Exhibit 99.2
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AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 9, 2003
BY AND AMONG
PLATO LEARNING, INC.,
LSPN MERGER CORP.
AND
LIGHTSPAN, INC.
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TABLE OF CONTENTS
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ARTICLE I CERTAIN DEFINITIONS............................................ 2
ARTICLE II THE MERGER.................................................... 9
2.1 The Merger.................................................... 9
2.2 Effective Time of the Merger.................................. 10
2.3 Effects of the Merger......................................... 10
2.4 Closing....................................................... 10
2.5 Certificate of Incorporation.................................. 10
2.6 Bylaws........................................................ 10
2.7 Directors and Officers........................................ 10
ARTICLE III CONVERSION OF SECURITIES..................................... 10
3.1 Exchange Ratio................................................ 10
3.2 Stock of Merger Sub........................................... 11
3.3 Stock Options and Other Equity-Based Awards................... 12
3.4 Exchange Fund................................................. 13
3.5 Exchange Procedures........................................... 13
3.6 Distributions with Respect to Unexchanged Shares.............. 14
3.7 No Further Ownership Rights in Company Common Stock........... 14
3.8 No Fractional Shares of Buyer Common Stock.................... 14
3.9 Termination of Exchange Fund.................................. 15
3.10 No Liability.................................................. 15
3.11 Investment of the Exchange Fund............................... 15
3.12 Lost Certificates............................................. 15
3.13 Withholding Rights............................................ 15
3.14 Further Assurances............................................ 16
3.15 Stock Transfer Books.......................................... 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................ 16
4.1 Representations and Warranties of the Company................. 16
(a) Corporate Organization.................................. 16
(b) Capitalization.......................................... 17
(c) Authority; No Violation................................. 18
(d) Consents and Approvals.................................. 19
(e) Financial Reports and SEC Documents..................... 20
(f) Absence of Undisclosed Liabilities...................... 20
(g) Absence of Certain Changes or Events.................... 21
(h) Legal Proceedings....................................... 21
(i) Compliance with Applicable Law.......................... 21
(j) Contracts............................................... 22
(k) Environmental Liability................................. 23
(l) Employee Benefit Plans; Labor Matters................... 23
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(m) Intellectual Property................................... 25
(n) Properties.............................................. 30
(o) Insurance............................................... 30
(p) Taxes................................................... 31
(q) Reorganization under the Code........................... 32
(r) Form S-4; Joint Proxy Statement/Prospectus.............. 32
(s) Affiliate Transactions.................................. 32
(t) Ownership of Buyer Stock................................ 32
(u) State Takeover Laws..................................... 32
(v) Opinion of Financial Advisor............................ 32
(w) Board Approval.......................................... 32
(x) Brokers' Fees........................................... 33
4.2 Representations and Warranties of Buyer and Merger Sub........ 33
(a) Corporate Organization.................................. 33
(b) Capitalization.......................................... 34
(c) Authority; No Violation................................. 35
(d) Consents and Approvals.................................. 36
(e) Financial Reports and SEC Documents..................... 36
(f) Absence of Undisclosed Liabilities...................... 37
(g) Absence of Certain Changes or Events.................... 37
(h) Legal Proceedings....................................... 37
(i) Compliance with Applicable Law.......................... 37
(j) Contracts............................................... 38
(k) Intellectual Property................................... 38
(l) Taxes................................................... 42
(m) Reorganization under the Code........................... 43
(n) Form S-4; Joint Proxy Statement/Prospectus.............. 43
(o) Ownership of Company Stock.............................. 43
(p) Opinion of Financial Advisor............................ 43
(q) Board Approval.......................................... 43
(r) Interim Operations of Merger Sub........................ 43
(s) Buyer Common Stock...................................... 43
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS...................... 44
5.1 Covenants of the Company...................................... 44
(a) Ordinary Course......................................... 44
(b) Dividends; Changes in Share Capital..................... 45
(c) Issuance of Securities.................................. 45
(d) Governing Documents..................................... 45
(e) No Acquisitions......................................... 45
(f) No Dispositions......................................... 45
(g) Investments; Indebtedness............................... 45
(h) Tax-Free Qualification.................................. 46
(i) Compensation............................................ 46
(j) Accounting Methods; Tax Matters......................... 46
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(k) Litigation.............................................. 46
(l) Intellectual Property................................... 46
(m) Company Contracts....................................... 47
(n) Certain Actions......................................... 47
(o) No Related Actions...................................... 47
5.2 Covenants of Buyer............................................ 47
(a) Ordinary Course......................................... 47
(b) Dividends; Changes in Share Capital..................... 47
(c) Issuance of Securities.................................. 47
(d) Governing Documents..................................... 48
(e) No Dispositions......................................... 48
(f) Tax-Free Qualification.................................. 48
(g) Accounting Methods; Tax Matters......................... 48
(h) Certain Actions......................................... 48
5.3 Governmental Filings.......................................... 48
5.4 Control of Other Party's Business............................. 48
ARTICLE VI ADDITIONAL AGREEMENTS......................................... 49
6.1 Preparation of Proxy Statement; Stockholders Meetings......... 49
6.2 Access to Information......................................... 50
6.3 Reasonable Efforts............................................ 52
6.4 Acquisition Proposals......................................... 53
6.5 Fees and Expenses............................................. 55
6.6 Directors' and Officers' Indemnification and Insurance........ 55
6.7 Public Announcements.......................................... 56
6.8 Listing of Shares of Buyer Common Stock....................... 56
6.9 Affiliates.................................................... 56
6.10 Notification of Certain Matters............................... 56
6.11 Accountants' Letters.......................................... 57
6.12 Appointment to Board of Directors............................. 57
6.13 Option Grants................................................. 57
6.14 Rights Agreement.............................................. 57
6.15 Company Options............................................... 58
6.16 Company Warrants.............................................. 58
ARTICLE VII CONDITIONS PRECEDENT......................................... 58
7.1 Conditions to Each Party's Obligation to Effect the Merger.... 58
(a) Stockholder Approval.................................... 58
(b) No Injunctions or Restraints; Illegality................ 58
(c) HSR Act................................................. 58
(d) Nasdaq Listing.......................................... 58
(e) Effectiveness of the Form S-4........................... 59
7.2 Additional Conditions to Obligations of Buyer................. 59
(a) Representations and Warranties.......................... 59
(b) Performance of Obligations of the Company............... 59
(c) Third Party Consents.................................... 59
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(d) Lock-Up Agreement....................................... 59
(e) Consulting Agreement.................................... 59
(f) No Material Terminations................................ 59
(g) Tax Opinion............................................. 59
7.3 Additional Conditions to Obligations of the Company........... 60
(a) Representations and Warranties.......................... 60
(b) Performance of Obligations of Buyer..................... 60
(c) Tax Opinion............................................. 60
(d) Board of Directors...................................... 60
ARTICLE VIII TERMINATION AND AMENDMENT................................... 61
8.1 Termination................................................... 61
8.2 Effect of Termination......................................... 62
8.3 Amendment..................................................... 63
8.4 Extension; Waiver............................................. 63
ARTICLE IX GENERAL PROVISIONS............................................ 64
9.1 Non-Survival of Representations, Warranties and Agreements.... 64
9.2 Notices....................................................... 64
9.3 Interpretation................................................ 65
9.4 Counterparts.................................................. 65
9.5 Entire Agreement; No Third Party Beneficiaries................ 65
9.6 Governing Law................................................. 65
9.7 Severability.................................................. 66
9.8 Assignment.................................................... 66
9.9 Enforcement................................................... 66
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LIST OF EXHIBITS
Exhibit Title
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Exhibit A Form of Company Voting Agreement
Exhibit B Form of Buyer Voting Agreement
Exhibit C Form of Affiliate Agreement
Exhibit D Form of Lock-Up Agreement
Exhibit E Form of Consulting Agreement
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
September 9, 2003, is by and between PLATO Learning, Inc., a Delaware
corporation ("BUYER"), LSPN Merger Corp., a Delaware corporation and a
wholly-owned subsidiary of Buyer ("MERGER SUB"), on the one hand, and
Lightspan, Inc., a Delaware corporation (the "COMPANY"), on the other hand.
WHEREAS, the respective Boards of Directors of Buyer, Merger Sub and the
Company have each determined that it is in the best interest of their respective
stockholders to effect and Buyer, acting as the sole Stockholder of Merger Sub,
has approved a merger of Merger Sub with and into the Company with the Company
surviving as a wholly-owned subsidiary of Buyer (the "Merger"), pursuant to
which, among other things, all of the issued and outstanding common stock of the
Company, par value $0.001 per share ("COMPANY COMMON STOCK"), other than Company
Common Stock owned by the Company, Buyer or their respective wholly-owned
Subsidiaries, shall be converted into the right to receive shares of common
stock, par value $0.01 per share, of Buyer ("BUYER COMMON STOCK"), all upon the
terms and subject to the conditions set forth herein;
WHEREAS, the Boards of Directors of Buyer, Merger Sub and the Company have
approved and adopted this Agreement, the Merger and the other transactions
contemplated hereby, and each has recommended approval of the transactions
contemplated hereby by their respective stockholders;
WHEREAS, concurrently herewith and as an inducement for Buyer to enter
into this Agreement, Buyer and certain stockholders of the Company (the
"PRINCIPAL COMPANY STOCKHOLDERS") are entering into an agreement (the "Company
VOTING AGREEMENT") in the form attached hereto as Exhibit A pursuant to which
such Principal Company Stockholders have agreed, among other things, to vote all
of the shares of Company Common Stock beneficially owned by them in favor of
approval and adoption of this Agreement and the Merger;
WHEREAS, concurrently herewith and as an inducement for Company to enter
into this Agreement, Company and certain stockholders of the Buyer (the
"PRINCIPAL BUYER STOCKHOLDERS") are entering into an agreement (the "BUYER
VOTING AGREEMENT") in the form attached hereto as Exhibit B pursuant to which
such Principal Buyer Stockholders have agreed, among other things, to vote all
of the shares of Buyer Common Stock beneficially owned by them in favor of
approval and adoption of this Agreement and the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "CODE") and that this Agreement shall constitute a
"plan of reorganization" under Treasury Regulation Section 1.368-2(f).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained herein and for
other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the respective
meanings set forth below:
"ACQUISITION PROPOSAL" shall have the meaning set forth in Section
6.4(a)(i).
"ACADEMIC SYSTEMS" shall have the meaning set forth in Section
6.4(b).
"AFFILIATE" shall have the meaning ascribed to such term under Rule
144 of the Securities Act.
"AFFILIATE AGREEMENT" shall have the meaning set forth in Section
6.9.
"AGREEMENT" shall have the meaning set forth in the Preamble.
"BENEFICIAL OWNERSHIP" or "BENEFICIALLY OWN" shall have the meaning
ascribed to such terms under Section 13(d) of the Exchange Act and the
rules and regulations thereunder.
"BENEFIT PLAN" means, with respect to any entity, any employee
benefit plan, program, policy, practice, agreement, contract or other
arrangement providing benefits to any current or former employee, officer
or director of such entity or any beneficiary or dependent thereof that is
sponsored or maintained by such entity or to which such entity contributes
or is obligated to contribute, whether or not written, including any
employee welfare benefit plan within the meaning of Section 3(1) of ERISA,
any employee pension benefit plan within the meaning of Section 3(2) of
ERISA (whether or not such plan is subject to ERISA), any employment or
severance agreement, and any bonus, incentive, executive compensation,
deferred compensation, vacation, performance pay, loan or loan guarantee,
stock purchase, stock option, performance share, stock appreciation or
other equity compensation, severance, change of control, plant closing or
fringe benefit plan, program or policy.
"BUSINESS DAY" means any day on which banks are not required or
authorized to close in the City of New York, New York.
"BUYER" shall have the meaning set forth in the Preamble.
"BUYER 10-Q" means Buyer's Quarterly Report on Form 10-Q for the
quarter ended April 30, 2003, as filed with the SEC.
"BUYER 2002 10-K" means Buyer's Annual Report on Form 10-K for the
fiscal year ended October 31, 2002, as filed with the SEC.
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"BUYER CAPITAL STOCK" shall have the meaning set forth in Section
4.2(b)(i)(B).
"BUYER COMMON STOCK" shall have the meaning set forth in the
Recitals.
"BUYER CONTRACT" and "BUYER CONTRACTS" shall have the meaning set
forth in Section 4.2(j).
"BUYER DISCLOSURE SCHEDULE" shall have the meaning set forth in
Section 4.2.
"BUYER OPTION PLANS" means the Buyer 2000 Stock Incentive Plan and
the Buyer 2002 Stock Plan.
"BUYER PREFERRED STOCK" shall have the meaning set forth in Section
4.2(b)(i)(B).
"BUYER RECOMMENDATION" shall have the meaning set forth in Section
6.1(c).
"BUYER SEC DOCUMENTS" shall have the meaning set forth in Section
4.2(e).
"BUYER STOCK MARKET VALUE" means the volume-weighted average of the
closing prices of the Buyer Common Stock on the NASDAQ National Market
System on each of the 15 trading days ending on (and including) the date
immediately prior to the Closing Date.
"BUYER STOCK OPTION" shall have the meaning set forth in Section
6.13.
"BUYER STOCKHOLDER APPROVAL" shall have the meaning set forth in
Section 4.2(c)(i).
"BUYER STOCKHOLDERS MEETING" shall have the meaning set forth in
Section 4.2(c)(i).
"BUYER TERMINATION FEE" means an amount in cash equal to $500,000.
"BUYER VOTING AGREEMENT" shall have the meaning set forth in the
Recitals.
"CERTIFICATE OF MERGER" shall have the meaning set forth in Section
2.2.
"CHANGE IN THE BUYER RECOMMENDATION" shall have the meaning set
forth in Section 6.1(c).
"CHANGE IN THE COMPANY RECOMMENDATION" shall have the meaning set
forth in Section 6.1(b).
"CLOSING" shall mean the closing of the transactions contemplated by
the Agreement in accordance with Section 2.4.
"CLOSING DATE" shall have the meaning set forth in Section 2.4.
"CODE" shall have the meaning set forth in the Recitals.
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"COMPANY WARRANT" shall have the meaning set forth in Section
3.3(d).
"COMPANY WARRANT AGREEMENTS" shall have the meaning set forth in
Section 3.3(d).
"CONFIDENTIAL INFORMATION" means all non-public and confidential or
proprietary information, source code, object code, software tools,
designs, schematics, plans or any other information of the Company or any
of its Subsidiaries which is contained in any media now known or hereafter
developed, including, without limitation, any information encompassed in
any Intellectual Property, and any reports, investigations, experiments,
research or development work or notes, experimental work, work in
progress, drawings, designs, plans, proposals, compositions, manufacturing
and production processes and techniques, methods, technical data,
specifications, marketing or sales information, business models and
business methodologies, financial projections and other information, cost,
summaries, pricing information, and all concepts, ideas, know-how,
compositions, plans, materials or information related to the Company and
its Subsidiaries, their present or future products, services, sales,
suppliers, customers, employees, investors or business, whether or not
such information would be enforceable as a trade secret or the copying of
which would be enjoined or restrained by a court as constituting unfair
competition.
"COMPANY" shall have the meaning set forth in the Preamble.
"COMPANY 10-Q" means the Company's Quarterly Report on Form 10-Q for
the quarter ended April 30, 2003, as filed with the SEC.
"COMPANY 2002 10-K" means the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 2003, as filed with the SEC.
"COMPANY BENEFIT PLAN" means a Benefit Plan maintained or
contributed to by the Company or any ERISA Affiliate of the Company, to
which the Company or any ERISA Affiliate of the Company is required to
contribute, or with respect to which the Company or any ERISA Affiliate
may have any liability.
"COMPANY CAPITAL STOCK" shall have the meaning set forth in Section
4.1(b)(i).
"COMPANY CERTIFICATE" and "COMPANY CERTIFICATES" shall have the
meanings set forth in Section 3.1(b).
"COMPANY COMMON STOCK" shall have the meaning set forth in the
Recitals.
"COMPANY CONTRACT" and "COMPANY CONTRACTS" shall have the meaning
set forth in Section 4.1(j).
"COMPANY DISCLOSURE SCHEDULE" shall have the meaning set forth in
Section 4.1.
"COMPANY INTELLECTUAL PROPERTY" shall have the meaning set forth in
Section 4.1(m).
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"COMPANY NEAR-THE-MONEY OPTION" shall mean each Company Stock Option
that (i) remains outstanding and unexercised immediately prior to the
Effective Time, whether vested or unvested, and (ii) has an exercise price
greater than or equal to the Company Share Price, but less than or equal
to $12.50 per share.
"COMPANY OPTION PLANS" means collectively, the Company's 1992 Stock
Option Plan, the Company's 2000 Equity Incentive Plan, and any other
arrangement under which the Company has granted any option to purchase
shares of Company Common Stock that remains outstanding immediately prior
to the Effective Time; provided, however, that, notwithstanding the
foregoing, for purposes of this Agreement the ESPP shall not be considered
or deemed to be a Company Option Plan.
"COMPANY STOCK PURCHASE RIGHTS" means the rights to purchase shares
of Company Common Stock under the ESPP with payroll deductions made under
the ESPP.
"COMPANY PREFERRED STOCK" shall have the meaning set forth in
Section 4.1(b)(i).
"COMPANY RECOMMENDATION" shall have the meaning set forth in Section
6.1(b).
"COMPANY REDUCED TERMINATION FEE" means an amount in cash equal to
$500,000.
"COMPANY SEC DOCUMENTS" shall have the meaning set forth in Section
4.1(e).
"COMPANY SHARE PRICE" shall have the meaning set forth in Section
3.3(a).
"COMPANY STOCK OPTION" shall have the meaning set forth in Section
3.3(a).
"COMPANY STOCKHOLDER APPROVAL" shall have the meaning set forth in
Section 4.1(c)(i).
"COMPANY STOCKHOLDERS MEETING" shall have the meaning set forth in
Section 4.1(c)(i).
"COMPANY TERMINATION FEE" means an amount in cash equal to
$1,000,000.
"COMPANY VOTING AGREEMENT" shall have the meaning set forth in the
Recitals.
"CONFIDENTIALITY AGREEMENT" shall have the meaning set forth in
Section 6.2.
"CONTROLLED GROUP LIABILITY" means any and all liabilities (a) under
Title IV of ERISA, other than for payment of premiums to the Pension
Benefit Guaranty Corporation, (b) under Section 302 of ERISA, (c) under
Sections 412 and 4971 of the Code, (d) for violation of the continuation
coverage requirements of Section 601 et seq. of ERISA and Section 4980B of
the Code or the group health requirements of Sections 701 et seq. of the
Code and Sections 9801 et seq. of ERISA, and (e) under corresponding or
similar provisions of foreign laws or regulations.
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"DGCL" means the General Corporation Law of the State of Delaware.
"DOJ" means the Antitrust Division of the U.S. Department of
Justice.
"EFFECTIVE TIME" shall have the meaning set forth in Section 2.2.
"ENVIRONMENTAL LAW" means applicable statutes, regulations, rules,
ordinances, codes, common law, policies, advisories, guidance, actions,
licenses, permits, orders, approvals, plans, authorizations, concessions,
franchises and similar items of all Governmental Entities and all
applicable judicial and administrative and regulatory decrees, judgments
and orders and all covenants running with the land that relate to: (A)
occupational health and safety; (B) the protection of human health or the
environment; (C) the treatment, storage, disposal, handling, release or
remediation of Hazardous Materials; or (D) exposure of persons to
Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means any entity that, together with the Company,
is treated as a single employer under Sections 414(b), (c), (m) or (o) of
the Code.
"ESPP" means the Lightspan Partnership, Inc. 2000 Employee Stock
Purchase Plan.
"EXCESS SHARES" shall have the meaning set forth in Section 3.8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"EXCHANGE AGENT" shall have the meaning set forth in Section 3.4.
"EXCHANGE FUND" shall have the meaning set forth in Section 3.4.
"EXCHANGE RATIO" shall have the meaning set forth in Section 3.1(b).
"EXCLUSIVITY AGREEMENT" shall mean the letter agreement between
Buyer and the Company dated as of August 1, 2003, as may be amended from
time to time.
