ended. DSNC also shall furnish to Alydaar, prior to the Closing
Date, audited financial statements for the year ending December 31, 1998.
Notwithstanding the above, the delivery of any notice pursuant to this Section
5.8 will not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
5.9 Reasonable Best Efforts and Further Assurances. Subject to the
respective rights and obligations of DSNC and Alydaar under this Agreement, each
of the parties to this Agreement will use its reasonable best efforts to
effectuate the Merger and other transactions contemplated hereby, to fulfill and
cause to be fulfilled the conditions to closing under this Agreement and to
effect the Closing as soon as practicable; provided that neither DSNC nor
Alydaar nor any subsidiary or affiliate thereof will be required to agree to any
divestiture by itself or any of its affiliates of shares of capital stock or of
any business, assets or property, or the imposition of any material limitation
on the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock. Subject to the first sentence of
this Section 5.9, each party hereto, at the reasonable request of another party
hereto, will execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of the transactions contemplated hereby, including but not
limited to actions to be taken at and after the Effective Time.
5.10 Intentionally reserved.
5.11 Schedules. Notwithstanding anything to the contrary contained in
this Agreement, information disclosed in a Schedule to this Agreement shall be
deemed to be disclosed in all other Schedules, provided that such information
shall be disclosed with sufficient specificity such that the applicability of
such information to such other Schedules shall be apparent.
5.12 NMS Listing. Alydaar agrees to authorize for listing on the Nasdaq
National Market, prior to the Effective Time, the shares of Alydaar Common Stock
issuable, and those required to be reserved for issuance, in connection with the
Merger, upon official notice of issuance.
5.13 DSNC Affiliate Agreement. Set forth on Schedule 5.13 is a list of
those persons who may be deemed to be, in DSNC's reasonable judgment, affiliates
of DSNC within the meaning of Rule 145 promulgated under the Securities Act
(each a "DSNC Affiliate"). DSNC will provide Alydaar with such information and
documents as Alydaar reasonably requests for purposes of reviewing such list.
DSNC will use its reasonable best efforts to deliver or cause
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to be delivered to Alydaar, as promptly as practicable on or following the date
hereof (and in any event no later than the date 30 days prior to the Effective
Time), from each DSNC Affiliate an executed affiliate agreement in substantially
the form attached hereto as Exhibit C (the "DSNC Affiliate Agreement"), each of
which will be in full force and effect as of the Effective Time. Alydaar will be
entitled to place appropriate legends on the certificates evidencing any Alydaar
Common Stock to be received by a DSNC Affiliate pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Alydaar Common Stock, consistent with the terms of the DSNC
Affiliate Agreement.
5.14 Tax-Free Merger. No party shall take any action either prior to or
after the Effective Time that could reasonably be expected to cause the Merger
to fail to qualify as a "reorganization" under Section 368(a) of the Code.
5.15 Pooling Covenant. Prior to the earlier of termination of this
Agreement and the Effective Time, Alydaar will not take any action, and Alydaar
will not permit any of its affiliates to take any action, that would be
reasonably likely to interfere with Alydaar's ability to account for the Merger
as a pooling of interests. In addition, Alydaar will use its reasonable best
efforts to deliver or cause to be delivered to DSNC, on or as promptly as
practicable following the date hereof (and in any event no later than the date
30 days prior to the Effective Time), from each person who may be deemed to be
an "affiliate" of Alydaar within the meaning of Rule 145 promulgated under the
Securities Act, an agreement (which will be in full force and effect as of the
Effective Time) requiring such person to refrain from taking any action that
would be reasonably likely to interfere with Alydaar's ability to account for
the Merger as a pooling of interests.
5.16 Employee Matters. Promptly following the Merger, as determined by
Alydaar in its sole discretion, employees of DSNC will (a) continue under the
current employee benefit plans of DSNC, or (b) become subject to Alydaar
standard employee benefit plans on an equivalent basis with other similarly
situated employees of Alydaar and will receive full credit pursuant to such
plans for years of service at DSNC.
