Exhibit 2.5
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____________________________________________________________
AGREEMENT AND PLAN OF MERGER
among
STERLING SOFTWARE, INC.
STERLING SOFTWARE (SOUTHERN), INC.
and
CAYENNE SOFTWARE, INC.
dated as of August 27, 1998
____________________________________________________________
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF MERGER...................................................1
ARTICLE I - THE MERGER.........................................................1
Section 1.1 The Merger..................................................1
Section 1.2 Closing.....................................................2
Section 1.3 Effective Time..............................................2
Section 1.4 Effects of the Merger.......................................2
Section 1.5 Certificate of Incorporation; Bylaws........................2
Section 1.6 Directors; Officers.........................................2
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITALSTOCK OF THE
CONSTITUENT CORPORATIONS.......................................................3
Section 2.1 Effect on Capital Stock.....................................3
Section 2.2 Stock Options and Warrants..................................4
ARTICLE III - PAYMENT FOR SHARES...............................................5
Section 3.1 Payment for Shares..........................................5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES....................................7
Section 4.1 Representations and Warranties of Company...................7
Section 4.2 Representations and Warranties of Parent and Merger Sub....21
ARTICLE V - CONDUCT OF BUSINESS OF COMPANY....................................22
Section 5.1 Conduct of Business of Company.............................22
ARTICLE VI - ADDITIONAL COVENANTS.............................................24
Section 6.1 Preparation of the Proxy Statement.........................24
Section 6.2 Stockholders Meeting.......................................24
Section 6.3 Access to Information; Confidentiality.....................25
Section 6.4 Reasonable Best Efforts....................................25
Section 6.5 Public Announcements.......................................25
Section 6.6 No Solicitation; Acquisition Proposals.....................26
Section 6.7 Consents, Approvals and Filings............................27
Section 6.8 Board Action Relating to Stock Option Plans................28
Section 6.9 Employee Benefit Matters...................................28
Section 6.10 Indemnification; Directors' and Officers' Insurance........28
Section 6.11 Credit Arrangements........................................29
ARTICLE VII - CONDITIONS PRECEDENT............................................31
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger.....................................................31
Section 7.2 Conditions to Obligations of Parent and Merger Sub.........31
Section 7.3 Conditions to Obligation of Company........................32
(i)
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER..............................33
Section 8.1 Termination................................................35
Section 8.2 Effect of Termination......................................35
Section 8.3 Amendment..................................................35
Section 8.4 Extension; Waiver..........................................35
Section 8.5 Procedure for Termination, Amendment, Extension or
Waiver.....................................................35
ARTICLE IX - GENERAL PROVISIONS...............................................35
Section 9.1 Nonsurvival of Representations and Warranties..............35
Section 9.2 Fees and Expenses..........................................36
Section 9.3 Definitions................................................36
Section 9.4 Notices....................................................39
Section 9.5 Interpretation.............................................39
Section 9.6 Entire Agreement; Third-Party Beneficiaries................39
Section 9.7 Governing Law..............................................39
Section 9.8 Assignment.................................................39
Section 9.9 Enforcement................................................40
Section 9.10 Severability...............................................40
Section 9.11 Counterparts...............................................40
(ii)
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of August 27, 1998 (this
"Agreement"), is made and entered into among Sterling Software, Inc., a Delaware
corporation ("Parent"), Sterling Software (Southern), Inc., a Georgia
corporation and wholly owned subsidiary of Parent ("Merger Sub"), and Cayenne
Software, Inc., a Massachusetts corporation ("Company").
RECITALS:
A. The Executive Committee of the Board of Directors of Parent and the
respective Boards of Directors of Merger Sub and Company have determined that it
would be advisable and in the best interests of their respective stockholders
for Parent to acquire Company, by means of a merger of Company with and into
Merger Sub (the "Merger"), on the terms and subject to the conditions set forth
in this Agreement.
B. Concurrently with the execution and delivery of this Agreement and as
a condition to Parent's and Merger Sub's willingness to enter into this
Agreement, (i) Parent and Company have entered into a Stock Option Agreement,
dated as of the date hereof (the "Stock Option Agreement"), pursuant to which
Company has granted to Parent an option to purchase certain shares of capital
stock of Company under certain circumstances and (ii) Parent has entered into a
Stockholder Agreement, dated as of the date hereof (the "Stockholder
Agreement"), with each of the Preferred Stockholders (as hereinafter defined),
pursuant to which each Preferred Stockholder has (x) agreed, among other things,
to vote all shares of capital stock of Company owned by such Preferred
Stockholder in favor of the approval of this Agreement and (y) granted to Parent
an option to purchase all shares of capital stock of Company owned by such
Preferred Stockholder.
C. Parent, Merger Sub and Company desire to make certain representations,
warranties and covenants in connection with the Merger and to prescribe various
conditions to the consummation of the Merger.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained in this Agreement, the parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. On the terms and subject to the conditions set
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forth in this Agreement, and in accordance with the Massachusetts Business
Corporation Law (the "MBCL") and the Georgia Business Corporation Code (the
"GBCC"), the Merger shall be effected and Company shall be merged with and into
Merger Sub at the Effective Time (as hereinafter defined). At the Effective
Time, the separate existence of Company shall cease and Merger Sub shall
continue as the surviving corporation (sometimes hereinafter referred to as the
"Surviving Corporation").
Section 1.2 Closing. Unless this Agreement shall have been terminated and
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the transactions herein contemplated shall have been abandoned pursuant to
Article VIII, and subject to the satisfaction or waiver of all of the conditions
set forth in Article VII, the closing of the Merger (the "Closing") will take
place as soon as practicable, but in no event later than 10:00 a.m. on the
second business day (the "Closing Date") following satisfaction or waiver of all
of the conditions set forth in Article VII, other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the fulfillment
or waiver of those conditions, at the offices of ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇,
2300 ▇▇▇▇▇▇▇▇ ▇▇▇▇ Center, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, unless another date,
time or place is agreed to in writing by the parties hereto.
Section 1.3 Effective Time. On the Closing Date (or on such other date as
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Parent and Company may agree), the parties hereto shall file with the Secretary
of State of The Commonwealth of Massachusetts (the "Massachusetts State
Secretary") articles of merger (the "Massachusetts Articles of Merger") and any
other appropriate documents, executed in accordance with the relevant provisions
of the MBCL, shall file with the Secretary of State of the State of Georgia (the
"Georgia State Secretary") a certificate of merger (the "Georgia Certificate of
Merger") and any other appropriate documents, executed in accordance with the
relevant provisions of the GBCC, and shall make all other filings or recordings
required under the MBCL and GBCC in connection with the Merger. The Merger shall
become effective upon the later of the filing of the Massachusetts Articles of
Merger and the filing of the Georgia Certificate of Merger, or at such later
time as may be specified in the Massachusetts Articles of Merger or the Georgia
Certificate of Merger (the "Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the effects set
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forth in the applicable provisions of the MBCL and the GBCC. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
property of Company and Merger Sub shall vest in the Surviving Corporation, and
all liabilities of Company and Merger Sub shall become the liabilities of the
Surviving Corporation.
Section 1.5 Certificate of Incorporation; Bylaws At the Effective Time,
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(a) the certificate of incorporation of Merger Sub as in effect at the Effective
Time shall, from and after the Effective Time, be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
in accordance with the provisions thereof and applicable law and (b) the bylaws
of Merger Sub as in effect at the Effective Time shall, from and after the
Effective Time, be the bylaws of the Surviving Corporation until thereafter
changed or amended in accordance with the provisions thereof and applicable law.
Section 1.6 Directors; Officers. From and after the Effective Time, (a)
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the directors of Merger Sub shall be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be, and (b) the
officers of Merger Sub shall be the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
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EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
Section 2.1 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any holder of shares of
Company's common stock, par value $0.01 per share (the "Common Shares"), or
shares of Company's Series D Convertible Preferred Stock, par value $1.00 per
share (the "Preferred Shares" and, together with the Common Shares, the
"Shares"), or any other capital stock of Company or any shares of capital stock
of Merger Sub:
(a) Common Stock of Merger Sub. Each share of common stock, par
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value $0.10 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall remain outstanding and shall not be affected in any way
by the effectiveness of the Merger.
(b) Cancellation of Treasury Shares and Parent-Owned Shares. Each
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Share issued and outstanding immediately prior to the Effective Time that is
owned by Company or any Subsidiary (as hereinafter defined) of Company or by
Parent, Merger Sub or any other Subsidiary of Parent (other than shares in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) shall automatically be canceled and retired
and shall cease to exist, and no cash or other consideration shall be delivered
or deliverable in exchange therefor.
(c) Conversion of Shares. Each Share issued and outstanding
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immediately prior to the Effective Time (other than Shares to be canceled and
retired in accordance with Section 2.1(b) and any Dissenting Shares (as
hereinafter defined)) shall be converted into the right to receive the
applicable amount of cash specified in this Section 2.1(c) (the "Merger
Consideration"), which (i) in the case of each Common Share, is $0.375, and (ii)
in the case of each Preferred Share, is $20.00, upon surrender of the
certificate formerly representing such Share in accordance with this Agreement;
provided, however, that in the event that there shall be outstanding at the
Effective Time any Advances (as hereinafter defined), the Merger Consideration
shall be reduced, in the case of each Common Share, by an amount (rounded to the
nearest one-tenth of a cent) equal to the quotient obtained by dividing (1) the
aggregate amount of such outstanding Advances by (2) 21,333,398.
(d) Dissenting Shares. Notwithstanding anything in this Agreement
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to the contrary, any Shares issued and outstanding immediately prior to the
Effective Time held by a holder who has the right to demand, and who properly
demands, payment for such Shares ("Dissenting Shares") in accordance with
Sections 85 through 98 of the MBCL (together with any successor provisions, the
"Appraisal Provisions") shall not be converted into a right to receive the
applicable Merger Consideration, unless such holder fails to perfect or
otherwise loses such holder's right to payment in accordance with the Appraisal
Provisions. If, after the Effective Time, such holder fails to perfect or loses
any such right, each such Share of such holder shall be treated as a Share that
had been converted as of the Effective Time into the right to receive the
applicable Merger Consideration in accordance with Section 2.1(c). At the
Effective Time, any holder of Dissenting Shares shall cease to have any rights
with respect thereto, except the rights provided in the Appraisal Provisions and
as provided in the immediately preceding sentence. Company shall give prompt
notice to Parent of any demands received by Company for payment in
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accordance with the Appraisal Provisions, and Parent shall have the right to
participate in and direct all negotiations and proceedings with respect to such
demands. Company shall not, except with the prior written consent of Parent,
make any payment with respect to, or settle or offer to settle, any such
demands.
Section 2.2 Stock Options and Warrants.
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(a) At the Effective Time, each then-outstanding option to
purchase Common Shares (collectively, the "Options") granted under the ▇▇▇▇▇▇▇
Information Systems, Inc. Amended and Restated 1986 Incentive and Nonqualified
Stock Option Plan, the Cayenne Software, Inc. Amended 1996 Incentive and
Nonqualified Stock Option Plan, the Cayenne Software, Inc. 1998 Nonqualified
Stock Option Plan, the Cadre Technologies, Inc. 1988 Incentive and Non-Statutory
Stock Option Plan, the Cadre Technologies, Inc. 1989 Non-Statutory Stock Option
Plan and the Stock Option Agreements, dated December 29, 1997, between Company
and each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (collectively, the "Stock
Option Plans"), whether or not then exercisable or fully vested, shall be
assumed by Parent and shall constitute an option (a "Substitute Option") to
acquire, on substantially the same terms and subject to substantially the same
conditions as were applicable under such Option, including without limitation
term, vesting, exercisability, status as an "incentive stock option" under
Section 422 of the Code (if applicable) or as an employee stock purchase plan
option under Section 423 of the Code (if applicable), and termination
provisions, the number of shares of common stock, par value $0.10 per share
("Parent Common Stock"), of Parent, rounded down to the nearest whole share (it
being understood that the portion, if any, of an Option that would otherwise
have resulted in a Substitute Option being exercisable to purchase a fractional
share of Parent Common Stock shall be extinguished as a result of such
rounding), determined by multiplying the number of Common Shares subject to such
Option immediately prior to the Effective Time by the Conversion Factor, at an
exercise price per share of Parent Common Stock (increased to the nearest whole
cent) equal to the exercise price per share of Common Shares subject to such
Option divided by the Conversion Factor; provided, however, that in the case of
any Option to which Section 421 of the Code applies by reason of its
qualification as an incentive stock option under Section 422 of the Code or as
an employee stock purchase plan option under Section 423 of the Code, the
conversion formula shall be adjusted if necessary to comply with Section 424(a)
of the Code.