"EXPENSES" means all out-of-pocket expenses (including all fees and
expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its Affiliates) incurred by a party
hereto or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby, including the
preparation, printing, filing and mailing of the Joint Proxy
Statement/Prospectus and the Form S-4 and the solicitation of stockholder
approvals and all other matters related to the transactions contemplated
hereby and thereby.
"FORM S-4" shall have the meaning set forth in Section 4.1(d)(ii).
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"FTC" means the U.S. Federal Trade Commission.
"GAAP" means U.S. generally accepted accounting principles.
"GOVERNMENTAL ENTITY" shall have the meaning set forth in Section
4.1(d).
"HAZARDOUS MATERIALS" means any substance: (A) the presence of which
requires reporting, investigation, removal or remediation under any
Environmental Law; (B) that is defined as a "hazardous waste," "hazardous
substance" or "pollutant" or "contaminant" under any Environmental Law;
(C) that is toxic, explosive, corrosive, flammable, ignitable, infectious,
radioactive, reactive, carcinogenic, mutagenic or otherwise hazardous and
is regulated under any Environmental Law; (D) the presence of which causes
or threatens to cause a nuisance, trespass or other tortious condition or
poses a hazard to the health or safety of persons; (E) that contains
gasoline, diesel fuel or other petroleum hydrocarbons, PCBs, asbestos or
urea formaldehyde foam insulation.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section
4.1(m)(i).
"JOINT PROXY STATEMENT/PROSPECTUS" shall have the meaning set forth
in Section 4.1(d)(ii).
"KNOWLEDGE" means, with respect to any entity, the actual knowledge
of such entity's executive officers after reasonable inquiry.
"LICENSE" shall have the meaning set forth in Section 4.1(m)(iv)(a).
"LICENSED BUYER INTELLECTUAL PROPERTY" shall have the meaning set
forth in Section 4.2(k)(ii).
"LICENSED COMPANY INTELLECTUAL PROPERTY" shall have the meaning set
forth in Section 4.1(m)(iv).
"LIENS" means any liens, pledges, charges, encumbrances and security
interests whatsoever.
"MATERIAL ADVERSE EFFECT" means, with respect to any entity, any
change, effect, event or occurrence that is or is reasonably likely to be,
individually or in the aggregate, materially adverse to (a) the business,
assets, properties, current or future financial condition or results of
operations, of such entity and its Subsidiaries taken as a whole or (b)
the ability of such entity to timely consummate the transactions
contemplated by this Agreement; provided, that each of (i) any change in
the price or trading volume of Company Common Stock or Buyer Common Stock
from the date hereof, (ii) any adverse change or effect that is the result
of any general decline in the economy or financial markets or any
conditions generally affecting the industry in which such entity competes,
and (iii) any adverse change or effect that is the result of actions the
Company is required
7
to take or prohibited from taking under this Agreement, or that the
Company takes with the express written consent of Buyer after the date of
this Agreement and prior to the Effective Time, or (iv) any adverse effect
that is the result of the announcement or pendency of the transactions
contemplated by this Agreement (including the loss of customers,
suppliers, vendors or employees that is a result of the announcement or
pendency of the transactions contemplated by this Agreement), shall not be
deemed by itself, either alone or in combination with other effects, to
constitute a Material Adverse Effect.
"MERGER" shall have the meaning set forth in the Recitals.
"MERGER CONSIDERATION" shall have the meaning set forth in Section
3.1(b).
"MERGER SUB" shall have the meaning set forth in the Preamble.
"NASDAQ" means The Nasdaq National Market.
"NECESSARY CONSENTS" shall have the meaning set forth in Section
4.1(d).
"NON-SUBSIDIARY AFFILIATE" shall have the meaning set forth in
Section 4.1(b)(iii).
"OWNED BUYER INTELLECTUAL PROPERTY" shall have the meaning set forth
in Section 4.2(k)(i).
"OWNED COMPANY INTELLECTUAL PROPERTY" shall have the meaning set
forth in Section 4.1(m)(iii).
"PERSON" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in the Exchange Act).
"PRINCIPAL BUYER STOCKHOLDERS" shall have the meaning set forth in
the Recitals.
"PRINCIPAL COMPANY STOCKHOLDERS" shall have the meaning set forth in
the Recitals.
"REGULATORY LAW" means the HSR Act, and all other federal, state and
foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate (a) mergers, acquisitions or
other business combinations, (b) foreign investment or (c) actions having
the purpose or effect of monopolization or restraint of trade or lessening
of competition.
"REQUIRED APPROVALS" shall have the meaning set forth in Section
6.3(i).
"RIGHTS AGREEMENT" shall have the meaning set forth in Section 6.14.
"SEC" means the U.S. Securities and Exchange Commission.
8
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SUBSIDIARY" shall have the meaning ascribed to such term in Rule
1-02 of Regulation S-X of the SEC.
"SUBSTITUTE WARRANT" shall have the meaning set forth in Section
3.3(d).
"SUPERIOR PROPOSAL" means a bona fide written proposal not solicited
by or on behalf of the Company made by a Person other than Buyer that is
(a) for an Acquisition Proposal (except that references in the definition
of "Acquisition Proposal" to "10%" shall be "50%") involving the Company
and (b) on terms which the Company's Board of Directors determines in its
reasonable good faith judgment (after consultation with its financial and
legal advisors) to be more favorable to the Company's stockholders, than
the Merger and (ii) is reasonably capable of being completed on the terms
proposed.
"SURVIVING CORPORATION" shall have the meaning set forth in Section
2.1.
"TAX RETURN" means any return, report or similar statement
(including any attached schedules) required to be filed with respect to
any Tax, including any information return, claim for refund, amended
return or declaration of estimated Tax.
"TAXES" means any and all U.S. federal, state or local, foreign, or
other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto)
imposed by any taxing authority, including taxes or other charges on or
with respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth,
and taxes or other charges in the nature of excise, withholding, ad
valorem or value added.
"TERMINATION DATE" shall have the meaning set forth in Section
8.1(b).
"VOTING DEBT" means any bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which holders of
capital stock of the same issuer may vote.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions hereof, in
accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with
and into the Company, with the Company as the surviving corporation in the
Merger (the "SURVIVING CORPORATION"), which shall continue its corporate
existence under the laws of the State of Delaware and the separate existence of
Merger Sub shall thereupon cease. As a result of the Merger, the Company will
become a wholly-owned subsidiary of Buyer. The name of the Surviving Corporation
shall be the name of the Company.
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2.2 Effective Time of the Merger. The Merger shall become effective as
set forth in a properly executed Certificate of Merger duly filed with the
Secretary of State of the State of Delaware (the "CERTIFICATE OF MERGER"), which
filing shall be made as soon as practicable on or after the Closing Date. As
used in this Agreement, the term "EFFECTIVE TIME" shall mean the date and time
when the Merger becomes effective, as set forth in the Certificate of Merger.
2.3 Effects of the Merger. The Merger shall have the effects set forth
in the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all of the property, rights, privileges, powers and franchises
of Merger Sub and the Company shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Merger Sub and the Company shall become the
debts, liabilities and duties of the Surviving Corporation.
2.4 Closing. Upon the terms and subject to the conditions set forth in
Article VII and the termination rights set forth in Article VIII, the closing
(the "CLOSING") will take place at the offices of Winston & Xxxxxx, 00 Xxxx
Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000 at 10:00 A.M. on the second Business Day
following the satisfaction or waiver (subject to applicable law) of the
conditions (excluding conditions that, by their nature, cannot be satisfied
until the Closing Date) set forth in Article VII, unless this Agreement has been
theretofore terminated pursuant to its terms or unless another place, time or
date is agreed to by the parties hereto (the date of the Closing, the "CLOSING
DATE").
2.5 Certificate of Incorporation. Subject to Section 6.6(b), the
Effective Time, the certificate of incorporation of Merger Sub in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation, until duly amended in accordance
with the terms thereof and of the DGCL, except the name of the Surviving
Corporation in such certificate of incorporation shall be changed to be
Lightspan, Inc.
2.6 Bylaws. Subject to Section 6.6(b), at the Effective Time, the
bylaws of Merger Sub as in effect immediately prior to the Effective Time shall
be the bylaws of the Surviving Corporation.
2.7 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
and the officers of the Merger Sub immediately prior to the Effective Time shall
be the officers of the Surviving Corporation, in each case, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
ARTICLE III
CONVERSION OF SECURITIES
3.1 Exchange Ratio. At the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any Company Capital Stock:
(a) All shares of Company Capital Stock that are held by the
Company as treasury stock or that are owned by the Company, Buyer or
their respective wholly-owned Subsidiaries (other than those held in a
fiduciary capacity for the benefit of third
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parties) immediately prior to the Effective Time shall cease to be
outstanding and shall be cancelled and retired and shall cease to
exist.
(b) Subject to Sections 3.1(a) and 3.8, each share of Company
Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares to be canceled in accordance with Section
3.1(a)) shall be converted into the right to receive an aggregate
amount (the "EXCHANGE RATIO") of fully paid and nonassessable shares of
Buyer Common Stock equal to (i) 1.330, if the Buyer Stock Market Value
is equal to or greater than $7.89; (ii) $10.50 divided by the Buyer
Stock Market Value, if the Buyer Stock Market Value is equal to or
greater than $6.23, but less than $7.89; (iii) 1.685, if the Buyer
Stock Market Value is less than $6.23, subject to adjustment pursuant
to Section 3.1(c) (the "MERGER CONSIDERATION"). All of such shares of
Buyer Common Stock shall be duly authorized and validly issued and free
of preemptive rights, with no personal liability attaching to the
ownership thereof. All such shares of Company Common Stock shall cease
to be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of a certificate that immediately prior to the
Effective Time represented any such shares of Company Common Stock (a
"COMPANY CERTIFICATE" and collectively, the "COMPANY CERTIFICATES")
shall thereafter cease to have any rights with respect to such shares
of Company Common Stock, except the right to receive certificates
representing the Merger Consideration to be issued in consideration
therefor (including any cash paid in lieu of fractional shares) and any
dividends or other distributions to which holders of Company Common
Stock become entitled, all in accordance with this Article III upon the
surrender of such Company Certificate.
(c) In the event the Buyer Stock Market Value is less than
$5.50, the Company may deliver a written notice (the "REPRICING
NOTICE") to the Buyer prior to the Effective Time, stating that the
Company elects to terminate this Agreement pursuant to Section 8.1(i).
Five (5) business days after delivery of such Repricing Notice, in
accordance with Section 9.2, this Agreement will terminate in
accordance with Section 8.1(i) unless Buyer, in its sole discretion,
elects to increase the Exchange Ratio in accordance with this Section
3.1(c) (the "REPRICING OPTION") by delivering to the Company written
notice ("REPRICING OPTION NOTICE") exercising the Repricing Option. In
the event Buyer delivers the Repricing Option Notice pursuant to this
subsection (c), notwithstanding anything to the contrary in this
Section 3.1, the Exchange Ratio shall equal 1.685 multiplied by $5.50
divided by the Buyer Stock Market Value.
(d) If, between the date of this Agreement and the Effective
Time, there is a reclassification, recapitalization, stock split,
split-up, stock dividend, combination, exchange of shares or any
similar transaction with respect to, or rights issued in respect of,
Company Common Stock or Buyer Common Stock, or Buyer or Company pays an
extraordinary dividend or makes an extraordinary distribution, the
Exchange Ratio shall be adjusted accordingly to provide to the holders
of Company Common Stock the same economic effect as contemplated by
this Agreement prior to such event.
3.2 Stock of Merger Sub. At the Effective Time, by virtue of the Merger
and without any action on the part of any holder of shares of capital stock of
Merger Sub, each issued and outstanding share of capital stock of Merger Sub
shall be converted into and become one fully
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paid and nonassessable share of common stock, par value $0.001 per share, of the
Surviving Corporation.
3.3 Stock Options and Other Equity-Based Awards.
(a) At the Effective Time, each option to purchase shares of
Company Common Stock granted under Company Option Plans (a "COMPANY
STOCK OPTION") that is outstanding and unexercised immediately prior
thereto, whether vested or unvested, and has an exercise price less
than (i) the Buyer Stock Market Value multiplied by (ii) the Exchange
Ratio (the "COMPANY SHARE PRICE"), shall cease to represent a right to
acquire shares of Company Common Stock and automatically shall be
converted without any action on the part of any holder of any Company
Stock Option, at the Effective Time, into the right to receive an
aggregate amount of fully paid and nonassessable shares of Buyer Common
Stock equal to (i) the difference between (A) the Company Share Price
minus (B) the option exercise price, multiplied by (ii) the number of
option shares divided by (iii) the Buyer Stock Market Value.
(b) At the Effective Time, each Company Stock Option that is
outstanding and unexercised immediately prior thereto, whether vested
or unvested, and has an exercise price greater than or equal to the
Company Share Price, shall be cancelled at the Effective Time.
(c) At the Effective Time, the Company Stock Purchase Rights
then outstanding will be accelerated in the manner described in this
Section 3.3(c). The Effective Time will be treated as the end of the
current offering and the purchase date for purposes of the ESPP, and
payroll deductions under the ESPP will end at the Effective Time. All
payroll deductions accumulated under the ESPP immediately prior to the
Effective Time will be used to purchase Company Common Stock at the
Effective Time in accordance with the terms and conditions of the ESPP,
with the Company Share Price serving as the fair market value of a
share of Company Common Stock on the purchase date for the current
offering. All Company Stock Purchase Rights will then terminate, and
the ESPP will terminate effective at the Effective Time. Buyer shall
use commercially reasonable efforts to ensure that, as soon as
practicable following the Effective Time, (i) the Merger Consideration
issued with respect to shares of Company Common Stock previously issued
pursuant to the ESPP, (ii) shares of Buyer Common Stock issued pursuant
to Section 3.3(a) above and (iii) shares of Buyer Common Stock issuable
upon exercise of Buyer Stock Options granted pursuant to Section 6.13,
each are available for trading through a broker-dealer selected by
Buyer and reasonably acceptable to the Company.
(d) At the Effective Time, each warrant to purchase Company
Common Stock (each, a "COMPANY Warrant") that is outstanding and
unexercised immediately prior thereto, shall cease to represent a right
to acquire Company Common Stock and automatically shall be converted
(in accordance with the further provisions contained in Section 6.15),
into and represent a warrant to purchase, on the same terms and
conditions as were applicable under the Company Warrant (taking into
account any changes thereto), Buyer Common Stock ("SUBSTITUTE
WARRANTS"), and Buyer shall assume each
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such Substitute Warrant subject to the terms of the agreements
evidencing grants thereunder (the "COMPANY WARRANT AGREEMENTS"),
provided, however, that from and after the Effective Time: (i) the
number of shares of Buyer Common Stock purchasable upon exercise of the
Substitute Warrant shall be equal to the number of shares of Company
Common Stock that were purchasable under the Company Warrant
immediately prior to the Effective Time multiplied by the Exchange
Ratio, rounded to the nearest whole share, and (ii) the per share
exercise price of each Substitute Warrant shall be equal to the per
share exercise price of each Company Warrant immediately prior to the
Effective Time divided by the Exchange Ratio, rounded to the nearest
cent.
(e) If, between the date of this Agreement and the Effective
Time, there is a reclassification, recapitalization, stock split,
split-up, stock dividend, combination or exchange of shares with
respect to, or rights issued in respect of, Company Common Stock or
Buyer Common Stock, the consideration issued to holders of Company
Stock Options and Company Stock Purchase Rights and Company Warrants
pursuant to this Section 3.3 shall be adjusted accordingly to provide
to the holders of Company Stock Options and Company Warrants the same
economic effect as contemplated by this Agreement prior to such event.
3.4 Exchange Fund. Prior to the Effective Time, Buyer shall appoint a
commercial bank or trust company having net capital of not less than
$300,000,000, or a subsidiary thereof, to act as exchange agent hereunder for
the purpose of exchanging Company Certificates for the Merger Consideration (the
"EXCHANGE AGENT"). At or prior to the Effective Time, Buyer shall deposit with
the Exchange Agent, in trust for the benefit of holders of shares of Company
Common Stock, certificates representing the shares of Buyer Common Stock
issuable pursuant to Section 3.1 in exchange for outstanding shares of Company
Common Stock and cash sufficient to make payments in lieu of fractional shares
in accordance with Section 3.8. Following the Effective Time, Buyer agrees to
make available to the Exchange Agent from time to time as needed, cash
sufficient to pay any amounts required under Section 3.6. Any cash and
certificates representing Buyer Common Stock deposited with the Exchange Agent
(including the proceeds from sales of Excess Shares in accordance with Section
3.8) shall hereinafter be referred to as the "EXCHANGE FUND."
3.5 Exchange Procedures. Promptly after the Effective Time, Buyer shall
cause the Exchange Agent to mail to each holder of a Company Certificate (a) a
letter of transmittal that shall specify that delivery shall be effected, and
risk of loss and title to the Company Certificates shall pass, only upon proper
delivery of the Company Certificates to the Exchange Agent, and which letter
shall be in customary form and have such other provisions as Buyer may
reasonably specify and (b) instructions for effecting the surrender of such
Company Certificates in exchange for certificates representing the Merger
Consideration, together with any dividends and other distributions with respect
thereto and any cash in lieu of fractional shares. Upon surrender of a Company
Certificate to the Exchange Agent together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may reasonably be required by the Exchange Agent, the holder
of such Company Certificate shall be entitled to receive in exchange therefor
(a) shares of Buyer Common Stock representing, in the aggregate, the whole
number of shares that such holder has the right to receive pursuant to Section
3.1 (after taking into account all shares of Company Common Stock then held by
such
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holder) and (b) a check in the amount equal to the cash that such holder has the
right to receive pursuant to the provisions of this Article III, including cash
in lieu of any fractional shares of Buyer Common Stock pursuant to Section 3.8
and dividends and other distributions pursuant to Section 3.6. No interest will
be paid or will accrue on any cash payable pursuant to Section 3.6 or Section
3.8. In the event of a transfer of ownership of Company Common Stock that is not
registered in the transfer records of the Company, one or more shares
certificates evidencing, in the aggregate, the proper number of shares of Buyer
Common Stock may be issued with respect to such Company Common Stock to such a
transferee, together with a check in the proper amount of cash that such holder
has the right to receive pursuant to the provisions of this Article III,
including cash in lieu of any fractional shares of Buyer Common Stock pursuant
to Section 3.8 and any dividends or other distributions to which such holder is
entitled pursuant to Section 3.6, if the Company Certificate is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid.
3.6 Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Company Certificate with respect to the shares
of Buyer Common Stock that such holder would be entitled to receive upon
surrender of such Company Certificate, and no cash payment in lieu of fractional
shares of Buyer Common Stock shall be paid to any such holder pursuant to
Section 3.8 until such holder shall surrender such Company Certificate in
accordance with Section 3.5. Subject to the effect of applicable law, following
surrender of any such Company Certificate, there shall be paid to the record
holder thereof without interest, (a) promptly after the time of such surrender,
the amount of any cash payable in lieu of fractional shares of Buyer Common
Stock to which such holder is entitled pursuant to Section 3.8 and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Buyer Common Stock and (b)
at the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time and a payment date subsequent to
such surrender payable with respect to such shares of Buyer Common Stock.
3.7 No Further Ownership Rights in Company Common Stock. All shares of
Buyer Common Stock issued and cash paid upon conversion of shares of Company
Common Stock in accordance with the terms of this Article III (including any
cash paid pursuant to Section 3.6 or 3.8) shall be deemed to have been issued or
paid in full satisfaction of all rights pertaining to the shares of Company
Common Stock.
3.8 No Fractional Shares of Buyer Common Stock. No certificates or
scrip or shares of Buyer Common Stock representing fractional shares of Buyer
Common Stock or book-entry credit of the same shall be issued upon the surrender
for exchange of Company Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to have any rights of a stockholder of
Buyer or a holder of shares of Buyer Common Stock. In lieu of any such
fractional share, each holder of shares of Company Common Stock that would
otherwise have been entitled to a fraction of a share of Buyer Common Stock upon
surrender of Company Certificates (determined after taking into account all
Company Certificates delivered by such holder) shall be paid, upon such
surrender, cash (without interest) in an amount equal to the
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product of (i) the fractional interest of Buyer Common Stock to which such
holder otherwise would have been entitled multiplied by (ii) the Buyer Stock
Market Value.