5.17 Director and Officer Liability. For six years after the Effective
Time, Alydaar will cause the Surviving Corporation to indemnify and hold
harmless the present and former officers and directors of DSNC in respect of
acts or omissions occurring prior to the Effective Time to the extent provided
under DSNC's Articles of Incorporation and Bylaws in effect on the date hereof;
provided that such indemnification shall (i) be subject to any limitations
imposed from time to time under applicable law that pursuant to such law are
applicable to such indemnification, and (ii) continue beyond such six year
period with respect to claims filed prior to, and unresolved at, the end of such
period. For six years after the Effective Time, Alydaar will cause the Surviving
Corporation to provide officers' and directors' liability insurance in respect
of acts or omissions occurring prior to the Effective Time covering each such
person currently covered by DSNC's officers' and directors' liability insurance
policy on terms with respect to coverage no less favorable than those of such
policy in effect on the date hereof with a policy coverage amount of $1 million;
provided that Alydaar may substitute therefor policies of at least the same
coverage containing terms that are no less favorable to the extent such
liability insurance can be maintained at an aggregate cost to Alydaar not
greater than $255,000 in total premiums for such officers' and directors'
liability insurance over the course of such six
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year period; provided, further, that if such insurance cannot be so maintained
or obtained at such cost, Alydaar shall maintain or obtain as much of such
insurance for each such person as can be so maintained or obtained at an
aggregate cost of $255,000 in total premiums for such officers' and directors'
liability insurance over the course of such six year period. Any counsel
retained in connection with the provisions of this Section 5.17 shall be chosen
by Alydaar, which counsel shall be reasonably satisfactory to the indemnitees
and only one law firm shall be retained with respect to any single action unless
there is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more indemnitees. Alydaar
will cause the Surviving Corporation to pay the reasonable fees and expenses of
such counsel. Neither Alydaar nor the Surviving Corporation will be liable for
any settlement effected without its written consent (which consent will not be
unreasonable withheld).
ARTICLE VI
CONDITIONS OF THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by
the requisite vote under applicable law, by the shareholders of DSNC.
(b) Registration Statement Effective; DSNC Proxy Statement.
The SEC shall have declared the Registration Statement effective. No
stop order suspending the effectiveness of the Registration Statement
or any part thereof shall have been issued and no proceeding for that
purpose, and no similar proceeding in respect of the DSNC Proxy
Statement, shall have been initiated or threatened in writing by the
SEC.
(c) No Order; Approvals. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and which has
the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger. All consents, approvals, orders or other
actions by or in respect of or filings with any Governmental Entity
required to permit the consummation of the Merger and the transactions
contemplated hereby shall have been obtained, provided that any of the
foregoing relating to the SEC or the State of Michigan shall have been
obtained without conditions or limitations which are unacceptable to
Alydaar in the exercise of its reasonable business judgment.
(d) Tax Opinions. DSNC and Alydaar shall each have received
written opinions from their respective counsel, Xxxxxx, Xxxxxxx &
Xxxxxxx LLP, and McGuire, Woods, Battle & Xxxxxx LLP, in form and
substance reasonably satisfactory to them, to the effect that the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code and such opinions shall not have been withdrawn;
provided, however, that if the counsel to either DSNC or Alydaar does
not render such opinion, this
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condition shall nonetheless be deemed to be satisfied with respect to
such party if counsel to the other party renders such opinion to such
party. The parties to this Agreement agree to make reasonable
representations as requested by such counsel for the purpose of
rendering such opinions.
(e) Nasdaq Listing. The shares of Alydaar Common Stock
issuable to shareholders of DSNC pursuant to this Agreement and such
other shares required to be reserved for issuance in connection with
the Merger shall have been authorized for listing on the Nasdaq
National Market subject to official notice of issuance.
(f) Opinion of Accountants. DSNC shall have received from
Xxxxx Xxxxxxxx LLP, independent auditors for DSNC, a letter dated
within two business days prior to the Effective Time (which may contain
customary qualifications and assumptions), to the effect that Xxxxx
Xxxxxxxx LLP concurs with DSNC's management conclusion that no
conditions exist related to DSNC that would preclude Alydaar from
accounting for the Merger as a pooling of interests; and DSNC shall
have received from Xxxxx, Xxxxxxxxxx and Co., LLP, the independent
auditors for Alydaar, a copy of a letter addressed to Alydaar dated the
Closing Date, in substance reasonably satisfactory to DSNC (and which
may contain customary qualifications and assumptions and which may be
based in part on the letter referred to above from Xxxxx Xxxxxxxx LLP
to DSNC) to the effect that Xxxxx, Xxxxxxxxxx and Co., LLP concurs with
Alydaar's management conclusions that as of that date, no conditions
exist that would preclude Alydaar from accounting for the Merger as a
pooling of interests.
(g) Third Party Consents. DSNC shall have obtained such
consents and approvals as are required pursuant to the Foothill Capital
Corp. Loan Security Agreement; provided that no party shall have the
right to assert any such failure to obtain such consents and approvals
as a condition to close if any act or failure to act by such party
caused the failure of such condition.
