EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DIVINE, INC.
TD ACQUISITION CORP.
AND
DATA RETURN CORPORATION
NOVEMBER 1, 2001
TABLE OF CONTENTS
PAGE
ARTICLE I The Merger; Effective Time; Closing.............................................................2
1.1 The Merger......................................................................................2
1.2 Effective Time..................................................................................2
1.3 Closing.........................................................................................2
1.4 Effect of the Merger............................................................................2
1.5 Dissenter's Rights..............................................................................2
ARTICLE II The Surviving Corporation.......................................................................2
2.1 Articles of Incorporation; Name.................................................................2
2.2 Bylaws..........................................................................................3
2.3 Additional Actions..............................................................................3
ARTICLE III Directors and Officers of the Surviving Corporation.............................................3
3.1 Directors.......................................................................................3
3.2 Officers........................................................................................3
ARTICLE IV Merger Consideration; Conversion or Cancellation of Shares in the Merger........................3
4.1 Share Consideration for the Merger; Conversion or Cancellation of Shares in the Merger..........3
4.2 Payment for Shares in the Merger................................................................6
4.3 Fractional Parent Shares........................................................................7
4.4 Transfer of Shares after the Effective Time.....................................................7
4.5 Lost, Stolen or Destroyed Certificates..........................................................7
4.6 Withholding Rights..............................................................................8
ARTICLE V Representations and Warranties..................................................................8
5.1 Representations and Warranties of Parent and Merger Sub.........................................8
5.2 Representations and Warranties of the Company..................................................18
ARTICLE VI Additional Covenants and Agreements............................................................36
6.1 Conduct of Business of the Company.............................................................36
6.2 No Solicitation................................................................................39
6.3 Meeting of Stockholders/Shareholders...........................................................41
6.4 Registration Statement.........................................................................42
6.5 Reasonable Efforts.............................................................................43
6.6 Access to Information..........................................................................44
6.7 Publicity......................................................................................44
6.8 Affiliates of the Company and Parent...........................................................44
6.9 Maintenance of Insurance.......................................................................45
6.10 Representations and Warranties.................................................................45
6.11 Filings; Other Action..........................................................................45
6.12 Tax-Free Reorganization Treatment..............................................................45
6.13 Nasdaq Listing.................................................................................46
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6.14 Indemnification................................................................................46
6.15 Sale of Company Services.......................................................................47
6.16 Registration on Form S-8; Registration on Form S-3.............................................47
6.17 Section 16(b)..................................................................................48
6.18 Takeover Statutes..............................................................................48
6.19 Further Amendments to Rights Plan..............................................................48
6.20 Employees......................................................................................49
ARTICLE VII Conditions.....................................................................................49
7.1 Conditions to Each Party's Obligations.........................................................49
7.2 Conditions to the Obligations of the Company...................................................50
7.3 Conditions to the Obligations of Parent........................................................51
ARTICLE VIII Termination....................................................................................52
8.1 Termination by Mutual Consent..................................................................52
8.2 Termination by Either the Company or Parent....................................................52
8.3 Termination by the Company.....................................................................53
8.4 Termination by Parent..........................................................................53
8.5 Effect of Termination; Termination Fee.........................................................54
ARTICLE IX Miscellaneous and General......................................................................56
9.1 Payment of Expenses............................................................................56
9.2 Non-Survival of Representations and Warranties.................................................56
9.3 Modification or Amendment......................................................................56
9.4 Waiver of Conditions...........................................................................56
9.5 Counterparts...................................................................................56
9.6 Governing Law; Jurisdiction....................................................................56
9.7 Notices........................................................................................57
9.8 Entire Agreement; Assignment...................................................................58
9.9 Parties in Interest............................................................................58
9.10 Certain Definitions............................................................................58
9.11 Severability...................................................................................60
9.12 Specific Performance...........................................................................60
9.13 Recovery of Attorney's Fees....................................................................61
9.14 Captions.......................................................................................61
9.15 No Strict Construction.........................................................................61
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TABLE OF DEFINED TERMS
Acquisition Transaction........................................................................Section 9.10(a)
Affiliate Shares...............................................................................Section 6.16(b)
Agreement.........................................................................................Introduction
Articles of Merger.................................................................................Section 1.2
Authorized Representatives.........................................................................Section 6.6
Certificates....................................................................................Section 4.2(b)
Closing............................................................................................Section 1.3
Closing Date.......................................................................................Section 1.3
Code..................................................................................................Recitals
Company...........................................................................................Introduction
Company Acquisition Proposal....................................................................Section 6.2(a)
Company Affiliate..................................................................................Section 6.8
Company Affiliate Letter...........................................................................Section 6.8
Company Common Stock..................................................................................Recitals
Company Contract................................................................................Section 5.2(p)
Company Disclosure Schedule........................................................................Section 5.2
Company Employee...............................................................................Section 6.20(c)
Company Financial Statements................................................................Section 5.2(h)(ii)
Company Insurance Policies......................................................................Section 5.2(u)
Company Intellectual Property Right............................................................Section 9.10(b)
Company Intellectual Property Rights...........................................................Section 9.10(b)
Company International Employee Plans........................................................Section 5.2(n)(xi)
Company Key Employees.......................................................................Section 5.2(p)(ii)
Company Option...............................................................................Section 4.1(c)(i)
Company Option Plans............................................................................Section 5.2(b)
Company Plan Affiliate.......................................................................Section 5.2(n)(i)
Company Rights..................................................................................Section 5.2(b)
Company Rights Agreement........................................................................Section 5.2(y)
Company Scheduled Plans......................................................................Section 5.2(n)(i)
Company SEC Reports..........................................................................Section 5.2(h)(i)
Company Shareholders Meeting....................................................................Section 6.3(a)
Company Stock.........................................................................................Recitals
Company Superior Proposal.......................................................................Section 6.2(a)
Company Warrant............................................................................Section 4.1(c)(iii)
Confidentiality Agreement..........................................................................Section 6.6
Covered Parties................................................................................Section 6.14(a)
Credit Agreement......................................................................................Recitals
DGCL............................................................................................Section 5.1(o)
XXXXX........................................................................................Section 5.1(i)(i)
Effective Time.....................................................................................Section 1.2
Encumbrance....................................................................................Section 9.10(c)
Environmental Costs and Liabilities.............................................................Section 5.2(s)
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Environmental Laws..............................................................................Section 5.2(s)
ERISA..........................................................................................Section 9.10(d)
Exchange Act....................................................................................Section 5.1(g)
Exchange Agent..................................................................................Section 4.2(a)
Exchange Ratio..................................................................................Section 4.1(a)
Expenses Fee....................................................................................Section 8.5(d)
GAAP........................................................................................Section 5.1(i)(ii)
Governmental Entity............................................................................Section 9.10(e)
HSR Act.........................................................................................Section 5.1(g)
Hazardous Material..............................................................................Section 5.2(s)
Intellectual Property Right....................................................................Section 9.10(f)
Intellectual Property Rights...................................................................Section 9.10(f)
IRS.........................................................................................Section 5.2(n)(ii)
Knowledge......................................................................................Section 9.10(g)
Loan Documents........................................................................................Recitals
Material Adverse Effect........................................................................Section 9.10(h)
Material Subsidiary............................................................................Section 9.10(i)
Merger................................................................................................Recitals
Merger Sub........................................................................................Introduction
NNM.............................................................................................Section 5.1(d)
Other Pending Transactions......................................................................Section 5.1(c)
Other Proxy Statements..........................................................................Section 5.1(l)
Other Registration Statements...................................................................Section 5.1(l)
Parent............................................................................................Introduction
Parent Common Stock...................................................................................Recitals
Parent Contract.................................................................................Section 5.1(s)
Parent Disclosure Schedule.........................................................................Section 5.1
Parent Financial Statements.................................................................Section 5.1(i)(ii)
Parent Intellectual Property Right.............................................................Section 9.10(j)
Parent Intellectual Property Rights............................................................Section 9.10(j)
Parent Option Plans.............................................................................Section 5.1(c)
Parent Rights...................................................................................Section 5.1(c)
Parent Rights Agreement.........................................................................Section 5.1(c)
Parent SEC Reports...........................................................................Section 5.1(i)(i)
Parent Shares...................................................................................Section 4.1(a)
Parent Stockholders Meeting.....................................................................Section 6.3(b)
Parties...........................................................................................Introduction
Person.........................................................................................Section 9.10(k)
Post-Merger Exercise Price...................................................................Section 4.1(c)(i)
Proxy Statement....................................................................................Section 6.4
Reseller Agreement................................................................................Section 6.15
Restraints......................................................................................Section 7.1(c)
Returns........................................................................................Section 9.10(l)
S-4 Registration Statement.........................................................................Section 6.4
S-8 Registration Statement.....................................................................Section 6.16(a)
SEC..........................................................................................Section 5.1(i)(i)
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Securities Act..................................................................................Section 5.1(g)
Share Consideration.............................................................................Section 4.2(a)
Shareholders Voting Agreement.........................................................................Recitals
Shelf Registration Statement...................................................................Section 6.16(b)
Significant Tax Agreement......................................................................Section 9.10(m)
Stock Merger Exchange Fund......................................................................Section 4.2(a)
Subsidiary.....................................................................................Section 9.10(n)
Substitute Option............................................................................Section 4.1(c)(i)
Substitute Warrant.........................................................................Section 4.1(c)(iii)
Surviving Corporation..............................................................................Section 1.1
Tax............................................................................................Section 9.10(o)
Taxes..........................................................................................Section 9.10(o)
TBCA...............................................................................................Section 1.1
Terminated Options...........................................................................Section 4.1(c)(i)
Termination Date................................................................................Section 8.2(a)
Termination Fee.................................................................................Section 8.5(b)
Transaction Expenses...............................................................................Section 9.1
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EXHIBITS
Shareholders Voting Agreement...............................................................Exhibit A
Credit Agreement............................................................................Exhibit B
Form of Articles of Incorporation of Surviving Corporation..................................Exhibit C
Form of Bylaws of Surviving Corporation.....................................................Exhibit D
Form of Company Affiliate Letter............................................................Exhibit E
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of November 1, 2001, by and among divine, inc., a
Delaware corporation
("PARENT"), TD Acquisition Corp., a Texas corporation and a direct wholly-owned
Subsidiary of Parent ("MERGER SUB"), and Data Return Corporation, a Texas
corporation (the "COMPANY"). Parent, Merger Sub and the Company are referred to
collectively herein as the "PARTIES". Capitalized terms used herein are defined
as referenced in the Table of Defined Terms contained herein.