3.9 Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of Company Certificates twelve months after
the Effective Time shall, at Buyer's request, be delivered to Buyer or otherwise
on the instruction of Buyer, and any holders of Company Certificates who have
not theretofore complied with this Article III shall, after such delivery, look
only to Buyer for certificates representing the Merger Consideration with
respect to the shares of Company Common Stock formerly represented thereby to
which such holders are entitled pursuant to Sections 3.1 and 3.5, any cash in
lieu of fractional shares of Buyer Common Stock to which such holders are
entitled pursuant to Section 3.8 and any dividends or distributions with respect
to shares of Buyer Common Stock to which such holders are entitled pursuant to
Section 3.6. Any such portion of the Exchange Fund remaining unclaimed by
holders of shares of Company Common Stock immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental Entity
shall, to the extent permitted by law, become the property of Buyer free and
clear of any claims or interest of any Person previously entitled thereto.
3.10 No Liability. None of Buyer, Merger Sub, the Company or the
Exchange Agent shall be liable to any Person in respect of any Merger
Consideration (or dividends or distribution with respect thereto) from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
3.11 Investment of the Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund as directed by Buyer on a daily basis;
provided that no such investment or loss thereon shall affect the amounts
payable or the timing of the amounts payable to the Company stockholders
pursuant to the other provisions of this Article III. Any interest and other
income resulting from such investments shall promptly be paid to Buyer.
3.12 Lost Certificates. If any Company Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Company Certificate to be lost, stolen or destroyed and, if
required by Buyer, the posting by such Person of a bond in such reasonable
amount as Buyer may direct as indemnity against any claim that may be made
against it with respect to such Company Certificate, the Exchange Agent will
deliver in exchange for such lost, stolen or destroyed Company Certificate, a
certificate representing the Merger Consideration with respect to the shares of
Company Common Stock formerly represented thereby, any cash in lieu of
fractional shares of Buyer Common Stock, and unpaid dividends and distributions
on shares of Buyer Common Stock deliverable in respect thereof, pursuant to this
Agreement.
3.13 Withholding Rights. Buyer shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to Sections 3.6 and 3.8 of
this Agreement any such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of U.S.
state or local or foreign Tax law. To the extent that amounts are so withheld or
paid over to or deposited with the relevant Governmental Entity by Buyer, such
amounts shall be treated for all purposes of this Agreement as having been paid
to the Person in respect of which such deduction and withholding was made by
Buyer.
15
3.14 Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of the Surviving Corporation or Merger Sub,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Surviving Corporation or Merger Sub, any other actions
and things necessary to vest, perfect or confirm of record or otherwise in Buyer
or the Surviving Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger.
3.15 Stock Transfer Books. The stock transfer books of the Company
shall be closed immediately upon the Effective Time, and there shall be no
further registration of transfers of shares of Company Common Stock thereafter
on the records of the Company. On or after the Effective Time, any Company
Certificates presented to the Exchange Agent, Buyer or the Surviving Corporation
for any reason shall be converted into the right to receive Merger Consideration
with respect to the shares of Company Common Stock formerly represented thereby
(including any cash in lieu of fractional shares of Buyer Common Stock to which
the holders thereof are entitled pursuant to Section 3.8 and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 3.6).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. Except as disclosed
in the Company disclosure schedule delivered to Buyer concurrently herewith (the
"COMPANY DISCLOSURE SCHEDULE") (each section of which qualifies only the
correspondingly numbered representation and warranty or covenant of the
Company), the Company hereby represents and warrants to Buyer as follows:
(a) Corporate Organization.
(i) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware. The Company has the corporate power and
authority to own or lease all of its properties and assets and
to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the
character or location of the properties and assets owned or
leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would
not, either individually or in the aggregate, have a Material
Adverse Effect on the Company. True and complete copies of the
certificate of incorporation and bylaws of the Company, as in
effect as of the date of this Agreement, have previously been
made available by the Company to Buyer.
(ii) Each Subsidiary of the Company (A) is duly
organized and validly existing under the laws of its
jurisdiction of organization, (B) is duly qualified to do
business and in good standing in all jurisdictions (whether
U.S. federal, state or local or foreign) where its ownership
or leasing of property or the conduct of its
16
business requires it to be so qualified and (C) has all
requisite corporate power and authority to own or lease its
properties and assets and to carry on its business as now
conducted, in each case, except as would not have a Material
Adverse Effect on the Company.
(b) Capitalization.
(i) The authorized capital stock of the Company
consists of (A) 250,000,000 shares of Company Common Stock, of
which, as of September 8, 2003, 4,768,016 shares were issued
and outstanding and 25,000 shares were held in treasury and
(B) 20,000,000 shares of preferred stock, par value $0.01 per
share, of the Company ("COMPANY PREFERRED STOCK," and together
with the Company Common Stock, the "COMPANY CAPITAL STOCK"),
of which no shares are issued and outstanding. All of the
issued and outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. As of the date
of this Agreement, except as set forth in Section 4.1(b)(i) of
the Company Disclosure Schedule and except pursuant to the
ESPP and the terms of options and stock issued pursuant to
Company Option Plans, the Company does not have and is not
bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of Company Capital
Stock or any other equity securities of the Company or any
securities of the Company representing the right to purchase
or otherwise receive any shares of Company Capital Stock. None
of the Company Stock Options are "reload" options or options
of a similar nature that grant to the holder any right to
additional Company Stock Options upon the exercise thereof. As
of September 8, 2003, no shares of Company Capital Stock were
reserved for issuance, except for 154,145 shares of Company
Common Stock reserved for issuance pursuant to the ESPP and
for stock options pursuant to the Company Option Plans (not
including unexercised outstanding Company Stock Options). The
Company has no Voting Debt issued or outstanding. As of
September 1, 2003, 779,861 shares of Company Common Stock are
subject to outstanding Company Stock Options. Since September
8, 2003, except as permitted by this Agreement, (A) no Company
Common Stock has been issued except in connection with the
exercise of issued and outstanding Company Stock Options and
(B) no options, warrants, securities convertible into, or
commitments with respect to the issuance of, shares of Company
Common Stock have been issued, granted or made.
(ii) Except pursuant to the Rights Agreement or as
set forth in the preceding paragraph, (i) there are no Company
Capital Stock or other equity securities of any class of the
Company, or any security convertible or exchangeable into or
exercisable for such Company Capital Stock or other equity
securities, issued, reserved for issuance or outstanding and
(ii) there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which
the Company is a party or by which it is bound obligating the
Company to issue, exchange, transfer, deliver or sell
additional shares of
17
Company Capital Stock of or other equity interests in the
Company or obligating the Company to grant, extend, accelerate
the vesting of, otherwise modify or amend or enter into any
such option, warrant, equity security, call, right, commitment
or agreement. No rights under the Rights Agreement are
currently exercisable and since September 1, 2003, no rights
under the Rights Agreement have at any time become
exercisable. The Company does not have any outstanding stock
appreciation rights, phantom stock, performance based rights
or similar rights or obligations. To the knowledge of the
Company, other than the Company Voting Agreement, there are no
voting trusts, proxies or other voting arrangement or
understandings with respect to shares of Company Capital Stock
or other equity interests in the Company.
(iii) The Company owns, directly or indirectly, all
of the issued and outstanding shares of capital stock or other
equity ownership interests of each Subsidiary of the Company,
free and clear of any Liens, and all of such shares or equity
ownership interests are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof.
No Subsidiary of the Company has or is bound by any
outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the
purchase or issuance of any shares of capital stock or any
other equity security of such Subsidiary or any securities
representing the right to purchase or otherwise receive any
shares of capital stock or any other equity security of such
Subsidiary. Section 4.1(b)(iii) of the Company Disclosure
Schedule sets forth a list of each investment of the Company
in any corporation, joint venture, partnership, limited
liability company or other entity other than its Subsidiaries,
which would be considered a Subsidiary if such investment
constituted control of such entity (each a "NON-SUBSIDIARY
AFFILIATE").
(c) Authority; No Violation.
(i) The Company has full corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
approved by the Board of Directors of the Company and declared
advisable. The Board of Directors of the Company has directed
that this Agreement be submitted to the Company stockholders
for approval at a meeting of the Company stockholders for the
purpose of approving the Merger and adopting this Agreement
(the "COMPANY STOCKHOLDERS MEETING"), and, except for the
approval of the Merger and the adoption of this Agreement by
the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock (the "COMPANY
STOCKHOLDER APPROVAL"), except for amending the Rights
Agreement as set described in Section 6.14, no other corporate
proceedings on the part of the Company are necessary to
approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and (assuming due
authorization,
18
execution and delivery by Buyer and Merger Sub) constitutes a
valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as
may be limited by bankruptcy, moratorium, insolvency or other
similar laws now or hereafter in effect generally affecting
the enforcement of creditors' rights.
(ii) Neither the execution and delivery of this
Agreement by the Company, nor the consummation by the Company
of the transactions contemplated hereby, nor compliance by the
Company with any of the terms or provisions hereof, will (A)
violate any provision of the certificate of incorporation or
bylaws of the Company, or (B) assuming that the consents and
approvals referred to in Section 4.1(d) are duly obtained,
except as set forth in Section 4.1(c)(ii) of the Company
Disclosure Schedule, (I) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction
applicable to the Company, any of its Subsidiaries or
Non-Subsidiary Affiliates or any of their respective
properties or assets or (II) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under,
constitute a default (or an event that, with notice or lapse
of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation
under, accelerate the performance required by, accelerate any
right or benefit provided by, or result in the creation of any
Lien upon any of the respective properties or assets of the
Company, any of its Subsidiaries or its Non-Subsidiary
Affiliates under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to
which the Company, any of its Subsidiaries or Non-Subsidiary
Affiliates is a party, or by which they or any of their
respective properties or assets may be bound or affected,
except in the case of clause (B) above, for such violations,
conflicts, breaches or defaults that either individually or in
the aggregate will not have a Material Adverse Effect on the
Company or the Surviving Corporation.
(d) Consents and Approvals. Except for (i) the filing of a
notification and report form under the HSR Act and the termination or
expiration of the waiting period under the HSR Act, if such filing of a
notification and report form is required by the HSR Act, and any other
applicable anti-trust or competition approvals, (ii) the filing with
the SEC of a joint proxy statement/prospectus relating to the matters
to be submitted to Buyer's stockholders at the Buyer Stockholders
Meeting and the matters to be submitted to the Company's stockholders
at the Company Stockholders Meeting (such joint proxy
statement/prospectus, and any amendments or supplements thereto, the
"JOINT PROXY STATEMENT/PROSPECTUS") and a registration statement on
Form S-4 with respect to the issuance of Buyer Common Stock in the
Merger (such Form S-4, and any amendments or supplements thereto, the
"FORM S-4") and (iii) the filing of the Certificate of Merger (the
consents, approvals, filings and registration required under or in
relation to clauses (i) though (iii) above, "NECESSARY CONSENTS"), and
(iv) such other consents, approvals, filings and registrations as set
forth in Section 4.1(d) the Company Disclosure Schedule, no consents or
approvals of or filings or registrations with any supranational or
national, state, municipal or local government, foreign or domestic,
any instrumentality,
19
subdivision, court, administrative agency or commission or other
authority thereof, or any quasi-governmental or private body exercising
any regulatory, taxing, importing or other governmental or
quasi-governmental authority (each, a "GOVERNMENTAL ENTITY") are
necessary in connection with (A) the execution and delivery by the
Company of this Agreement and (B) the consummation by the Company of
the transactions contemplated by this Agreement. The failure to obtain
the consents, approvals, filings and registrations set forth in Section
4.1(d) of the Company Disclosure Schedule would not reasonably be
expected to have a Material Adverse Effect on the Company or the Buyer.
(e) Financial Reports and SEC Documents. Each of the Company
and its Subsidiaries has filed all reports, prospectuses, forms,
schedules, registration statements, proxy statements or information
statements required to be filed by it since January 31, 2003 under the
Securities Act or under Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act in the form filed, or to be filed, with the SEC
(collectively, the "COMPANY SEC DOCUMENTS"). Each of the Company SEC
Documents, including the Company 2003 10-K and the Company 10-Q, (i)
complied or will comply in all material respects as to form with the
applicable requirements under the Securities Act or the Exchange Act,
as the case may be, and (ii) as of its filing date (except as amended
or supplemented prior to the date hereof), did not or will not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made,
not misleading; and each of the balance sheets contained in or
incorporated by reference into any such Company SEC Document (including
the related notes and schedules thereto) fairly presents or will fairly
present the financial position of the entity or entities to which it
relates as of its date, and each of the statements of income and
changes in stockholders' equity and cash flows or equivalent statements
in such Company SEC Documents (including any related notes and
schedules thereto) fairly presents or will fairly present the results
of operations, changes in stockholders' equity and changes in cash
flows, as the case may be, of the entity or entities to which it
relates for the periods to which it relates, in each case in accordance
with GAAP consistently applied during the periods involved, except, in
each case, as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements.
(f) Absence of Undisclosed Liabilities. Except as disclosed in
the audited financial statements (or notes thereto) included in the
Company 2003 10-K, or in the financial statements (or notes thereto)
included in the Company 10-Q, or in the Company SEC Documents filed
prior to the date hereof, neither the Company nor any of its
Subsidiaries had at April 30, 2003, or has incurred since that date
through the date hereof, any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature, except (i)
liabilities, obligations or contingencies which (A) are accrued or
reserved against in the financial statements in the Company 2003 10-K,
or the Company 10-Q or reflected in the respective notes thereto or (B)
were incurred after April 30, 2003 in the ordinary course of business
and consistent with past practices, (ii) liabilities, obligations or
contingencies that have been discharged or paid in full prior to the
date hereof, and (iii) liabilities, obligations and contingencies that
are of a nature not required to be reflected in the consolidated
financial statements of the Company and its Subsidiaries prepared in
accordance with GAAP consistently applied.
20
(g) Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Documents filed prior to the date hereof, since
April 30, 2003, the Company and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with
past practice, and since such date, there has not been (i) any event or
events have occurred that have had or would reasonably be expected to
have, either individually or in the aggregate, a Material Adverse
Effect on the Company; (ii) any declaration, setting aside or payment
of any dividend or other distribution with respect to the Company
Capital Stock or any redemption, purchase or other acquisition of any
of the Company Capital Stock; (iii) (A) any granting by the Company or
any of its Subsidiaries to any officer or director of the Company or
any of its Subsidiaries of any increase in compensation, (B) any
granting by the Company or any of its Subsidiaries to any such officer
or director of any increase in severance or termination pay, (C) any
granting by the Company or any of its Subsidiaries to any such officer,
director or other key employees of any loans or any increases to
outstanding loans, if any, (D) except employment agreements in the
ordinary course of business consistent with past practice with
employees other than any executive officer of the Company and any entry
by the Company or any of its Subsidiaries into any employment,
severance or termination agreement with any such employee or executive
officer or director, or (E) any increase in or establishment of any
Benefit Plan (including amendment of existing Benefit Plans); (iv) any
material damage, destruction or loss (whether or not covered by
insurance) with respect to the Company or any of its Subsidiaries; (v)
any material payment to an Affiliate of the Company or any of its
Subsidiaries other than in the ordinary course of business consistent
with past practice; (vi) any revaluation by the Company or any of its
Subsidiaries of any of their assets; (vii) any mortgage, lien, pledge,
encumbrance, charge, agreement, claim or restriction placed upon any of
the material properties or assets of the Company or any of its
Subsidiaries; (viii) any material change in the accounting methods,
principles or practices used by the Company; or (ix) any other action
or event that would have required the consent of Buyer pursuant to
Section 5.1 of this Agreement had such action or event occurred after
the date of this Agreement.
(h) Legal Proceedings. Except as set forth in Section 4.1(h)
of the Company Disclosure Schedule, there are no material suits,
actions or proceedings or investigations pending or, to the knowledge
of the Company, threatened, against or affecting the Company or any of
its Subsidiaries. To the knowledge of the Company, there are no
judgments, decrees, injunctions, rules or orders of any Governmental
Entity or arbitrator outstanding against the Company or its
Subsidiaries.
(i) Compliance with Applicable Law. The Company and each of
its Subsidiaries hold all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to each, and have complied in all
respects with and are not in default in any material respect under any,
applicable law, statute, order, rule or regulation of any Governmental
Entity relating to the Company or any of its Subsidiaries.
21
(j) Contracts.
(i) Section 4.1(j)(i) of the Company Disclosure
Schedule sets forth a complete and accurate list of all
contracts and agreements that are material to the business,
assets, liabilities, capitalization, prospects, condition
(financial or otherwise) or results of operations of the
Company and its Subsidiaries (collectively, "COMPANY
CONTRACTS," and each a "COMPANY CONTRACT"). The Company has
made available to Buyer a complete and accurate copy of each
Company Contract.
(ii) Except as set forth in Section 4.1(j)(ii) of the
Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is a party to or is bound by any contract,
arrangement, commitment or understanding (whether written or
oral) (A) with respect to the employment of any directors,
officers or employees other than in the ordinary course of
business consistent with past practice; (B) which, upon the
consummation or stockholder approval of the transactions
contemplated by this Agreement, will (either alone or upon the
occurrence of any additional acts or events) result in (1) a
requirement to obtain the consent of the other party to such
contract, arrangement, commitment or understanding or in a
termination of any such contract, (2) any payment (whether of
severance pay or otherwise) becoming due from Buyer, the
Company, the Surviving Corporation or any of their respective
Subsidiaries to any officer or employee thereof; (C) which is
a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed,
entirely or in part, after the date of this Agreement (whether
or not filed with the SEC), or (D) which materially restricts
the conduct of any line of business by the Company or any
Subsidiary thereof upon consummation of the Merger or will
materially restrict the ability of Buyer or the Surviving
Corporation or any Subsidiary thereof to engage in any line of
business. Each contract, arrangement, commitment or
understanding of the type described in this Section 4.1(j),
whether or not set forth in the Company Disclosure Schedule or
in the Company SEC Documents, shall be included in the
definition of the term "Company Contract."
(iii) (A) Each Company Contract is valid and binding
on the Company and any of its Subsidiaries that is a party
thereto, as applicable, and in full force and effect, (B) the
Company and each of its Subsidiaries has in all material
respects performed all obligations required to be performed by
it to date under each Company Contract, and (C) neither the
Company nor any of its Subsidiaries knows of, or has received
notice of, the existence of any event or condition which
constitutes, or, after notice or lapse of time or both, will
constitute, a material default on the part of the Company or
any of its Subsidiaries under any such Company Contract.
(iv) Except as set forth in Section 4.1(j)(iv) of the
Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries has received any notice, whether written or
oral, from any other party to a Company Contract of the other
party's intention to terminate any such Company Contract
whether as a
22
result of the announcement or consummation of the transactions
contemplated hereby or otherwise.
(k) Environmental Liability. There are no legal,
administrative, arbitral or other proceedings, claims, actions, causes
of action, private environmental investigations or remediation
activities or governmental investigations of any nature seeking to
impose, or that could reasonably result in the imposition of, on the
Company or any of its Subsidiaries, any material liability or
obligation arising under Environmental Law, pending or, to the
knowledge of the Company, threatened, against the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is
subject to any agreement, order, judgment, decree, letter or memorandum
by or with any Governmental Entity or third party imposing any material
liability or obligation with respect to the foregoing.
(l) Employee Benefit Plans; Labor Matters.
(i) There does not now exist any, and to the
knowledge of the Company, there are no existing circumstances
that could reasonably be expected to result in, any Controlled
Group Liability to the Company or any of its Subsidiaries. No
Company Benefit Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA. Neither the Company
nor any ERISA Affiliate has, within the six year period
preceding the date hereof, participated in, contributed to or
had any obligation or liability with respect to any plan that
is subject to Title IV or ERISA or section 412 of the Code. No
Company Benefit Plan is funded by a trust intended to be
exempt from taxation under section 501(c)(9) of the Code, nor
does any Company Benefit Plan provide any post-employment
welfare benefits to any employees or former employees of the
Company, except as may otherwise be required to be provided
pursuant to Part 6 of Title I of ERISA, section 4980B of the
Code, or a similar applicable state continuation coverage law.