6.2 Additional Conditions to Obligations of DSNC. The obligation of
DSNC to consummate and effect the Merger shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by DSNC:
(a) Representations and Warranties. The representations and
warranties of Alydaar and Merger Sub contained in this Agreement shall
be true and correct in all material respects as of the date of this
Agreement (except that representations and warranties qualified by
materiality or Material Adverse Effect shall be true and correct in all
respects). In addition, the representations and warranties of Alydaar
and Merger Sub contained in this Agreement shall be true and correct in
all material respects on and as of the Effective Time except for
changes specifically contemplated by this Agreement and except for
those representations and warranties which address matters only as of a
particular date, which shall remain true and correct in all material
respects (except that representations and warranties qualified by
materiality or Material Adverse Effect shall be true and correct in all
respects) as of such particular date, with the same force and effect as
if made on and as of the Effective Time. DSNC shall have received a
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certificate with respect to the foregoing signed on behalf of Alydaar
by the Chief Executive Officer and the Chief Financial Officer of
Alydaar;
(b) Agreements and Covenants. Alydaar and Merger Sub shall
have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied
with by them on or prior to the Effective Time, and DSNC shall have
received a certificate to such effect signed on behalf of Alydaar by
the Chief Executive Officer and the Chief Financial Officer of Alydaar;
(c) Material Adverse Effect. No Material Adverse Effect with
respect to Alydaar shall have occurred since the date of this
Agreement; and
(d) Legal Opinion. DSNC shall have received a legal opinion
from McGuire, Woods, Battle & Xxxxxx LLP in the form attached hereto as
Exhibit D.
6.3 Additional Conditions to the Obligations of Alydaar and Merger Sub.
The obligations of Alydaar and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, exclusively
by Alydaar:
(a) Representations and Warranties. The representations and
warranties of DSNC contained in this Agreement shall be true and
correct in all material respects as of the date of this Agreement
(except that representations and warranties qualified by materiality or
Material Adverse Effect shall be true and correct in all respects). In
addition, the representations and warranties of DSNC contained in this
Agreement shall be true and correct in all material respects on and as
of the Effective Time except for changes specifically contemplated by
this Agreement and except for those representations and warranties
which address matters only as of a particular date, which shall remain
true and correct in all material respects (except that representations
and warranties qualified by materiality or Material Adverse Effect
shall be true and correct in all respects) as of such particular date,
with the same force and effect as if made on and as of the Effective
Time. Alydaar shall have received a certificate with respect to the
foregoing signed on behalf of DSNC by the President and the Chief
Financial Officer of DSNC;
(b) Agreements and Covenants. DSNC shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time, and Alydaar shall have received a
certificate to such effect signed on behalf of DSNC by the President
and the Chief Financial Officer of DSNC;
(c) Material Adverse Effect. No Material Adverse Effect with
respect to DSNC shall have occurred since the date of this Agreement;
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(d) Legal Opinion. Alydaar shall have received a legal opinion
from Xxxxxx, Xxxxxxx & Xxxxxxx LLP, or such other counsel to DSNC as
shall be reasonably acceptable to Alydaar and its counsel, in the form
attached hereto as Exhibit E;
(e) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or the legal,
contractual or regulatory restraint limiting or restricting Alydaar
conduct or operation of its business or the business or DSNC, following
the Merger, shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental Entity,
domestic or foreign, seeking the foregoing be pending;
(f) Settlement of All Shareholder Lawsuits. All outstanding or
pending lawsuits brought by shareholders in which any of DSNC or any of
its affiliates, officers and/or directors are named as defendants,
including, without limitation, In Re: DSNC Systems Network Corporation
Securities Litigation, shall have been settled and approved and such
settlement and approval shall be final and nonappealable, substantially
in the form approved prior to the date hereof by the Board of Directors
of DSNC, by the applicable courts or authority and releases in favor of
DSNC shall have been executed and delivered by the plaintiffs in such
lawsuits; provided that in each case such settlement, approval and
release shall have been obtained on terms acceptable to Alydaar in its
reasonable discretion, including without limitation with respect to the
form and source of consideration to be paid by DSNC in any such
settlement. Any such settlement involving the issuance of additional
shares of capital stock or related rights by DSNC shall have a
corresponding offset on the Exchange Ratio as contemplated in Section
1.6(a);
(g) Financial Statements. The audited financial statements of
DSNC for the year ending December 31, 1998 shall be acceptable to
Alydaar in all material respects in its reasonable judgment; and
(h) Consents; Approvals or Waivers. DSNC shall have obtained
consents, approvals or waivers of any change of control provision in
DSNC Contracts that are material, either individually or in the
aggregate.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of the Merger
by the shareholders of DSNC:
(a) by mutual written consent duly authorized by the
Boards of Directors of Alydaar and DSNC;
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(b) by either Alydaar or DSNC, if the Merger shall not have
been consummated by July 31, 1999 for any reason; provided, however,
that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose action or failure to act has
been a principal cause of or resulted in the failure of the Merger to
occur on or before such date and such action or failure to act
constitutes a breach of this Agreement; provided that in any event this
Agreement shall be automatically terminated on September 30, 1999 in
the event that the Merger shall not have been consummated by such date.