(b) Company shall use its best efforts to obtain all necessary
waivers, consents or releases from holders of Options granted under the Stock
Option Plans and take any such other action as may be reasonably necessary to
give effect to the transactions contemplated by Section 2.2(a).
(c) Parent shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of Substitute Options pursuant to the terms set forth in Section
2.2(a). At such time (if any) as such action may be required under the
Securities Act (as hereinafter defined), Parent will cause the shares of Parent
Common Stock subject to all then-outstanding Substitute Options to be covered by
an effective registration statement on Form S-8 (or any successor form) or
another appropriate form and Parent shall use its reasonable best efforts to
maintain the effectiveness of such registration statement for so long as such
Substitute Options remain outstanding. In addition, at such time (if any) as
such action may be required under the rules and policies of the NYSE (as
hereinafter
4
defined) or any other exchange upon which shares of Parent Common Stock may be
listed, Parent shall use all reasonable efforts to cause the shares of Parent
Common Stock subject to all then-outstanding Substitute Options to be listed on
the NYSE or such other exchange, as the case may be.
(d) At the Effective Time, each then-outstanding warrant to
purchase Common Shares (collectively, the "Warrants") issued under or evidenced
by the Warrant Agreement, dated December 20, 1996, between Company and Silicon
Valley Bank, the Convertible Preferred Stock Purchase Agreement, dated January
2, 1997, between Company and Southbrook International Investments, Ltd.
("Southbrook"), the Convertible Preferred Stock Purchase Agreement, dated July
18, 1997, between Company and Southbrook, the Convertible Preferred Stock
Purchase Agreement, dated August 28, 1997, between Company, the Preferred
Stockholders and certain other persons named therein, the Warrant Certificate,
dated November 1995, executed by Cadre Technologies, Inc. ("Cadre Technologies")
in favor of First Portland Corporation (dba First Portland Leasing Corp.), the
Share Purchase Agreement, dated April 13, 1995, between Cadre Technologies and
Stichting Administratiekantoor Cadmount, and the Warrant Certificate, dated
January 1997, executed by Company in favor of ▇▇▇▇ de Vleeschauver
(collectively, the "Warrant Documents") shall be canceled and retired and shall
cease to exist, and no cash or other consideration shall be delivered or
deliverable in exchange therefor.
(e) Company shall use its best efforts to obtain all necessary
waivers, consents or releases from holders of Warrants issued under or evidenced
by the Warrant Documents and take such other action as may be reasonably
necessary to give effect to the transactions contemplated by Section 2.2(d).
ARTICLE III
PAYMENT FOR SHARES
Section 3.1 Payment for Shares.
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(a) Payment Fund. Concurrently with the Effective Time, Parent
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shall deposit, or shall cause to be deposited, with or for the account of a bank
or trust company designated by Parent, which shall be reasonably satisfactory to
Company (the "Paying Agent"), for the benefit of the holders of Shares, cash in
an amount sufficient to pay the aggregate Merger Consideration payable upon the
conversion of Shares pursuant to Section 2.1(c) (the "Payment Fund").
(b) Letters of Transmittal; Surrender of Certificates. As soon as
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reasonably practicable after the Effective Time, Parent shall instruct the
Exchange Agent to mail to each holder of record (other than Company or any of
its Subsidiaries or Parent, Merger Sub or any other Subsidiary of Parent) of a
certificate or certificates that, immediately prior to the Effective Time,
evidenced outstanding Shares (the "Certificates"), (i) a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent, and shall be in such form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the applicable
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter
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of transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor cash in an amount equal to the product
of (i) the number of Shares theretofore represented by such Certificate and (ii)
the applicable Merger Consideration, and the Certificate so surrendered shall
forthwith be canceled. No interest shall be paid or accrued on any cash payable
upon the surrender of any Certificate. If payment is to be made to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the surrendered
Certificate or established to the satisfaction of Parent and the Surviving
Corporation that such taxes have been paid or are not applicable.
(c) Cancellation and Retirement of Shares; No Further Rights. As
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of the Effective Time, all Shares (other than Shares to be canceled in
accordance with Section 2.1(b)) issued and outstanding immediately prior to the
Effective Time shall cease to be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of any such Shares shall
cease to have any rights with respect thereto or arising therefrom (including
without limitation the right to vote), except the right to receive the
applicable Merger Consideration, without interest, upon surrender of such
Certificate in accordance with Section 3.1(b), and until so surrendered, each
such Certificate shall represent for all purposes only the right to receive the
applicable Merger Consideration, without interest. The Merger Consideration paid
upon the surrender for exchange of Certificates in accordance with the terms of
this Article III shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates.
(d) Investment of Payment Fund. The Paying Agent shall invest the
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Payment Fund, as directed by Parent, in (i) direct obligations of the United
States of America, (ii) obligations for which the full faith and credit of the
United States of America is pledged to provide for the payment of principal and
interest, (iii) commercial paper rated the highest quality by either ▇▇▇▇▇'▇
Investors Services, Inc. or Standard & Poor's Corporation, or (iv) certificates
of deposit, bank repurchase agreements or bankers' acceptances of commercial
banks with capital exceeding $500 million. Any net earnings with respect to the
Payment Fund shall be the property of and paid over to Parent as and when
requested by Parent.
(e) Termination of Payment Fund. Any portion of the Payment Fund
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which remains undistributed to the holders of Certificates for 180 days after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
Certificates that have not theretofore complied with this Article III shall
thereafter look only to Parent, and only as general creditors thereof, for
payment of their claim for any Merger Consideration.
(f) No Liability. None of Parent, Merger Sub, the Surviving
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Corporation or the Paying Agent shall be liable to any person in respect of any
payments or distributions payable from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to five years after
the Effective Time (or immediately prior to such earlier date on which any
Merger Consideration in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity (as hereinafter defined)), any
amounts payable in respect of such
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Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(g) Withholding Rights. Parent shall be entitled to deduct and
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withhold, or cause to be deducted or withheld, from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares, Options or
Certificates such amounts as are required to be deducted and withheld with
respect to the making of such payment under the Code, or any provision of
applicable state, local or foreign tax law. To the extent that amounts are so
deducted and withheld, such deducted and withheld amounts shall be treated for
all purposes of this Agreement as having been paid to such holders in respect of
which such deduction and withholding was made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Company. Company
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represents and warrants to Parent and Merger Sub as follows:
(a) Organization, Standing and Corporate Power. Each of Company
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and each Subsidiary of Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of Company and each Subsidiary of Company
is duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect (as hereinafter defined) on Company. Company has delivered to
Parent true, complete and correct copies of the articles of organization and by-
laws or comparable governing documents of Company and each Subsidiary of
Company, in each case as amended to the date of this Agreement. A true, correct
and complete list of all Subsidiaries of Company, together with the jurisdiction
of incorporation of each such Subsidiary and the percentage of each such
Subsidiary's capital stock owned by Company or another Subsidiary, is set forth
in Section 4.1(a) of the Disclosure Schedule (as hereinafter defined).
(b) Authority; Noncontravention. Company has the requisite
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corporate power and authority to enter into this Agreement and the Stock Option
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Stock Option Agreement by
Company and the consummation by Company of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Company, subject, in the case of the Merger, to the approval of this
Agreement by its stockholders as contemplated by Section 6.2. Each of this
Agreement and the Stock Option Agreement has been duly executed and delivered by
Company and, assuming that this Agreement or the Stock Option Agreement, as
applicable, constitutes a valid and binding obligation of Parent and Merger Sub,
constitutes a valid and binding obligation of Company, enforceable against
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity. Except as
7
specified in Section 4.1(b) of the Disclosure Schedule, the execution and
delivery of this Agreement and the Stock Option Agreement do not, and the
consummation of the transactions contemplated hereby or thereby and compliance
with the provisions hereof or thereof will not, (i) conflict with any of the
provisions of the articles of organization or by-laws of Company or the
comparable governing documents of any Subsidiary of Company, in each case as
amended to the date of this Agreement, (ii) subject to the governmental filings
and other matters referred to in Section 4.1(c), conflict with, result in a
breach of or default (with or without notice or lapse of time, or both) under,
or give rise to a material obligation, a right of termination, cancellation or
acceleration of any obligation or a loss of a material benefit under, or require
the consent of any person under, any indenture or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which
Company or any of its Subsidiaries is a party or by which Company or any of its
Subsidiaries or any of their respective assets is bound or affected, or (iii)
subject to the governmental filings and other matters referred to in Section
4.1(c), contravene any domestic or foreign law, rule or regulation or any order,
writ, judgment, injunction, decree, determination or award currently in effect,
which, in the case of clauses (ii) and (iii) above could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Company.
(c) Consents and Approvals. No consent, approval or authorization
----------------------
of, or declaration or filing with, or notice to, any domestic or foreign
governmental agency or regulatory authority (a "Governmental Entity") which has
not been received or made is required by or with respect to Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
or the Stock Option Agreement by Company or the consummation by Company of the
transactions contemplated hereby or thereby, except for (i) the filing of
premerger notification and report forms under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), with respect to the
Merger, (ii) the filing with the Securities and Exchange Commission (the "SEC")
of (A) the Proxy Statement (as hereinafter defined), and (B) such reports under
the Exchange Act (as hereinafter defined) as may be required in connection with
this Agreement or the Stock Option Agreement and the transactions contemplated
hereby or thereby, (iii) the filing of the Massachusetts Articles of Merger with
the Massachusetts State Secretary and the filing of the Georgia Certificate of
Merger with the Georgia State Secretary, and appropriate documents with the
relevant authorities of other states in which Company is qualified to do
business, (iv) such other consents, approvals, authorizations, filings or
notices as are specified in Section 4.1(c) of the Disclosure Schedule, and (v)
any other consents, approvals, authorizations, filings or notices the failure to
make or obtain which could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company.
(d) Capital Structure. The authorized capital stock of Company
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consists solely of 52,400,000 Common Shares and 1,600,000 shares of preferred
stock, par value $1.00 per share, of Company. As of the date hereof: (i)
21,333,398 Common Shares were issued and outstanding; (ii) 170,000 Preferred
Shares were issued and outstanding; (iii) 2,578,762 Common Shares were reserved
for issuance pursuant to outstanding Options granted under the Stock Option
Plans; (iv) 5,200,000 Common Shares were reserved for issuance upon conversion
of Preferred Shares; (v) 1,407,973 Common Shares were reserved for issuance
pursuant to outstanding Warrants issued under or evidenced by the Warrant
Documents; and (vi) no Common Shares were held by Company in its treasury.