(ii) Each of the Company Benefit Plans has been
operated and administered in all material respects in
accordance with applicable law and administrative rules and
regulations of any Governmental Entity, including, but not
limited to, ERISA and the Code; all benefits due under each
Company Benefit Plan have been timely paid; and there are no
pending or threatened claims (other than claims for benefits
in the ordinary course), lawsuits or arbitrations that have
been asserted or instituted, and, to the knowledge of the
Company, no set of circumstances exists, that may reasonably
give rise to a claim or lawsuit, against the Company Benefit
Plans, any fiduciaries thereof with respect to their duties to
the Company Benefit Plans or the assets of any of the trusts
under any of the Company Benefit Plans, in each case that
could reasonably be expected to result in any liability of the
Company or any of its Subsidiaries to the Pension Benefit
Guaranty Corporation, the U.S. Department of the Treasury, the
U.S. Department of Labor, any Company Benefit Plan, any
participant in a Company Benefit Plan, or any other party. All
contributions and payments to or with respect to each Company
Benefit Plan have been timely made and the Company has made
23
adequate provision for reserves to satisfy contributions and
payments that have not been made because they are not yet due
under the terms of such Company Benefit Plan or related
arrangement, document, or applicable law. No Company Benefit
Plan has any unfunded accrued benefits that are not fully
reflected in the Company's financial statements.
(iii) Neither the Company nor any Subsidiary of the
Company is a party to any collective bargaining or other labor
union contract applicable to individuals employed by the
Company or any Subsidiary of the Company, and no collective
bargaining agreement or other labor union contract is being
negotiated by the Company or any Subsidiary of the Company.
There is no labor dispute, strike, slowdown or work stoppage
against the Company or any Subsidiary of the Company pending
or, to the knowledge of the Company, threatened against the
Company or any Subsidiary of the Company and no unfair labor
practice or labor charge or complaint has occurred with
respect to the Company or any Subsidiary of the Company.
(iv) Neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated hereby (either alone or in conjunction with any
other event) will (A) result in forgiveness of indebtedness or
otherwise) becoming due to any director or any employee of the
Company or any Subsidiaries of the Company under any Company
Benefit Plan or otherwise; (B) increase any benefits otherwise
payable under any Company Benefit Plan; (C) result in any
acceleration of the time of payment or vesting of any such
benefits; (D) require the funding of any trust or other
funding vehicle; or (E) limit or prohibit any existing ability
to amend, merge, terminate or receive a reversion of assets
from any Company Benefit Plan or related trust.
(v) There has been no disallowance of a deduction, or
reasonable expectation of a disallowance of a deduction, under
Section 162(m) of the Code for employee compensation of any
amount paid or payable by the Company or any Subsidiary of the
Company Each Company Benefit Plan that is intended to be a
tax-qualified plan is so qualified, in both form and
operation, has received one or more IRS determination letters
to such effect, and no facts exist that could cause the
qualified status of such Company Benefit Plan to be adversely
affected.
(vi) Each Company Benefit Plan can be amended or
terminated at any time without approval from any Person,
without advance notice, and without any liability other than
for benefits accrued prior to such amendment or termination.
No agreement, commitment, or obligation exists to increase any
benefits under any Company Benefit Plan or to adopt any new
Company Benefit Plan.
(vii) Section 4.1(l)(vii) of the Company Disclosure
Schedule sets forth a list of each Company Benefit Plan.
(viii) The Company has heretofore made available to
Buyer true and complete copies of (1) each Company Benefit
Plan, including all amendments to
24
such plan, (2) each trust agreement, annuity or insurance contract, or
other funding instrument pertaining to each Company Benefit Plan, (3) the
most recent determination letter issued by the IRS with respect to each
Company Benefit Plan that is intended to be tax-qualified and a copy of
any pending applications for such IRS letters, (4) the two most recent
actuarial valuation reports for each Company Benefit Plan for which an
actuarial valuation report has been prepared, (5) the two most recent
annual reports (IRS Form 5500 Series), including all schedules to such
reports, if applicable, filed with respect to each Company Benefit Plan,
(6) the most recent plan audits, financial statements, and accountant's
opinion (with footnotes) for each Company Benefit Plan, and (7) all
relevant schedules and reports concerning the administrative costs,
benefit payments, employee and employer contributions, claims experience,
financial information, and insurance premiums for each Company Benefit
Plan that is a self-funded health benefit plan, and (8) all correspondence
with government authorities concerning any Company Benefit Plan (other
than as previously referenced above).
(ix) Based on historical payroll deduction elections and the ESPP's
rules regarding changes to payroll deduction elections, the total dollar
amount of payroll deductions expected to be accumulated in the ESPP
immediately prior to the Effective Time is $200,000, and that total dollar
amount will not exceed $250,000.
(m) Intellectual Property.
(i) As used herein, the term "INTELLECTUAL PROPERTY" means: (A) any
and all trademarks, service marks, brand names, certification marks, trade
dress, assumed names, corporate names, trade names, Internet domain names,
logos, slogans and all other indicia of origin, sponsorship or affiliation
(whether registered or unregistered), together with any and all
translations, modifications and combinations thereof, and including all
goodwill associated therewith, and all registrations therefor in any
jurisdiction and all applications to register any of the foregoing in any
jurisdiction, and any and all extensions, modifications and renewals of
any such registration or application; (B) any and all writings, works of
authorship (whether registered or not) and all other works, whether
copyrighted, copyrightable or not in any jurisdiction, any and all
copyrights, copyright registrations and applications for registration of
copyrights in any jurisdiction, and any renewals or extensions thereof,
including without limitation any and all other computer programs and
software (including any and all source code, object code, executable code,
system and program architecture, program files, data, databases and
related documentation); (C) any and all inventions, developments,
improvements, discoveries, know-how, concepts and ideas, whether
patentable or not in any jurisdiction and whether or not reduced to
practice, and all improvements thereto; (D) any and all patents, patent
applications, patent disclosures, industrial designs, industrial models
and utility models throughout the world, together with all reissuances,
revalidations,
25
continuations, continuations-in-part, divisions, revisions, extensions,
reexaminations and foreign counterparts thereof; (E) any and all
non-public information, trade secrets and proprietary or Confidential
Information and rights in any jurisdiction to limit the use or disclosure
thereof by any Person, whether or not such information has been marked
"CONFIDENTIAL" or bears a statutory copyright notice or claim to copyright
thereon or is known to be proprietary or nonpublic; (F) any and all
advertising and promotional materials; (G) any and all other intellectual
property or proprietary rights; (H) any and all agreements, licenses,
immunities, covenants not to xxx and the like relating to any of the
foregoing; (I) any and all copies and tangible embodiments of any of the
foregoing (in whatever form or medium); and (J) any and all claims or
causes of action arising out of or related to any infringement or
misappropriation of any of the foregoing.
(ii) A list of all Intellectual Property used in the business of the
Company or any of its Subsidiaries, covering any aspect of the business of
the Company or any of its Subsidiaries or otherwise necessary to the
business of the Company or any of its Subsidiaries as presently conducted
("COMPANY INTELLECTUAL PROPERTY") is set forth on Section 4.1(m)(ii) of
the Company Disclosure Schedule, including without limitation:
(A) each and every registered and unregistered trade name,
trademark, service xxxx, trade dress, corporate name and Internet domain
name;
(B) each and every patent, patent application and unpatented
invention;
(C) each and every registered and unregistered copyright,
including without limitation all computer software; and
(D) a general description of each and every trade secret,
including without limitation all customer lists.
(iii) With respect to each item of Company Intellectual Property
owned by the Company or any of its Subsidiaries ("OWNED COMPANY
INTELLECTUAL PROPERTY"), including without limitation the Company
Intellectual Property listed as "owned" on Section 4.1(m)(iii) of the
Company Disclosure Schedule:
(A) the Company possesses all right, title and interest in and to
the item, free and clear of any lien or other restriction;
(B) the item is not subject to any outstanding order, decree,
judgment, stipulation, award, decision, injunction or agreement in any
manner restricting the transfer, use, enforcement or licensing thereof or
otherwise;
26
(C) no litigation, action, suit, claim, proceeding, hearing,
governmental investigation, charge, complaint or demand ("ACTION") is
pending, asserted or, to the knowledge of the Company, threatened that
challenges the legality, validity, enforceability, use or ownership of the
item; and
(D) the item is valid, enforceable and subsisting.
(iv) With respect to each item of Company Intellectual Property used
or enjoyed by the Company or any of its Subsidiaries pursuant to a
license, sublicense, agreement or other permission ("LICENSED COMPANY
INTELLECTUAL PROPERTY"), including without limitation the Company
Intellectual Property listed as "licensed" on Section 4.1(m)(iv) of the
Company Disclosure Schedule:
(A) the license, sublicense, agreement or permission covering the
item ("LICENSE") is legal, valid, binding, enforceable and in full force
and effect in all material respects and is not terminable by anyone other
than the Company or one of its Subsidiaries;
(B) none of the Company, any of the Company's Subsidiaries or, to
the knowledge of the Company, any other party to the License is in
material breach or default thereof. No event has occurred which with
notice or lapse of time or both would constitute a material breach or
default of the License or which would permit termination or modification
of the License or acceleration thereunder;
(C) neither Company nor any of its Subsidiaries has repudiated
any provision of the License and, to the knowledge of the Company, no
other party to the License has repudiated any provision thereof;
(D) neither the Company nor any of its Subsidiaries has received
notice that any party to the License intends to cancel, not renew, or
terminate the license, sublicense, agreement or permission or to exercise
or not exercise an option thereunder;
(E) the License will not and may not be terminated or cancelled,
and the rights of the Company or any of its Subsidiaries thereunder will
not and may not be diminished or impaired, and the obligations of the
Company and any of its Subsidiaries thereunder will not and may not be
increased, as a result of the consummation of the transactions
contemplated by this Agreement;
(F) the License is not subject to any outstanding order, decree,
judgment, stipulation, award, decision, injunction or agreement in any
manner restricting the transfer, use, enforcement or licensing thereof or
otherwise; and
27
(G) no Action is pending, asserted or, to the knowledge of the
Company, threatened that challenges the legality, validity,
enforceability, use or licensing of the License.
(v) Each of the Company and its Subsidiaries, as applicable, has the
full right to possess, make, have made, use, copy, sell, distribute,
display, transfer, license and otherwise fully exploit all Owned Company
Intellectual Property, and has the full right to use and exploit all
Licensed Company Intellectual Property as used and exploited in the
business of each of the Company and its Subsidiaries, as applicable, as
presently conducted.
(vi) None of the Company's or any of its Subsidiaries' rights in or
to any of the Company Intellectual Property shall be adversely affected by
the Company's execution or delivery of this Agreement or by the
performance of any of the Company's obligations hereunder.
(vii) Neither the Company nor any of its Subsidiaries (A) has been
the subject of any Action, or has received any notice, charge, complaint,
claim, demand or threat, that involves a claim of infringement,
misappropriation or violation of any Intellectual Property right or other
proprietary right of any Person; or (B) has brought any Action against any
Person for infringement of any Company Intellectual Property or breach of
any license, sublicense or agreement involving any Company Intellectual
Property. No claim of infringement, misappropriation or violation of any
Intellectual Property right or other proprietary right of any Person has
been asserted or threatened by any Person against any licensee or customer
of the Company or any of its Subsidiaries based on the use of any Company
Intellectual Property.
(viii) Neither the Company nor any of its Subsidiaries has
interfered with, infringed upon, misappropriated or violated any
Intellectual Property rights of any Person. No Company Intellectual
Property, and no permitted use of any Company Intellectual Property by any
licensee or customer of the Company or any of its Subsidiaries through
license or sale from the Company or any of its Subsidiaries, as
applicable, directly or indirectly, constitutes or has constituted an
unauthorized use, inducement to infringe, contributory infringement,
misappropriation or other violation of the Intellectual Property rights of
any Person and no valid grounds exist for any bona fide claims against the
Company or any of its Subsidiaries, customers or licensees with respect to
any Intellectual Property. Without limiting the generality of the
foregoing, no person ever employed or otherwise engaged by the Company or
any of its Subsidiaries has asserted or, to the knowledge of the Company,
threatened any claim against the Company or any of its Subsidiaries,
relating to any Intellectual Property. There has not been, nor is there
presently, any unauthorized use, interference, disclosure, infringement,
misappropriation or violation of any Company Intellectual Property by any
Person.
28
(ix) Neither Company nor any of its Subsidiaries has entered into
any agreement (A) to indemnify any Person against any charge of
infringement of any Intellectual Property; or (B) granting any Person the
right to bring infringement actions with respect to, or otherwise to
enforce rights with respect to, any Company Intellectual Property.
(x) The Company has the exclusive right to file, prosecute and
maintain all of its and its Subsidiaries' patent applications and other
applications to register the Owned Company Intellectual Property, and has
the exclusive right to maintain its and its Subsidiaries' patents and
other registrations and is not aware of any claim by any Person regarding
title to same or derivative works of same.
(xi) The Company and its Subsidiaries have taken reasonable and
necessary steps to maintain and protect the Company Intellectual Property
and their rights thereunder and thereto, and no rights to any Company
Intellectual Property have been lost. The Company and its Subsidiaries, as
applicable, have paid all fees, annuities and all other payments which
have heretofore become due to any governmental entity with respect to the
Owned Company Intellectual Property and has taken all steps reasonable and
necessary to prosecute and maintain the same. No such obligation on the
part of the Company or any of its Subsidiaries exists with respect to any
Licensed Company Intellectual Property.
(xii) Neither the Company nor any of its Subsidiaries have
transferred its title in or to any copy of any computer program or
software (including source code, object code, data and databases)
constituting Company Intellectual Property. All computer programs and
software which are distributed by the Company or any of its Subsidiaries
(A) conform in all material respects with all specifications conveyed to
their customers or other transferees, and (B) are operative for their
intended purposes free of any material defects or deficiencies. No Company
Intellectual Property has been supplied by the Company or any of its
Subsidiaries to any Person except pursuant to a binding license under
which all rights of the Company or any of its Subsidiaries to such Company
Intellectual Property are fully preserved and protected. All source code
for all computer programs and software constituting Owned Company
Intellectual Property is in the sole possession of the Company or its
Subsidiaries, and all source code constituting Company Intellectual
Property has been maintained strictly confidential. Neither the Company
nor any of its Subsidiaries has any obligation to afford any Person access
to any source code for any computer program constituting Owned Company
Intellectual Property.
(xiii) Except as set forth in Section 4.1(m)(xiii) of the Company
Disclosure Schedule, neither Company nor any of its Subsidiaries is
obligated to pay any amount, whether as a royalty, license fee or other
payment, to any Person in order to use any of the Company Intellectual
Property.
29
(xiv) No licenses or permissions from third parties or releases of
third party rights in respect of any Company Intellectual Property are
necessary for consummation of the transactions contemplated by this
Agreement.
(xv) Each of the current employees of the Company or its
Subsidiaries is, and each of the former employees of the Company or its
Subsidiaries was, an "employee" within the meaning of an pursuant to the
definition of "work made for hire" in 17 U.S.C. Section 101, as amended.
All current and former employees, independent contractors and consultants
of the Company have assigned to the Company or one of its Subsidiaries, as
applicable, all of their respective rights, title and interest in and to
any Company Intellectual Property developed, invented or created on behalf
of the Company or its Subsidiaries by such employees, independent
contractors and consultants. No current or former employee, independent
contractor or consultant of the Company or its Subsidiaries has any
interest in any Company Intellectual Property.
(n) Properties. The Company has good, valid and marketable title to, or a
valid leasehold interest in, all of its properties and assets (real, personal
and mixed, tangible and intangible), including without limitation, all the
properties and assets reflected in the balance sheet of the Company as of April
30, 2003 (except for properties and assets disposed of in the ordinary course of
business and consistent with past practice since April 30, 2003). None of such
properties or assets are subject to any Liens (whether absolute, accrued,
contingent or otherwise), except (i) Liens for current Taxes not yet due, and
Liens for Taxes that are being contested in good faith by appropriate
proceedings and with respect to which proper reserves have been taken by the
Company and have been duly reflected on its books and records; (ii) deposits or
pledges to secure obligations under workmen's compensation, social security or
similar laws, or under unemployment insurance as to which the Company is not in
default; (iii) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the ordinary
course of business of the company; and (iv) minor imperfections of title and
encumbrances, if any, which do not materially detract from the value of the
property or assets subject thereto.
(o) Insurance. All fire and casualty, general liability, business
interruption, product liability and any other insurance policies maintained by
the Company are with reputable insurance carriers, and are in character and
amount at least equivalent to that carried by Persons engaged in similar
businesses and subject to the same or similar perils or hazards. None of the
insurance policies will terminate or lapse (or be affected in any other material
manner) by reason of the transactions contemplated by this Agreement. No insurer
under any insurance policy has cancelled or generally disclaimed liability under
any such policy or indicated any intent to do so or not to renew any such
policy. All material claims under the insurance policies have been filed by the
Company and paid in a timely fashion.
30
(p) Taxes.
(i) Each of the Company and its Subsidiaries has duly and timely
filed all material Tax Returns required to be filed by it, and all such
Tax Returns are true, complete and accurate in all material respects. The
Company and each of its Subsidiaries has paid or accrued in one or more of
the financial statements included in the Company SEC Documents all
material Taxes required to be paid by it, and has paid all Taxes that it
was required to withhold from amounts owing to any employee, creditor or
third party. There are no pending or to the knowledge of the Company
threatened, audits, examinations, investigations, deficiencies, claims or
other proceedings in respect of Taxes relating to the Company or any
Subsidiary of the Company that if determined adversely would have a
Material Adverse Effect on the Company or any Subsidiary of the Company.
There are no Liens for Taxes upon the assets of the Company or any
Subsidiary of the Company, other than Liens for current Taxes not yet due,
and Liens for Taxes that are being contested in good faith by appropriate
proceedings. Neither the Company nor any of its Subsidiaries has requested
any extension of time within which to file any Tax Returns in respect of
any taxable year that have not since been filed, nor made any request for
waivers of the time to assess any Taxes that are pending or outstanding.
The consolidated federal income Tax Returns of the Company have been
examined, or the statute of limitations has closed, with respect to all
taxable years ending on or before January 31, 2000. Neither the Company
nor any of its Subsidiaries has any liability for Taxes of any predecessor
or of any other Person (other than the Company and its Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any comparable provision of
state, local or foreign law), as a transferee or under a contract. Neither
the Company nor any Subsidiary of the Company is a party to any agreement
(with any Person other than the Company and/or any of its Subsidiaries)
relating to the allocation or sharing of Taxes.
(ii) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" within the meaning of Section
355(a)(1)(A) of the Code in a distribution of stock intended to qualify
for tax-free treatment under Section 355 of the Code (A) in the two years
prior to the date of this Agreement (or will constitute such a corporation
in the two years prior to the Closing Date) or (B) in a distribution which
otherwise constitutes part of a "plan" or "series of related transactions"
within the meaning of Section 355(e) of the Code in conjunction with the
Merger.
(iii) None of the Company or any of its Subsidiaries is party to any
contract or agreement that could result in a payment that is nondeductible
under Section 280G of the Code (or for which an excise tax is due under
Section 4999 of the Code) or nondeductible under Section 162(m) of the
Code.
(iv) None of the Company or any of its Subsidiaries has participated
in a transaction (i) the "significant purpose of which is the avoidance or
evasion of United States federal income tax" within the meaning of Section
6111(d)(i)(A) of
31
the Code and the Treasury Regulations promulgated thereunder; or (ii) is a
"reportable transaction" (irrespective of the Effective Time) within the
meaning of the Section 1.6011-4 of the Treasury Regulations.
(q) Reorganization under the Code. Neither the Company nor any of
its Subsidiaries has knowingly taken any action or knows of any fact that
could prevent the Merger from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.