RECITALS
WHEREAS, the Board of Directors of each of Parent, Merger Sub and the
Company has determined that it is in the best interests of such corporation and
its respective stockholders that the Company and Parent enter into a business
combination through the merger of the Merger Sub with and into the Company (the
"MERGER") and, in furtherance thereof, has approved the Merger and the
transactions contemplated hereby and declared this Agreement to be advisable to
its respective stockholders;
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to the Company's willingness to enter into this
Agreement, certain stockholders of Company are entering into a Shareholders
Voting Agreement with Parent in the form of EXHIBIT A attached hereto (the
"SHAREHOLDERS VOTING AGREEMENT");
WHEREAS, concurrently with the execution of this Agreement, the Parent is
entering into a Credit Agreement with the Company in the form of EXHIBIT B
attached hereto (the "CREDIT AGREEMENT") and, pursuant to the Credit Agreement,
a Security Agreement and an Intellectual Property Security Agreement
(collectively, the "LOAN DOCUMENTS");
WHEREAS, pursuant to the Merger, the outstanding shares of the common
stock, par value $0.001 per share, of the Company ("COMPANY COMMON STOCK", and,
together with all other capital stock of the Company, "COMPANY STOCK"),
including the associated rights under the Company Rights Agreement (as defined
in Section 5.2(y) hereof), shall be converted into the right to receive shares
of the class A common stock, par value $0.001 per share, of the Parent ("PARENT
COMMON STOCK"), including the associated Parent Rights (as defined in Section
5.1(c) hereof), as set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, the Parties intend that this Agreement shall constitute a "plan of
reorganization" within the meaning of Treasury Regulation Section 1.368-3;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, the Parties hereby agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Texas Business Corporation Act (the
"TBCA"), at the Effective Time, the Merger Sub shall be merged with and into the
Company, the separate corporate existence of the Merger Sub shall thereupon
cease, and the Company shall be the successor or surviving corporation and shall
continue its existence under the laws of the State of Texas. The Company, as the
surviving corporation after the consummation of the Merger, is sometimes
hereinafter referred to as the "SURVIVING CORPORATION".
1.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, the
Parties shall cause the Merger to be consummated by filing a duly executed
articles of merger of the Company (the "ARTICLES OF MERGER") with the Office of
the Secretary of State of the State of Texas in such form as required by, and
executed in accordance with, the relevant provisions of the TBCA, as soon as
practicable, and shall take all other action required by law to effect the
Merger. The Merger shall become effective upon such filing or at such later time
as is agreed to in writing by the parties and provided in the Articles of Merger
(the "EFFECTIVE TIME").
1.3 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to ARTICLE
VIII, the closing of the Merger (the "CLOSING") shall take place at 10:00 a.m.,
local time, at the offices of Xxxx, Xxxx & Xxxxx LLC, 00 Xxxx Xxxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, on the business day all of the conditions
to the obligations of the Parties to consummate the Merger as set forth in
ARTICLE VII have been satisfied or waived, or such other date, time or place as
is agreed to in writing by the Parties (the "CLOSING DATE").
1.4 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the
TBCA. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.5 DISSENTER'S RIGHTS. In accordance with Article 5.11 of the TBCA, no
rights of dissenting shareholders shall be available to the holders of shares of
Company Stock in connection with the Merger.
ARTICLE II
THE SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION; NAME. At the Effective Time, the articles
of incorporation of the Company shall be amended in its entirety to read as set
forth on EXHIBIT C hereto, and, as so amended, shall be the articles of
incorporation of the Surviving Corporation, until thereafter amended as provided
therein and by applicable law, subject to SECTION 6.14(b).
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2.2 BYLAWS. At the Effective Time, the bylaws of Merger Sub in effect
immediately prior to the Effective Time, a copy of which is attached as EXHIBIT
D, shall be the bylaws of the Surviving Corporation, until thereafter amended as
provided therein and by applicable law, subject to SECTION 6.14(b).
2.3 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of the Company, or (b) otherwise carry out the provisions
of this Agreement, the officers and directors of the Surviving Corporation are
authorized to take, and will take, any and all such lawful actions.
ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 DIRECTORS. The directors of Merger Sub shall be the initial directors
of the Surviving Corporation, until their respective successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's articles of incorporation
and bylaws.
3.2 OFFICERS. The officers of Merger Sub shall be the initial officers
of the Surviving Corporation, until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's articles of incorporation and
bylaws.
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
4.1 SHARE CONSIDERATION FOR THE MERGER; CONVERSION OR CANCELLATION OF
SHARES IN THE MERGER. At the Effective Time, the manner of converting or
canceling shares of capital stock of the Company and Merger Sub shall be as
follows:
(a) CONVERSION OF COMPANY STOCK. Subject to adjustment, if
applicable, pursuant to SECTIONS 4.1(e) AND 4.1(f) hereof, and subject to
the provisions of SECTION 4.3 hereof, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (excluding
any shares of Company Common Stock described in SECTION 4.1(d)), shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted automatically into the right to receive 1.9876 shares
of Parent Common Stock (including the associated Parent Rights). The shares
of Parent Common Stock (including the associated Parent Rights) issuable in
connection with the Merger and the transactions contemplated thereby are
referred to herein as the "PARENT SHARES". At the Effective Time, all
shares of Company Common Stock converted into the right to receive Parent
Shares pursuant to this SECTION 4.1(a) shall, by virtue of the Merger and
without any action on the part of the holders thereof,
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cease to be outstanding, be canceled and cease to exist, and each holder of
a certificate theretofore representing any such shares of Company Common
Stock shall thereafter cease to have any rights with respect to such shares
of Company Common Stock, except the right to receive, upon the surrender of
such certificate (or other appropriate action) in accordance with SECTION
4.2, the number of Parent Shares specified above. The ratio of shares of
Parent Common Stock issuable per share of Company Common Stock, as adjusted
from time to time pursuant to SECTIONS 4.1(e) AND 4.1(f), is sometimes
hereinafter referred to as the "EXCHANGE RATIO"..
(b) STOCK OF MERGER SUB. Each share of common stock, par value
$0.001 per share, of the Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into, and shall become, one
share of common stock, par value $0.001 per share, of the Surviving
Corporation.
(c) OUTSTANDING OPTIONS AND WARRANTS.
(i) Prior to the Effective Time, each option to purchase
shares of Company Common Stock that is outstanding and unexercised
pursuant to the Company Option Plans (each, a "COMPANY OPTION") in
effect on the date hereof shall (i) to the fullest extent permitted
by the applicable plans and option agreements, be terminated if the
result of dividing (A) the exercise price of such Company Option by
(B) the Exchange Ratio and rounding the result to the nearest tenth
of one cent (hereinafter, the "POST-MERGER EXERCISE PRICE"), is
greater than the closing sale price of the Parent Shares on the
trading day immediately preceding the Effective Time ("TERMINATED
OPTIONS"), and (ii) if the Post-Merger Exercise Price of such Company
Option is less than or equal to the closing sale price of the Parent
Shares on the trading day immediately preceding the Effective Time,
become and represent an option to purchase (a "SUBSTITUTE OPTION")
the number of Parent Shares (rounded to the nearest full share)
determined by multiplying (X) the number of Company Shares subject to
such Company Option immediately prior to the Effective Time by (Y)
the Exchange Ratio, at an exercise price per share of Parent Common
Stock equal to the Post-Merger Exercise Price. Promptly after the
Effective Time, Parent shall grant options to purchase Parent Shares
to holders of Terminated Options in consideration for the termination
thereof. The aggregate number of Parent Shares subject to such new
options shall equal 14,382,923 MINUS (I) the number of Parent Shares
subject to the Substitute Options, and (II) the product of (A) the
number of shares of Company Common Stock issued upon exercise of
Company Options between the date hereof and the Effective Time and
(B) the Exchange Ratio.
(ii) It is the intent of the Parties that the Substitute
Options shall qualify following the Effective Time as "incentive
stock options" as defined in Section 422 of the Code to the extent
that the related Company Options qualified as incentive stock options
immediately prior to the
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Effective Time, and the provisions of this SECTION 4.1(c) shall be
applied consistent with such intent.
(iii) Upon the Effective Time, each warrant to purchase shares
of Company Common Stock that is outstanding and unexercised (each, a
"COMPANY WARRANT") shall become and represent a warrant to purchase
(a "SUBSTITUTE WARRANT") a number of Parent Shares at an exercise
price as determined in accordance with the terms of such Company
Warrant.
(iv) After the Effective Time, except as provided above in
this SECTION 4.1(c), each Substitute Option and Substitute Warrant
shall be exercisable upon the same terms and conditions as were
applicable under the related Company Option or Company Warrant, as
the case may be, immediately prior to the Effective Time after giving
effect to any provision contained in such Company Option, Company
Warrant or related agreement, as the case may be, providing for
accelerated vesting as a result of this Agreement.
(v) The Company agrees that, after the date of this
Agreement, it will not grant any stock appreciation rights or limited
stock appreciation rights and will not permit cash payments to
holders of Company Options or Company Warrants in lieu of the
substitution therefor of Substitute Options and Substitute Warrants,
as described in this SECTION 4.1(c). Parent will reserve a sufficient
number of Parent Shares for issuance under this SECTION 4.1(c) and
SECTION 6.16 hereof.
(d) CANCELLATION OF OTHER CAPITAL STOCK AND TREASURY STOCK. All of
the shares of Company Stock that are owned by the Company as treasury stock
and all of the capital stock of the Company other than the Company Common
Stock, shall automatically cease to be outstanding, shall be canceled and
shall cease to exist and no Parent Shares shall be delivered in exchange
therefor.
(e) ADJUSTMENT TO EXCHANGE RATIO FOR ORGANIC CHANGES. The Exchange
Ratio shall be adjusted to reflect appropriately the effect of any stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into or exercisable or exchangeable
for shares of Parent Common Stock), extraordinary cash dividend,
reorganization, recapitalization, reclassification, combination, exchange
of shares or other like change with respect to shares of Parent Common
Stock occurring or having a record date on or after the date hereof and
prior to the Effective Time.
(f) Other ADJUSTMENTS TO EXCHANGE RATIO. In the event that the
Exchange Ratio would result in the issuance of more than 72,250,000 Parent
Shares in the Merger, the Exchange Ratio shall be adjusted to equal the
QUOTIENT of (a) 72,250,000 DIVIDED BY (b) the total number of Company
Common Shares outstanding immediately prior to the Effective Time.