Except as set forth in the immediately preceding sentence, as of the date
hereof, no shares of capital stock or other equity securities of Company were
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of
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Company are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. Except as specified above or in Section 4.1(d)
of the Disclosure Schedule, and except for the Stock Option Agreement, neither
Company nor any Subsidiary of Company has or is subject to or bound by or, at or
after the Effective Time will have or be subject to or bound by, any outstanding
option, warrant, call, subscription or other right (including any preemptive
right), agreement or commitment which (i) obligates Company or any Subsidiary of
Company to issue, sell or transfer, or repurchase, redeem or otherwise acquire,
any shares of the capital stock of Company or any Subsidiary of Company, (ii)
restricts the transfer of any shares of capital stock of Company or any of its
Subsidiaries, or (iii) relates to the voting of any shares of capital stock of
Company or any of its Subsidiaries. No bonds, debentures, notes or other
indebtedness of Company or any Subsidiary of Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which the stockholders of Company or any Subsidiary of Company
may vote are issued or outstanding. Except as specified in Section 4.1(d) of the
Disclosure Schedule, all of the outstanding shares of capital stock of each
Subsidiary of Company have been duly authorized, validly issued, fully paid and
nonassessable and are owned by Company, by one or more Subsidiaries of Company,
by Company and one or more such Subsidiaries, or by persons who are designees of
Company or a Subsidiary of Company in the case of foreign qualifying shares held
by such persons in accordance with the laws of the jurisdiction of organization
of certain foreign Subsidiaries of Company, free and clear of Liens (as
hereinafter defined). Company has taken all necessary corporate action to
authorize, reserve for issuance and permit the issuance of, and at all times
from the date hereof until the Stock Option Agreement terminates will keep
reserved for issuance upon exercise of the option granted to Parent pursuant to
the Stock Option Agreement, all Common Shares or other securities which may be
issuable pursuant to the Stock Option Agreement. All Common Shares or other
securities which may be issuable pursuant to the Stock Option Agreement, upon
issuance pursuant thereto, will be duly authorized, validly issued, fully paid
and nonassessable, and will be delivered free and clear of all Liens. All Common
Shares held pursuant to the Escrow Agreement, dated as of July 18, 1996, by and
among ▇▇▇▇▇▇▇ Information Systems, Inc., ▇▇▇▇▇ ▇. ▇▇▇▇▇, as agent for the former
stockholders of Cadre Technologies, and State Street Bank and Trust Company, as
escrow agent, have been distributed in accordance with the terms thereof.
(e) SEC Documents. Company has filed all reports, schedules,
forms, statements and other documents required to be filed with the SEC pursuant
to the Securities Act or the Exchange Act since December 31, 1994 (such reports,
schedules, forms, statements and other documents are hereinafter referred to as
the "SEC Documents"). As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of (i) the SEC
Documents as of such dates or (ii) any press release or other public statement
issued or made by Company (with any statement pertaining to the Company made by
an executive officer of Company being deemed for purposes of this Section 4.1(e)
to have been made by Company) since December 31, 1994, as of their respective
dates of issuance, contained any untrue statements of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of Company included
in the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited consolidated quarterly
9
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may otherwise be indicated in the notes
thereto) and fairly present the consolidated financial position of Company and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited quarterly statements, to normal year-end audit
adjustments).
(f) Absence of Certain Changes or Events; No Undisclosed Material
-------------------------------------------------------------
Liabilities.
-----------
(i) Except as disclosed in the SEC Documents filed and
publicly available prior to the date of this Agreement (the "Filed SEC
Documents") or specified in Section 4.1(f) of the Disclosure Schedule, since the
date of the most recent audited financial statements included in the Filed SEC
Documents, Company and its Subsidiaries have conducted their businesses only in
the ordinary course, and there has not been: (A) any Material Adverse Change;
(B) any declaration, setting aside or payment of any dividend or other
distribution in respect of shares of Company's capital stock, or any redemption
or other acquisition by Company of any shares of its capital stock; (C) any
increase in the rate or terms of compensation payable or to become payable by
Company or its Subsidiaries to their directors, officers or key employees,
except increases occurring in the ordinary course of business consistent with
past practice; (D) any entry into, or increase in the rate or terms of, any
bonus, insurance, severance, pension or other employee or retiree benefit plan,
payment or arrangement made to, for or with any such directors, officers or key
employees, except increases occurring in the ordinary course of business
consistent with past practices or as required by applicable law; (E) any entry
into any agreement, commitment or transaction by Company or any of its
Subsidiaries which is material to Company and its Subsidiaries taken as a whole,
except for agreements, commitments or transactions entered into in the ordinary
course of business consistent with past practice; (F) any change by Company in
accounting methods, principles or practices, except as required or permitted by
generally accepted accounting principles; (G) any write-off or write-down of, or
any determination to write-off or write-down, any asset of Company or any of its
Subsidiaries or any portion thereof which write-off, write-down or determination
exceeds $50,000 individually or $250,000 in the aggregate; (H) any announcement
or implementation of any reduction in force, lay-off, early retirement program,
severance program or other program or effort concerning the termination of
employment of employees of Company or its Subsidiaries; or (I) any announcement
of or entry into any agreement, commitment or transaction by Company or any of
its Subsidiaries to do any of the things described in the preceding clauses (A)
through (H) otherwise than as expressly provided for herein.
(ii) Except as disclosed in the Filed SEC Documents or
specified in Section 4.1(f) of the Disclosure Schedule and liabilities incurred
in the ordinary course of business consistent with past practice since the date
of the most recent financial statements included in the Filed SEC Documents,
there are no liabilities of Company or its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, due, to become due, determined,
determinable or otherwise, having or which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
(g) Certain Information. The Proxy Statement will, at the time it
-------------------
is filed with the SEC, at any time that it is amended or supplemented, at the
time it is mailed to the stockholders of Company and at the time of the
Stockholders Meeting referred to in Section 6.2,
10
(i) comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder and (ii) not 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 misleading; provided,
however, that no representation or warranty is made by Company with respect to
statements made therein based on information supplied by Parent or Merger Sub
specifically for inclusion therein.
(h) Real Property; Other Assets.
---------------------------
(i) Section 4.1(h)(i) of the Disclosure Schedule sets
forth all of the real property owned in fee by Company and its Subsidiaries (the
"Owned Real Property").
(ii) Company or one of its Subsidiaries has good and
marketable title to each parcel of Owned Real Property and to each other asset
reflected in the latest balance sheet of Company included in the Filed SEC
Documents (other than any such other asset disposed of or consumed in the
ordinary course of business or as specified in Section 4.1(h)(ii) of the
Disclosure Schedule) free and clear of all Liens except (A) those reflected or
reserved against in the latest balance sheet of Company included in the Filed
SEC Documents, (B) taxes and general and special assessments not in default and
payable without penalty and interest, and (C) other Liens that individually or
in the aggregate would not have a Material Adverse Effect on Company.
(iii) Company has heretofore made available to Parent true,
correct and complete copies of all leases, subleases and other agreements (the
"Real Property Leases") under which Company or any of its Subsidiaries uses or
occupies or has the right to use or occupy, now or in the future, any real
property or facility (the "Leased Real Property"), including all modifications,
amendments and supplements thereto. Except in each case where the failure could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company: (A) Company or one of its Subsidiaries has a valid
and subsisting leasehold interest in each parcel of Leased Real Property free
and clear of all Liens and each Real Property Lease is in full force and effect,
(B) all rent and other sums and charges payable by Company or its Subsidiaries
as tenants thereunder are current in all material respects, (C) no termination
event or condition or uncured default of a material nature on the part of
Company or any such Subsidiary or, to Company's knowledge, the landlord, exists
under any Real Property Lease, and (D) Company or one of its Subsidiaries is the
sole undisputed lessee of each Leased Real Property, is in actual possession
thereof and is entitled to quiet enjoyment thereof in accordance with the terms
of the applicable Real Property Lease.
(i) Software.
--------
(i) Section 4.1(i)(i) of the Disclosure Schedule sets
forth under the caption "Owned Software" a true, correct and complete list of
all computer programs (source code or object code) owned by Company or any
Subsidiary of Company, including without limitation any computer programs in the
development or testing phase (collectively, the "Owned Software"), and Section
4.1(i)(i) of the Disclosure Schedule sets forth under the caption "Licensed
Software" a true, correct and complete list of all computer programs (source
code or object code) licensed to Company or any Subsidiary of Company by another
person (other than
11
any off-the-shelf computer program that is so licensed under a shrink wrap
license) (collectively, the "Licensed Software" and, together with the Owned
Software, the "Software").
(ii) Except as specified in Section 4.1(i)(ii) of the
Disclosure Schedule, Company, directly or through its Subsidiaries, has good,
marketable and exclusive title to, and the valid and enforceable power and
unqualified right to sell, license, lease, transfer, use or otherwise exploit,
all versions and releases of the Owned Software and all copyrights thereof, free
and clear of all Liens. Company, directly or through its Subsidiaries, is in
actual possession of the source code and object code for each computer program
included in the Owned Software, and Company, directly or through its
Subsidiaries, is in possession of all other documentation (including without
limitation all related engineering specifications, program flow charts,
installation and user manuals) and know-how required for the effective use of
the Software as currently used in Company's business or as offered or
represented to Company's customers or potential customers. Company, directly or
through its Subsidiaries, is in actual possession of the object code and user
manuals for each computer program included in the Licensed Software. The
Software constitutes all of the computer programs necessary to conduct Company's
business as now conducted, and includes all of the computer programs used in the
development, marketing, licensing, sale or support of the products and the
services presently offered by Company. Except as specified in Section 4.1(i)(ii)
of the Disclosure Schedule, no person other than Company and its Subsidiaries
has any right or interest of any kind or nature in or with respect to the Owned
Software or any portion thereof or any rights to sell, license, lease, transfer,
use or otherwise exploit the Owned Software or any portion thereof.
(iii) Section 4.1(i)(iii) of the Disclosure Schedule sets
forth a true, correct and complete list, by computer program, of (A) all persons
other than Company and its Subsidiaries that have been provided with the source
code or have a right to be provided with the source code (including any such
right that may arise after the occurrence of any specified event or
circumstance, either with or without the giving of notice or passage of time or
both) for any of the Owned Software, and (B) all source code escrow agreements
relating to any of the Owned Software (setting forth as to any such escrow
agreement the source code subject thereto and the names of the escrow agent and
all other persons who are actual or potential beneficiaries of such escrow
agreement), and identifies with specificity all agreements and arrangements
pursuant to which the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby would entitle any third
party or parties to receive possession of the source code for any of the Owned
Software or any related technical documentation. Except as specified in Section
4.1(i)(iii) of the Disclosure Schedule, no person (other than Company and its
Subsidiaries and any person that is a party to a contract referred to in clause
(v) of the first sentence of Section 4.1(l) that restricts such person from
disclosing any information concerning such source code) is in possession of, or
has or has had access to, any source code for any computer program included in
the Owned Software.
(iv) There are no defects in any computer program included
in the Software that would adversely affect the functioning thereof in
accordance with any published specifications therefor or which would cause the
Owned Software or, to Company's knowledge, the Licensed Software, to fail to be
Year 2000 compliant in all material respects. Without limiting the generality of
the foregoing, all of the Owned Software and, to Company's knowledge, all of the
Licensed Software has the following properties and capabilities: (A) the
capability to correctly recognize and accurately process dates expressed as a
four-digit number (or the binary equivalent
12
or other machine readable iteration thereof) (collectively, the "Four-Digit
Dates"); (B) the capability to accurately execute calculations using Four-Digit
Dates; (C) the functionality (both on-line and batch), including entry, inquiry,
maintenance and update, to support processing involving Four-Digit Dates; (D)
the capability to generate interfaces and reports that support processing
involving Four-Digit Dates; (E) the capability to generate and successfully
transition, without human intervention, into the year 2000 using the correct
system date and to thereafter continue processing with Four-Digit Dates; and (F)
the capability to provide correct results in forward and backward data
calculations spanning century boundaries, including the conversion of pre-2000
dates currently stored as two-digit dates; provided, however, that no
representation or warranty is made as to the effect that defects in computer
programs, hardware or systems provided by third parties (or the inability of any
such programs, hardware or systems, other than those contemplated by the
documentation for the Software to be used in conjunction with the Software, to
properly exchange date data with the Software) may, when used in conjunction
with the Software, have on the foregoing capabilities. Each computer program
included in the Software is in machine readable form and contains all current
revisions. Section 4.1(i)(iv) of the Disclosure Schedule sets forth a true,
correct and complete list of any current developments or maintenance efforts
with respect to the Owned Software, including without limitation the development
of new computer programs, enhancements or revisions to existing computer
programs included in the Owned Software.