(r) Form S-4; Joint Proxy Statement/Prospectus. None of the
information to be supplied by the Company or its Subsidiaries in the Form
S-4 or the Joint Proxy Statement/Prospectus will, (i) at the time the Form
S-4 becomes effective under the Securities Act, (ii) at the time of the
mailing of the Joint Proxy Statement/Prospectus and any amendments or
supplements thereto, and (iii) at the time of each of the Buyer
Stockholders Meeting and the Company Stockholders Meeting, 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 the light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement/Prospectus will comply, as of its
mailing date, as to form in all material respects with all applicable law,
including the provisions of the Exchange Act, except that no
representation is made by the Company with respect to information supplied
by Buyer or Merger Sub for inclusion therein.
(s) Affiliate Transactions. Except as set forth in Section 4.1(s) of
the Company Disclosure Schedule or as disclosed in the Company SEC
Documents, there are no contracts, agreements, arrangements or other
transactions between the Company, on the one hand, and (i) any officer or
director of the Company, (ii) any record or beneficial owner of five
percent or more of the Company Common Stock or (iii) any Affiliate of any
such officer, director or beneficial owner, on the other hand.
(t) Ownership of Buyer Stock. As of the date of this Agreement,
neither the Company nor any of its Subsidiaries own any shares of Buyer
Capital Stock.
(u) State Takeover Laws. The Board of Directors of the Company has
approved this Agreement and the transactions contemplated by this
Agreement as required under any applicable state takeover laws, including
Section 203 of the DGCL, so that any such state takeover laws will not
apply to this Agreement or any of the transactions contemplated hereby.
(v) Opinion of Financial Advisor. The Company has received the
opinion of U.S. Bancorp Xxxxx Xxxxxxx, dated the date hereof, to the
effect that the Exchange Ratio to be received by holders of Company Common
Stock in the Merger is fair to such stockholders from a financial point of
view.
(w) Board Approval. The Board of Directors of the Company, at a
meeting duly called and held, has, by unanimous vote, (i) determined that
this Agreement and the transactions contemplated hereby are advisable,
fair to and in the best interests of the
32
stockholders of the Company, (ii) approved and adopted this Agreement and
(iii) recommended that this Agreement and the transactions contemplated
hereby be approved and adopted by the holders of Company Common Stock.
(x) Brokers' Fees. Except as set forth in Section 4.1(x) of the
Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries nor any of their respective officers or directors has
employed any broker or finder or incurred any liability for any brokers'
fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
4.2 Representations and Warranties of Buyer and Merger Sub. Except as
disclosed in the Buyer disclosure schedule delivered to the Company concurrently
herewith (the "BUYER DISCLOSURE SCHEDULE") (each section of which qualifies only
the correspondingly numbered representation and warranty or covenant of Buyer),
Buyer and Merger Sub hereby represent and warrant to the Company as follows:
(a) Corporate Organization.
(i) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Buyer has the
corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified would not, either individually or in the aggregate, have a
Material Adverse Effect on Buyer. True and complete copies of the
certificate of incorporation and bylaws of Buyer, as in effect as of the
date of this Agreement, have previously been made available by Buyer to
the Company.
(ii) Each Subsidiary of Buyer (A) is duly organized and validly
existing under the laws of its jurisdiction of organization, (B) is duly
qualified to do business and in good standing in all jurisdictions
(whether U.S. federal, state or local or foreign) where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and (C) has all requisite corporate power and authority to own
or lease its properties and assets and to carry on its business as now
conducted, in each case, except as would have not have a Material Adverse
Effect on Buyer.
(iii) Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Merger Sub
was formed by Buyer solely for the purpose of engaging in the transactions
contemplated hereby and has engaged in no business and has incurred no
liabilities other than in connection with the transactions contemplated by
this Agreement. True and complete copies of the certificate of
incorporation and bylaws of Merger Sub, as in effect as of the date of
this Agreement, have previously been made available to the Company.
33
(b) Capitalization.
(i) The authorized capital stock of Buyer consists of (A) 50,000,000
shares of Buyer Common Stock, of which, as of August 31, 2003, 16,365,524
shares were issued and outstanding and 1,723,665 shares were held in
treasury and (B) 5,000,000 shares of preferred stock, par value $0.01 per
share, of Buyer (the "BUYER PREFERRED STOCK," and together with the Buyer
Common Stock, the "BUYER CAPITAL STOCK"), of which no shares are issued
and outstanding. All of the issued and outstanding shares of Buyer Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement,
except as set forth in the Buyer SEC Documents, Buyer does not have and is
not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of Buyer Capital Stock or any other equity
securities of Buyer or any securities of Buyer representing the right to
purchase or otherwise receive any shares of Buyer Capital Stock. None of
the Buyer Stock Options are "reload" options or options of a similar
nature that grant to the holder any right to additional Buyer Stock
Options upon the exercise thereof. As of August 31, 2003, no shares of
Buyer Capital Stock were reserved for issuance, except for 1,601,222
shares of Buyer Common Stock reserved for issuance upon the exercise of
stock options pursuant to the Buyer Option Plans and outstanding warrants.
Buyer has no Voting Debt issued or outstanding. As of August 31, 2003,
2,964,421 shares of Buyer Common Stock are subject to outstanding Buyer
Stock Options and outstanding warrants. Since September 1, 2003, except as
permitted by this Agreement, (A) no Buyer Common Stock has been issued
except in connection with the exercise of issued and outstanding Buyer
Stock Options and outstanding warrants and (B) no options, warrants,
securities convertible into, or commitments with respect to the issuance
of, shares of Buyer Common Stock have been issued, granted or made.
(ii) Except at set forth in the preceding paragraph or as described
in the Buyer SEC Documents, (A) there are no Buyer Capital Stock or other
equity securities of any class of Buyer, or any security convertible or
exchangeable into or exercisable for such Buyer Capital Stock or other
equity securities, issued, reserved for issuance or outstanding and (B)
there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which Buyer is a party or by
which it is bound obligating Buyer to issue, exchange, transfer, deliver
or sell additional shares of Buyer Capital Stock of or other equity
interests in Buyer or obligating Buyer to grant, extend, accelerate the
vesting of, otherwise modify or amend or enter into any such option,
warrant, equity security, call, right, commitment or agreement. Buyer does
not have any outstanding stock appreciation rights, phantom stock,
performance based rights or similar rights or obligations. To the
knowledge of Buyer, other than the Buyer Voting Agreement, there are no
voting trusts, proxies or other voting arrangement or understandings with
respect to shares of Buyer Capital Stock or other equity interests in
Buyer.
34
(iii) The authorized capital stock of Merger Sub consists of 1000
shares of common stock, par value $0.01 per share, all of which are
validly issued, fully paid and nonassessable, and are owned by Buyer free
and clear of any Liens.
(iv) Buyer owns, directly or indirectly, all of the issued and
outstanding shares of capital stock or other equity ownership interests of
each Subsidiary of Buyer, free and clear of any Liens, and all of such
shares or equity ownership interests are duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. No
Subsidiary of Buyer has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character
calling for the purchase or issuance of any shares of capital stock or any
other equity security of such Subsidiary or any securities representing
the right to purchase or otherwise receive any shares of capital stock or
any other equity security of such Subsidiary. Section 4.2(b)(iv) of the
Buyer Disclosure Schedule sets forth a list of each material investment of
Buyer in any Non-Subsidiary Affiliate.
(c) Authority; No Violation.
(i) Each of Buyer and Merger Sub has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of each of
Buyer and Merger Sub. Buyer, as sole stockholder of Merger Sub, has
approved this Agreement and the transactions contemplated hereby. The
Board of Directors of Buyer has directed that the issuance of Buyer Common
Stock pursuant to this Agreement be submitted to Buyer stockholders for
approval at a meeting of Buyer stockholders (the "BUYER STOCKHOLDERS
MEETING"), and, except for the approval of the issuance of Buyer Common
Stock in the Merger by the affirmative vote of the holders of a majority
of the total votes cast on the proposal in person or by proxy (the "BUYER
STOCKHOLDER APPROVAL"), no other corporate proceedings on the part of
Buyer or Merger Sub are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of Buyer and Merger Sub
and (assuming due authorization, execution and delivery by the Company)
constitutes a valid and binding obligation of Buyer and Merger Sub,
enforceable against Buyer and Merger Sub in accordance with its terms
except as may be limited by bankruptcy, moratorium, insolvency or other
similar laws now or hereafter in effect generally affecting the
enforcement of creditors' rights.
(ii) Neither the execution and delivery of this Agreement by Buyer
and Merger Sub, nor the consummation by Buyer and Merger Sub of the
transactions contemplated hereby, nor compliance by Buyer and Merger Sub
with any of the terms or provisions hereof, will (A) violate any provision
of the certificate of incorporation or bylaws of Buyer or the certificate
of incorporation or bylaws of
35
Merger Sub or (B) assuming that the consents and approvals referred to in
Section 4.2(d) are duly obtained, except as set forth in Section
4.2(c)(ii) of the Buyer Disclosure Schedule, (I) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Buyer or Merger Sub, any of their Subsidiaries or
any of their respective properties or assets or (II) violate, conflict
with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event that, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate
the performance required by, accelerate any right or benefit provided by,
or result in the creation of any Lien upon any of the respective
properties or assets of Buyer or Merger Sub, any of their Subsidiaries or
Non-Subsidiary Affiliates under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Buyer or Merger Sub,
any of their Subsidiaries or Non-Subsidiary Affiliates is a party, or by
which they or any of their respective properties or assets may be bound or
affected, except in the case of clause (B) above, for such violations,
conflicts, breaches or defaults that, either individually or in the
aggregate, will not have a Material Adverse Effect on Buyer or the
Surviving Corporation.
(d) Consents and Approvals. Except for (i) the filing of a notification
and report form under the HSR Act and the termination or expiration of the
waiting period under the HSR Act, if such filing of a notification and report
form is required by the HSR Act, and any other applicable anti-trust or
competition approvals, (ii) the filing with the SEC of the Joint Proxy
Statement/Prospectus and the Form S-4, (iii) the filing of the Certificate of
Merger, (iv) any consents, authorizations, approvals, filings or exemptions in
connection with compliance with the rules of the Nasdaq, (v) such filings and
approvals as are required to be made or obtained under the securities or "Blue
Sky" laws of various states in connection with the issuance of the shares of
Buyer Common Stock pursuant to this Agreement, and (vi) such other consents,
approvals, filings and registrations the failure of which to obtain or make
would not reasonably be expected to have a Material Adverse Effect on Buyer, no
consents or approvals of or filings or registrations with any Governmental
Entity are necessary in connection with (A) the execution and delivery by each
of Buyer and Merger Sub of this Agreement and (B) the consummation by each of
Buyer and Merger Sub of the transactions contemplated by this Agreement.
(e) Financial Reports and SEC Documents. Each of Buyer and its
Subsidiaries has filed all reports, prospectuses, forms, schedules, registration
statements, proxy statements or information statements required to be filed by
it since October 31, 2002 under the Securities Act or under Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act in the form filed, or to be filed, with
the SEC (collectively, the "BUYER SEC DOCUMENTS"). Each of the Buyer SEC
Documents, including the Buyer 2002 10-K and the Buyer 10-Q, (i) complied or
will comply in all material respects as to form with the applicable requirements
under the Securities Act or the Exchange Act, as the case may be, and (ii) as of
its filing date (except as amended or supplemented prior to the date hereof),
did not or will not contain any untrue statement of a material fact or omit to
state
36
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; and each of the balance sheets contained in or
incorporated by reference into any such Buyer SEC Document (including the
related notes and schedules thereto) fairly presents or will fairly present the
financial position of the entity or entities to which it relates as of its date,
and each of the statements of income and changes in stockholders' equity and
cash flows or equivalent statements in such Buyer SEC Documents (including any
related notes and schedules thereto) fairly presents or will fairly present the
results of operations, changes in stockholders' equity and changes in cash
flows, as the case may be, of the entity or entities to which it relates for the
periods to which it relates, in each case in accordance with GAAP consistently
applied during the periods involved, except, in each case, as may be noted
therein, subject to normal year-end audit adjustments in the case of unaudited
statements.
(f) Absence of Undisclosed Liabilities. Except as disclosed in the audited
financial statements (or notes thereto) included in the Buyer 2002 10-K, or in
the financial statements (or notes thereto) included in the Buyer 10-Q or in the
Buyer SEC Documents filed prior to the date hereof, neither Buyer nor any of its
Subsidiaries had at April 30, 2003, or has incurred since that date through the
date hereof, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except (i) liabilities, obligations or
contingencies which (A) are accrued or reserved against in the financial
statements in the Buyer 2003 10-K or in the Buyer 10-Q or reflected in the
respective notes thereto or (B) were incurred after April 30, 2003 in the
ordinary course of business and consistent with past practices, (ii)
liabilities, obligations or contingencies that (A) would not reasonably be
expected to have a Material Adverse Effect on Buyer, or (B) have been discharged
or paid in full prior to the date hereof, and (iii) liabilities, obligations and
contingencies that are of a nature not required to be reflected in the
consolidated financial statements of Buyer and its Subsidiaries prepared in
accordance with GAAP consistently applied.
(g) Absence of Certain Changes or Events. Except as disclosed in the Buyer
SEC Documents filed prior to the date hereof, since April 30, 2003, Buyer and
its Subsidiaries have conducted their businesses only in the ordinary course and
in a manner consistent with past practice, and since such date, there has not
been any event or events have occurred that have had or would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect on Buyer.
(h) Legal Proceedings. There are no material suits, actions or proceedings
or investigations pending or, to the knowledge of Buyer, threatened, against or
affecting Buyer or any of its Subsidiaries. To the knowledge of Buyer, there are
no judgments, decrees, injunctions, rules or orders of any Governmental Entity
or arbitrator outstanding against Buyer or its Subsidiaries.
(i) Compliance with Applicable Law. Buyer and each of its Subsidiaries
hold all material licenses, franchises, permits and authorizations necessary for
the lawful conduct of their respective businesses under and pursuant to each,
and have complied in all respects with and are not in default in any material
respect under any, applicable law,
37
statute, order, rule or regulation of any Governmental Entity relating to Buyer
or any of its Subsidiaries.
(j) Contracts.
(i) Except as described in the Buyer SEC Documents, there are no
contracts, arrangements, commitments or understandings that are material
to the business, assets, liabilities, capitalization, prospects, condition
(financial or otherwise) or results of operations of Buyer and its
Subsidiaries (collectively, the contracts, arrangements, commitments or
understandings of the type described in this Section 4.2(j)(i), including
those set forth in Section 4.2(j)(i) of the Buyer Disclosure Schedule or
filed with the Buyer SEC Documents, "BUYER CONTRACTS," and each a "BUYER
CONTRACT").
(ii) Except as set forth in Section 4.2(j)(ii) of the Buyer
Disclosure Schedule, neither the Buyer nor any of its Subsidiaries is a
party to or is bound by any contract, arrangement, commitment or
understanding (whether written or oral): (A) which, upon the consummation
or Buyer stockholder approval of the transactions contemplated by this
Agreement, will (either alone or upon the occurrence of any additional
acts or events) result in a requirement to obtain the consent of the other
party to such contract, arrangement, commitment or understanding or in a
termination of any such contract; or (B) which materially restricts the
conduct of any line of business by Buyer or any Subsidiary thereof
(including the Surviving Corporation) upon consummation of the Merger or
will materially restrict the ability of Buyer or the Surviving Corporation
or any Subsidiary thereof to engage in any line of business or the sale of
any products, including but not limited to those products collectively
sold by Buyer and the Company immediately prior to the Effective Time.
(iii) Each Buyer Contract is valid and binding on Buyer and any of
its Subsidiaries that is a party thereto, as applicable, and in full force
and effect, (B) Buyer and each of its Subsidiaries has in all material
respects performed all obligations required to be performed by it to date
under each Buyer Contract, and (C) neither Buyer nor any of its
Subsidiaries knows of, or has received notice of, the existence of any
event or condition which constitutes, or, after notice or lapse of time or
both, will constitute, a material default on the part of Buyer or any of
its Subsidiaries under any such Buyer Contract.
(iv) Neither Buyer nor any of its Subsidiaries has received any
notice, whether written or oral, from any other party to a Buyer Contract
of the other party's intention to terminate any such Buyer Contract
whether as a result of the announcement or consummation of the
transactions contemplated hereby or otherwise.
(k) Intellectual Property.
(i) All Intellectual Property used in the business of the Buyer or
any of its Subsidiaries, covering any aspect of the business of the Buyer
or any of its
38
Subsidiaries or otherwise necessary to the business of the Buyer or any of
its Subsidiaries as presently conducted shall hereinafter be referred to
as "BUYER INTELLECTUAL PROPERTY." With respect to each item of Buyer
Intellectual Property owned by Buyer or any of its Subsidiaries ("OWNED
BUYER INTELLECTUAL PROPERTY"):
(A) Buyer possesses all right, title and interest in and to the
item, free and clear of any lien or other restriction;
(B) the item is not subject to any outstanding order, decree,
judgment, stipulation, award, decision, injunction or agreement in any
manner restricting the transfer, use, enforcement or licensing thereof or
otherwise;
(C) no Action is pending, asserted or, to the knowledge of Buyer,
threatened that challenges the legality, validity, enforceability, use or
ownership of the item; and
(D) the item is valid, enforceable and subsisting.
(ii) With respect to each item of Buyer Intellectual Property used
or enjoyed by Buyer or any of its Subsidiaries pursuant to a license,
sublicense, agreement or other permission ("LICENSED BUYER INTELLECTUAL
PROPERTY"):
(A) the License covering the item is legal, valid, binding,
enforceable and in full force and effect in all material respects and is
not terminable by anyone other than Buyer or one of its Subsidiaries;
(B) none of Buyer, any of Buyer's Subsidiaries or, to the knowledge
of Buyer, any other party to the License is in material breach or default
thereof. No event has occurred which with notice or lapse of time or both
would constitute a material breach or default of the License or which
would permit termination or modification of the License or acceleration
thereunder;
(C) neither Buyer nor any of its Subsidiaries has repudiated any
provision of the License and, to the knowledge of Buyer, no other party to
the License has repudiated any provision thereof;
(D) neither Buyer nor any of its Subsidiaries has received notice
that any party to the License intends to cancel, not renew, or terminate
the license, sublicense, agreement or permission or to exercise or not
exercise an option thereunder;
(E) the License will not and may not be terminated or cancelled, and
the rights of Buyer or any of its Subsidiaries thereunder will not and may
not be diminished or impaired, and the obligations of Buyer and any of its
Subsidiaries thereunder will not and may not be increased, as a result of
the consummation of the transactions contemplated by this Agreement;
39
(F) the License is not subject to any outstanding order, decree,
judgment, stipulation, award, decision, injunction or agreement in any
manner restricting the transfer, use, enforcement or licensing thereof or
otherwise; and
(G) no Action is pending, asserted or, to the knowledge of Buyer,
threatened that challenges the legality, validity, enforceability, use or
licensing of the License.
(iii) Each of Buyer and its Subsidiaries, as applicable, has the
full right to possess, make, have made, use, copy, sell, distribute,
display, transfer, license and otherwise fully exploit all Owned Buyer
Intellectual Property, and has the full right to use and exploit all
Licensed Buyer Intellectual Property as used and exploited in the business
of each of Buyer and its Subsidiaries, as applicable, as presently
conducted.
(iv) None of Buyer's or any of its Subsidiaries' rights in or to any
of Buyer Intellectual Property shall be adversely affected by Buyer's
execution or delivery of this Agreement or by the performance of any of
Buyer's obligations hereunder.
(v) Neither Buyer nor any of its Subsidiaries (A) has been the
subject of any Action, or has received any notice, charge, complaint,
claim, demand or threat, that involves a claim of infringement,
misappropriation or violation of any Intellectual Property right or other
proprietary right of any Person; or (B) has brought any Action against any
Person for infringement of any Buyer Intellectual Property or breach of
any license, sublicense or agreement involving any Buyer Intellectual
Property. No claim of infringement, misappropriation or violation of any
Intellectual Property right or other proprietary right of any Person has
been asserted or threatened by any Person against any licensee or customer
of Buyer or any of its Subsidiaries based on the use of any Buyer
Intellectual Property.