(c) by either Alydaar or DSNC, if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, or
there shall be any law or regulation, in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger,
which order, decree or ruling is final and nonappealable;
(d) by either Alydaar or DSNC, if the required approval of the
shareholders of DSNC contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote upon a
vote taken at a meeting of shareholders duly convened therefor or at
any adjournment thereof;
(e) by Alydaar, if at any time prior to the approval of the
Merger by the shareholders of DSNC, the Board of Directors of DSNC:
(i) withdraws its recommendation of this Agreement or
the Merger,
or
(ii) accepts, publicly endorses, recommends or
executes a letter of intent or similar document with respect
to a Superior Proposal or resolves to do any of the foregoing;
(f) by Alydaar, if any of the following shall occur:
(i) DSNC shall have failed to include in the DSNC
Proxy Statement the unanimous recommendation of the Board of
Directors of DSNC in favor of approval and adoption of this
Agreement and the Merger, or the Board of Directors of DSNC
shall have amended or modified in a manner adverse to Alydaar
such Board of Directors' unanimous recommendation in favor of
the Merger or approval or adoption of this Agreement;
(ii) the Board of Directors of DSNC shall have
approved, publicly endorsed, recommended or executed a letter
of intent or similar document with respect to any Acquisition
Proposal other than the Merger;
(iii) a tender or exchange offer relating to
securities of DSNC shall have been commenced and DSNC shall
not have sent to its security holders, within 10 business days
after the commencement of such tender or exchange
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offer, a statement that DSNC recommends rejection of such
tender or exchange offer;
(iv) an Acquisition Proposal (other than a tender or
exchange offer relating to the securities of DSNC) is publicly
announced, and, upon Alydaar's request, DSNC fails to issue a
press release announcing its opposition to such Acquisition
Proposal within ten business days after such request; or
(g) by DSNC, upon a breach of any representation, warranty,
covenant or agreement on the part of Alydaar set forth in this
Agreement, or if any such representation or warranty of Alydaar shall
have become inaccurate, in either case such that the conditions set
forth in Section 6.2(a) or Section 6.2(b), as the case may be, would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become inaccurate; provided,
however, that if such inaccuracy in Alydaar's representations and
warranties or breach by Alydaar is curable by Alydaar through the
exercise of its commercially reasonable efforts, then DSNC may not
terminate this Agreement under this Section 7.1(g) for so long as
Alydaar is exercising commercially reasonable efforts to cure such
inaccuracy or breach, not to exceed 60 days from the time of written
notice to Alydaar from DSNC of its intent to terminate pursuant to this
Section 7.1(g); and, provided, further, that DSNC may not terminate
this Agreement pursuant to this Section 7.1(g) if it shall have
breached this Agreement;
(h) by Alydaar, upon a breach of any representation, warranty,
covenant or agreement on the part of DSNC set forth in this Agreement,
or if any such representation or warranty of DSNC shall have become
inaccurate, in either case such that the conditions set forth in
Section 6.3(a) or Section 6.3(b), as the case may be, would not be
satisfied as of the time of such breach or as of the time such
representation or warranty shall have become inaccurate; provided,
however, that if such inaccuracy in DSNC's representations and
warranties or breach by DSNC is curable by DSNC through the exercise of
its commercially reasonable efforts, then Alydaar may not terminate
this Agreement under this Section 7.1(h) for so long as DSNC is
exercising commercially reasonable efforts to cure such inaccuracy or
breach, not to exceed 60 days from the time of written notice to DSNC
from Alydaar of its intent to terminate pursuant to this Section
7.1(h); and, provided, further, that Alydaar may not terminate this
Agreement pursuant to this Section 7.1(h) if it shall have breached
this Agreement;
(i) by either Alydaar or DSNC, in the event of a tender or an
exchange offer relating to the securities of DSNC which is accepted by
more than fifty percent (50%) of the outstanding shares of DSNC Common
Stock;
(j) by DSNC, relying on the written opinion of outside legal
counsel that the Board is required to terminate the Agreement pursuant
to its fiduciary duties to the shareholders under applicable law.