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4.2 PAYMENT FOR SHARES IN THE MERGER. The manner of exchanging
tificates formerly representing shares of Company Common Stock for certificates
representing shares of Parent Common Stock in the Merger shall be as follows:
(a) EXCHANGE AGENT. On or prior to the Closing Date, Parent shall
make available to Computershare Trust Company of New York, or other entity
mutually agreed upon by the Parties (the "EXCHANGE AGENT"), for the benefit
of the holders of shares of Company Stock, a sufficient number of
certificates representing the Parent Shares required to effect the delivery
of the aggregate consideration in Parent Shares, required to be issued
pursuant to the terms hereof (collectively, the "SHARE CONSIDERATION" and
the certificates representing the shares of Parent Common Stock comprising
such aggregate Share Consideration being referred to hereinafter as the
"STOCK MERGER EXCHANGE FUND"). The Exchange Agent shall, pursuant to
instructions, deliver the Share Consideration out of the Stock Merger
Exchange Fund. The Stock Merger Exchange Fund shall not be used for any
purpose other than as set forth in this Agreement.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "CERTIFICATES") (i) a
letter of transmittal, in a form reasonably satisfactory to the Parties
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates for payment therefor. Subject
to SECTION 4.5, upon surrender of Certificates for cancellation to the
Exchange Agent, together with such letter of transmittal duly executed and
any other required documents, the holder of such Certificates shall be
entitled to receive for each of the shares of Company Common Stock
represented by such Certificates the Share Consideration, without interest,
allocable to such Certificates and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, such Certificates shall
represent solely the right to receive the Share Consideration allocable to
such Certificates.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions on Parent Shares, having a record date after the
Effective Time and payable to the holders of record thereof after the
Effective Time will be paid to Persons entitled by reason of the Merger to
receive Parent Shares until such Persons surrender their Certificates as
provided in SECTION 4.2(b) above. Upon such surrender, there shall be paid
to the Person in whose name the Parent Shares are issued any dividends or
other distributions having a record date after the Effective Time and
payable with respect to such Parent Shares between the Effective Time and
the time of such surrender. After such surrender, at the appropriate
payment date, there shall be paid to the Person in whose name the Parent
Shares are issued any dividends or other distributions on such Parent
Shares with a payment date after such surrender which shall have a record
date after the Effective Time. In no event shall the Persons entitled to
receive such
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dividends or other distributions be entitled to receive interest on such
dividends or other distributions.
(d) TRANSFERS OF OWNERSHIP. If any certificate representing Parent
Shares is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of
such exchange that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the issuance of certificates for such
Parent Shares, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable.
(e) NO LIABILITY. Neither the Exchange Agent nor any of the Parties
shall be liable to a holder of shares of Company Stock for any Parent
Shares or any dividend to which the holders thereof are entitled, that are
delivered to a public official pursuant to applicable escheat law. The
Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the Parent Shares held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such Parent Shares for
the account of the Persons entitled thereto.
(f) TERMINATION OF FUND. Subject to applicable law, any portion of
the Stock Merger Exchange Fund that remains unclaimed by the former
stockholders of the Company for one (1) year after the Effective Time shall
be delivered to Parent, upon demand of Parent, and any former stockholder
of the Company shall thereafter look only to Parent for payment of such
stockholder's applicable claim for the Share Consideration for such
stockholder's shares of Company Stock.
4.3 FRACTIONAL PARENT SHARES. No fractional Parent Shares shall be issued
in connection with the Merger. If a holder of shares of Company Common Stock is
entitled to receive any fractional Parent Shares based on application of the
Exchange Ratio to the total number of shares of Company Common Stock held by
such holder immediately prior to the Effective Time, such fractional Parent
Shares shall be rounded up or down to the nearest whole number (with fractions
equal to or greater than 0.5 being rounded up).
4.4 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. After the Effective
Time, there shall be no further registration of transfers of shares of Company
Stock. All Share Consideration issued upon the surrender for exchange of shares
of Company Stock in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock. If, after the Effective Time, Certificates are presented
to the Exchange Agent, the Surviving Corporation or the Parent for any reason,
they shall be canceled and exchanged as provided in this ARTICLE IV.
4.5 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificate
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificate, upon the making and
delivery of an affidavit of that fact by the holder
7
thereof, such Parent Shares and any dividends or other distributions to which
the owner thereof is entitled; PROVIDED, HOWEVER, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to deliver a customary bond
in such sum as it may reasonably direct as indemnity against any claim that may
be made against Parent, the Surviving Corporation or the Exchange Agent with
respect to the Certificate alleged to have been lost, stolen or destroyed.
4.6 WITHHOLDING RIGHTS. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to this ARTICLE IV such amounts as it is required
to deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. If the Surviving
Corporation or Parent, as the case may be, so withholds amounts, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock, Company Option or Company Warrant,
as the case may be, in respect of which the Surviving Corporation or Parent, as
the case may be, made such deduction and withholding.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Parent and
Merger Sub hereby represent and warrant to the Company that the statements
contained in this SECTION 5.1 are true and correct, except to the extent set
forth on the disclosure schedule delivered contemporaneously with this Agreement
by Parent to the Company (the "PARENT DISCLOSURE SCHEDULE"). The Parent
Disclosure Schedule shall be arranged in sections and paragraphs corresponding
to the lettered and numbered paragraphs contained in this SECTION 5.1, and the
disclosure in any paragraph shall qualify only the corresponding paragraph in
this SECTION 5.1 (provided that the listing of an item in one paragraph of the
Parent Disclosure Schedule shall be deemed to be a listing in each paragraph of
the Parent Disclosure Schedule and to apply to any other representation and
warranty of Parent in this Agreement to the extent that it is reasonably
apparent from a reading of such disclosure item that it would also qualify or
apply to such other paragraph or representation or warranty).
(a) CORPORATE ORGANIZATION AND QUALIFICATION. Each of Parent, its
Material Subsidiaries and the Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and is qualified and in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification,
except where failure to be so qualified would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Parent. Each of Parent, its Material Subsidiaries and the Merger Sub has
all requisite power and authority (corporate or otherwise) to own its
properties and to carry on its business as it is now being conducted.
8
(b) OPERATIONS OF MERGER SUB. Merger Sub is a direct, wholly-owned
Subsidiary of Parent, 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.
(c) CAPITALIZATION. The authorized capital stock of Parent consists
of (i) 2,500,000,000 shares of Parent Common Stock, of which 278,241,311
shares were issued and outstanding on October 24, 2001, approximately
90,000,000 of which are validly reserved for issuance in connection with
the Merger, and approximately 74,000,000 of which are validly reserved for
issuance in connection with the proposed acquisitions of Eprise Corporation
and RoweCom Inc. (the "OTHER PENDING TRANSACTIONS"), (ii) 100,000,000
shares of class C common stock, $0.001 par value per share, of which none
were issued and outstanding on the date hereof, and (iii) 50,000,000 shares
of preferred stock, $0.001 par value per share, 500,000 shares of which
have been designated Series A Junior Participating Preferred Stock. No
shares of Series A Junior Participating Preferred Stock are issued and
outstanding as of the date hereof. All of the outstanding shares of capital
stock of Parent have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth on SECTION 5.1(c) of the Parent
Disclosure Schedule, the Parent has no outstanding stock appreciation
rights, phantom stock or similar rights, except, as of October 24, 2001,
options to purchase 22,504,883 shares of Parent Common Stock were
outstanding under Parent's 1999 Stock Incentive Plan and 42,351 shares
reserved for future grant under such plan, 1,096,786 shares of Parent
Common Stock had been issued pursuant to Parent's 2000 Employee Stock
Purchase Plan and 3,069,880 shares are reserved for issuance under such
plan, and 20,623,477 options to purchase shares of Parent Common Stock were
outstanding under Parent's 2001 Stock Incentive Plan and 8,376,523 shares
are reserved for future grants under such plan (the 1999 Stock Incentive
Plan, 2000 Stock Incentive Plan and 2001 Stock Incentive Plan,
collectively, the "PARENT OPTION PLANS"). As of October 24, 2001, except as
set forth on SECTION 5.1(c) of the Parent Disclosure Schedule and other
than options and shares issued or outstanding under the Parent Option
Plans, the Rights (the "PARENT RIGHTS") under the Rights Agreement, dated
as of February 12, 2001, between Parent and Computershare Investor
Services, LLC, as amended (the "PARENT RIGHTS AGREEMENT"), there are no
outstanding or authorized options, warrants, calls, rights (including
preemptive rights), commitments or any other agreements of any character to
which the Parent is a party, or by which it may be bound, requiring it to
issue, transfer, grant, sell, purchase, redeem or acquire any shares of
capital stock or any of its securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock of Parent. Except as set forth on SECTION 5.1(c) of the
Parent Disclosure Schedule, there are no stockholder agreements, voting
trusts or other agreements or understandings to which the Parent is a party
or by which it is bound relating to the voting of any shares of the capital
stock of the Parent. The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, $0.001 par value per share, 1,000 shares of
which are issued and outstanding and held by Parent.
9
(d) LISTINGS. Parent's securities are not listed, or quoted, for
trading on any U.S. domestic or foreign securities exchange, other than the
NASDAQ National Market (the "NNM"). When issued, each Parent Share will be
duly listed and admitted for trading on the NNM.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. The board of directors of
Merger Sub has approved this Agreement and declared it and the Merger to be
advisable, and Merger Sub has the requisite corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The board of directors of Parent has declared the
Merger and the related issuance of Parent Shares advisable, has duly and
validly authorized this Agreement and the consummation by Parent of the
transactions contemplated hereby and has recommended that the stockholders
of Parent approve the Merger and the related issuance of shares of Parent
Common Stock (if such approval is required by the rules and regulations of
the NNM) and Parent has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. No other corporate proceedings on the part of Parent
or Merger Sub are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby, other than any required approval of
the issuance of the Parent Shares pursuant to this Agreement by the
stockholders of Parent in accordance with the rules and regulations of the
NNM. The affirmative vote of the holders of a majority in interest of the
stock present or represented by proxy at the Parent Stockholders Meeting,
provided a quorum is present, is sufficient for Parent's stockholders to
approve the issuance of shares of Parent Common Stock in connection with
the Merger, and no other approval of any holder of any securities of Parent
is required in connection with the consummation of the transactions
contemplated hereby. This Agreement and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by the boards of directors of Parent and Merger Sub and
by Parent as the sole stockholder of Merger Sub. This Agreement has been
duly and validly executed and delivered by Parent and Merger Sub and,
assuming this Agreement constitutes the valid and binding agreement of the
Company, constitutes the valid and binding agreement of Parent and Merger
Sub, enforceable against Parent and Merger Sub in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability relating
to or affecting creditors' rights and to general principles of equity
(regardless of whether that enforceability is considered in a proceeding at
law or in equity).
(f) PRESENT COMPLIANCE WITH OBLIGATIONS AND LAWS. Neither Parent
nor any of its Material Subsidiaries is: (i) in violation of its
certificate of incorporation, bylaws or similar documents; (ii) in default
in the performance of any obligation, agreement or condition of any debt
instrument that (with or without the passage of time or the giving of
notice, or both) affords to any Person the right to accelerate any
indebtedness or terminate any right; (iii) in default under or breach of
(with or without the passage of time or the giving of notice)
10
any other contract to which it is a party or by which it or its assets are
bound; or (iv) in violation of any law, regulation, administrative order or
judicial order, decree or judgment (domestic or foreign) applicable to it
or its business or assets, except where any violation, default or breach
under items (ii), (iii) or (iv) would not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect on Parent.