(v) Except as specified in Section 4.1(i)(v) of the
Disclosure Schedule, none of the sale, license, lease, transfer, use,
reproduction, distribution, modification or other exploitation by Company, any
Subsidiary of Company or any of their respective successors or assigns of any
version or release of any computer program included in the Software obligates or
will obligate Company, any Subsidiary of Company or any of their respective
successors or assigns to pay any royalty, fee or other compensation to any other
person.
(vi) Neither Company nor any of its Subsidiaries markets,
or has marketed, and none of them has supported or is obligated to support, any
Licensed Software.
(vii) Except as specified in Section 4.1(i)(vii) of the
Disclosure Schedule, no agreement, license or other arrangement pertaining to
any of the Software (including without limitation any development, distribution,
marketing, user or maintenance agreement, license or arrangement) to which
Company or any Subsidiary of Company is a party will terminate or become
terminable by any party thereto as a result of the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(j) Intellectual Property.
---------------------
(i) Section 4.1(j)(i) of the Disclosure Schedule sets
forth a true, correct and complete list (including, to the extent applicable,
registration, application or file numbers) of all patents, trademarks, trade
names, service marks, domain names and registered copyrights used by Company or
any Subsidiary of Company in connection with the conduct of Company's business,
and all registrations of or applications for registration of any of the
foregoing, including any additions thereto or extensions, continuations,
renewals or divisions thereof (setting forth the registration, issue or serial
number and a description of the same) (collectively, together with all trade
dress, trade secrets, processes, formulae, designs, know-how and other
intellectual property rights that are so used, the "Intellectual Property").
Parent has
13
heretofore been furnished with true, correct and complete copies of each U.S.
registration or application for U.S. registration covering any of the
Intellectual Property which is registered with, or in respect of which any
application for registration has been filed with, any U.S. Governmental Entity.
(ii) The Intellectual Property includes all of the
intellectual property rights owned or licensed by Company and its Subsidiaries
that are reasonably necessary to conduct Company's business as it is now
conducted, and includes all of the intellectual property rights owned or
licensed by Company and its Subsidiaries that are used in the development,
marketing, licensing or support of the Software. Except as specified in Section
4.1(j)(ii) of the Disclosure Schedule, (A) Company, directly or through its
Subsidiaries, has good, marketable and exclusive title to, and the valid and
enforceable power and unqualified right to use, the Intellectual Property free
and clear of all Liens and (B) no person or entity other than Company and its
Subsidiaries has any right or interest of any kind or nature in or with respect
to the Intellectual Property or any portion thereof or any rights to use, market
or exploit the Intellectual Property or any portion thereof.
(k) No Infringement. Except as specified in Section 4.1(k) of the
---------------
Disclosure Schedule, neither the existence nor the sale, license, lease,
transfer, use, reproduction, distribution, modification or other exploitation by
Company, any Subsidiary of Company or any of their respective successors or
assigns of any Software or Intellectual Property, as such Software or
Intellectual Property, as the case may be, is or was, or is currently
contemplated to be, sold, licensed, leased, transferred, used or otherwise
exploited by such persons, does, did or will (i) infringe on any patent,
trademark, copyright or other right of any other person, (ii) constitute a
misuse or misappropriation of any trade secret, know-how, process, proprietary
information or other right of any other person, or (iii) entitle any other
person to any interest therein, or right to compensation from Company, any
Subsidiary of Company or any of their respective successors or assigns, by
reason thereof. Except as specified in Section 4.1(k) of the Disclosure
Schedule, neither Company nor any of its Subsidiaries has received any
complaint, assertion, threat or allegation or otherwise has notice of any
lawsuit, claim, demand, proceeding or investigation involving matters of the
type contemplated by the immediately preceding sentence or is aware of any facts
or circumstances that could reasonably be expected to give rise to any such
lawsuit, claim, demand, proceeding or investigation. Except as specified in
Section 4.1(k) of the Disclosure Schedule, there are no restrictions on the
ability of Company, any Subsidiary of Company or any of their respective
successors or assigns to sell, license, lease, transfer, use, reproduce,
distribute, modify or otherwise exploit any Software or Intellectual Property.
(l) Material Contracts. There have been made available to Parent
------------------
and its representatives true, correct and complete copies of all of the
following contracts to which Company or any of its Subsidiaries is a party or by
which any of them is bound (collectively, the "Material Contracts"): (i)
contracts with any current officer or director of Company or any of its
Subsidiaries; (ii) contracts pursuant to which Company or any of its
Subsidiaries licenses other persons to use the Software and pursuant to which
other persons license Company or any of its Subsidiaries to use the Licensed
Software; (iii) contracts (A) for the sale of any of the assets of Company or
any of its Subsidiaries, other than contracts entered into in the ordinary
course of business or (B) for the grant to any person of any preferential rights
to purchase any of its assets; (iv) contracts which restrict Company or any of
its Subsidiaries from competing in any line of business or with any person in
any geographical area or which restrict any other person from
14
competing with Company or any of its Subsidiaries in any line of business or in
any geographical area; (v) contracts which restrict Company or any of its
Subsidiaries from disclosing any information concerning or obtained from any
other person or which restrict any other person from disclosing any information
concerning or obtained from Company or any of its Subsidiaries; (vi) indentures,
credit agreements, security agreements, mortgages, guarantees, promissory notes
and other contracts relating to the borrowing of money; and (vii) all other
agreements, contracts or instruments entered into outside of the ordinary course
of business or which are material to Company. Except as specified in Section
4.1(l) of the Disclosure Schedule, all of the Material Contracts are in full
force and effect and are the legal, valid and binding obligation of Company
and/or its Subsidiaries, enforceable against them in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity). Except as
specified in Section 4.1(l) of the Disclosure Schedule, neither Company nor any
of its Subsidiaries is in breach or default in any material respect under any
Material Contract nor, to the knowledge of Company, is any other party to any
Material Contract in breach or default thereunder in any material respect.
(m) Litigation, etc. As of the date hereof, except as specified
---------------
in Section 4.1(m) of the Disclosure Schedule, (i) there is no suit, claim,
action, proceeding (at law or in equity) or investigation pending or, to the
knowledge of Company, threatened against Company or any of its Subsidiaries
before any court or other Governmental Entity, and (ii) neither Company nor any
of its Subsidiaries is subject to any outstanding order, writ, judgement,
injunction, decree or arbitration order or award that, in any such case
described in clauses (i) and (ii), has had or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company. As
of the date hereof, there are no suits, claims, actions, proceedings or
investigations pending or, to the knowledge of Company, threatened, seeking to
prevent, hinder, modify or challenge the transactions contemplated by this
Agreement.
(n) Compliance with Applicable Laws. All federal, state, local
-------------------------------
and foreign governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights ("Permits") necessary for each
of Company and its Subsidiaries to own, lease or operate its properties and
assets and to carry on its business as now conducted have been obtained or made,
and there has occurred no default under any such Permit, except for the lack of
Permits and for defaults under Permits which lack or default could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company. Except as disclosed in the Filed SEC Documents or in
Section 4.1(n) of the Disclosure Schedule, Company and its Subsidiaries are in
compliance with all applicable statutes, laws, ordinances, rules, orders and
regulations of any Governmental Entity, except for non-compliance which could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company.
(o) Environmental Laws. Except as specified in Section 4.1(o) of
------------------
the Disclosure Schedule and as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company: (A)
neither Company nor any of its Subsidiaries has violated or is in violation of
any Environmental Law; (B) none of the Owned Real Property or Leased Real
Property (including without limitation soils and surface and ground waters) are
contaminated with any Hazardous Substance in quantities which require
investigation
15
or remediation under Environmental Laws; (C) neither Company nor any of its
Subsidiaries is liable for any off-site contamination; (D) neither Company nor
any of its Subsidiaries has any liability or remediation obligation under any
Environmental Law; (E) no assets of Company or any of its Subsidiaries are
subject to pending or threatened Liens under any Environmental Law; (F) Company
and its Subsidiaries have all Permits required under any Environmental Law
("Environmental Permits"); and (G) Company and its Subsidiaries are in
compliance with their respective Environmental Permits.
(p) Taxes. Except as specified in Section 4.1(p) of the
-----
Disclosure Schedule:
(i) Except where the failure to do so could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company, each of Company and each Subsidiary of Company (and
any affiliated or unitary group of which any such person was a member) has (A)
timely filed all federal, state, local and foreign returns, declarations,
reports, estimates, information returns and statements ("Returns") required to
be filed by or for it in respect of any Taxes (as hereinafter defined) and has
caused such Returns as so filed to be true, correct and complete, (B)
established reserves that are reflected in Company's most recent financial
statements included in the Filed SEC Documents and that as so reflected are
adequate for the payment of all Taxes not yet due and payable with respect to
the results of operations of Company and its Subsidiaries through the date
hereof, and (C) timely withheld and paid over to the proper taxing authorities
all Taxes and other amounts required to be so withheld and paid over. Each of
Company and each Subsidiary of Company (and any affiliated or unitary group of
which any such person was a member) has timely paid all Taxes that are shown as
being due on the Returns referred to in the immediately preceding sentence.
(ii) (A) There has been no taxable period since 1991 for
which a Return of Company or any of its Subsidiaries has been examined by the
Internal Revenue Service (the "IRS"), (B) all examinations described in clause
(A) have been completed without the assertion of material deficiencies, and (C)
except for alleged deficiencies which have been finally and irrevocably
resolved, Company has not received formal or informal notification that any
deficiency for any Taxes, the amount of which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company,
has been or will be proposed, asserted or assessed against Company or any of its
Subsidiaries by any federal, state, local or foreign taxing authority or court
with respect to any period.
(iii) Neither Company nor any of its Subsidiaries has (A)
executed or entered into with the IRS or any other taxing authority any
agreement or other document that continues in force and effect beyond the
Effective Time and that extends or has the effect of extending the period for
assessments or collection of any federal, state, local or foreign Taxes, (B)
executed or entered into with the IRS or any other taxing authority any closing
agreement or other similar agreement (nor has Company or any of its Subsidiaries
received any ruling, technical advice memorandum or similar determination)
affecting the determination of Taxes required to be shown on any Return not yet
filed, or (C) requested any extension of time to be granted to file after the
Effective Time any Return required by applicable law to be filed by it.
(iv) Neither Company nor any of its Subsidiaries has made
an election under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code)
16
owned by Company or any of its Subsidiaries. None of the assets of Company or
any of its Subsidiaries is required to be treated as being owned by any other
person pursuant to the "safe harbor" leasing provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954 as formerly in effect.
(v) Neither Company nor any of its Subsidiaries is a
party to, is bound by or has any obligation under any tax sharing agreement or
similar agreement or arrangement.
(vi) Company has not agreed to make, nor is it required to
make, any material adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise.
(vii) Neither Company nor any of its Subsidiaries is, or
has been, a United States Real Property Holding Corporation within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(viii) Except for the group of which Company is presently a
member, Company has never been a member of an affiliated group of corporations,
within the meaning of Section 1504 of the Code, other than as a common parent
corporation, and each of Company's Subsidiaries has never been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, except where Company was the common parent of such affiliated group.
(ix) Neither Company nor any Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted, or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
For purposes of this Agreement, "Taxes" shall mean all federal, state,
local, foreign income, property, sales, excise, employment, payroll, franchise,
withholding and other taxes, tariffs, charges, fees, levies, imposts, duties,
licenses or other assessments of every kind and description, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority.