(vi) Neither Buyer nor any of its Subsidiaries has interfered with,
infringed upon, misappropriated or violated any Intellectual Property
rights of any Person. No Buyer Intellectual Property, and no permitted use
of any Buyer Intellectual Property by any licensee or customer of Buyer or
any of its Subsidiaries through license or sale from Buyer or any of its
Subsidiaries, as applicable, directly or indirectly, constitutes or has
constituted an unauthorized use, inducement to infringe, contributory
infringement, misappropriation or other violation of the Intellectual
Property rights of any Person and no valid grounds exist for any bona fide
claims against Buyer or any of its Subsidiaries, customers or licensees
with respect to any Intellectual Property. Without limiting the generality
of the foregoing, no person ever employed or otherwise engaged by Buyer or
any of its Subsidiaries has asserted or, to the knowledge of Buyer,
threatened any claim against Buyer or any of its Subsidiaries, relating to
any Intellectual Property. There has not been, nor is there presently, any
unauthorized use, interference, disclosure, infringement, misappropriation
or violation of any Buyer Intellectual Property by any Person.
40
(vii) Neither Buyer nor any of its Subsidiaries has entered into any
agreement (A) to indemnify any Person against any charge of infringement
of any Intellectual Property; or (B) granting any Person the right to
bring infringement actions with respect to, or otherwise to enforce rights
with respect to, any Buyer Intellectual Property.
(viii) Buyer has the exclusive right to file, prosecute and maintain
all of its and its Subsidiaries' patent applications and other
applications to register the Owned Buyer Intellectual Property, and has
the exclusive right to maintain its and its Subsidiaries' patents and
other registrations and is not aware of any claim by any Person regarding
title to same or derivative works of same.
(ix) Buyer and its Subsidiaries have taken reasonable and necessary
steps to maintain and protect Buyer Intellectual Property and their rights
thereunder and thereto, and no rights to any Buyer Intellectual Property
have been lost. Buyer and its Subsidiaries, as applicable, have paid all
fees, annuities and all other payments which have heretofore become due to
any governmental entity with respect to the Owned Buyer Intellectual
Property and has taken all steps reasonable and necessary to prosecute and
maintain the same. No such obligation on the part of Buyer or any of its
Subsidiaries exists with respect to any Licensed Buyer Intellectual
Property.
(ix) Neither Buyer nor any of its Subsidiaries have transferred its
title in or to any copy of any computer program or software (including
source code, object code, data and databases) constituting Buyer
Intellectual Property. All computer programs and software which are
distributed by Buyer or any of its Subsidiaries (A) conform in all
material respects with all specifications conveyed to their customers or
other transferees, and (B) are operative for their intended purposes free
of any material defects or deficiencies. No Buyer Intellectual Property
has been supplied by Buyer or any of its Subsidiaries to any Person except
pursuant to a binding license under which all rights of Buyer or any of
its Subsidiaries to such Buyer Intellectual Property are fully preserved
and protected. All source code for all computer programs and software
constituting Owned Buyer Intellectual Property is in the sole possession
of Buyer or its Subsidiaries, and all source code constituting Buyer
Intellectual Property has been maintained strictly confidential. Neither
Buyer nor any of its Subsidiaries has any obligation to afford any Person
access to any source code for any computer program constituting Owned
Buyer Intellectual Property.
(x) Except as set forth in Section 4.2(k)(x) of Buyer Disclosure
Schedule, neither Buyer nor any of its Subsidiaries is obligated to pay
any amount, whether as a royalty, license fee or other payment, to any
Person in order to use any of Buyer Intellectual Property.
(xi) No licenses or permissions from third parties or releases of
third party rights in respect of any Buyer Intellectual Property are
necessary for consummation of the transactions contemplated by this
Agreement.
41
(xii) Each of the current employees of Buyer or its Subsidiaries is,
and each of the former employees of Buyer or its Subsidiaries was, an
"employee" within the meaning of an pursuant to the definition of "work
made for hire" in 17 U.S.C. Section 101, as amended. All current and
former employees, independent contractors and consultants of Buyer have
assigned to Buyer or one of its Subsidiaries, as applicable, all of their
respective rights, title and interest in and to any Buyer Intellectual
Property developed, invented or created on behalf of Buyer or its
Subsidiaries by such employees, independent contractors and consultants.
No current or former employee, independent contractor or consultant of
Buyer or its Subsidiaries has any interest in any Buyer Intellectual
Property.
(l) Taxes.
(i) Each of Buyer and its Subsidiaries has duly and timely filed all
material Tax Returns required to be filed by it, and all such Tax Returns
are true, complete and accurate in all material respects. Buyer and each
of its Subsidiaries has paid or accrued in one or more of the financial
statements included in the Buyer SEC Documents all material Taxes required
to be paid by it, and has paid all Taxes that it was required to withhold
from amounts owing to any employee, creditor or third party. There are no
pending or to the knowledge of Buyer threatened, audits, examinations,
investigations, deficiencies, claims or other proceedings in respect of
Taxes relating to Buyer or any Subsidiary of Buyer that if determined
adversely would have a Material Adverse Effect on the Buyer or any
Subsidiary of Buyer. There are no Liens for Taxes upon the assets of Buyer
or any Subsidiary of Buyer, other than Liens for current Taxes not yet
due, and Liens for Taxes that are being contested in good faith by
appropriate proceedings. Neither Buyer nor any of its Subsidiaries has
requested any extension of time within which to file any Tax Returns in
respect of any taxable year that have not since been filed, nor made any
request for waivers of the time to assess any Taxes that are pending or
outstanding. The consolidated federal income Tax Returns of Buyer have
been examined, or the statute of limitations has closed, with respect to
all taxable years ending on or before October 31, 1999. Neither Buyer nor
any of its Subsidiaries has any liability for Taxes of any predecessor or
of any other Person (other than Buyer and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any comparable provision of state, local
or foreign law), as a transferee or under a contract. Neither Buyer nor
any Subsidiary of Buyer is a party to any agreement (with any Person other
than Buyer and/or any of its Subsidiaries) relating to the allocation or
sharing of Taxes.
(ii) Buyer has not constituted either a "distributing corporation"
or a "controlled corporation" within the meaning of Section 355(a)(1)(A)
of the Code in a distribution of stock intended to qualify for tax-free
treatment under Section 355 of the Code (A) in the two years prior to the
date of this Agreement (or will constitute such a corporation in the two
years prior to the Closing Date) or (B) in a distribution which otherwise
constitutes part of a "plan" or "series of related transactions" within
the meaning of Section 355(e) of the Code in conjunction with the Merger.
42
(iii) None of the Buyer or any of its Subsidiaries has participated
in a transaction (i) the "significant purpose of which is the avoidance or
evasion of United States federal income tax" within the meaning of Section
6111(d)(i)(A) of the Code and the Treasury Regulations promulgated
thereunder; or (ii) is a "reportable transaction" (irrespective of the
Effective Time) within the meaning of the Section 1.6011-4 of the Treasury
Regulations.
(m) Reorganization under the Code. Neither Buyer nor any of its
Subsidiaries has knowingly taken any action or knows of any fact that could
prevent the Merger from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code.
(n) Form S-4; Joint Proxy Statement/Prospectus. None of the information to
be supplied by Buyer or its Subsidiaries in the Form S-4 or the Joint Proxy
Statement/Prospectus will, (i) at the time the Form S-4 becomes effective under
the Securities Act, (ii) at the time of the mailing of the Joint Proxy
Statement/Prospectus and any amendments or supplements thereto, and (iii) at the
time of each of the Buyer Stockholders Meeting and the Company Stockholders
Meeting, 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 the light of the circumstances under which they are made,
not misleading. The Joint Proxy Statement/Prospectus will comply, as of its
mailing date, as to form in all material respects with all applicable law,
including the provisions of the Exchange Act, except that no representation is
made by Buyer or Merger Sub with respect to information supplied by the Company
for inclusion therein.
(o) Ownership of Company Stock. As of the date of this Agreement, neither
Buyer nor any of its Subsidiaries own any shares of Company Capital Stock.
(p) Opinion of Financial Advisor. Buyer has received the opinion of Xxxxxx
Brothers, dated the date hereof, to the effect that the consideration to be paid
is fair to the Buyer from a financial point of view.
(q) Board Approval. The Board of Directors of Buyer, at a meeting duly
called and held, has, by unanimous vote, (i) determined that this Agreement and
the transactions contemplated hereby are advisable, fair to and in the best
interests of the stockholders of Buyer, (ii) approved and adopted this Agreement
and (iii) recommended that the issuance of Buyer Common Stock in the Merger
pursuant to this Agreement be approved by the holders of Buyer Common Stock.
(r) Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
(s) Buyer Common Stock. The Buyer Common Stock to be issued in connection
with the Merger (including the Buyer Common Stock to be issued in accordance
with Article 3 and Section 6.13) has been duly authorized by all necessary
corporate action, and when issued in accordance with this Agreement, will be
validly
43
issued, fully paid and nonassessable and not subject to preemptive rights, and
will be freely tradable. Without limiting the generality of the foregoing and
subject to the provisions of Rule 145 under the Securities Act, none of the
shares of Buyer Common Stock to be issued in connection with the Merger will
constitute "restricted securities" within the meaning of Rule 144 under the
Securities Act.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement or Section 5.1 of the Company Disclosure Schedule and except
to the extent the Buyer shall otherwise consent in writing):
(a) Ordinary Course.
(i) The Company and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course, in substantially the
same manner as heretofore conducted, and shall use their reasonable
efforts to keep available the services of their respective present
officers and key employees, preserve intact their present lines of
business, maintain their rights and franchises and preserve their
relationships with customers, suppliers and others having business
dealings with them.
(ii) The Company shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new line of business, (B) incur or
commit to any capital expenditures or any obligations or liabilities in
connection therewith other than capital expenditures which individually
and in the aggregate do not exceed $250,000 or make payments in connection
with any of the foregoing, (C) except in the ordinary course under the
Company's existing line of credit, incur any additional indebtedness in a
single transaction or a group of related transactions having a value in
excess of 1% of the Company's assets or (D) enter into any transaction
with its Affiliates.
(b) Dividends; Changes in Share Capital. The Company shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of
any of its capital stock, except the declaration and payment of dividends
from a wholly-owned Subsidiary of the Company to the Company or to another
wholly-owned Subsidiary of the Company, (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for,
shares of its capital stock, except for any such transaction by a
wholly-owned Subsidiary of the Company which remains a wholly-owned
Subsidiary after consummation of such transaction, or (iii) repurchase,
redeem or otherwise acquire any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital
stock.
44
(c) Issuance of Securities. The Company shall not, and shall not
permit any of its Subsidiaries to, issue, deliver, sell, pledge or dispose
of, or authorize or propose the issuance, delivery, sale, pledge or
disposition of, any shares of its capital stock of any class, any Voting
Debt or any securities convertible into or exercisable for, or any rights,
warrants, calls or options to acquire, any such shares or Voting Debt, or
enter into any commitment, arrangement, undertaking or agreement with
respect to any of the foregoing, other than the issuance of Company Common
Stock upon the exercise of Company Stock Options outstanding on the date
of this Agreement in accordance with their present terms or pursuant to
the ESPP.
(d) Governing Documents. Except to the extent required to comply
with its obligations hereunder or with applicable law, the Company shall
not, and shall not permit its Subsidiaries to, amend or propose to so
amend their respective Certificates of Incorporation or its bylaws or
other governing documents.
(e) No Acquisitions. The Company shall not, and shall not permit any
of its Subsidiaries to, acquire or agree to acquire by merger or
consolidation, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire
any assets (excluding the acquisition of assets used in the operations of
the business of the Company and its Subsidiaries in the ordinary course,
which assets do not constitute a business unit, division or all or
substantially all of the assets of the transferor). The Company shall not,
and shall not permit its Subsidiaries to, enter into any material joint
venture, partnership or other similar arrangement.
(f) No Dispositions. The Company shall not, and shall not permit any
of its Subsidiaries to, sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets (including capital
stock of Subsidiaries of the Company) other than in the ordinary course of
business consistent with past practice.
(g) Investments; Indebtedness. The Company shall not, and shall not
permit any of its Subsidiaries to (i) make any loans, advances or capital
contributions to, or investments in, any other Person, other than (A)
loans or investments by the Company or a Subsidiary of the Company to or
in the Company or any Subsidiary of the Company, or (B) in the ordinary
course of business consistent with past practice which are not,
individually or in the aggregate, material to the Company or its
Subsidiaries, as applicable (provided that none of such transactions
referred to in this clause (B) presents a material risk of making it more
difficult to obtain any approval or authorization required in connection
with the Merger under Regulatory Law) or (ii) except in the ordinary
course consistent with past practice, incur any indebtedness for borrowed
money or guarantee any such indebtedness of another Person, issue or sell
any debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another Person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another Person
(other than any wholly-owned Subsidiary) or enter into any arrangement
having the economic effect of any of the foregoing.
45
(h) Tax-Free Qualification. The Company shall not, and shall not
permit any of its Subsidiaries to, take any action (including any action
otherwise permitted by this Section 5.1) that it knows would prevent the
Merger from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code.
(i) Compensation. Except as required by law or by the express terms
of any collective bargaining agreement or other agreement currently in
effect and disclosed in writing to the Buyer between the Company or any
Subsidiary of the Company and any director, officer, consultant or
employee thereof, the Company shall not increase the amount of
compensation of, or pay any severance to (other than non-material
increases in the ordinary course of business consistent with past
practice), any director, officer, consultant or key employee of the
Company or any Subsidiary of the Company, or make any increase in or
commitment to increase or accelerate the payment of any employee benefit,
grant any additional Company Stock Options, adopt or amend or make any
commitment to adopt or amend any Company Benefit Plan or fund or make any
contribution to any Company Benefit Plan or any related trust or other
funding vehicle, other than regularly scheduled contributions to trusts
funding qualified plans. Except as required by the Company Option Plans,
(i) the Company shall not accelerate the vesting of, or the lapsing of
restrictions with respect to any Company Stock Option or other stock-based
award, and (ii) any option granted or committed to be granted after the
date of this Agreement shall not accelerate as a result of the approval or
consummation of any transaction contemplated by this Agreement.
(j) Accounting Methods; Tax Matters. Except as disclosed in Company
SEC Documents filed prior to the date of this Agreement, or as required by
a Governmental Entity, the Company shall not change in any material
respect its methods of accounting in effect at July 31, 2003, except as
required by changes in GAAP as concurred in by the Company's independent
public accountants. The Company shall not (i) change its fiscal year; (ii)
make or revoke any Tax election that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on the
Company or Buyer; (iii) settle any material Tax claim or assessment or
(iv) surrender any right to claim a material Tax refund or to any
extension or waiver of the limitations period applicable to any material
Tax claim or assessment.
(k) Litigation. The Company shall not, and shall not permit any of
its Subsidiaries to, settle or compromise any material suit, action,
proceeding or regulatory investigation pending for an amount in excess of
$250,000 or enter into any consent decree, injunction or similar restraint
or form of equitable relief in settlement of any suit, action, proceeding
or regulatory investigation pending.
(l) Intellectual Property. The Company shall not transfer or license
to any Person or otherwise extend, amend or modify any rights to the
Company Intellectual Property, other than in the ordinary course of
business consistent with past practice or pursuant to any contracts,
agreements, arrangements or understandings currently in place that have
been disclosed in writing to Buyer prior to the date of this Agreement.
46
(m) Company Contracts. Except in the ordinary course of business
consistent with past practices and as would not have a Material Adverse
Effect on the Company or Buyer, the Company and its Subsidiaries shall not
amend or otherwise modify, or terminate, any Company Contracts, or enter
into any joint venture, lease or service agreements or other material
agreement of the Company or any of its Subsidiaries.
(n) Certain Actions. The Company and its Subsidiaries shall not take
any action or omit to take any action (i) for the purpose of preventing,
delaying or impeding the consummation of the Merger or the other
transactions contemplated by this Agreement or (ii) that could reasonably
be expected to have a Material Adverse Effect on the Company.
(o) No Related Actions. The Company shall not, and shall not permit
any of its Subsidiaries to, agree or commit to do any of the foregoing.
5.2 Covenants of Buyer. During the period from the date of this Agreement
and continuing until the Effective Time, Buyer agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or Section 5.2 of the Buyer Disclosure Schedule and except to the
extent the Company shall otherwise consent in writing):
(a) Ordinary Course. Buyer and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall use their
reasonable efforts to keep available the services of their respective
present officers and key employees, preserve intact their present lines of
business, maintain their rights and franchises and preserve their
relationships with customers, suppliers and others having business
dealings with them. Until such time that the transactions contemplated by
this Agreement are consented to or permitted by the requisite lender or
lenders under the Buyer's existing lines of credit, Buyer shall not draw
down any amounts under or otherwise utilize its existing lines of credit.
(b) Dividends; Changes in Share Capital. Buyer shall not, and shall
not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of
any of its capital stock, except the declaration and payment of dividends
from a wholly-owned Subsidiary of Buyer to Buyer or to another
wholly-owned Subsidiary of Buyer, (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for, shares
of its capital stock, except for any such transaction by a wholly-owned
Subsidiary of Buyer which remains a wholly-owned Subsidiary after
consummation of such transaction, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into
or exercisable for any shares of its capital stock.
(c) Issuance of Securities. Buyer shall not, and shall not permit
any of its Subsidiaries to, issue, deliver, sell, pledge or dispose of,
any shares of its capital stock of any class, any Voting Debt or any
securities convertible into or exercisable for, or any rights, warrants,
calls or options to acquire, any such shares or Voting Debt, or enter into
any commitment, arrangement, undertaking or agreement with respect to any
of the
47
foregoing, other than the issuance of Buyer Common Stock upon the exercise
of Buyer stock options and warrants outstanding on the date of this
Agreement in accordance with their present terms.
(d) Governing Documents. Except to the extent required to comply
with their respective obligations hereunder or with applicable law, Buyer
and Merger Sub shall not, and shall not permit their respective
Subsidiaries to, amend or propose to so amend their respective
Certificates of Incorporation or bylaws or other governing documents.
(e) No Dispositions. Buyer shall not, and shall not permit any of
its Subsidiaries to, sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets (including capital
stock of Subsidiaries of Buyer) other than in the ordinary course of
business consistent with past practice.
(f) Tax-Free Qualification. Buyer shall not, and shall not permit
any of its Subsidiaries to, take any action (including any action
otherwise permitted by this Section 5.2) that it knows would prevent the
Merger from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code.
(g) Accounting Methods; Tax Matters. Except as disclosed in Buyer
SEC Documents filed prior to the date of this Agreement, or as required by
a Governmental Entity, Buyer shall not change in any material respect its
methods of accounting in effect at July 31, 2003, except as required by
changes in GAAP as concurred in by Buyer's independent public accountants.
Buyer shall not (i) change its fiscal year; (ii) make or revoke any Tax
election that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Company or Buyer; (iii)
settle any material Tax claim or assessment or (iv) surrender any right to
claim a material Tax refund or to any extension or waiver of the
limitations period applicable to any material Tax claim or assessment.
(h) Certain Actions. Buyer and its Subsidiaries shall not take any
action or omit to take any action (i) for the purpose of preventing,
delaying or impeding the consummation of the Merger or the other
transactions contemplated by this Agreement or (ii) that could reasonably
be expected to have a Material Adverse Effect on the Buyer.
5.3 Governmental Filings. The Company and Buyer shall file all reports and
correspondence required to be filed by each of them with the SEC (and all other
Governmental Entities) between the date of this Agreement and the Effective Time
and shall, if requested by the other party and (to the extent permitted by
applicable law or regulation or any applicable confidentiality agreement)
deliver to the other party copies of all such reports, correspondence,
announcements and publications promptly upon request.
5.4 Control of Other Party's Business. Nothing contained in this Agreement
shall give Buyer, directly or indirectly, the right to control or direct the
Company's operations prior to the Effective Time. Prior to the Effective Time,
each of the Company and Buyer shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
48
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of Proxy Statement; Stockholders Meetings.