(g) CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by Parent nor the consummation by Parent of the
transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the certificate of incorporation (or other
similar documents) or bylaws (or other similar documents) of Parent or its
Material Subsidiaries; (ii) require any consent, approval, authorization or
permit of, or registration or filing with or notification to, any
governmental or regulatory authority, in each case, by or on behalf of
Parent or any of its Material Subsidiaries, except (A) in connection with
the applicable requirements, if any, of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), (B) pursuant to the
applicable requirements of the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "SECURITIES ACT") and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "EXCHANGE ACT") (including a Schedule 13D with
regard to the Shareholders Voting Agreement in accordance with the Exchange
Act), and the NNM, (C) the filing of the Articles of Merger pursuant to the
TBCA and appropriate documents with the relevant authorities of other
states in which Parent is authorized to do business, (D) as may be required
by any applicable state securities laws, (E) the consents, approvals,
orders, authorizations, registrations, declarations and filings required
under the antitrust or competition laws of foreign countries identified in
the Parent Disclosure Schedule, or (F) where the failure to obtain such
consent, approval, authorization or permit, or to make such registration,
filing or notification, would not reasonably be expected to, individually
or in the aggregate, have a Material Adverse Effect on Parent or adversely
affect the ability of Parent to consummate the transactions contemplated
hereby; (iii) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration or lien or other charge
or encumbrance) under any of the terms, conditions or provisions of any
indenture, note, license, lease, agreement or other instrument or
obligation to which Parent or any of its Material Subsidiaries is a party
or by which any of their assets may be bound (or, with respect to
Subsidiaries other than Material Subsidiaries, that would reasonably be
expected to have a Material Adverse Effect on Parent), except for such
violations, breaches and defaults (or rights of termination, cancellation
or acceleration or lien or other charge or encumbrance) as to which
requisite waivers or consents have been obtained or that, individually or
in the aggregate, would not reasonably be expected to have a Material
Adverse Effect on Parent or adversely affect the ability of Parent to
consummate the transactions contemplated hereby; (iv) cause the suspension
or revocation of any authorizations, consents, approvals or licenses
currently in effect that, individually or in the aggregate, would
reasonably be
11
expected to have a Material Adverse Effect on Parent; or (v) assuming the
consents, approvals, authorizations or permits and registrations, filings
or notifications referred to in this SECTION 5.1(g) are duly and timely
obtained or made, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Parent or any of its Material Subsidiaries
or to any of their respective assets, except for violations that,
individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on Parent or adversely affect the ability of
Parent to consummate the transactions contemplated hereby. Without limiting
the generality or effect of the foregoing, on or prior to the date of this
Agreement, Parent has obtained the consent of Computer Associates
International, Inc. to this transaction under those certain Non-Competition
Agreements, dated as of March 29, 1999, among PLATINUM TECHNOLOGIES
International, INC. and certain principal officers of Parent and delivered
a copy of such consent to the Company.
(h) LITIGATION. Except as set forth in the Parent SEC Reports filed
prior to the date hereof or in SECTION 5.1(h) of the Parent Disclosure
Schedule, there are no actions, suits, claims, investigations or
proceedings pending or, to the Knowledge of Parent, threatened against
Parent or any of its Subsidiaries that, individually or in the aggregate,
would reasonably be expected to result in obligations or liabilities of
Parent or any of its Subsidiaries that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Parent or
adversely affect the ability of Parent or Merger Sub to perform their
obligations under this Agreement. Neither Parent nor any of its Material
Subsidiaries is subject to any outstanding judgment, order, writ,
injunction or decree that (i) has or may have the effect of prohibiting or
impairing any business practice of Parent or any of its Subsidiaries, any
acquisition of property (tangible or intangible) by Parent or any of its
Subsidiaries, the conduct of the business by Parent or any of its
Subsidiaries, or Parent's ability to perform its obligations under this
Agreement or (ii) individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Parent.
(i) SEC REPORTS; FINANCIAL STATEMENTS.
(i) Parent has filed all forms, reports and documents with
the Securities and Exchange Commission (the "SEC") required to be
filed by it pursuant to the federal securities laws and the SEC rules
and regulations thereunder, all of which complied in all material
respects with all applicable requirements of the Securities Act and
the Exchange Act (collectively, the "PARENT SEC REPORTS") and all of
which are available through the SEC's Electronic Data Gathering and
Retrieval System ("XXXXX"). None of the Parent SEC Reports,
including, without limitation, any financial statements or schedules
included therein, at the time filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
filing) contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
12
circumstances under which they were made, not misleading. None of
Parent's Subsidiaries is required to file any forms, reports or other
documents with the SEC.
(ii) The consolidated balance sheets and the related
consolidated statements of income, stockholders' equity (deficit) and
cash flows (including the related notes thereto) of Parent included
in the Parent SEC Reports (collectively, "PARENT FINANCIAL
STATEMENTS") comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with U.S. generally accepted accounting principles applied
on a basis consistent throughout the periods involved ("GAAP")
(except as otherwise noted therein or, in the case of unaudited
interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act), and present fairly in all material
respects the consolidated financial position of Parent and its
consolidated Subsidiaries as of their respective dates, and the
consolidated results of their operations and their cash flows for the
periods presented therein, except that the unaudited interim
financial statements do not include footnote disclosure of the type
associated with audited financial statements and were or are subject
to normal and recurring year-end adjustments that were not or are not
expected to be material in amount.
(iii) Since June 30, 2001, there has not been any material
change, by Parent or any of its Subsidiaries, in accounting
principles, methods or policies for financial accounting purposes,
except as required by concurrent changes in GAAP, or as disclosed in
the Parent SEC Reports. There are no material amendments or
modifications to agreements, documents or other instruments, which
previously had been filed by Parent with the SEC pursuant to the
Securities Act or the Exchange Act, that have not been filed with the
SEC but that are required to be filed.
(j) NO LIABILITIES. Neither Parent nor any of its Subsidiaries has
any material indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to become
due or asserted or unasserted), and, to the Knowledge of Parent, there is
no reasonable basis for the assertion of any claim with respect to any
indebtedness, obligation or liability of any nature against Parent or any
of its Subsidiaries, except for indebtedness, obligations and liabilities
(i) that are fully reflected in, reserved against or otherwise described in
the most recent Parent Financial Statements, (ii) that have been incurred
after the date of the most recent Parent Financial Statements in the
ordinary course of business, consistent with past practice, (iii) that are
obligations to perform under executory contracts in the ordinary course of
business (none of which is a liability resulting from a breach of contract
or warranty, tort, infringement or legal action), or (iv) that would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
13
(k) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as described in
the Parent SEC Reports, since June 30, 2001, and through the date hereof,
except with respect to the actions contemplated by this Agreement, there
has not been (i) any Material Adverse Effect on Parent; (ii) any damage,
destruction or loss of any assets of Parent or any of its Material
Subsidiaries (whether or not covered by insurance) that has had or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent; (iii) any material change by Parent in
its accounting methods, principles or practices, except as required by
GAAP, or any disagreement between Parent and its independent accountants
concerning Parent's financial statements or their conformity with GAAP; or
(iv) any labor dispute or charge of unfair labor practice (other than
routine individual grievances), that, individually or in the aggregate, has
had or would reasonably be expected to have a Material Adverse Effect on
Parent, any activity or proceeding by a labor union or representative
thereof to organize any employee of Parent or any of its Subsidiaries or
any campaign being conducted to solicit authorization from employees to be
represented by such labor union in each case that, individually or in the
aggregate, has had or would reasonably be expected to have a Material
Adverse Effect on Parent.
(l) S-4 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS. None
of the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in the S-4 Registration Statement or the Proxy
Statement will (i) in the case of the S-4 Registration Statement, at the
time it becomes effective or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, or
(ii) in the case of the Proxy Statement, at the time of the mailing of the
Proxy Statement, at the time of the Company Shareholders Meeting and Parent
Stockholders Meeting (if necessary) and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with
respect to Parent, Merger Sub or any of their respective officers and
directors or any of its Subsidiaries should occur that is required to be
described in an amendment of, or a supplement to, the Proxy Statement or
the S-4 Registration Statement, Parent shall promptly inform the Company so
that such event may be so described, and such amendment or supplement shall
be promptly filed with the SEC and, as required by law, disseminated to the
stockholders of the Company. The S-4 Registration Statement will (with
respect to Parent and Merger Sub) comply as to form in all material
respects with the requirements of the Securities Act. The Proxy Statement
will (with respect to Parent and Merger Sub) comply as to form in all
material respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, Parent and Merger Sub make no representation
or warranty with respect to any information supplied by, or related to, the
Company or any of its affiliates or advisors that is contained in any of
the foregoing documents. Any registration statement(s) filed with the SEC
by Parent between
14
the date hereof and the Effective Time (other than the S-4 Registration
Statement) are referred to collectively herein as the "OTHER REGISTRATION
STATEMENTS". Any proxy statement(s) filed with the SEC by Parent between
the date hereof and the Effective Time (other than the Proxy Statement) are
referred to collectively herein as the "OTHER PROXY STATEMENTS." None of
the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in (or to Parent's knowledge, any other
information included or incorporated by reference into) the Other
Registration Statements or the Other Proxy Statements will (i) in the case
of the Other Registration Statements, at the time they become effective or
at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading, or (ii) in the case
of the Other Proxy Statements, at the time of the mailing of such Other
Proxy Statement and at the time of any stockholder action related thereto
and at the Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(m) TAXES.
(i) Parent and each of its Material Subsidiaries has timely
filed (after taking into account any extensions to file) all federal,
state, local and foreign Returns required by applicable Tax law to be
filed by Parent and each of its Material Subsidiaries. All Taxes owed
by Parent or any of its Material Subsidiaries to a taxing authority,
or for which Parent or any of its Material Subsidiaries is liable,
whether to a taxing authority or to other Persons or entities under a
Significant Tax Agreement, as of the date hereof, have been paid and,
as of the Effective Time, will have been paid. All Returns were true
and correct in all material respects when filed. Other than any
reserve for deferred Taxes established to reflect timing differences
between book and Tax treatment, Parent has made accruals for Taxes on
the Parent Financial Statements which are adequate to cover any Tax
liability of Parent and each of its Subsidiaries determined in
accordance with GAAP through the date of the Parent Financial
Statements.