(q) Benefit Plans. Section 4.1(q) of the Disclosure Schedule sets
-------------
forth a true, correct and complete list of all the employee benefit plans (as
that phrase is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) maintained or contributed to (or to
which Company has any obligation to contribute) for the benefit of any current
or former employee, officer or director of the Company or any of its
Subsidiaries ("Company ERISA Plans") and any other benefit or compensation plan,
program or arrangement maintained or contributed to (or to which Company has any
obligation to contribute) for the benefit of any current or former employee,
officer or director of the Company or any of its Subsidiaries (Company ERISA
Plans and such other plans being referred to as "Company Plans"). Company has
furnished or made available to Parent and its representatives a true, correct
and complete copy of every document pursuant to which each Company Plan is
established or operated (including any summary plan descriptions), a written
description of any Company Plan for which there is no written document, and the
three most recent annual reports, financial
17
statements and actuarial valuations with respect to each Company Plan. Except as
specified in Section 4.1(q) of the Disclosure Schedule:
(i) none of the Company ERISA Plans is a "multiemployer
plan" within the meaning of ERISA;
(ii) none of the Company Plans promises or provides
retiree health benefits or retiree life insurance benefits to any person;
(iii) none of the Company Plans provides for payment of a
benefit, the increase of a benefit amount, the payment of a contingent benefit
or the acceleration of the payment or vesting of a benefit by reason of the
execution of this Agreement or the consummation of the transactions contemplated
by this Agreement;
(iv) neither Company nor any of its Subsidiaries has an
obligation to adopt, or is considering the adoption of, any new benefit or
compensation plan, program or arrangement or, except as required by law, the
amendment of an existing Company Plan;
(v) each Company ERISA Plan intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the IRS that it is so qualified and nothing has occurred since the date of
such letter that could reasonably be expected to affect the qualified status of
such Company ERISA Plan;
(vi) each Company Plan has been operated in accordance
with its terms and the requirements of all applicable law, and no prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code has
occurred with respect to any Company ERISA Plan;
(vii) neither Company nor any of its Subsidiaries or
members of their "controlled group" has incurred any direct or indirect
liability under ERISA or the Code in connection with the termination of,
withdrawal from or failure to fund, any Company ERISA Plan or other retirement
plan or arrangement, and no fact or event exists that could reasonably be
expected to give rise to any such liability;
(viii) the aggregate accumulated benefit obligations of each
Company ERISA Plan subject to Title IV of ERISA (as of the date of the most
recent actuarial valuation prepared for such Company ERISA Plan and based on the
discount rate and other actuarial assumptions used in such valuation) do not
exceed the fair market value of the assets of such Company ERISA Plan (as of the
date of such valuation);
(ix) Company is not aware of any claims relating to the
Company Plans, other than routine claims for benefits; and
(x) None of the Company Plans provides for benefits or
other participation therein, and Company has received no claims or demands for
participation in or benefits under any Company Plan, by any individual
classified or treated by the Company as an independent contractor;
18
provided, however, that the failure of the representations set forth in clauses
(v), (vi), (vii), (ix) and (x) to be true and correct shall not be deemed to be
a breach of any such representation unless such failures could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company.
(r) Absence of Changes in Benefit Plans. Except as disclosed in
-----------------------------------
the Filed SEC Documents or in Section 4.1(r) of the Disclosure Schedule, since
the date of the most recent audited financial statements included in the Filed
SEC Documents, neither Company nor any of its Subsidiaries has adopted or agreed
to adopt any collective bargaining agreement or any Company Plan.
(s) Labor Matters.
-------------
(i) Except as specified in Section 4.1(s)(i) of the
Disclosure Schedule, neither Company nor any of its Subsidiaries is a party to
any employment, labor or collective bargaining agreement, and there are no
employment, labor or collective bargaining agreements which pertain to employees
of Company or any of its Subsidiaries. Company has heretofore made available to
Parent true, complete and correct copies of the agreements set forth in Section
4.1(s)(i) of the Disclosure Schedule, together with all amendments,
modifications, supplements or side letters affecting the duties, rights and
obligations of any party thereunder.
(ii) No employees of Company or any of its Subsidiaries
are represented by any labor organization and, to the knowledge of Company, no
labor organization or group of employees of Company or any of its Subsidiaries
has made a pending demand for recognition or certification. There are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority and, to the knowledge of Company, there are no
organizing activities involving Company or any of its Subsidiaries pending with
any labor organization or group of employees of Company or any of its
Subsidiaries.
(iii) Except as specified in Section 4.1(s)(iii) of the
Disclosure Schedule, there are no (A) unfair labor practice charges, grievances
or complaints pending or threatened in writing by or on behalf of any employee
or group of employees of Company or any of its Subsidiaries, or (B) complaints,
charges or claims against Company or any of its Subsidiaries pending, or
threatened in writing to be brought or filed, with any Governmental Entity or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment of any individual by Company or
any of its Subsidiaries.
(t) Brokers. No broker, investment banker, financial advisor or
-------
other person, other than ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, the fees and expenses of which
will be paid by Company, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Company.
(u) Written Opinion of Financial Advisor. Company has received
------------------------------------
the written opinion of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, dated August 26, 1998 (a true,
correct and complete copy of which has been delivered to Parent by Company), to
the effect that, based upon and subject to the
19
matters set forth therein and as of the date thereof, the Merger Consideration
is fair to the holders of Shares from a financial point of view, and such
opinion has not been withdrawn or modified.
(v) Voting Requirements. The affirmative votes of each of (i) the
-------------------
holders of two-thirds of the outstanding Shares entitled to vote at the
Stockholders Meeting with respect to the approval of this Agreement, taken as a
whole, (ii) the affirmative vote of the holders of two-thirds of the outstanding
Common Shares entitled to vote at the Stockholders Meeting with respect to the
approval of this Agreement, taken separately, and (iii) the affirmative vote of
the holders of two-thirds of the outstanding Preferred Shares entitled to vote
at the Stockholders Meeting with respect to the approval of this Agreement,
taken separately, are the only votes of the holders of any class or series of
Company's capital stock or other securities required in connection with the
consummation by Company of the Merger and the other transactions contemplated
hereby to be consummated by Company. The restrictions contained in Chapters
110C, 110D, 110E and 110F of the Massachusetts General Laws are not applicable
to the transactions contemplated hereby, including the transactions contemplated
by the Stock Option Agreement and the Stockholder Agreement.
Section 4.2 Representations and Warranties of Parent and Merger Sub.
--------------------------------------------------------
Parent and Merger Sub represent and warrant to Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent
------------------------------------------
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated.
(b) Authority; Noncontravention. Parent and Merger Sub have the
---------------------------
requisite corporate power and authority to enter into this Agreement. The
execution and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
have been duly authorized by the Executive Committee of the Board of Directors
of Parent and the Board of Directors of Merger Sub and have been duly approved
by Parent as sole stockholder of Merger Sub, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Merger Sub and, assuming this
Agreement constitutes a valid and binding obligation of Company, constitutes a
valid and binding obligation of each of Parent and Merger Sub, enforceable
against each such party in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principals of equity. The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions of this Agreement will not (i) conflict with any of the provisions of
the certificate of incorporation or bylaws of Parent or Merger Sub, in each case
as amended to the date of this Agreement, (ii) subject to the governmental
filings and other matters referred to in Section 4.2(c), conflict with, result
in a breach of or default (with or without notice or lapse of time, or both)
under, or give rise to a material obligation, a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or require the consent of any person under, any indenture, or other
agreement, permit, concession, franchise, license or similar instrument or
undertaking to which Parent or Merger Sub is a party or by which Parent or
Merger Sub or any of their respective assets is bound or affected, or (iii)
subject to the governmental filings and other matters referred to in Section
4.2(c), contravene any law, rule or
20
regulation, or any order, writ, judgment, injunction, decree, determination or
award currently in effect, which, in the case of clauses (ii) and (iii) above,
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
(c) Consents and Approvals. No consent, approval or authorization
----------------------
of, or declaration or filing with, or notice to, any Governmental Entity which
has not been received or made is required by or with respect to Parent or Merger
Sub in connection with the execution and delivery of this Agreement by Parent or
Merger Sub or the consummation by Parent or Merger Sub, as the case may be, of
any of the transactions contemplated hereby, except for (i) the filing of
premerger notification and report forms under the HSR Act with respect to the
Merger, (ii) the filing with the SEC of such reports under the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby, (iii) the filing of the Massachusetts Articles of Merger
with the Massachusetts State Secretary and the filing of the Georgia Certificate
of Merger with the Georgia State Secretary and appropriate documents with the
relevant authorities of other states in which Company is qualified to do
business, and (iv) any other consents, approvals, authorizations, filings or
notices the failure to make or obtain which could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent.
(d) Certain Information. None of the information supplied or to
-------------------
be supplied by Parent or Merger Sub specifically for inclusion in the Proxy
Statement will, at the time it is so supplied, 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 misleading.
(e) Financing. Parent and Merger Sub collectively have cash on
---------
hand or financing commitments from financially responsible third parties, or a
combination thereof, in an aggregate amount sufficient to enable Parent and
Merger Sub to (i) pay in full the Merger Consideration and all fees and expenses
payable by Parent and Merger Sub in connection with this Agreement and the
transactions contemplated thereby and (ii) satisfy and discharge such of
Company's existing indebtedness as, pursuant to its terms, will become due and
payable prior to its stated maturity as a result of the consummation of the
transactions contemplated hereby.
ARTICLE V
CONDUCT OF BUSINESS OF COMPANY
Section 5.1 Conduct of Business of Company. Except as expressly
------------------------------
provided for herein, during the period from the date of this Agreement to the
Effective Time, Company shall, and shall cause each of its Subsidiaries to, act
and carry on its business only in the ordinary course of business consistent
with past practice and, to the extent consistent therewith, use reasonable
efforts to preserve intact its current business organizations, keep available
the services of its current key officers and employees and preserve the goodwill
of those engaged in material business relationships with Company, and to that
end, without limiting the generality of the foregoing, Company shall not, and
shall not permit any of its Subsidiaries to, without the prior consent of
Parent:
21
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, securities or other property) in
respect of, any of its outstanding capital stock (other than, with respect to a
Subsidiary of Company, to its corporate parent), (B) split, combine or
reclassify any of its outstanding capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its outstanding capital stock, or (C) purchase, redeem or
otherwise acquire any shares of outstanding capital stock or any rights,
warrants or options to acquire any such shares, except, in the case of this
clause (C), for the acquisition of Shares from holders of Options in full or
partial payment of the exercise price payable by such holder upon exercise of
Options;
(ii) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into or exchangeable for, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible or exchangeable
securities, other than upon the exercise of Options outstanding on the date of
this Agreement;
(iii) amend its articles of organization, by-laws or other
comparable charter or organizational documents;
(iv) directly or indirectly acquire, make any investment
in, or make any capital contributions to, any person other than in the ordinary
course of business consistent with past practice;
(v) directly or indirectly sell, pledge or otherwise
dispose of or encumber any of its properties or assets that are material to its
business, except for sales, pledges or other dispositions or encumbrances in the
ordinary course of business consistent with past practice;
(vi) (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, other than indebtedness owing
to or guarantees of indebtedness owing to Company or any direct or indirect
wholly owned Subsidiary of Company or (B) make any loans or advances to any
other person, other than to Company or to any direct or indirect wholly owned
Subsidiary of Company and other than routine advances to employees consistent
with past practice, except, in the case of clause (A), for borrowings under the
Existing Credit Agreement (as hereinafter defined) in the ordinary course of
business consistent with past practice or pursuant to Advances provided for in
Section 6.11;
(vii) grant or agree to grant to any officer, employee or
consultant any increase in wages or bonus, severance, profit sharing,
retirement, deferred compensation, insurance or other compensation or benefits,
or establish any new compensation or benefit plans or arrangements, or amend or
agree to amend any existing Company Plans, except as may be required under
existing agreements or by law;
(viii) accelerate the payment, right to payment or vesting
of any bonus, severance, profit sharing, retirement, deferred compensation,
stock option, insurance or other compensation or benefits;
22
(ix) enter into or amend any employment, consulting,
severance or similar agreement with any individual, except with respect to new
hires of non-officer employees in the ordinary course of business consistent
with past practice;
(x) adopt or enter into a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other material reorganization or any agreement relating to an Acquisition
Proposal (as hereinafter defined);
(xi) make any tax election or settle or compromise any
income tax liability of Company or of any of its Subsidiaries involving on an
individual basis more than $50,000;
(xii) make any change in any method of accounting or
accounting practice or policy, except as required by any changes in generally
accepted accounting principles;
(xiii) enter into any agreement, understanding or commitment
that restrains, limits or impedes Company's ability to compete with or conduct
any business or line of business;
(xiv) except as specified in Section 5.1 of the Disclosure
Schedule, plan, announce, implement or effect any reduction in force, lay-off,
early retirement program, severance program or other program or effort
concerning the termination of employment of employees of Company or its
Subsidiaries;
(xv) accelerate the collection of any account receivable
or delay the payment of any account payable, or otherwise reduce the assets or
increase the liabilities of Company or any of its Subsidiaries otherwise than in
the ordinary course of business consistent with past practice, in any such case
with the purpose or effect of using the resulting increase in the cash flow of
Company or any of its Subsidiaries to reduce the total indebtedness of Company
and its Subsidiaries for money borrowed; or
(xvi) authorize any of, or commit or agree to take any of,
the foregoing actions in respect of which it is restricted by the provisions of
this Section 5.1.