(a) As promptly as reasonably practicable following the date hereof, Buyer
and the Company shall cooperate in preparing (including by causing their tax
counsel to provide tax opinions) and each shall cause to be filed with the SEC
mutually acceptable proxy materials that shall constitute the Joint Proxy
Statement/Prospectus and Buyer shall prepare and file with the SEC the Form S-4.
The Joint Proxy Statement/Prospectus will be included as a prospectus in and
will constitute a part of the Form S-4 as Buyer's prospectus. Each of Buyer and
the Company shall use its reasonable best efforts to have the Joint Proxy
Statement/Prospectus cleared by the SEC and the Form S-4 declared effective by
the SEC as soon after such filing as practicable and to keep the Form S-4
effective as long as is necessary to consummate the Merger and the transactions
contemplated hereby. Each of Buyer and the Company shall, as promptly as
practicable after receipt thereof, provide the other party with copies of any
written comments, and advise each other of any oral comments, with respect to
the Joint Proxy Statement/Prospectus or Form S-4 received from the SEC. The
parties shall cooperate and provide the other party with a reasonable
opportunity to review and comment on any amendment or supplement to the Joint
Proxy Statement/Prospectus and the Form S-4 prior to filing such with the SEC
and will provide each other with a copy of all such filings made with the SEC.
Notwithstanding any other provision herein to the contrary, no amendment or
supplement (including by incorporation by reference) to the Joint Proxy
Statement/Prospectus or the Form S-4 shall be made without the approval of both
Buyer and the Company, which approval shall not be unreasonably withheld or
delayed; provided, that, with respect to documents filed by a party hereto that
are incorporated by reference in the Form S-4 or Joint Proxy
Statement/Prospectus, this right of approval shall apply only with respect to
information relating to the other party or its business, financial condition or
results of operations. Buyer will use reasonable best efforts to cause the Joint
Proxy Statement/Prospectus to be mailed to Buyer stockholders, and the Company
will use reasonable best efforts to cause the Joint Proxy Statement/Prospectus
to be mailed to the Company stockholders, in each case, as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
If, at any time prior to the Effective Time, any information relating to Buyer
or the Company, or any of their respective affiliates, officers or directors, is
discovered by Buyer or the Company and such information should be set forth in
an amendment or supplement to any of the Form S-4 or the Joint Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party hereto discovering such information shall
promptly notify the other parties hereto and, to the extent required by law,
rules or regulations, an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and disseminated to the
stockholders of Buyer and the Company.
49
(b) The Company shall duly take all commercially reasonable action to
call, give notice of, convene and hold the Company Stockholders Meeting as soon
as practicable on a date determined in accordance with the mutual agreement of
Buyer and the Company for the purpose of obtaining the Company Stockholder
Approval and, subject to Section 6.4, shall take all commercially reasonable
action to solicit the Company Stockholder Approval. The Board of Directors of
the Company shall recommend the approval and adoption of the plan of Merger
contained in this Agreement by the stockholders of the Company to the effect as
set forth in Section 4.1(w) (the "COMPANY RECOMMENDATION"), and shall not (i)
withdraw, modify or qualify (or propose to withdraw, modify or qualify) in any
manner adverse to Buyer such recommendation or (ii) take any action or make any
statement in connection with the Company Stockholders Meeting inconsistent with
such recommendation (collectively, a "CHANGE IN THE COMPANY RECOMMENDATION");
provided, however, that the Board of Directors of the Company may make a Change
in the Company Recommendation pursuant to Section 6.4 hereof.
(c) Buyer shall duly take all commercially reasonable action to call, give
notice of, convene and hold the Buyer Stockholders Meeting as soon as
practicable on a date determined in accordance with the mutual agreement of
Buyer and the Company for the purpose of obtaining the Buyer Stockholder
Approval and, shall take all commercially reasonable action, consistent with its
fiduciary duties, to solicit the Buyer Stockholder Approval. The Board of
Directors of Buyer shall, recommend the approval of the issuance of Buyer Common
Stock in the Merger by the stockholders of Buyer (the "BUYER RECOMMENDATION"),
and shall not (i) withdraw, modify or qualify (or propose to withdraw, modify or
qualify) in any manner adverse to Company such recommendation or (ii) take any
action or make any statement in connection with the Buyer Stockholders Meeting
inconsistent with such recommendation (collectively, a "CHANGE IN THE BUYER
RECOMMENDATION").
6.2 Access to Information.
(a) Upon reasonable notice, the Company shall (and shall cause its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financial advisors and other representatives of Buyer reasonable access during
normal business hours, during the period prior to the Effective Time or the
termination of this Agreement, to all its properties, books, contracts,
commitments, records, officers and employees and, during such period, the
Company shall (and shall cause its Subsidiaries to) furnish promptly to Buyer
(i) a copy of each report, schedule, registration statement and other document
filed, published, announced or received by it during such period pursuant to the
requirements of U.S. federal or state securities laws or the HSR Act, as
applicable (other than documents that such party is not permitted to disclose
under applicable law), and (ii) all other information concerning it and its
business, properties and personnel as such other party may reasonably request;
provided, however, that (A) Buyer shall not contact, and Buyer shall not
authorize any of its officers, employees, accountants, counsel, financial
advisors or other representatives to contact, any employee or customer of the
Company or any of its subsidiaries without the prior authorization of the
Company's Chief Executive Officer, Chief Operating Officer or Chief Financial
Officer, (B) Buyer
50
shall cooperate in a reasonable manner with the Company to
minimize any disruption to the Company's business while exercising the rights
provided under this Section 6.2, and (C) the Company may restrict the foregoing
access to the extent that (x) any law, treaty, rule or regulation of any
Governmental Entity applicable to it or any contract requires it or its
Subsidiaries to restrict or prohibit access to any such properties or
information or (y) the information is subject to confidentiality obligations to
a third party.
(b) Upon reasonable notice, the Buyer shall (and shall cause its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financial advisors and other representatives of Company reasonable access during
normal business hours, during the period prior to the Effective Time or the
termination of this Agreement, to all its properties, books, contracts,
commitments, records, officers and employees and, during such period, the Buyer
shall (and shall cause its Subsidiaries to) furnish promptly to Company (i) a
copy of each report, schedule, registration statement and other document filed,
published, announced or received by it during such period pursuant to the
requirements of U.S. federal or state securities laws or the HSR Act, as
applicable (other than documents that such party is not permitted to disclose
under applicable law), and (ii) all other information concerning it and its
business, properties and personnel as such other party may reasonably request;
provided, however, that (A) Company shall not contact, and Company shall not
authorize any of its officers, employees, accountants, counsel, financial
advisors or other representatives to contact, any employee or customer of the
Buyer or any of its subsidiaries without the prior authorization of the Buyer's
Chief Executive Officer, Chief Operating Officer or Chief Financial Officer, (B)
Company shall cooperate in a reasonable manner with the Buyer to minimize any
disruption to the Buyer's business while exercising the rights provided under
this Section 6.2, and (C) the Buyer may restrict the foregoing access to the
extent that (x) any law, treaty, rule or regulation of any Governmental Entity
applicable to it or any contract requires it or its Subsidiaries to restrict or
prohibit access to any such properties or information or (y) the information is
subject to confidentiality obligations to a third party.
(c) Buyer and Company will hold any information obtained pursuant to this
Section 6.2 in confidence in accordance with, and shall otherwise be subject to,
the provisions of the confidentiality agreement dated May 15, 2002, between
Buyer and the Company (the "CONFIDENTIALITY AGREEMENT"), which Confidentiality
Agreement shall continue in full force and effect. Any investigation by either
Buyer or the Company shall not affect the representations and warranties of the
other.
Notwithstanding anything herein to the contrary (or in the Confidentiality
Agreement), any party to this Agreement (and each employee, representative, or
other agent of such parties) may disclose to any and all persons, without
limitation of any kind, the U.S. "tax treatment or "tax structure" (in each
case, within the meaning of Treasury Regulation section 1.6011-4) of the
transactions contemplated hereunder and all materials of any kind (including
opinions or other tax analysis) that are provided to such parties relating to
such U.S. "tax treatment" and "tax structure" (in each case, within the meaning
of Treasury Regulation section 1.60114); provided, that such disclosure may not
be made to the extent required to be kept confidential to comply with any
federal or state securities law. The intent of this provision is that the
transactions contemplated by the Agreement
51
are not treated as having been offered under conditions of confidentiality
for purposes of Treasury Regulation section 1.6011-4(b)(3) and shall be
construed in a manner consistent with such purpose.
6.3 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each party hereto will use its reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under this Agreement and applicable laws and regulations to
consummate the Merger and the other transactions contemplated by this Agreement
as soon as practicable after the date hereof, including (i) preparing and filing
as promptly as practicable all documentation to effect all necessary
applications, notices, petitions, filings and other documents and to obtain as
promptly as practicable (A) all Necessary Consents and (B) all other consents,
waivers, licenses, orders, registrations, approvals, permits, rulings,
authorizations and clearances necessary or advisable to be obtained from any
third party and/or any Governmental Entity in order to consummate the Merger or
any of the other transactions contemplated by this Agreement (other than such
consents, waivers, licenses, orders, registrations, approvals, permits, rulings,
authorizations and clearances, the failure of which to obtain would not have a
Material Adverse Effect on the Company or Buyer, as the case may be)
(collectively, the "REQUIRED APPROVALS") and (ii) taking all reasonable steps as
may be necessary to obtain all such Necessary Consents and the Required
Approvals , and (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; provided, however, that notwithstanding
anything to the contrary contained in this Section 6.3 or elsewhere in this
Agreement, neither Buyer or the Company shall be required to take any action or
do any thing if the Board of Directors of Buyer or the Board of Directors of the
Company, respectively, determines in good faith, after consultation with outside
counsel, that the taking of such action or the doing of such thing would be
inconsistent with its fiduciary duties to Buyer's or the Company's stockholders,
respectively, under applicable law. In furtherance and not in limitation of the
foregoing, each of Buyer and the Company agrees (i) to make, as promptly as
practicable, (A) an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby, if
such filing of a notification and report form is required by the HSR Act, and
(B) all other necessary filings with other Governmental Entities relating to the
Merger, and, to supply as promptly as practicable any additional information or
documentation that may be requested pursuant to such laws or by such
Governmental Entities and to use reasonable best efforts to cause the expiration
or termination of the applicable waiting periods under the HSR Act, if
applicable, and the receipt of Required Approvals under such other laws or from
such Governmental Entities as soon as practicable and (ii) not to extend any
waiting period under the HSR Act, if applicable, or enter into any agreement
with the FTC or the DOJ not to consummate the transactions contemplated by this
Agreement, except with the prior written consent of the other parties hereto
(which consent shall not be unreasonably withheld or delayed). Notwithstanding
anything to the contrary in this Agreement, neither Buyer nor the Company nor
any of their respective Subsidiaries shall be required to hold separate
(including by trust or otherwise) or to divest or agree to divest any of their
respective businesses or assets, or to take or agree to take any action or agree
to any limitation that could reasonably be expected to have a Material Adverse
Effect on Buyer (assuming the Merger has been consummated) or to substantially
impair the benefits to Buyer, as of the date hereof, to be realized from
52
consummation of the Merger, and neither Buyer or the Company shall be required
to agree to or effect any divestiture, hold separate any business or take any
other action that is not conditional on the consummation of the Merger.
6.4 Acquisition Proposals.
(a) The Company agrees that neither it nor any of its Subsidiaries
nor any of the officers and directors of it or its Subsidiaries shall, and
that it shall not authorize or instruct any of its and its Subsidiaries'
employees, agents and representatives (including any investment banker,
attorney or accountant retained by it or any of its Subsidiaries) to,
directly or indirectly, (i) initiate, solicit or knowingly encourage or
facilitate any inquiries or the making of any proposal or offer with
respect to, or a transaction to effect, a merger, reorganization, share
exchange, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving it or any of its
Subsidiaries, or any purchase or sale of assets having a fair market value
(as determined by the Board of Directors of the Company in good faith) in
excess of 10% of the fair market value of the consolidated assets
(including stock of its Subsidiaries) of it and its Subsidiaries, taken as
a whole, or any purchase or sale of, or tender or exchange offer for, its
equity securities that, if consummated, would result in any Person (or the
stockholders of such Person) beneficially owning securities representing
10% or more of its total voting power (or of the surviving parent entity
in such transaction) or the voting power of any of its Subsidiaries (any
such proposal, offer or transaction (other than a proposal or offer made
by Buyer or an Affiliate thereof), an "ACQUISITION PROPOSAL"), (ii) have
any discussion with or provide any Confidential Information or non-public
data to any Person relating to an Acquisition Proposal, or engage in any
negotiations concerning an Acquisition Proposal, or knowingly facilitate
any effort or attempt to make or implement an Acquisition Proposal (other
than a proposal or offer made by Buyer or an Affiliate thereof), (iii)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal or (iv) approve or recommend, or propose to approve
or recommend, or execute or enter into, any letter of intent, agreement in
principle, merger agreement, acquisition agreement, option agreement or
other similar agreement or propose publicly or agree to do any of the
foregoing related to any Acquisition Proposal.
(b) Notwithstanding anything in this Agreement to the contrary, the
Company (and its Board of Directors) shall be permitted to (i) continue
negotiations with any Person related to the sale of its Academic Systems
subsidiary ("ACADEMIC SYSTEMS") so long as negotiations with said Person
began prior to August 1, 2003, (ii) comply with applicable law (including
Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act) with regard
to an Acquisition Proposal, (iii) file with the SEC a report on Form 8-K
in accordance with the requirements thereof with respect to this Agreement
and file a copy of this Agreement and any related agreements as an exhibit
to such report, (iv) make any disclosure to the Company's stockholders or
any public announcement if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, failure
to so disclose would be inconsistent with any applicable law, rule or
regulation or any duty of the Board of Directors; provided that the
Company shall not, except in accordance with the provisions of Section
6.1(b) and 6.4(b)(v), effect a Change in the Company Recommendation, (v)
effect a Change in the Company Recommendation
53
or (vi) engage in discussions or negotiations with, or provide any
information to, any Person in response to an unsolicited bona fide
Acquisition Proposal by any such Person, or take any of the actions
described in Sections 6.4(a)(iii) and (iv) above, if and only to the
extent that, in any such case referred to in clause (v) or (vi):
(A) the Company Stockholder Approval shall not yet have
been obtained;
(B) the Company has not previously breached any of its
covenants in Section 6.4(a);
(C) (I) in the case of clause (v) above, the Company has
received an unsolicited bona fide written Acquisition Proposal from
a third party and the Company's Board of Directors concludes in good
faith that such Acquisition Proposal would lead to a Superior
Proposal and (II) in the case of clause (vi) above, the Company's
Board of Directors concludes in good faith that there is a
reasonable likelihood that such Acquisition Proposal would lead to a
Superior Proposal;
(D) the Company's Board of Directors, after consultation with
outside counsel, determines in good faith that it is required to do
so in the exercise of its fiduciary duties under applicable law;
(E) prior to providing any information or data to any Person
in connection with an Acquisition Proposal by any such Person, the
Company's Board of Directors receives from such Person an executed
confidentiality agreement having provisions that are at least as
restrictive to such Person as the comparable provisions contained in
the Confidentiality Agreement; and
(F) prior to providing any information or data to any Person
or entering into discussions or negotiations with any Person, it
promptly notifies Buyer of the receipt of such inquiries, proposals
or offers received by, any such information requested from, or any
such discussions or negotiations sought to be initiated or continued
with, any of its representatives.
The Company agrees that, subject to any obligation of confidentiality to
which the Company may be bound, it will promptly keep Buyer informed of
the status and material terms of any inquiries, proposals or offers and
the status and material terms of any discussions or negotiations,
including the identity of the party making such inquiry, proposal or
offer, except to the extent that the Company's Board of Directors, after
consultation with outside counsel, determines in good faith that to do so
would be inconsistent with the exercise of its fiduciary duties under
applicable law. Notwithstanding anything in this Agreement to the
contrary, the Company shall not be obligated to provide Buyer with any
information regarding an expression of interest, proposal, inquiry or
offer relating to the sale of Academic Systems that is received by or on
behalf of the Company from a Person with whom the Company began
negotiations prior to August 1, 2003.
54
(c) The Company agrees that it will, and will cause its officers,
directors and representatives to, immediately cease and cause to be
terminated any activities, discussions or negotiations existing as of the
date of this Agreement with any parties (other than Buyer) conducted
heretofore with respect to any Acquisition Proposal provided, however,
that, notwithstanding anything to the contrary, the Company shall be
permitted to continue negotiations with any Person related to the sale of
Academic Systems so long as negotiations with said Person began prior to
August 1, 2003. The Company agrees that it will use reasonable best
efforts to promptly inform its directors, officers, key employees, agents
and representatives of the obligations undertaken in this Section 6.4.
Nothing in this Section 6.4 shall (x) permit the Company to terminate this
Agreement (except as specifically provided in Article VIII hereof) or (y)
affect or limit any other obligation of the Company under this Agreement
except as specifically provided in Section 6.1(b).
6.5 Fees and Expenses. Subject to Section 8.2, whether or not the Merger
is consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party hereto incurring
such Expenses, except Expenses (including filing fees) incurred in connection
with the filing, printing and mailing of the Joint Proxy Statement/Prospectus
and Form S-4, which shall be shared equally by Buyer and the Company.
6.6 Directors' and Officers' Indemnification and Insurance. Following the
Effective Time, Buyer shall (a) indemnify and hold harmless, and provide
advancement of expenses to, all past and present directors, officers and
employees of the Company (in all of their capacities) (the "Indemnified
Parties") to the same extent such individuals are indemnified or have the right
to advancement of expenses as of the date of this Agreement by the Company
pursuant to the Company's certificate of incorporation, bylaws and
indemnification agreements, if any, in existence on the date hereof with, or for
the benefit of, any directors, officers and employees of the Company for acts or
omissions occurring at or prior to the Effective Time (including for acts or
omissions occurring in connection with the approval of this Agreement and the
consummation of the transactions contemplated hereby), (b) include and cause to
be maintained in effect in the Surviving Corporation's (or any successor's)
certificate of incorporation and bylaws for a period of six years after the
Effective Time, the provisions set forth in the Company's Certificate of
Incorporation and Bylaws on the date of this Agreement regarding elimination of
liability of directors, indemnification of officers, directors and employees and
advancement of expenses, which provisions shall not be amended, repealed or
otherwise modified during such six-year period in any manner that would
adversely affect the rights thereunder of any Indemnified Party. After the
Company Stockholder Approval has been obtained and as close as practicable to
the Effective Time, the Company shall purchase a five-year (measured from the
Effective Time) extended reporting period endorsement with commercially
reasonable terms ("REPORTING TAIL COVERAGE") under its existing directors' and
officers' liability insurance policy(ies) covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy on terms no more favorable to such Indemnified Parties than the terms of
such current insurance coverage; provided, that the cost of such reporting tail
coverage shall not exceed 400% of the current annualized costs of all the
Company's directors' and officers' liability insurance policies effective during
the period from January 31, 2002 to January 31, 2003. Buyer and the Surviving
Corporation jointly and severally agree to pay all expenses, including
attorneys' fees,
55
that may be incurred by the Indemnified Parties in enforcing the indemnity and
other obligations provided for in this Section 6.6. The obligations of Buyer
under this Section 6.6 shall not be terminated or modified in such a manner as
to adversely affect any indemnitee to whom this Section 6.6 applies without the
consent of such affected indemnitee (it being expressly agreed that (i) this
Section 6.6 shall survive the consummation of the Merger and the Effective Time,
(ii) the indemnitees to whom this Section 6.6 applies shall be third party
beneficiaries of and may enforce this Section 6.6 and (iii) this Section 6.6
shall be binding in all successors and assigns of Buyer and the Surviving
Corporation).
6.7 Public Announcements. Buyer, Merger Sub and the Company shall consult
with each other before issuing any press release or otherwise make any public
statement with respect to the Merger or this Agreement and, except as required
by law , court process or by obligations pursuant to any listing agreement with
any national securities exchange or national securities quotation system, shall
not issue any such press release or make any such public statement, without the
other party's consent, such consent not to be unreasonably withheld or delayed.