(ii) Parent and each of its Material Subsidiaries have
withheld with respect to its employees, creditors, independent
contractors, stockholders or other parties all federal and state
income taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) Except as set forth in SECTION 5.1(m) of the Parent
Disclosure Schedule, there is no Tax deficiency outstanding,
assessed, or to Parent's Knowledge, proposed against Parent or any of
its Material Subsidiaries. Neither Parent nor any of its Material
Subsidiaries have executed or requested any waiver of any statute of
limitations on or extending the period for the assessment or
collection of any federal or
15
material state Tax that is still in effect. There are no liens for
Taxes on the assets of Parent or of any of its Material Subsidiaries
other than with respect to Taxes not yet due and payable.
(iv) Except as set forth in SECTION 5.1(m) of the Parent
Disclosure Schedule, to Parent's Knowledge, no federal or state Tax
audit or other examination of Parent or any of its Material
Subsidiaries is presently in progress, nor has Parent or any of its
Material Subsidiaries been notified either in writing or orally of
any request for such federal or state Tax audit or other examination.
(v) Neither Parent nor any of its Material Subsidiaries has
filed any consent agreement under Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition
of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by Parent.
(n) UNLAWFUL PAYMENTS AND CONTRIBUTIONS. To the Knowledge of
Parent, neither Parent, any Subsidiary of Parent nor any of their
respective directors, officers, employees or agents has, with respect to
the businesses of Parent or its Subsidiaries, (i) used any funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or
employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any Person
or entity.
(o) TAKEOVER STATUTE. No "fair price", "moratorium", "control share
acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws in the United States (with the exception of
Section 203 of the
Delaware General Corporate Law ("DGCL")) applicable to
Parent is applicable to the Merger or the other transactions contemplated
hereby. Assuming the accuracy of the representation and warranty set forth
in SECTION 5.2(aa), the action of the board of directors of Parent in
approving this Agreement (and the transactions provided for herein) is
sufficient to render inapplicable to this Agreement (and the transactions
provided for herein) the restrictions on "business combinations" (as
defined in Section 203 of the DGCL) as set forth in Section 203 of the
DGCL.
(p) NOT AN INVESTMENT COMPANY. Parent is not an "investment
company" within the meaning of that term as used in the Investment Company
Act of 1940, as amended.
(q) PARENT INTANGIBLE PROPERTY.
(i) Except for such matters as would not reasonably be
expected to have a Material Adverse Effect on Parent, Parent or its
Subsidiaries owns or is properly licensed to use all Intellectual
Property
16
Rights used or required for the conduct of the business of Parent and
its Subsidiaries.
(ii) Except for such matters as would not reasonably be
expected to have a Material Adverse Effect on Parent, neither Parent
nor any of its Subsidiaries nor, to the Knowledge of Parent, any
other party to any agreement relating to or involving any Parent
Intellectual Property Right is in breach thereof or in default
thereunder.
(iii) Except for such matters as would not reasonably be
expected to have a Material Adverse Effect on Parent, to the
Knowledge of Parent, no third party is infringing, misappropriating,
diluting or otherwise violating any Parent Intellectual Property
Right.
(iv) Except for such matters as would not reasonably be
expected to have a Material Adverse Effect on Parent, neither Parent
nor any of its Subsidiaries has received oral or written notification
or is a party to any suit, action, complaint, legal or administrative
proceeding (A) relating to a claim of infringement, misappropriation,
dilution, or other violation of any Intellectual Property Right of
any third party, (B) relating to a demand to cease and desist certain
conduct, an offer to license, or notice of the existence of any
Intellectual Property Right of any third party, or (C) relating to
any claim involving the validity, enforceability, or the right of
Parent or any of its Subsidiaries to use Parent Intellectual
Property.
(r) BROKERS AND FINDERS. Except for the fees and expenses payable
to Xxxxx, Xxxxxxxx & Xxxx, which fees and expenses are determined pursuant
to its agreement with Parent, neither Parent nor any of its Subsidiaries
has employed any investment banker, broker, finder, consultant or
intermediary in connection with the transactions contemplated by this
Agreement that would be entitled to any investment banking, brokerage,
finder's or similar fee or commission in connection with this Agreement or
the transactions contemplated hereby.
(s) AGREEMENTS, CONTRACTS AND COMMITMENTS; MATERIAL CONTRACTS.
Except as set forth in Section 5.1(s) of the Parent Disclosure Schedule,
(A) each material agreement, contract, obligation, promise or undertaking
(whether written or oral and whether express or implied), to which Parent
is a party or by which Parent or its assets is or may become bound (a
"PARENT CONTRACT"), is in full force and effect; and (B) no condition
exists or event has occurred that to the Knowledge of Parent (whether with
or without notice or lapse of time or both, or the happening or occurrence
of any other event), would constitute a default by Parent or a Material
Subsidiary of Parent or, to the Knowledge of Parent, any other party
thereto under, or result in a right in termination of, any Parent Contract,
except as would not, individually or in the aggregate, be reasonably
expected to result in a Material Adverse Effect on Parent.
17
(t) PERMITS. Parent and each of its Material Subsidiaries holds all
licenses, permits, registrations, orders, authorizations, approvals and
franchises that are required to permit it to conduct its businesses as
presently conducted, except where the failure to hold such licenses,
permits, registrations, orders, authorizations, approvals or franchises
would not reasonably be expected to, individually or in the aggregate, have
a Material Adverse Effect on Parent. All such licenses, permits,
registrations, orders, authorizations, approvals and franchises are now,
and will be after the Closing, valid and in full force and effect, except
where the failure to be valid and in full force and effect or to have the
benefit of any such license, permit, registration, order, authorization,
approval or franchise would not reasonably be expected to, individually or
in the aggregate, have a Material Adverse Effect on Parent. Neither Parent
nor any of its Material Subsidiaries has received any notification of any
asserted present failure (or past and unremedied failure) by it to have
obtained any such license, permit, registration, order, authorization,
approval or franchise, except where such failure would not reasonably be
expected to, individually or in the aggregate, have a Material Adverse
Effect on Parent.
(u) TAKEOVER STATUTE. Neither Parent nor any of its Subsidiaries
(including Merger Sub) is, nor at any time during the last three years has
any of such been, an "affiliated shareholder" of the Company as defined in
Article 13.02 of the TBCA. Neither Parent nor any of its Subsidiaries
(including Merger Sub) owns (directly or indirectly, beneficially or of
record) and none is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each
case, any shares of capital stock of the Company (other than as
contemplated by this Agreement).
(v) TRANSACTIONS WITH AFFILIATES. Except as set forth in SECTION
5.1(v) of the Parent Disclosure Schedule, since the date of Parent's last
proxy statement to its stockholders, no event has occurred that would be
required to be reported by Parent pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
(w) PARENT RIGHTS PLAN. Neither the execution of this Agreement or
the Shareholders Voting Agreement nor the consummation of the transactions
contemplated hereby or thereby will trigger a "Stock Acquisition Date" or
"Distribution Date" (as such terms are defined in the Parent Rights
Agreement) or will cause the Company or any of its affiliates to become an
"Acquiring Person" (as defined in the Parent Rights Agreement).
5.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Parent and Merger Sub that the statements contained
in this SECTION 5.2 are true and correct, except to the extent set forth on the
disclosure schedule delivered contemporaneously with this Agreement by the
Company to Parent and Merger Sub (the "COMPANY DISCLOSURE SCHEDULE"). The
Company Disclosure Schedule shall be arranged in sections and paragraphs
corresponding to the lettered and numbered paragraphs contained in this SECTION
5.2, and the disclosure in any paragraph shall qualify only the corresponding
paragraph in this SECTION 5.2 (provided that the listing of an item in one
paragraph of the Company
18
Disclosure Schedule shall be deemed to be a listing in each paragraph of the
Company Disclosure Schedule and to apply to any other representation and
warranty of the Company in this Agreement to the extent that it is reasonably
apparent from a reading of such disclosure item that it would also qualify or
apply to such other paragraph or representation or warranty.)
(a) CORPORATE ORGANIZATION AND QUALIFICATION. Each of the Company
and its Subsidiaries is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and is
qualified and in good standing as a foreign entity in each jurisdiction
where the properties owned, leased or operated, or the business conducted,
by it require such qualification, except where failure to be so qualified
would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company. Each of the Company and its
Subsidiaries has all requisite power and authority (corporate or otherwise)
to own its properties and to carry on its business as it is now being
conducted. All of the Subsidiaries of the Company are set forth in SECTION
5.2(a) of the Company Disclosure Schedule. The Company has heretofore
delivered or made available to Parent complete and correct copies of its
certificate of incorporation and bylaws and the charter documents of its
material Subsidiaries, each as amended.
(b) CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock, of which 36,182,438
shares were issued and outstanding as of October 31, 2001. All of the
outstanding shares of capital stock of the Company and its Subsidiaries
have been duly authorized and validly issued and are fully paid and
nonassessable. The Company has no outstanding stock appreciation rights,
phantom stock or similar rights. All outstanding shares of capital stock or
other equity interests of the Subsidiaries of the Company are owned by the
Company or a direct or indirect wholly-owned Subsidiary of the Company,
free and clear of all liens, pledges, charges, encumbrances, claims and
options of any nature. Except for options to purchase an aggregate of
9,541,318 shares of Company Common Stock outstanding as of October 31, 2001
pursuant to (i) the Company's 1998 Stock Option Plan, (ii) the Company's
1999 Long-Term Incentive Plan, (iii) the Stock Option Agreement dated as of
January 15, 1998, between the Company and Xxxxxxx X. Xxxxx and (iv) the
Non-Qualified Stock Option Agreement, dated as of August 12, 1998, between
the Company and Xxxxx Xxxx (collectively, the "COMPANY OPTION PLANS"), the
Company Warrants and the Rights (as defined in the Company Rights Agreement
(as defined in Section 5.2(y) hereof) and referred to herein as "COMPANY
RIGHTS"), there are no outstanding or authorized options, warrants, calls,
rights (including preemptive rights), commitments or any other agreements
of any character to which the Company or any of its Subsidiaries is a party
to, or by which any of them may be bound, requiring them to issue,
transfer, grant, sell, purchase, redeem or acquire any shares of capital
stock or any of their securities or rights convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of capital stock
of the Company or any of its Subsidiaries. There are no stockholder
agreements, voting trusts or other agreements or understandings to which
the Company is a party or by which it is bound relating
19
to the voting of any shares of the capital stock of the Company. Except as
set forth in SECTION 5.2(b) of the Company Disclosure Schedule, no rights
that arose prior to the date hereof with respect to the registration of
shares of Company Common Stock under the Securities Act, including, but not
limited to, demand rights or piggy-back registration rights, shall apply
with respect to any Parent Shares issuable in connection with the Merger or
upon exercise of Substitute Options or Substitute Warrants. SECTION 5.2(b)
of the Company Disclosure Schedule sets forth a list, as of the date
hereof, of the outstanding options and warrants to acquire shares of
Company Stock, the name of the holder of such option or warrant, the
exercise price of such option or warrant, the number of shares as to which
such option or warrant will have vested at such date and whether the
exercisability of such option or warrant will be accelerated in any way by
the transactions contemplated by this Agreement and the extent of
acceleration, if any, and any adjustments to such options or warrants
resulting from the consummation of the transactions contemplated by this
Agreement. Except as set forth in SECTION 5.2(b) of the Company Disclosure
Schedule, since June 30, 2001, no Company Options or other options or
warrants convertible or exchangeable for shares of Company Stock have been
issued or accelerated or had their terms modified.