ARTICLE VI
ADDITIONAL COVENANTS
Section 6.1 Preparation of the Proxy Statement. As soon as practicable
----------------------------------
following the date hereof, Company and Parent shall jointly prepare a proxy
statement (the "Proxy Statement"), in accordance with the Exchange Act and the
rules and regulations under the Exchange Act, with respect to the transactions
contemplated hereby. Company, Parent and Merger Sub shall cooperate with each
other in the preparation of the Proxy Statement. Company and Parent shall use
all reasonable efforts to respond promptly to any comments made by the SEC with
respect to the Proxy Statement and to cause the Proxy Statement to be mailed to
the stockholders of Company at the earliest practicable date.
23
Section 6.2 Stockholders Meeting. Company shall take all action
--------------------
necessary, in accordance with the MBCL, the Exchange Act and other applicable
law and its articles of organization and by-laws, to convene and hold a special
meeting of the stockholders of Company (the "Stockholders Meeting") as promptly
as practicable after the date hereof for the purpose of considering and voting
upon this Agreement and to solicit proxies pursuant to the Proxy Statement in
connection therewith. Subject to the provisions of Section 6.6(b), the Board of
Directors of Company shall recommend that the holders of Shares vote in favor of
the approval of this Agreement at the Stockholders Meeting and shall cause such
recommendation to be included in the Proxy Statement. At the Stockholders
Meeting, Parent and Merger Sub shall vote any Shares beneficially owned by them
(which may be voted by them pursuant to applicable law) in favor of the approval
of this Agreement.
Section 6.3 Access to Information; Confidentiality. Each of Parent and
---------------------------------------
Company shall, and shall cause each of its Subsidiaries to, afford to the other
and its officers, employees, counsel, financial advisors and other
representatives access during the period prior to the Effective Time to all its
properties, books, contracts, commitments, Returns, personnel and records and,
during such period, each of Parent and Company shall, and shall cause each of
its Subsidiaries to, furnish as promptly as practicable to the other such
information concerning its business, properties, financial condition, operations
and personnel as the other may from time to time request. Any such
investigation by Parent or Company shall not affect the representations or
warranties contained in this Agreement. Except as required by law, Parent and
Company will hold, and will cause its directors, officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any non-public information obtained from the other in
confidence to the extent required by, and in accordance with the provisions of,
the letter agreement, dated June 9, 1998, between Parent and Company with
respect to confidentiality and other matters.
Section 6.4 Reasonable Best Efforts. On the terms and subject to the
------------------------
conditions set forth in this Agreement, each of the parties shall use its
reasonable best efforts to take, or cause to be taken, all actions, and do, or
cause to be done, and assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated hereby, including the satisfaction of the respective conditions set
forth in Article VII.
Section 6.5 Public Announcements. Parent and Merger Sub, on the one
--------------------
hand, and Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release, SEC filing (including without limitation the Proxy Statement) or
other public statements with respect to the transactions contemplated hereby,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, by court process or by obligations pursuant to any listing
agreement with any national securities exchange.
Section 6.6 No Solicitation; Acquisition Proposals.
--------------------------------------
(a) During the period from and including the date of this
Agreement to and including the Effective Time, Company shall not, and shall not
authorize or permit any of its Subsidiaries, or any of its or their affiliates,
officers, directors, employees, agents or
24
representatives (including without limitation any investment banker, financial
advisor, attorney or accountant retained by Company or any of its Subsidiaries),
to, directly or indirectly, initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries, any expression of interest or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal,
or enter into or maintain or continue discussions or negotiate with any person
in furtherance of such inquiries or to obtain an Acquisition Proposal or agree
to or endorse any Acquisition Proposal; provided, however, that nothing in this
Agreement shall prohibit the Board of Directors of Company, prior to the time at
which this Agreement shall have been approved by Company's stockholders, from
furnishing information to, or entering into, maintaining or continuing
discussions or negotiations with, any person that makes an unsolicited, bona
fide written Acquisition Proposal after the date hereof if, and to the extent
that, the Board of Directors of Company, after consultation with and based upon
the advice of independent legal counsel, determines in good faith that (i) such
Acquisition Proposal would be more favorable to Company's stockholders than the
Merger, and (ii) the failure to take such action would result in a breach by the
Board of Directors of Company of its fiduciary duties to Company's stockholders
under applicable law, and, prior to furnishing any non-public information to
such person, Company receives from such person an executed confidentiality
agreement with provisions no less favorable to Company than the letter agreement
relating to the furnishing of confidential information of Company to Parent
referred to in the last sentence of Section 6.3. Company shall promptly (and, in
any event within 24 hours) notify Parent after receipt of any Acquisition
Proposal or any request for information relating to Company or any of its
Subsidiaries or for access to the properties, books or records of Company or any
of its Subsidiaries by any person who has informed Company that such person is
considering making, or has made, an Acquisition Proposal (which notice shall
identify the person making, or considering making, such Acquisition Proposal and
shall set forth the material terms of any Acquisition Proposal received), and
Company shall keep Parent informed in reasonable detail of the terms, status and
other pertinent details of any such Acquisition Proposal.
(b) During the period from and including the date of this
Agreement to and including the Effective Time, neither the Board of Directors of
Company nor any committee thereof shall withdraw or modify, or propose publicly
to withdraw or modify, in a manner adverse to Parent or Merger Sub, the approval
of this Agreement or the transactions contemplated hereby or the recommendation
referred to in the penultimate sentence of Section 6.2; provided, however, that
nothing contained in this Agreement will prohibit the Board of Directors of
Company from withdrawing or modifying the recommendation referred to in the
penultimate sentence of Section 6.2 following the receipt by Company after the
date hereof, under circumstances not involving any breach of the provisions of
Section 6.6(a), of an unsolicited Acquisition Proposal if, and to the extent
that, the Board of Directors of Company, after consultation with and based upon
the advice of independent legal counsel, determines in good faith that (i) the
transactions contemplated by such Acquisition Proposal would be more favorable
to Company's stockholders than the transactions contemplated hereby, and (ii)
the failure to take such action would result in a breach by the Board of
Directors of Company of its fiduciary duties to Company's stockholders under
applicable law; and provided further that nothing contained in this Agreement
will prohibit the Board of Directors of Company from, to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal.
(c) Nothing in this Section 6.6, and no action taken by the Board
of Directors of the Company pursuant to this Section 6.6, will (i) have any
effect on Company's obligations
25
under the first sentence of Section 6.2, which obligations shall be absolute and
unconditional, (ii) permit Company to terminate this Agreement except in
accordance with the provisions of Section 8.1, (iii) permit Company to enter
into any agreement providing for any transaction contemplated by an Acquisition
Proposal for as long as this Agreement remains in effect, or (iv) affect in any
manner any other obligation of Company under this Agreement.
(d) For purposes of this Agreement, "Acquisition Proposal" means
an inquiry, offer, proposal or other indication of interest regarding any of the
following (other than the transactions contemplated by this Agreement or the
Stock Option Agreement with Parent or Merger Sub) involving Company: (i) any
merger, consolidation, share exchange, recapitalization, business combination or
other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of all or substantially all the assets of Company
and its Subsidiaries, taken as a whole, in a single transaction or series of
related transactions; (iii) any tender offer or exchange offer for 20% percent
or more of the outstanding shares of capital stock of Company or the filing of a
registration statement under the Securities Act in connection therewith; 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.
Section 6.7 Consents, Approvals and Filings. Upon the terms and subject
--------------------------------
to the conditions hereof, each of the parties hereto shall (a) make promptly its
respective filings, and thereafter make any other required submissions, under
the HSR Act and the Exchange Act, with respect to the Merger and the other
transactions contemplated hereby and (b) use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Merger and the other
transactions contemplated hereby, including without limitation using its
reasonable best efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities and parties
to contracts with Company and its Subsidiaries as are necessary for the
consummation of the Merger and the other transactions contemplated hereby and to
fulfill the conditions to the Merger; provided, however, that in no event shall
Parent or any of its Subsidiaries be required to agree or commit to divest, hold
separate, offer for sale, abandon, limit its operation of or take similar action
with respect to any assets (tangible or intangible) or any business interest of
it or any of its Subsidiaries (including without limitation the Surviving
Corporation after consummation of the Merger) in connection with or as a
condition to receiving the consent or approval of any Governmental Entity
(including without limitation under the HSR Act). In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall use their reasonable best efforts to take all such action.
Section 6.8 Board Action Relating to Stock Option Plans. As soon as
-------------------------------------------
practicable following the date of this Agreement, the Board of Directors of
Company (or, if appropriate, any committee administering a Stock Option Plan)
shall adopt such resolutions and take such actions as may be required to cause
each outstanding Option to be automatically converted, at the Effective Time,
into a Substitute Option in accordance with Section 2.2 and shall make such
other changes to the Stock Option Plans as it deems appropriate to give effect
to the Merger (subject to the approval of Parent, which shall not be
unreasonably withheld).
Section 6.9 Employee Benefit Matters.
-------------------------
26
(a) From and after the Effective Time, Parent shall, and shall
cause its Subsidiaries (including the Surviving Corporation) to, honor and
provide for payment of all accrued obligations and benefits under all Company
Plans and employment or severance agreements between Company and persons who are
or had been employees of Company or any of its Subsidiaries at or prior to the
Effective Time ("Covered Employees"), all in accordance with their respective
terms.
(b) From and after the Effective Time, Parent shall, and shall
cause its Subsidiaries (including the Surviving Corporation) to, provide Covered
Employees who remain in the employ of Parent or any such Subsidiary employee
benefits that are reasonably comparable to the employee benefits provided to
similarly situated employees of Parent or any such Subsidiary who are not
Covered Employees. To the extent that Covered Employees are included in any
benefit plan of Parent or its Subsidiaries, Parent agrees that the Covered
Employees shall receive credit under such plan (other than any such plan
providing for sabbaticals) for service prior to the Effective Time with Company
and its Subsidiaries to the same extent such service was counted under similar
Company Plans for purposes of eligibility, vesting, eligibility for retirement
(but not for benefit accrual) and, with respect to vacation, disability and
severance, benefit accrual. To the extent that Covered Employees are included in
any medical, dental or health plan other than the plan or plans they
participated in at the Effective Time, Parent agrees that any such plans shall
not include pre-existing condition exclusions, except to the extent such
exclusions were applicable under the similar Company Plan at the Effective Time,
and shall provide credit for any deductibles and co-payments applied or made
with respect to each Covered Employee in the calendar year of the change.