6.8 Listing of Shares of Buyer Common Stock. Buyer shall use its
reasonable best efforts to cause the shares of Buyer Common Stock to be issued
in the Merger and the shares of Buyer Common Stock to be reserved for issuance
upon exercise of the Company Converted Options to be approved for listing on the
Nasdaq, subject to official notice of issuance, prior to the Closing Date.
6.9 Affiliates. Not less than 45 days prior to the date of the Company
Stockholders Meeting, the Company shall deliver to Buyer a letter identifying
all Persons who, in the judgment of the Company, may be deemed at the time this
Agreement is submitted for adoption by the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act
and applicable SEC rules and regulations, and such list shall be updated as
necessary to reflect changes from the date thereof. The Company shall use
reasonable efforts to cause each Person identified on such list to deliver to
Buyer prior to the Effective Time, a written agreement substantially in the form
attached as Exhibit C hereto (an "AFFILIATE AGREEMENT").
6.10 Notification of Certain Matters. Buyer and the Company shall promptly
notify each other of (i) the occurrence or non-occurrence of any fact or event
which would be reasonably likely (A) to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate such that the conditions
set forth in Section 7.2(a) or Section 7.3(a) would not be satisfied as a result
thereof or (B) to cause any covenant, condition or agreement under this
Agreement not to be complied with or satisfied such that the conditions set
forth in Section 7.2(a) or Section 7.3(a) would not be satisfied as a result
thereof and (ii) any failure of Buyer or the Company, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder such that the conditions set forth in Section
7.2(a) or Section 7.3(a) would not be satisfied as a result thereof; provided,
however, that no such notification shall affect the representations or
warranties of any party or the conditions to the obligations of any party
hereunder. Each of Buyer and the Company shall give prompt notice to the other
party of any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
56
6.11 Accountants' Letters. The Company shall use its reasonable efforts to
cause to be delivered to Buyer a letter from its independent public accountants
addressed to Buyer, dated a date within two Business Days before the date on
which the Form S-4 shall become effective, in form and substance reasonably
satisfactory to Buyer and customary in scope and substance for letters delivered
by independent public accountants in connection with registration statements
similar to the Form S-4, relating to the performance by such accountants of
their procedures with respect to the financial statements of the Company
contained in or incorporated by reference in the Form S-4.
6.12 Appointment to Board of Directors. At or prior to the Effective
Time, Buyer shall appoint Xxxx X. Xxxxxx to Buyer's Board of Directors as a
Class I Director.
6.13 Option Grants.
At the Effective Time, automatically and without any further action on the
part of the Company, Buyer or any other Person, all holders of Company
Near-the-Money Options who forfeited such Near-the-Money Options under Section
3.3(b) shall be granted options (each a "BUYER STOCK OPTION") to purchase Buyer
Common Stock pursuant to and in accordance with this Section 6.13. Each Buyer
Stock Option will be fully vested immediately upon grant, and remain exercisable
for a period of twelve months from the Closing Date without regard to services;
if any, provided to Buyer by the holder of such Buyer Stock Option during such
period, provided, however, that from and after the Effective Time: (i) the
number of shares of Buyer Common Stock purchasable upon exercise of the Buyer
Stock Options shall be equal to the number of shares of Company Common Stock
that were purchasable under the Company Near-the-Money Options immediately prior
to the Effective Time multiplied by the Exchange Ratio, rounded to the nearest
whole share, and (ii) the per share exercise price of each Buyer Stock Option
shall be equal to the per share exercise price of each Company Near-the-Money
Option immediately prior to the Effective Time divided by the Exchange Ratio,
rounded to the nearest cent. As soon as practicable after the Effective Time,
Buyer shall deliver to the recipients of Buyer Stock Options appropriate notices
setting forth their rights pursuant to the Buyer Stock Options, together with
agreements or terms and conditions documents related thereto, which rights,
agreements and terms and conditions shall be no less favorable to the recipients
of Buyer Stock Options than those applicable to the Company Near-the-Money
Option(s) to which such Buyer Stock Option(s) relate. Buyer will reserve for
issuance a number of shares of Buyer Common Stock at least equal to the number
of shares of Buyer Common Stock that will be subject to Buyer Stock Options.
Buyer represents, warrants and covenants that (i) it currently has availability
to issue the Buyer Stock Options pursuant to Buyer Option Plans, (ii) it has
filed a registration statement on Form S-8 with respect to all shares of Buyer
Common Stock issuance under the Buyer Option Plans, and (iii) it shall maintain
the effectiveness of that registration statement in accordance with the
requirements of applicable law for a period of not less than twelve months from
Closing Date.
6.14 Rights Agreement. Prior to the Closing, the Board of Directors of the
Company shall take all action necessary, including amending the Rights Agreement
dated as of February 14, 2002 (the "RIGHTS AGREEMENT"), in order to render the
Company rights thereunder inapplicable to the Merger and the other transactions
contemplated by this Agreement.
57
6.15 Company Options. The Company will take all actions reasonably
necessary and desirable to ensure that the provisions of Sections 3.3 and 6.13
can be effected, including, where necessary, amending any of the Company Stock
Option Plans, the ESPP, or any agreement or offering under any of them, and
obtaining any necessary consents. In addition, the Company will take all actions
reasonably necessary and desirable to terminate the Company Stock Option Plans
and the ESPP effective at the Effective Time, and to ensure that, on and after
the Effective Time, no rights under any of them remain outstanding.
6.16 Company Warrants. Prior to the Effective Time, the Company shall have
delivered to the Buyer a complete and accurate copy of each Company Warrant
Agreement. The Company agrees that it will not grant any warrants and will not
permit cash payments to holders of Company Warrants in lieu of the substitution
therefor of Substitute Warrants, as described herein without the prior consent
of the Buyer. As soon as practicable after the Effective Time, Buyer shall
deliver to each holder of a Company Warrant an appropriate notice setting forth
such holder's rights pursuant to the Company Warrant Agreements and such
holder's rights to acquire Buyer Common Stock and the agreement of such holder
evidencing the grants of such Company Warrants shall be deemed to be
appropriately amended so that such Company Warrants shall represent rights to
acquire Buyer Common Stock on substantially the same terms and conditions as
contained in the outstanding Company Warrants (subject to the adjustments
required by Section 3.3(d) after giving effect to the Merger and the terms of
the Company Warrant Agreements).
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of the Company and Buyer to effect the Merger are subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. (i) the Company shall have obtained
the Company Stockholder Approval and (ii) Buyer shall have obtained the
Buyer Stockholder Approval.
(b) No Injunctions or Restraints; Illegality. No law shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other
Governmental Entity of competent jurisdiction shall be in effect, having
the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(c) HSR Act. The waiting period (and any extension thereof) if
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(d) Nasdaq Listing. The shares of Buyer Common Stock to be issued in
the Merger and such other shares of Buyer Common Stock to be reserved for
issuance in connection with the Merger shall have been approved for
listing on the Nasdaq, subject to official notice of issuance.
58
(e) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act and shall not be
the subject of a stop order suspending the effectiveness of the Form S-4,
and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
7.2 Additional Conditions to Obligations of Buyer. The obligations of
Buyer to effect the Merger are subject to the satisfaction, or waiver by Buyer,
on or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent that such representations and
warranties speak as of another date, in which case such representations
and warranties shall be true and correct as of such other date), except,
where the failure of the representations and warranties to be true and
correct would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company; and Buyer shall
have received a certificate of the chief executive officer and the chief
financial officer of the Company, dated the Closing Date, to such effect.
(b) Performance of Obligations of the Company. The 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; and Buyer
shall have received a certificate signed on behalf of the Company by the
chief executive officer and chief financial officer of the Company to such
effect.
(c) Third Party Consents. The Company shall have obtained all
consents and approvals of third parties referred to in Section 7.2(c)
of the Company Disclosure Schedule.
(d) Lock-Up Agreement. Xxxx X. Xxxxxx shall have entered into
a Lock-Up Agreement substantially in the form of Exhibit D attached
hereto.
(e) Consulting Agreement. Xxxx X. Xxxxxx shall have entered into a
Consulting Agreement in substantially the form of Exhibit E attached
hereto (the "CONSULTING AGREEMENT") and Xxxx X. Xxxxxx shall not have
taken any action to revoke, withdraw or terminate the Consulting
Agreement.
(f) No Material Terminations. Between the date hereof and the
Closing Date, neither the Company, its Subsidiaries or their respective
Affiliates shall have received notice, whether written or oral, from any
of the other parties to the Company Contracts, representing more than 10%
of the annual revenues of the Company and its Subsidiaries, of such
party's intention to terminate such Company Contract.
(g) Tax Opinion. The Buyer shall have received from Winston &
Xxxxxx, counsel to the Buyer, a written opinion, dated the Closing Date,
to the effect that for federal income tax purposes the Merger will
constitute a "reorganization" within the
59
meaning of Section 368(a) of the Code provided, however, that if Winston &
Xxxxxx does not render such opinion or withdraws or modifies such opinion,
this condition shall nonetheless be deemed to be satisfied if counsel to
the Company renders such opinion to Buyer in form and substance
satisfactory to Buyer. In rendering such opinion, counsel to the Buyer
shall be entitled to rely upon customary assumptions, representations and
covenants reasonably satisfactory to such counsel, including
representations and covenants set forth in certificates of officers of
Buyer, the Company an Merger Sub.
7.3 Additional Conditions to Obligations of the Company. The obligations
of the Company to effect the Merger are subject to the satisfaction, or waiver
by the Company, on or prior to the Closing Date, of the following additional
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Buyer and Merger Sub set forth in this Agreement,
disregarding all qualifications and exceptions contained therein relating
to materiality or Material Adverse Effect, shall be true and correct as of
the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except to the extent that such representations
and warranties speak as of another date, in which case such
representations and warranties shall be true and correct as of such other
date), except where the failure of the representations and warranties to
be true and correct would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Buyer; and the
Company shall have received a certificate of the chief executive officer
and chief financial officer of Buyer and an authorized officer of Merger
Sub, dated the Closing Date, to such effect.
(b) Performance of Obligations of Buyer. Buyer shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing; and the Company shall
have received a certificate signed on behalf of Buyer by the chief
executive officer and chief financial officer of Buyer to such effect.
(c) Tax Opinion. The Company shall have received from Xxxxxx Godward
LLP, counsel to the Company, a written opinion, dated the Closing Date, to
the effect that for federal income tax purposes the Merger will constitute
a "reorganization" within the meaning of Section 368(a) of the Code;
provided, however, that if Xxxxxx Godward LLP does not render such opinion
or withdraws or modifies such opinion, this condition shall nonetheless be
deemed to be satisfied if counsel to Buyer renders such opinion to the
Company, in form and substance satisfactory to the Company. In rendering
such opinion, counsel to the Company shall be entitled to rely upon
customary assumptions, representations and covenants reasonably
satisfactory to such counsel, including representations and covenants set
forth in certificates of officers of Buyer, the Company an Merger Sub.
(d) Board of Directors. Xxxx X. Xxxxxx shall have been
appointed to Buyer's Board of Directors as a Class I Director.
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, and except as specifically provided below, whether before or
after the Buyer Stockholders Meeting or the Company Stockholders Meeting:
(a) By mutual written consent of Buyer and the Company;
(b) By either Buyer or the Company, in the event the Effective Time
shall not have occurred on or before December 31, 2003 (the "TERMINATION
DATE"); provided, however, that the right to terminate this Agreement
under this Section 8.1(b) shall not be available to any party whose action
or failure to fulfill any obligation under this Agreement (including such
party's obligations set forth in Section 6.3) has been a material cause
of, or resulted in, the failure of the Effective Time to occur on or
before the Termination Date;
(c) By either Buyer or the Company, in the event any Governmental
Entity (i) shall have issued an order, decree or ruling or taken any other
action (which such party shall have used its reasonable best efforts to
resist, resolve or lift, as applicable, in accordance with Section 6.3)
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable or (ii)
shall have failed to issue an order, decree or ruling or to take any other
action which is necessary to fulfill the conditions set forth in Section
7.1(c), (d) or (e), as applicable, and such denial of a request to issue
such order, decree, ruling or the failure to take such other action shall
have become final and nonappealable (which order, decree, ruling or other
action such party shall have used its reasonable best efforts to obtain,
in accordance with Section 6.3); provided, however, that the right to
terminate this Agreement under this Section 8.1(c) shall not be available
to any party hereto whose failure to comply with Section 6.3 has been a
material cause of such action or inaction;
(d) By either Buyer or the Company (provided that the party seeking
to terminate this Agreement shall not be in material breach of any of its
obligations hereunder), in the event either the Buyer Stockholder Approval
or the Company Stockholder Approval has not been obtained by reason of the
failure to obtain the required vote at the Buyer Stockholders Meeting or
the Company Stockholders Meeting, as applicable;
(e) By Buyer, in the event the Company shall have (i) failed to make
the Company Recommendation, failed to reconfirm the Company Recommendation
within ten Business Days following the reasonable request of Buyer to do
so, or effected a Change in the Company Recommendation, whether or not
permitted by the terms hereof, (ii) willfully and materially breached its
obligations under Section 6.4 or (iii) materially breached its obligations
under this Agreement by reason of a failure to call the Company
Stockholders Meeting in accordance with Section 6.1(b) or a failure to
prepare and mail
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to its stockholders the Joint Proxy Statement/Prospectus in accordance
with Section 6.1(a);
(f) By the Company, in the event Buyer shall have (i) failed to make
the Buyer Recommendation or failed to reconfirm the Buyer Recommendation
within ten Business Days following the reasonable request of the Company
to do so, or effected a Change in the Buyer Recommendation, whether or not
permitted by the terms hereof, or (ii) materially breached its obligations
under this Agreement by reason of a failure to call the Buyer Stockholders
Meeting in accordance with Section 6.1(c) or a failure to prepare and mail
to its stockholders the Joint Proxy Statement/Prospectus in accordance
with Section 6.1(a);
(g) By Buyer, in the event the Company shall have materially
breached or failed to perform any of its representations, warranties,
covenants or other agreements contained in this Agreement, such that the
conditions set forth in Section 7.2(a) or (b) are not capable of being
satisfied on or before the Termination Date;
(h) By the Company, in the event Buyer shall have materially
breached or failed to perform any of its representations, warranties,
covenants or other agreements contained in this Agreement, such that the
conditions set forth in Section 7.3(a) or (b) are not capable of being
satisfied on or before the Termination Date;
(i) By the Company, in the event the Buyer Stock Market Value is
less than $5.50 provided the Buyer does not elect the Repricing Option set
forth in Section 3.1(c);
(j) By either Buyer or the Company, in the event the Company shall
have taken the actions described in Section 6.4(b)(v) as permitted
therein.
8.2 Effect of Termination.
(a) In the event of termination of this Agreement by either the
Company or Buyer as provided in Section 8.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the
part of any party hereto or their respective officers or directors except
with respect to Section 4.1(x), the penultimate sentence of Section 6.2,
Section 6.5, Section 6.7, this Section 8.2 and Article IX, which
provisions shall survive such termination; provided that, notwithstanding
anything to the contrary contained in this Agreement, neither Buyer nor
the Company shall be relieved or released from any liabilities or damages
arising out of its willful and material breach of this Agreement.
(b) In the event (i) Buyer terminates this Agreement pursuant to
Section 8.1(e), (ii) Buyer terminates this Agreement pursuant to Section
8.1(g) or (iii) Buyer or the Company terminates this Agreement pursuant to
Section 8.1(j), then the Company shall promptly, but in no event later
than one Business Day after the date of such termination, pay Buyer by
wire transfer of immediately available funds the Company Termination Fee.
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(c) In the event (A) Buyer terminates this Agreement pursuant to
Section 8.1(b) without the Company Stockholders Meeting having occurred or
Buyer or the Company terminates this Agreement pursuant to Section 8.1(d)
(provided, that the basis for such termination is the failure to obtain
the Company Stockholder Approval and the Company has not effected a Change
in the Company Recommendation), (B) at any time after the date of this
Agreement and before such termination an Acquisition Proposal with respect
to the Company (other than the Merger) shall have been publicly announced
or otherwise communicated to the stockholders of the Company and (C)
within twelve months of such termination the Company or any of its
Subsidiaries enters into any definitive agreement with respect to, or
consummates, any Acquisition Proposal, then the Company shall promptly,
but in no event later than one Business Day after the earlier of the date
the Company or its Subsidiary enters into such agreement with respect to
or consummates such Acquisition Proposal, pay Buyer by wire transfer of
immediately available funds the Company Reduced Termination Fee.
(d) In the event (i) the Company terminates this Agreement pursuant
to Section 8.1(f) or (ii) Company terminates this Agreement pursuant to
Section 8.1(h), Buyer shall, promptly but in no event later than one
Business Day after the date of termination, pay the Company by wire
transfer of immediately available funds the Buyer Termination Fee.
(e) The parties hereto acknowledge that the agreements contained in
this Section 8.2 are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, neither the Company
nor Buyer would enter into this Agreement; accordingly, if either party
fails promptly to pay any amount due pursuant to this Section 8.2, and, in
order to obtain such payment, the party entitled to such payment commences
a suit which results in a judgment against the non-paying party for the
fee set forth in this Section 8.2, the non-paying party shall pay to the
party entitled to such payment its costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Citibank, N.A. in
effect on the date such payment was required to be made, notwithstanding
the provisions of Section 6.5. The parties hereto agree that any remedy or
amount payable pursuant to this Section 8.2 is the exclusive remedy for
breaches or terminations of this Agreement other than with respect to any
willful and material breach of any representation, warranty, covenant or
agreement contained in this Agreement (or any other remedy which cannot be
waived under applicable law).
8.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after the Buyer Stockholder Approval or the Company Stockholder
Approval, but, after any such approval, no amendment shall be made which by law
or in accordance with the rules of any relevant stock exchange requires further
approval by such stockholders without such further approval (unless made subject
to such approval). This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally
63
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party hereto. The failure of any party
hereto to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights.
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants, agreements and other provisions, shall survive the Effective Time,
except for those covenants, agreements and other provisions contained herein
that by their terms apply or are to be performed in whole or in part after the
Effective Time and this Article IX or representations provided to counsel in
connection with the issuance of the tax opinions described in Section 7.2(g) and
Section 7.3(c).
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or facsimile, upon verbal confirmation of receipt,
(b) on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the fifth Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
if to Buyer or Merger Sub to:
PLATO Learning, Inc.
00000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxx
with a copy to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx
64
if to the Company to:
Lightspan, Inc.
00000 Xxxxxx Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 9212
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxx
with a copy to:
Xxxxxx Godward LLP
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: X. Xxxxxxxxxx Xxxxxxxx, Jr.
9.3 Interpretation. When a reference is made in this Agreement to
Articles, Sections, Exhibits or Schedules, such reference shall be to an Article
or Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement, the Confidentiality Agreement and the Exhibits,
Schedules and disclosure schedules and the other agreements and
instruments of the parties hereto delivered in connection herewith
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral (including but not limited to the
Exclusivity Agreement), among the parties hereto with respect to the
subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Article 2, Section 3.3, Section 5.1(h), Section
5.2(f), Section 6.6, Section 6.12 and Section 6.13.
9.6 Governing Law. This Agreement and all rights, remedies, liabilities,
powers and duties of the parties hereto shall be governed and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such state.
65
9.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party hereto. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties hereto as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
9.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other party, and any attempt to make any such assignment without
such consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns.
9.9 Enforcement. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of the United States located in the State of
Delaware or in any Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of any
court of the United States located in the State of Delaware or of any Delaware
state court in the event any dispute arises out of this Agreement or the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a court of the United States located in the State of
Delaware or a Delaware state court.
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IN WITNESS WHEREOF, Buyer, Merger Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
PLATO LEARNING, INC.
By: /s/ Xxxx Xxxxxx
---------------------------------------
Name: Xxxx Xxxxxx
Title: President and Chief Executive
Officer
LSPN MERGER CORP.
By: /s/ Xxxx Xxxxxx
---------------------------------------
Name: Xxxx Xxxxxx
Title: President and Chief Executive
Officer
LIGHTSPAN, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer
67