(c) FAIRNESS OPINION. The board of directors of the Company has
received an opinion from ABN AMRO Incorporated to the effect that, as of
the date hereof and based upon and subject to the matters stated therein,
the Exchange Ratio is fair to the holders of shares of Company Common Stock
from a financial point of view and a copy of such opinion has been or,
promptly upon becoming available, will be provided to Parent, and such
opinion has not been withdrawn, revoked or modified; it being understood
and acknowledged by Parent that such opinion has been rendered for the
benefit of the board of directors of the Company and is not intended to be,
and may not be, relied upon by Parent, its affiliates or their respective
stockholders.
(d) AUTHORITY RELATIVE TO THIS AGREEMENT. The board of directors of
the Company has declared this Agreement and the Merger to be advisable and
has unanimously recommended that the stockholders of the Company adopt this
Agreement and approve the Merger, and the Company has the requisite
corporate power and authority to execute and deliver this Agreement and,
upon approval of this Agreement by the stockholders of the Company, to
consummate the transactions contemplated hereby. This Agreement and the
consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by the board of directors of the Company,
and no other corporate proceedings on the part of the Company are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby (other than the approval of this Agreement and the approval of the
Merger by the stockholders of the Company in accordance with the TBCA).
This Agreement has been duly and validly executed and delivered by the
Company and, assuming this Agreement constitutes the valid and binding
agreement of Parent and Merger Sub, constitutes the valid and binding
agreement of the Company, enforceable
20
against the Company in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium and
other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity (regardless of whether that
enforceability is considered in a proceeding at law or in equity).
(e) PRESENT COMPLIANCE WITH OBLIGATIONS AND LAWS. Except as
disclosed in SECTION 5.2(e) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is: (i) in violation of its articles of
incorporation or bylaws or similar documents; (ii) in default in the
performance of any obligation, agreement or condition of any debt
instrument that (with or without the passage of time or the giving of
notice, or both) affords to any Person the right to accelerate any
indebtedness or terminate any right; (iii) in default under or breach of
(with or without the passage of time or the giving of notice) any other
contract to which it is a party or by which it or its assets are bound; or
(iv) in violation of any law, regulation, administrative order or judicial
order, decree or judgment (domestic or foreign) applicable to it or its
business or assets, except where any violation, default or breach under
items (ii), (iii), or (iv) would not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
(f) CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective articles of
incorporation (or other similar document) or bylaws (or other similar
document) of the Company or any of its Subsidiaries; (ii) require any
consent, approval, authorization or permit of, or registration or filing
with or notification to, any governmental or regulatory authority, in each
case, by or on behalf of the Company or any of its Subsidiaries, except (A)
pursuant to the applicable requirements of the Securities Act and the
Exchange Act and the NNM, (B) the filing of the Articles of Merger pursuant
to the TBCA and appropriate documents with the relevant authorities of
other states in which the Company is authorized to do business, (C) as may
be required by any applicable state securities laws, or (D) where the
failure to obtain such consent, approval, authorization or permit, or to
make such registration, filing or notification, would not reasonably be
expected to, individually or in the aggregate, have a Material Adverse
Effect on the Company or adversely affect the ability of the Company to
consummate the transactions contemplated hereby; (iii) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any right of termination,
cancellation or acceleration or lien or other charge or encumbrance) under
any of the terms, conditions or provisions of any indenture, note, license,
lease, agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of their assets may be
bound, except as disclosed in SECTION 5.2(f) of the Company Disclosure
Schedule and except for such violations, breaches and defaults (or rights
of termination, cancellation, or acceleration or lien or other charge or
encumbrance) as to which requisite waivers
21
or consents have been obtained or that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on the
Company or adversely affect the ability of the Company to consummate the
transactions contemplated hereby; (iv) cause the suspension or revocation
of any authorizations, consents, approvals or licenses currently in effect
that, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect on the Company; or (v) assuming the
consents, approvals, authorizations or permits and registrations, filings
or notifications referred to in this SECTION 5.2(f) are duly and timely
obtained or made, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any of its Subsidiaries or
to any of their respective assets, except for violations that would not
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect on the Company or adversely affect the ability of
the Company to consummate the transactions contemplated hereby.
(g) LITIGATION. Except as disclosed in Company SEC Reports filed
prior to the date hereof, or as set forth in SECTION 5.2(g) of the Company
Disclosure Schedule, there are no actions, suits, claims, investigations or
proceedings pending or, to the Knowledge of the Company, threatened against
the Company or any of its Subsidiaries that, individually or in the
aggregate, would reasonably be expected to result in obligations or
liabilities of the Company or any of its Subsidiaries that, individually or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect on the Company or adversely affect the ability of the Company to
perform its obligations under this Agreement. Neither the Company nor any
of its Subsidiaries is subject to any outstanding judgment, order, writ,
injunction or decree that (i) has or may have the effect of prohibiting or
impairing any business practice of the Company or any of its Subsidiaries,
any acquisition of property (tangible or intangible) by the Company or any
of its Subsidiaries, the conduct of the business by the Company or any of
its Subsidiaries, or Company's ability to perform its obligations under
this Agreement or (ii) individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on the Company.
(h) SEC REPORTS; FINANCIAL STATEMENTS.
(i) The Company has filed all forms, reports and documents
with the SEC required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder, all of
which complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act (the "COMPANY
SEC REPORTS"), all of which are available through XXXXX. None of the
Company SEC Reports, including, without limitation, any financial
statements or schedules included therein, at the time filed (or if
amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were
22
made, not misleading. None of the Company's Subsidiaries is required
to file any forms, reports or other documents with the SEC.
(ii) The consolidated balance sheets and the related
statements of income, stockholders' equity or deficit and cash flow
(including the related notes thereto) of the Company included in the
Company SEC Reports (collectively, the "COMPANY FINANCIAL
STATEMENTS") comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a basis consistent throughout the
periods involved (except as otherwise noted therein or, in the case
of unaudited interim financial statements, as may be permitted by the
SEC on Form 10-Q under the Exchange Act), and present fairly in all
material respects the consolidated financial position of the Company
and its consolidated Subsidiaries as of their respective dates, and
the results of its operations and its cash flow for the periods
presented therein, except that the unaudited interim financial
statements do not include footnote disclosure of the type associated
with audited financial statements and were or are subject to normal
and recurring year-end adjustments which were not or are not expected
to be material in amount.
(iii) Since June 30, 2001, there has not been any material
change, by the Company or any of its Subsidiaries in accounting
principles, methods or policies for financial accounting purposes,
except as required by concurrent changes in GAAP, or as disclosed in
the Company SEC Reports. There are no material amendments or
modifications to agreements, documents or other instruments, which
previously had been filed by the Company with the SEC pursuant to the
Securities Act or the Exchange Act, that have not been filed with the
SEC but which are required to be filed.
(i) NO LIABILITIES. Except as disclosed in SECTION 5.2(i) of the
Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether
due or to become due or asserted or unasserted), and, to the Knowledge of
the Company, there is no reasonable basis for the assertion of any claim
with respect to any indebtedness, obligation or liability of any nature
against the Company or any of its Subsidiaries, except for indebtedness,
obligations and liabilities (i) that are fully reflected in, reserved
against or otherwise described in the most recent Company Financial
Statements, (ii) that have been incurred after the most recent Company
Financial Statements in the ordinary course of business, consistent with
past practice, (iii) that are obligations to perform under executory
contracts in the ordinary course of business (none of which is a liability
resulting from a breach of contract or warranty, tort, infringement or
legal action) or (iv) that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company.
23
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as described in
the Company SEC Reports or as disclosed in SECTION 5.2(j) of the Company
Disclosure Schedule, since June 30, 2001, and through the date hereof,
except with respect to the actions contemplated by this Agreement, the
Credit Agreement, the Loan Documents or the Reseller Agreement, the Company
has conducted its business only in the ordinary course and in a manner
consistent with past practice and, since such date and through the date
hereof, there has not been (i) any Material Adverse Effect on the Company,
(ii) any damage, destruction or loss of assets of the Company or any of its
Subsidiaries (whether or not covered by insurance) that has had or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company, (iii) any material change by the
Company in its accounting methods, principles or practices, except as
required by GAAP; (iv) any material revaluation by the Company or any of
its Subsidiaries of any of its assets, including, without limitation,
writing down the value of capitalized software or inventory or deferred tax
assets or writing off notes or accounts receivable other than in the
ordinary course of business; (v) any labor dispute or charge of unfair
labor practice (other than routine individual grievances), that,
individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect on the Company, any activity or
proceeding by a labor union or representative thereof to organize any
employee of the Company or any of its Subsidiaries or any campaign being
conducted to solicit authorization from employees to be represented by such
labor union in each case that, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect on the
Company; (vi) any waiver by the Company or any of its Subsidiaries of any
rights of material value; or (vii) any other action or event that would
have required the consent of Parent pursuant to SECTION 6.1 (other than
subsection (n) thereof) had such action or event occurred after the date of
this Agreement.
(k) BROKERS AND FINDERS. Except for the fees and expenses payable
to ABN AMRO Incorporated and Bear Xxxxxxx & Co., Inc., which fees and
expenses are determined pursuant to their respective agreements with the
Company, true and complete copies of which (including all amendments) have
been furnished or otherwise made available to Parent, neither the Company
nor any of its Subsidiaries has employed any investment banker, broker,
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement that would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection
with this Agreement or the transactions contemplated hereby.