(c) Notwithstanding anything in this Agreement to the contrary,
from and after the Effective Time, the Surviving Corporation will have sole
discretion over the hiring, promotion, retention, firing and other terms and
conditions of the employment of employees of the Surviving Corporation. Except
as otherwise provided in this Section 6.9, nothing herein shall prevent Parent
or the Surviving Corporation from amending or terminating any Company Plan in
accordance with its terms.
Section 6.10 Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) For a period of five years after the Effective Time, the
provisions with respect to indemnification set forth in the certificate of
incorporation and bylaws of Merger Sub as in effect on the date of this
Agreement (true, correct and complete copies of which have been provided to
Company) shall not be amended, repealed or otherwise modified in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors or officers of Company in respect of
actions or omissions occurring at or prior to the Effective Time (including
without limitation the transactions contemplated by this Agreement), unless such
modification is required by law.
(b) For a period commencing at the Effective Time and expiring
not later than the fifth anniversary of the Effective Time, Parent shall cause
to be maintained in effect policies of directors' and officers' liability
insurance, for the benefit of those persons who are covered by Company's
directors' and officers' liability insurance policies at the Effective Time,
providing coverage with respect to matters occurring prior to the Effective Time
that is at least equal to the
27
coverage provided under Company's current directors' and officers' liability
insurance policies, to the extent that such liability insurance can be
maintained at an annual cost to Parent not greater than 150 percent of the
premium for the current Company directors' and officers' liability insurance;
provided that if such insurance cannot be so maintained at such cost, Parent
shall maintain as much of such insurance as can be so maintained at a cost equal
to 150 percent of the current annual premiums of Company for such insurance.
Section 6.11 Credit Arrangements.
-------------------
(a) During the period from and after the date hereof to the
earlier of the Effective Time and the termination of this Agreement pursuant to
Section 8.1, Company shall not (i) modify, amend or supplement, or waive any
rights under or in relation to, or enter into any agreement or arrangement
inconsistent with, the Forbearance Agreement, the Overadvance Note or the Loan
Documents (or request any of the foregoing from Silicon Valley Bank), (ii) make
any payments on account of any outstanding borrowings or other obligations under
the Loan Documents, except (A) mandatory payments of accrued interest on
outstanding principal balances under the Loan Documents as contemplated by
Section 5(b) and Section 7 of the Forbearance Agreement and (B) mandatory
payments in respect of Overadvances as contemplated by Section 6 of the
Forbearance Agreement, or (iii) effect any advance under the Overadvance
Facility (each, an "Advance"), except with Parent's prior written consent
obtained in accordance with the provisions of Section 6.11(b).
(b) Company may request that Parent consent to one or more
Advances to be used by Company solely to finance its working capital
requirements in the ordinary course of business consistent with past practice.
Each request for Parent's consent to an Advance under this Section 6.11(b) shall
set forth the proposed amount thereof, the intended use of the proceeds thereof
and confirmation that the conditions set forth in Section 6.11(c) are then
satisfied (it being understood that Company shall request an Advance only to the
extent that Company's other uncommitted sources of working capital are at the
time inadequate to satisfy Company's working capital requirements). Subject to
Company's compliance with this Section 6.11(b) and the satisfaction of the
conditions set forth in Section 6.11(c), Parent shall consent to an Advance so
long as the making of such Advance would not result in all Advances in the
aggregate exceeding $3,000,000; provided, however, that Parent, in its sole and
absolute discretion, may consent to one or more Advances that would result in
all Advances in the aggregate exceeding $3,000,000 or at a time when all
Advances in the aggregate already exceed $3,000,000.
(c) The obligation of Parent to consent to any Advance shall be
subject to the satisfaction on the date that any Advance is to be made (an
"Advance Date") of the following conditions:
(i) The Forbearance Agreement, the Overadvance Note and
the Loan Documents shall be in full force and effect without modification,
amendment or supplement, and neither Company nor Silicon Valley Bank shall have
(A) waived any rights thereunder without Parent's prior written consent or (B)
taken or omitted to take (or expressed any intention to take or omit to take)
any action in contravention thereof.
28
(ii) Company shall not have taken or omitted to take (or
expressed any intention to take or omit to take) any action in contravention of
the provisions of this Section 6.11 or the Cash Management Plan set forth in
Annex 6.11 to this Agreement.
(iii) All conditions to the obligations of Parent and
Merger Sub to effect the Merger set forth in Section 7.1(b) and Sections 7.2(a),
7.2(b), 7.2(c) and 7.2(d) shall have been satisfied (with the references in
Sections 7.2(a) and 7.2(b) to the "Closing Date" being deemed for purposes of
this Section 6.11(b)(ii) to be references to the applicable Advance Date).
(iv) From the date hereof to the applicable Advance Date,
neither Company nor any of its Subsidiaries or any of its or their affiliates,
officers, directors, employees, agents or representatives (including without
limitation any investment banker, financial advisor, attorney or accountant
retained by Company or any of its Subsidiaries) shall have (A) initiated,
solicited or encouraged (including by way of providing information or
assistance), or taken any other action to facilitate, any inquiries, any
expression of interest or the making of any proposal that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal or (B) entered into,
maintained or continued discussions or negotiated with any person in furtherance
of such inquiries or to obtain an Acquisition Proposal or agreed to or endorsed
any Acquisition Proposal.
(v) The making of an Advance to Company shall not cause a
default or event of default to occur under the Forbearance Agreement, the
Overadvance Note, the Loan Documents or any other obligations of Company or any
of its Subsidiaries for borrowed money or evidenced by indentures, credit
agreements, security agreements, mortgages, guarantees, promissory notes or
other contracts relating to the borrowing of money.
(vi) If a default or event of default has occurred and is
continuing under any indenture, credit agreement, security agreement, mortgage,
guaranty, promissory note or other contract relating to the borrowing of money
(including the Forbearance Agreement, the Overadvance Note and the Loan
Documents) to which the Company is a party, Company shall have obtained a
written waiver of such default or event of default or a forbearance agreement,
in each case in form and substance reasonably satisfactory to Parent.
(d) Neither Parent nor Merger Sub nor any of their respective
affiliates, directors, officers, employees or agents shall have any liability to
Company or any other person in connection with any action taken or omitted to be
taken under this Section 6.11 or in connection with any Advance or request for
an Advance; provided, however, without limiting the generality or effect of
Sections 8.1(c) and 8.2, that nothing contained in this Section 6.11(d) shall
relieve Parent of liability for any willful or intentional breach by Parent of
this Section 6.11.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligation of each party to effect the Merger is subject to the
satisfaction or written waiver on or prior to the Closing Date of the following
conditions:
29
(a) Stockholder Approval. This Agreement shall have been approved
--------------------
by the affirmative vote of the holders of the requisite number of shares of
capital stock of Company in the manner required pursuant to Company's articles
of organization and by-laws, the MBCL and other applicable law.
(b) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the party
invoking this condition shall have complied with its obligations under Section
6.7.
(c) HSR Act. All necessary waiting periods under the HSR Act
-------
applicable to the Merger shall have expired or been earlier terminated.
Section 7.2 Conditions to Obligations of Parent and Merger Sub. The
---------------------------------------------------
obligation of each of Parent and Merger Sub to effect the Merger is further
subject to satisfaction or written waiver on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Company contained in this Agreement, which representations and
warranties shall be deemed for purposes of this Section 7.2 not to include any
qualification or limitation with respect to materiality (whether by reference to
"Material Adverse Effect" or otherwise), shall be true and correct as of the
Closing Date, except where the matters in respect of which such representations
and warranties are not true and correct, in the aggregate, have not had and
could not reasonably be expected to have a Material Adverse Effect on Company,
with the same effect as though such representations and warranties were made as
of the Closing Date, and Parent and Merger Sub shall have received a certificate
signed on behalf of Company by an authorized officer of Company to such effect.
(b) Performance of Obligations of Company. Company shall have
-------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent and Merger
Sub shall have received a certificate signed on behalf of Company by an
authorized officer of Company to such effect.
(c) No Material Adverse Change. Since the date of this Agreement,
--------------------------
Company and its Subsidiaries, taken as a whole, shall not have experienced any
Material Adverse Change.
(d) Certain Litigation. There shall not be pending or threatened
------------------
any suit, action or proceeding seeking to restrain or prohibit the Merger or
seeking to obtain from Parent or Company or any of their respective affiliates
in connection with the Merger any material damages, or seeking any other relief
that, following the Merger, would materially limit or restrict the ability of
Parent and its Subsidiaries to own and conduct both the assets and businesses
owned and conducted by Parent and its Subsidiaries prior to the Merger and the
assets and businesses owned and conducted by Company and its Subsidiaries prior
to the Merger.
(e) Consents. All consents, authorizations, orders and approvals
--------
of (or filings or registrations with) any Governmental Entity or any other
person required to be obtained or
30
made prior to the Effective Time in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for the
filing of the articles of merger pursuant to Section 1.3 and except where the
failure to have obtained or made such consents, authorizations, orders,
approvals, filings or registrations could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent or the
Surviving Corporation.
(f) Insurance. Parent and Company shall have received written
---------
confirmation reasonably satisfactory to Parent from the insurers identified on
Annex 7.2 to this Agreement as to the matters set forth on such Annex.
(g) Termination or Modification of Certain Agreements. Each of
-------------------------------------------------
the Agreement, dated December 1, 1996, between Company and SciTools Inc.
(formerly known as Scientific Toolworks, Inc.) relating to ADA Professional
Developers Tool, as amended, the Agreement, dated August 12, 1997, between
Company and Proforma Corporation relating to Provision Workbench/BPR Modelers,
as amended, and the Agreement, dated January 1, 1998, between Company and Mesa
Systems Guild, Inc. relating to Mesa/Teamwork Model Bridge, as amended, shall
have been terminated or modified on terms reasonably satisfactory to Parent.
(h) Certain Actions by Secured Lender. Silicon Valley Bank shall
---------------------------------
not have exercised any rights or remedies or taken any other action under or in
respect of the Loan Documents or the Overadvance Note (as such terms are
hereinafter defined) and shall not have failed to make any Advance requested by
Company and consented to by Parent pursuant to Section 6.11.
Section 7.3 Conditions to Obligation of Company. The obligation of the
------------------------------------
Company to effect the Merger is further subject to satisfaction or written
waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of each of Parent and Merger Sub contained in this Agreement, which
representations and warranties shall be deemed for purposes of this Section 7.3
not to include any qualification or limitation with respect to materiality
(whether by reference to "Material Adverse Effect" or otherwise), shall be true
and correct as of the Closing Date, except where the matters in respect of which
such representations and warranties are not true and correct, in the aggregate,
have not had and could not reasonably be expected to have a Material Adverse
Effect on Parent or a material adverse effect on the economic benefits to be
realized by the holders of Shares as a result of the consummation of the Merger,
with the same effect as though such representations and warranties were made as
of the Closing Date, and Company shall have received a certificate signed on
behalf of Parent and Merger Sub by an authorized officer of Parent to such
effect.
(b) Performance of Obligations of Parent and Merger Sub. Each of
---------------------------------------------------
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by an authorized officer of Parent to such effect.
31
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination.
-----------
(a) This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of Company, in any one of
the following circumstances:
(i) By mutual written consent duly authorized by the
Boards of Directors of Parent and Company.
(ii) By Parent or Company, if the Effective Time shall not
have occurred on or before December 31, 1998, otherwise than as a result of any
material breach of any provision of this Agreement by the party seeking to
effect such termination.