7.2 Notice of Termination; Effect of Termination. Subject to the cure
periods set forth in Sections 7.1(g) and (h), any termination of this Agreement
under Section 7.1 above will be effective immediately upon the delivery of
written notice of the terminating party to the other
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parties hereto. In the event of the termination of this Agreement as provided in
Section 7.1, this Agreement shall be of no further force or effect, except (i)
as set forth in this Section 7.2, Section 7.3 and Article 8 (miscellaneous),
each of which shall survive the termination of this Agreement, and (ii) nothing
herein shall relieve any party from liability for any breach of this Agreement.
No termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees
and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such expenses whether or not the Merger is consummated; provided,
however, that Alydaar and DSNC shall share equally all fees and
expenses, other than attorneys' and accountants fees and expenses,
incurred in relation to the printing and filing of the DSNC Proxy
Statement (including any preliminary materials related thereto) and the
Registration Statement (including financial statements and exhibits)
and any amendments or supplements thereto.
(b) DSNC Payments. If this Agreement is terminated by Alydaar
or DSNC pursuant to Section 7.1(d) or Section 7.1(i), or by DSNC
pursuant to Section 7.1(j), or by Alydaar pursuant to Section 7.1(e) or
7.1(f), then DSNC shall pay to Alydaar, in cash, a non-refundable fee
in the amount of $2,000,000 (the "Termination Fee"); provided that no
Termination Fee shall be payable by DSNC, in the absence of a proposal
that either constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal, in the event of termination pursuant to (A)
Section 7.1(d), (B) Section 7.1(e)(i) or Section 7.1(f)(i), provided in
each case that the Board of Directors of DSNC is required to do so,
acting in good faith after consultation with outside legal counsel,
pursuant to its fiduciary duties under applicable law, or (C) Section
7.1(j). In the case of termination of this Agreement by DSNC pursuant
to Section 7.1(d) where an Acquisition Proposal has been made by any
person or entity other than Alydaar prior to such termination, and
within six months of such termination a transaction is consummated or a
definitive agreement or agreement in principal is entered into which
relates to such Acquisition Proposal, DSNC shall pay the Termination
Fee concurrently with any such consummation or the entering into of any
such agreement; or 7.1(i), the Termination Fee payable pursuant to the
preceding sentence shall be paid by DSNC prior to or contemporaneous
with notice of such termination being provided to Alydaar and as a
condition to DSNC's right to terminate under such provisions, and in
the case of termination of this Agreement by Alydaar pursuant to
Section 7.1(e), Section 7.1(f) or Section 7.1(j), the Termination Fee
payable pursuant to the preceding sentence shall be paid by DSNC within
three business days after such notice of such termination.
(c) No termination of this Agreement pursuant to Section
7.1(g) or 7.1(h) shall prejudice the ability of a non-breaching party
from seeking damages from any other party for any breach of this
Agreement, including, without limitation, attorneys' fees and the right
to pursue any remedy at law or in equity.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of Alydaar, DSNC and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants and agreements that by
their terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Alydaar or Merger Sub, to:
0000 Xxxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000, ext. 2022
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxxx, General Counsel
with a copy to:
McGuire, Woods, Battle & Xxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000-0000
Attention: B. Xxxxxx Xxxxxxx, Jr.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to DSNC, to:
00000 X. 00 Xxxx Xxxx
Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy to:
Xxxxxx, Xxxxxxx & Xxxxxxx LLP
000 Xxxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
8.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
(b) For purposes of this Agreement (a) as it relates to
Alydaar, the term "knowledge" means, with respect to any matter in
question, that any of the Chief Executive Officer, Chief Financial
Officer or General Counsel of Alydaar, has actual knowledge of such
matter and (b) as it relates to DSNC, the term "knowledge" means, with
respect to any matter in question, that either of the Chief Executive
Officer or the Chief Financial Officer of DSNC has actual knowledge of,
or reasonably should have known of, such matter.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including all Schedules (a) constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, it being understood
that the Confidentiality Agreement shall continue in full force and effect until
the Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 5.17.
8.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
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reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of laws.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
8.11 Waiver of Jury Trial. EACH OF ALYDAAR, DSNC AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF ALYDAAR, DSNC OR MERGER SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
ALYDAAR SOFTWARE CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
ALYDAAR ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
DATA SYSTEMS NETWORK CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