(l) S-4 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS. None
of the information supplied or to be supplied by the Company for inclusion
or incorporation by reference in the S-4 Registration Statement or the
Proxy Statement will (i) in the case of the S-4 Registration Statement, at
the time it becomes effective or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances
24
under which they are made, not misleading, or (ii) in the case of the Proxy
Statement, at the time of the mailing of the Proxy Statement, at the time
of the Company Shareholders Meeting and Parent Stockholders Meeting (if
necessary), and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to the Company, its
officers and directors or any of its Subsidiaries should occur that is
required to be described in an amendment of, or a supplement to, the Proxy
Statement or the S-4 Registration Statement, the Company shall promptly
inform Parent so that such event may be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. The S-4 Registration
Statement will (with respect to the Company) comply as to form in all
material respects with the requirements of the Securities Act. The Proxy
Statement will (with respect to the Company) comply as to form in all
material respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any information supplied by, or related to,
Parent, Merger Sub, or any other entity with which Parent or any Subsidiary
of Parent has entered into an agreement relating to the acquisition of such
entity by Parent or any Subsidiary of Parent, or any of their respective
affiliates or advisors, which is contained in any of the foregoing
documents.
(m) TAXES.
(i) The Company and each of its Subsidiaries has timely filed
(after taking into account any extensions to file) all material
federal, state, local and foreign Returns required by applicable Tax
law to be filed by the Company and each of its Subsidiaries. All
Taxes owed by the Company or any of its Subsidiaries to a taxing
authority, or for which the Company or any of its Subsidiaries is
liable, whether to a taxing authority or to other Persons or entities
under a Significant Tax Agreement, as of the date hereof, have been
paid and, as of the Effective Time, will have been paid. All Returns
were true and correct in all material respects when filed. Other than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax treatment, the Company has made
accruals for Taxes on the Company Financial Statements that are
adequate to cover any material Tax liability of the Company and each
of its Subsidiaries determined in accordance with GAAP through the
date of the Company Financial Statements.
(ii) The Company and each of its Subsidiaries have withheld
with respect to its employees, creditors, independent contractors,
shareholders or other parties all federal and state income taxes,
FICA, FUTA and other Taxes required to be withheld.
25
(iii) There is no Tax deficiency outstanding, assessed, or to
the Company's Knowledge, proposed against the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries have
executed or requested any waiver of any statute of limitations on or
extending the period for the assessment or collection of any federal
or material state Tax that is still in effect. There are no liens for
Taxes on the assets of Company or of any of its Subsidiaries other
than with respect to Taxes not yet due and payable.
(iv) No federal or state Tax audit or other examination of the
Company or any of its Subsidiaries is presently in progress, nor has
the Company or any of its Subsidiaries been notified either in
writing or orally of any request for such federal or state Tax audit
or other examination.
(v) Neither the Company nor any of its Subsidiaries has filed
any consent agreement under Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Code)
owned by the Company.
(vi) Neither the Company nor any of its Subsidiaries is a
party to (A) any agreement with a party other than the Company or any
of its Subsidiaries providing for the allocation or payment of Tax
liabilities or payment for Tax benefits with respect to a
consolidated, combined or unitary Return which Return includes or
included the Company or any Subsidiary or (B) any Significant Tax
Agreement other than any Significant Tax Agreement described in (A).
(vii) Except for the group of which the Company and its
Subsidiaries are now presently members, neither the Company nor any
of its Subsidiaries has ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code. There is
no excess loss account, deferred intercompany gain or loss, or
intercompany items as such terms are defined in the regulations
promulgated under the Code, that exist with respect to the Company or
any of its Subsidiaries.
(viii) Neither the Company nor any of its Subsidiaries is a
party to any joint venture, partnership or other arrangement or
contract which could be treated as a partnership for federal income
tax purposes.
(ix) Neither the Company nor any of its Subsidiaries has
agreed to make nor is it required to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method
or otherwise that have not yet been taken into account.
(x) Except as disclosed in SECTION 5.2(m) of the Company
Disclosure Schedule, there is no contract, agreement, plan or
arrangement
26
covering any individual or entity treated as an individual included
in the business or assets of the Company or its Subsidiaries that,
individually or collectively, could give rise to the payment by the
Company, a Subsidiary, Merger Sub or Parent of an amount that would
not be deductible by reason of Sections 280G or 162(m) of the Code or
similar provisions of Tax law.
(n) EMPLOYEE BENEFITS.
(i) For purposes hereof, the term "COMPANY SCHEDULED PLANS"
means each "employee pension benefit plan" (as such term is defined
in Section 3(2) of ERISA), "employee welfare benefit plan" (as such
term is defined in Section 3(1) of ERISA), material personnel or
payroll policy (including vacation time, holiday pay, service awards,
moving expense reimbursement programs and sick leave) or material
fringe benefit, severance agreement or plan or any medical, hospital,
dental, life or disability plan, pension benefit plan, excess benefit
plan, bonus, stock option, stock purchase or other incentive plan
(including any equity or equity-based plan), tuition reimbursement,
automobile use, club membership, parental or family leave, top-hat
plan or deferred-compensation plan, salary-reduction agreement,
change-of-control agreement, employment agreement, consulting
agreement, or collective-bargaining agreement, indemnification
agreement, retainer agreement, or any other material benefit plan,
policy, program, arrangement, agreement or contract, with respect to
any employee, former employee, director, independent contractor, or
any beneficiary or dependent thereof of the Company, with respect to
which the Company has any liability (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted
or unasserted). A "COMPANY PLAN AFFILIATE" is each entity that is
treated as a single employer with the Company pursuant to Section
4001 of ERISA or Section 414 of the Code. The Company has made
available to Parent copies of all employee manuals of the Company and
its Subsidiaries that include personnel policies applicable to any of
their respective employees.
(ii) The Company has made available to Parent a complete and
accurate copy of each written Company Scheduled Plan, together with,
if applicable, a copy of audited financial statements, actuarial
reports and Form 5500 Annual Reports (including required schedules),
if any, for the three (3) most recent plan years, the most recent
Internal Revenue Service ("IRS") determination letter or IRS
recognition of exemption; each other material letter, ruling or
notice issued by a governmental body with respect to each such plan
during the last three (3) years, a copy of each trust agreement,
insurance contract or other funding vehicle, if any, with respect to
each such plan, the current summary plan description and summary of
material modifications thereto with respect to each such plan and
Form 5310. There are no unwritten Company Scheduled Plans except as
set forth and described as comprehended to the Closing Date on
27
SECTION 5.2(n) of the Company Disclosure Schedule. There are no
negotiations, demands or proposals that are pending or threatened
that concern matters now covered, or that would be covered, by the
foregoing types of unwritten Company Scheduled Plans, if any.
(iii) To the Company's Knowledge, each Company Scheduled Plan
(1) has been in compliance and currently complies in form and in
operation with all applicable requirements of ERISA and the Code, and
any other legal requirements; (2) has been and is operated and
administered in compliance with its terms (except as otherwise
required by law); and (3) has been and is operated in compliance with
applicable legal requirements in such a manner as to qualify, where
appropriate, for both Federal and state purposes, for income tax
exclusions to its participants, tax-exempt income for its funding
vehicle, and the allowance of deductions and credits with respect to
contributions thereto. Each Company Scheduled Plan that is intended
to be qualified under Section 401(a) of the Code has received a
favorable determination letter or recognition of exemption from the
IRS on which the Company can rely.
(iv) With respect to each Company Scheduled Plan, there are no
claims or other proceedings pending or, to the Knowledge of the
Company, threatened with respect to the assets thereof (other than
routine claims for benefits).
(v) Except as would not be reasonably expected to have a
Material Adverse Effect on the Company, with respect to each Company
Scheduled Plan, no Person: (1) has entered into any "prohibited
transaction," as such term is defined in ERISA or the Code and the
regulations, administrative rulings and case law thereunder that is
not otherwise exempt under Code Section 4975 or ERISA Section 408 (or
any administrative class exemption issued thereunder); (2) has
breached a fiduciary obligation or violated Sections 402, 403, 405,
503, 510 or 511 of ERISA; (3) has any liability for any failure to
act or comply in connection with the administration or investment of
the assets of such plans; or (4) engaged in any transaction or
otherwise acted with respect to such plans in such a manner that
could subject Parent, or any fiduciary or plan administrator or any
other Person dealing with any such plan, to liability under Section
409 or 502 of ERISA or Sections 4972 or 4976 through 4980B of the
Code.
(vi) Each Company Scheduled Plan (other than any individual
contract with an employee or any stock option plan) may be amended,
terminated, modified or otherwise revised by the Company or Parent,
on and after the Closing, without incurring further obligations to
the Company or Parent (other than ordinary administrative expenses or
routine claims for benefits).
28
(vii) None of the Company or any current or former Company Plan
Affiliate has at any time participated in, made contributions to or
had any other liability with respect to any Company Scheduled Plan
that is a "multiemployer plan" as defined in Section 4001 of ERISA, a
"multiemployer plan" within the meaning of Section 3(37) of ERISA, a
"multiple employer plan" within the meaning of Section 413(c) of the
Code, a "multiple employer welfare arrangement" within the meaning of
Section 3(40) of ERISA or a plan that is subject to Title IV of
ERISA.
(viii) No Company Scheduled Plan provides, or reflects or
represents any liability to provide retiree health coverage to any
person for any reason, except as may be required by Part 6 of
Subtitle B of Title I of ERISA or applicable state insurance laws,
and neither the Company nor any Company Plan Affiliate has any
liability (whether accrued, absolute, contingent or otherwise, and
whether due or to become due to asserted or unasserted) to any
current or former employee, consultant or director (either
individually or as a group) to provide retiree health coverage,
except to the extent required by applicable continuation coverage
statutes.
(ix) Neither the Company nor a Company Plan Affiliate has any
liability for any material excise tax imposed by Code Sections 4971
or 4977. The Company has no material liability for any excise tax
imposed by Code Section 4972 or 4979.
(x) With respect to any Company Scheduled Plan that is a
welfare plan as defined in Section 3(1) of ERISA (1) each such
welfare plan that is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of the Code
materially meets such requirements; and (2) there is no disqualified
benefit (as such term is defined in Code Section 4976(b)) that would
subject the Company or any Company Plan Affiliate to a material tax
under Code Section 4976(a).
(xi) To the Company's Knowledge, each Company Scheduled Plan
that has been adopted or maintained by the Company or any Company
Plan Affiliate, whether informally or formally, or with respect to
which the Company or any Company Plan Affiliate will or may have any
liability, for the benefit of the Company employees who perform
services outside the United States (the "COMPANY INTERNATIONAL
EMPLOYEE PLANS") has been established, maintained and administered in
compliance with its terms and conditions and with the requirements
prescribed by any and all statutory or regulatory laws that are
applicable to such Company International Employee Plan. Furthermore,
no Company International Employee Plan has unfunded liabilities,
that, as of the Effective Time, will not be offset by insurance or
fully accrued, except for such funding deficiencies as would not
result in a Material Adverse Effect to the Company. Except as
required by law, no condition exists that would prevent the Company
or any Company Plan Affiliate from terminating or
29
amending any Company International Employee Plan at any time for any
reason without liability to the Company or any Company Plan Affiliate
(other than ordinary administration expenses or routine claims for
benefits).