(iii) By Parent or Company, if any federal or state court
of competent jurisdiction or other Governmental Entity shall have issued an
order, decree or ruling, or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and non-appealable, provided that neither
party may terminate this Agreement pursuant to this Section 8.1(a)(iii) if it
has not complied with its obligations under Section 6.7.
(iv) By Parent or Company, if the Stockholders Meeting
shall have been held and this Agreement shall not have been approved by the
affirmative vote of the holders of the requisite number of shares of capital
stock of Company, provided that Company may not terminate this Agreement
pursuant to this Section 8.1(a)(iv) unless it shall have paid to Parent the Fee
provided for in Section 8.1(b).
(v) By Parent, if (A) the Board of Directors of Company
or any committee thereof shall have (1) withdrawn or modified, in a manner
adverse to Parent or Merger Sub, its approval of this Agreement or the
transactions contemplated hereby or the recommendation referred to in the
penultimate sentence of Section 6.2, (2) approved, endorsed or recommended to
its stockholders an Acquisition Proposal, or (3) resolved to do any of the
foregoing or (B) if the Stockholders Meeting shall not have been held by October
31, 1998 as a result of a breach by Company of its obligations under Section
6.2.
(vi) By Parent or Company, if (A) the other party shall
have failed to comply in any material respect with any of the material covenants
and agreements contained in this Agreement to be complied with or performed by
such party at or prior to such date of termination, and such failure continues
for 20 business days after the actual receipt by such party of a written notice
from the other party setting forth in detail the nature of such failure, or (B)
the representations and warranties of the other party contained in this
Agreement, which representations and warranties shall be deemed for purposes of
this Section 8.1(a)(vi) not to include any qualification or limitation with
respect to materiality (whether by reference to a "Material Adverse Effect" or
otherwise), shall have been untrue in any respect on the date when made (or in
the case of any representations and warranties that are made as of a different
date, as of such different date) and the matters in respect
32
of which such representations and warranties shall have been untrue, in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect on such other party.
(b) If this Agreement is terminated pursuant to:
(i) Section 8.1(a)(iv); or
(ii) Section 8.1(a)(v);
then, in such event, Company shall pay to Parent prior to such termination, in
the case of termination by Company pursuant to Section 8.1(a)(iv), or promptly
(and in any event within three business days) after such termination, in the
case of termination by Parent pursuant to Section 8.1(a)(iv) or Section
8.1(a)(v), a fee in the amount of $570,000 (the "Fee"), which amount shall be
payable in immediately available funds.
(c) If this Agreement is terminated by Company pursuant to
Section 8.1(a)(vi), then, in such event, (i) Parent shall pay to or for the
account of Company promptly (and in any event within three business days) after
such termination, an amount in immediately available funds equal to $570,000
(the "Liquidated Damages Amount") to be applied as follows: (i) first, to any
accrued and unpaid interest on any then-outstanding Advances, (ii) next, to the
principal amount of any then-outstanding Advances, and (iii) finally, to the
extent not applied pursuant to clauses (i) and/or (ii), to an account specified
by Company for such purpose. Notwithstanding anything in this Agreement to the
contrary, the payment of the Liquidated Damages Amount pursuant to the
immediately preceding sentence shall be the sole and exclusive remedy of Company
for any and all damages arising or resulting from or relating to any of the
matters referred to in Section 8.1(a)(vi) and, upon compliance by Parent with
its obligations (if any) under this Section 8.1(c), none of Parent, Merger Sub,
any other Subsidiary of Parent or any of their respective officers, directors,
employees, agents, representatives or stockholders shall have any liability or
further obligation to Company or any of its officers, directors, employees,
agents, representatives or stockholders, or to any other person in respect of
any such matters.
Section 8.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 8.1(a) hereof, this Agreement
(except for the provisions of Section 4.1(t), the last sentence of Section 6.3,
paragraphs (b) and (c) of Section 8.1, this Section 8.2 and Article IX) shall
forthwith become void and cease to have any force or effect, without any
liability on the part of any party hereto or any of its affiliates; provided,
however, that nothing in this Section 8.2 shall relieve any party to this
Agreement of liability for any willful or intentional breach of this Agreement.
Section 8.3 Amendment. Subject to any applicable provisions of the
---------
MBCL, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
approval of this Agreement at the Stockholders Meeting, no amendment shall be
made which would reduce the amount or change the type of consideration into
which each Share shall be converted upon consummation of the Merger. This
Agreement may not be modified or amended except by written agreement executed
and delivered by duly authorized officers of each of the respective parties.
33
Section 8.4 Extension; Waiver. At any time prior to the Effective
-----------------
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement, or (c)
subject to Section 8.3, waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in a written instrument executed and delivered by a duly authorized
officer on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
Section 8.5 Procedure for Termination, Amendment, Extension or Waiver.
---------------------------------------------------------
A termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of Parent, Merger Sub
or Company, action by its Board of Directors or the duly authorized designee of
its Board of Directors.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Nonsurvival of Representations and Warranties. None of the
---------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
Section 9.2 Fees and Expenses. Whether or not the Merger shall be
-----------------
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby, except that each of Company and Parent shall
bear and pay one-half of the costs and expenses incurred in connection with the
filing of the premerger notification and report forms under the HSR Act
(including filing fees).
Section 9.3 Definitions. For purposes of this Agreement:
-----------
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) "business day" means any day other than Saturday, Sunday or
any other day on which banks in the City of New York are required or permitted
to close;
(c) "Common Merger Consideration" means the amount of cash the
right to receive which a Common Share shall be converted into at the Effective
Time pursuant to Section 2.1(c).
(d) "Conversion Factor" means an amount equal to the quotient
obtained by dividing the Common Merger Consideration by $21.50 (i.e., the
----
closing price for shares of Parent Common Stock on August 26, 1998).
34
(e) "Disclosure Schedule" means the disclosure schedule delivered
by each party to the other simultaneously with the execution of this Agreement;
(f) "Environmental Laws" means any federal, state or local law
relating to: (i) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (ii) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (iii) otherwise relating to
pollution of the environment or the protection of human health;
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, including the rules and regulations promulgated by the SEC pursuant
thereto;
(h) "Forbearance Agreement" means the Forbearance Agreement,
dated as of August 27, 1998, among Silicon Valley Bank, Company, Cayenne
Software Limited, ▇▇▇▇▇▇▇ GmbH and Cadre Technologies;
(i) "Hazardous Substances" means: (i) those substances defined in
or regulated under the following federal statutes and their state counterparts,
as each may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide and Rodenticide Act and the Clean Air Act; (ii)
petroleum and petroleum products including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas and any mixtures thereof; (iv) radon; (v) any
other contaminant; and (vi) any substance with respect to which any Governmental
Entity requires environmental investigation, monitoring, reporting or
remediation;
(j) "knowledge" means the actual knowledge of any executive
officer of Company or Parent, as the case may be;
(k) "Liens" means, collectively, all pledges, claims, liens,
charges, mortgages, conditional sale or title retention agreements,
hypothecations, collateral assignments, security interests, easements and other
encumbrances of any kind or nature whatsoever;
(l) "Loan Documents" has the meaning ascribed thereto in the
Forbearance Agreement, as such Loan Documents are modified by the Forbearance
Agreement;
(m) "Material Adverse Change" means any one or more changes,
events or occurrences which have had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company;
provided, however, that, solely for purposes of this definition insofar as it
relates to changes, events, or occurrences after the date hereof and, subject to
the next following proviso, no effect that is directly attributable to (i) the
performance by Company of its covenants hereunder, (ii) decreases in Company's
consolidated revenues, or (iii) the inability of Company or any of its
Subsidiaries to collect their respective accounts receivable after making
collection efforts consistent with past practice shall be deemed to constitute a
Material Adverse Effect on Company; provided, further, however, that the
inability of Company to pay its debts when the same are due and payable (whether
or not in the ordinary course of business or as a result of any action by any
person (other than a breach by Parent of its obligations under Section 6.11)
that affects
35
the time at which such obligations are due and payable) shall in all events be
deemed to constitute a Material Adverse Effect on Company for purposes of this
definition;
(n) a "Material Adverse Effect" with respect to any person means
a material adverse effect on (i) the ability of such person to perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby or (ii) the condition (financial or otherwise), assets, liabilities
(actual or contingent), results of operations or business of such person and its
Subsidiaries taken as a whole;
(o) the "NYSE" means the New York Stock Exchange;
(p) "Overadvance Facility" has the meaning ascribed thereto in
the Forbearance Agreement;
(q) "Overadvance Note" has the meaning ascribed thereto in the
Forbearance Agreement;
(r) a "person" means an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity;
(s) "Preferred Merger Consideration" means the amount of cash the
right to receive which a Preferred Share shall be converted into at the
Effective Time pursuant to Section 2.1(c).
(t) "Preferred Stockholders" means Integral Capital Partners III,
L.P., Integral Capital Partners International III, L.P., Winston Partners L.P.,
▇▇▇▇▇▇▇ ▇▇ LLC and ▇▇▇▇▇▇▇ ▇▇ LDC;
(u) "Securities Act" means the Securities Act of 1933, as
amended, including the rules and regulations promulgated by the SEC pursuant
thereto;
(v) a "Subsidiary" of any person means any other person of which
(i) the first mentioned person or any Subsidiary thereof is a general partner,
(ii) voting power to elect a majority of the board of directors or others
performing similar functions with respect to such other person is held by the
first mentioned person and/or by any one or more of its Subsidiaries, or (iii)
at least 50% of the equity interests of such other person is, directly or
indirectly, owned or controlled by such first mentioned person and/or by any one
or more of its Subsidiaries.
Section 9.4 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
36
(i) if to Parent or to Merger Sub, to
Sterling Software, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
2300 ▇▇▇▇▇▇▇▇ ▇▇▇▇ Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to Company, to
Cayenne Software, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.5 Interpretation. When a reference is made in this Agreement
--------------
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for convenience of reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
Section 9.6 Entire Agreement; Third-Party Beneficiaries. This
--------------------------------------------
Agreement constitutes the entire agreement, and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement (except for the letter agreement referenced in
the last sentence of Section 6.3 and the Stock Option Agreement). This
Agreement is not intended to confer upon any person (including without
limitation any employees or former employees of Company), other than the parties
hereto, any rights or remedies.
37
Section 9.7 Governing Law. Except to the extent necessarily governed
-------------
by the GBCC, this Agreement shall be governed by, and construed in accordance
with, the laws of The Commonwealth of Massachusetts, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Section 9.8 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment without
such prior written consent shall be null and void, except that Parent and/or
Merger Sub may assign this Agreement to any direct or indirect wholly owned
Subsidiary of Parent without the prior consent of Company; provided that Parent
and/or Merger Sub, as the case may be, shall remain liable for all of its
obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 9.9 Enforcement. Irreparable damage would occur in the event
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that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in any appropriate state court in The Commonwealth of Massachusetts or federal
court in Suffolk County in The Commonwealth of Massachusetts, this being in
addition to any other remedy to which they are entitled at law or in equity.
Each of the parties hereto (i) shall submit itself to the personal jurisdiction
of any appropriate state court in The Commonwealth of Massachusetts or federal
court in Suffolk County in The Commonwealth of Massachusetts in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (iii) shall not bring
any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than any appropriate state court in The Commonwealth
of Massachusetts or federal court in Suffolk County in The Commonwealth of
Massachusetts.
Section 9.10 Severability. Whenever possible, each provision or
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portion of any provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement shall be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
Section 9.11 Counterparts. This Agreement may be executed in one or
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more counterparts, all of which shall be considered one and the same instrument
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
[signature page follows]
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IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
STERLING SOFTWARE, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Senior Vice President and General Counsel
STERLING SOFTWARE (SOUTHERN), INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Vice President and Secretary
CAYENNE SOFTWARE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
39