(xii) Neither the Company nor any current or former Company
Plan Affiliate has any material liability (including, but not limited
to, any contingent liability) with respect to any plan subject to
Title IV of ERISA or Section 412 of the Code or any plan maintained
by any former Company Plan Affiliate.
(xiii) Other than by reason of actions taken following the
Closing, neither the execution of this Agreement nor the consummation
of the transactions contemplated by this Agreement will (1) entitle
any current or former employee of the Company to severance pay,
unemployment compensation or any other payment, (2) accelerate the
time of payment or vesting of any payment (other than for a
terminated or frozen tax-qualified plan, pursuant to a requirement
herein to freeze or terminate such plan), cause the forgiveness of
any indebtedness, or increase the amount of any compensation due to
any such employee or former employee or (3) result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the
Code for which an exemption is not available.
(o) COMPANY INTANGIBLE PROPERTY.
(i) The Company or its Subsidiaries owns or is properly
licensed to use all material Intellectual Property Rights used or
required for the conduct of the business of the Company and its
Subsidiaries. Notwithstanding the foregoing, this representation and
warranty shall not be deemed to be applicable to any Intellectual
Property Rights of third parties licensed or otherwise provided or
required to be provided by customers of the Company and its
Subsidiaries.
(ii) To the Knowledge of the Company, the Company Intellectual
Property Rights are valid and enforceable.
(iii) Except for such matters as would not reasonably be
expected to have a Material Adverse Effect on the Company, neither
the Company nor any of its Subsidiaries nor, to the Knowledge of the
Company, any other party to any agreement relating to or involving
any Company Intellectual Property Right is in breach thereof or in
default thereunder.
(iv) Except for nonexclusive licenses to customers entered
into in the ordinary course of business, neither the Company nor any
of its
30
Subsidiaries is a party to any agreement licensing or allowing the
use of any material Company Intellectual Property Right to third
parties.
(v) Except for such matters as would not reasonably be
expected to have a Material Adverse Effect on the Company, to the
Knowledge of the Company, no third party is infringing,
misappropriating, diluting or otherwise violating any Company
Intellectual Property Right.
(vi) Except for such matters as would not reasonably be
expected to have a Material Adverse Effect on the Company, neither
the Company nor any of its Subsidiaries has received oral or written
notification or is a party to any suit, action, complaint, legal or
administrative proceeding (i) relating to a claim of infringement,
misappropriation, dilution, violation of any license or other
violation with respect to any Intellectual Property Right of any
third party, (ii) relating to a demand to cease and desist certain
conduct, an offer to license, or notice of the existence of any
Intellectual Property Right of any third party, (iii) relating to any
claim involving the validity, enforceability, or the right of the
Company or any of its Subsidiaries to use any Company Intellectual
Property Right.
(vii) No Company Intellectual Property Right is subject to any
outstanding lien, security interest, judgment, injunction, order,
consent decree, or agreement restricting the use thereof by the
Company or any of its Subsidiaries or restricting the licensing
thereof by the Company or any of its Subsidiaries other than use or
licensing restrictions imposed with respect to Intellectual Property
Rights owned by third parties and licensed to the Company.
(p) AGREEMENTS, CONTRACTS AND COMMITMENTS; MATERIAL CONTRACTS.
Except as set forth in SECTION 5.2(p) of the Company Disclosure Schedule or
by the Credit Agreement, the Loan Documents or the Reseller Agreement,
neither the Company nor any of its Subsidiaries is a party to or is bound
by:
(i) any contract relating to the borrowing of money, the
guaranty of another Person's borrowing of money, or the creation of
an encumbrance or lien on the assets of the Company or any of its
Subsidiaries and with outstanding obligations in excess of $150,000;
(ii) any employment or consulting agreement, contract or
commitment with any officer or director level employee or member of
the Company's board of directors or any other employee who is one of
the fifteen (15) most highly compensated employees, including base
salary and bonuses (the "COMPANY KEY EMPLOYEES"), other than those
that are terminable by the Company or any of its Subsidiaries on no
more than thirty (30) days notice without liability or financial
obligation or benefits generally available to employees of the
Company, except to the extent
31
general principles of wrongful termination law may limit the
Company's or any of its Subsidiaries' ability to terminate employees
at will;
(iii) any agreement of indemnification or guaranty by the
Company or any of its Subsidiaries not entered into in the ordinary
course of business other than indemnification agreements between the
Company or any of its Subsidiaries and any of its officers or
directors in standard forms as filed by the Company with the SEC;
(iv) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company or any of its
Subsidiaries to engage in any line of business or conduct business in
any geographical area, compete with any person or granting any
exclusive distribution rights or limits the use or exploitation of
the Company Proprietary Rights;
(v) any contract requiring payments for capital expenditures
in excess of $150,000;
(vi) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the
ordinary course of business; or
(vii) any agreement, contract or commitment for the purchase of
any ownership interest in any corporation, partnership, joint venture
or other business enterprise for consideration in excess of $150,000,
which, in any case, includes all escrow and earn-out agreements with
outstanding obligations.
A true and complete copy (including all material amendments) of each
agreement, contract, obligation, promise or undertaking (whether written or
oral and whether express or implied) set forth in SECTION 5.2(p) of the
Company Disclosure Schedule (a "COMPANY CONTRACT"), or a summary of each
oral contract, has been made available to Parent. Each Company Contract is
in full force and effect. No condition exists or event has occurred that,
(whether with or without notice or lapse of time or both, or the happening
or occurrence of any other event) would constitute a default by the Company
or a Subsidiary of the Company or, to the Knowledge of the Company, any
other party thereto under, or result in a right in termination of, any
Company Contract, except as would not, individually or in the aggregate, be
reasonably expected to result in a Material Adverse Effect on the Company.
(q) UNLAWFUL PAYMENTS AND CONTRIBUTIONS. To the Knowledge of the
Company, neither the Company, any Subsidiary of the Company nor any of
their respective directors, officers, employees or agents has, with respect
to the businesses of the Company or its Subsidiaries, (i) used any funds
for any unlawful contribution, endorsement, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee; (iii) violated or is in
32
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any Person or entity.
(r) LISTINGS. The Company's securities are not listed for trading
on any U.S. domestic or foreign securities exchange, other than the NNM.
(s) ENVIRONMENTAL MATTERS. (i) Except for such noncompliance as
would not reasonably be expected to result in a Material Adverse Effect on
the Company, the Company and its Subsidiaries and the operations, assets
and properties thereof are in compliance with all Environmental Laws; (ii)
there are no judicial or administrative actions, suits, proceedings or
investigations pending or, to the Knowledge of the Company, threatened
against the Company or any Subsidiary of the Company alleging the violation
of any Environmental Law and neither the Company nor any Subsidiary has
received notice from any governmental body or Person alleging any violation
or liability of the Company or any of its Subsidiaries under any
Environmental Laws, in either case that could reasonably be expected to
result in a Material Adverse Effect on the Company; (iii) to the Knowledge
of the Company, there are no facts, circumstances or conditions relating
to, arising from, associated with or attributable to the Company or its
Subsidiaries or any real property currently or previously owned, operated
or leased by the Company or its Subsidiaries that could result in
Environmental Costs and Liabilities that would reasonably be expected to
result in a Material Adverse Effect on the Company; and (iv) to the
Knowledge of the Company, neither the Company nor any of its Subsidiaries
has ever generated, transported, treated, stored, handled or disposed of
any Hazardous Material at any site, location or facility in a manner that
could create any Environmental Costs and Liabilities that would reasonably
be expected to result in a Material Adverse Effect on the Company, and, to
the Knowledge of the Company, no such Hazardous Material has been or is
currently present on, in, at or under any real property owned or used by
the Company or any of its Subsidiaries in a manner (including without
limitation, containment by means of any underground or aboveground storage
tank) that could create any Environmental Costs and Liabilities that would
reasonably be expected to result in a Material Adverse Effect on the
Company. For the purpose of this Agreement, the following terms have the
following definitions: (X) "ENVIRONMENTAL COSTS AND LIABILITIES" means any
losses, liabilities, obligations, damages, fines, penalties, judgments,
actions, claims, costs and expenses (including, without limitation, fees,
disbursements and expenses of legal counsel, experts, engineers and
consultants and the costs of investigation and feasibility studies,
remedial or removal actions and cleanup activities) arising from or under
any Environmental Law; (Y) "ENVIRONMENTAL LAWS" means any applicable
federal, state, local or foreign law (including common law), statute, code,
ordinance, rule, regulation or other requirement relating to the
environment, natural resources, or public or employee health and safety;
and (Z) "HAZARDOUS MATERIAL" means any substance, material or waste
regulated by federal, state or local government, including, without
limitation, any substance, material or waste that is defined as a
"hazardous waste," "hazardous
33
material," "hazardous substance," "toxic waste" or "toxic substance" under
any provision of Environmental Law and including but not limited to
petroleum and petroleum products.
(t) TITLE TO PROPERTIES; LIENS; CONDITION OF PROPERTIES. The
Company and its Subsidiaries have good and marketable title to, or a valid
leasehold interest in, the real and personal property, shown on the most
recent Company Financial Statement or acquired after the date thereof. None
of the property owned or used by the Company or any of its Subsidiaries is
subject to any mortgage, pledge, deed of trust, lien (other than for taxes
not yet due and payable), conditional sale agreement, security title,
encumbrance, or other adverse claim or interest of any kind, except, solely
with respect to real property, for defects in title, easements, restrictive
covenants and similar encumbrances or impediments that in the aggregate do
not have a Material Adverse Effect on the Company. Except as disclosed in
SECTION 5.2(t) of the Company Disclosure Schedule, since June 30, 2001,
there has not been any sale, lease, or any other disposition or
distribution by the Company or any of its Subsidiaries of any of its assets
or properties material to the Company and its Subsidiaries, taken as a
whole, except transactions in the ordinary course of business, consistent
with past practices.
(u) INSURANCE. Except as disclosed in SECTION 5.2(u) of the Company
Disclosure Schedule, all insurance policies (including "self-insurance"
programs) now maintained by the Company (the "COMPANY INSURANCE POLICIES")
are in full force and effect, the Company is not in default under any of
the Company Insurance Policies, and no material claim for coverage under
any of the Company Insurance Policies has been denied. The Company has not
received any notice of cancellation or intent to cancel or increase or
intent to increase premiums with respect to such insurance policies nor, to
the Knowledge of the Company, is there any basis for any such action.
(v) LABOR AND EMPLOYEE RELATIONS.
(i) (A) None of the employees of the Company or any of its
Subsidiaries is represented in his or her capacity as an employee of
such company by any labor organization; (B) neither the Company nor
any of its Subsidiaries has recognized any labor organization nor has
any labor organization been elected as the collective bargaining
agent of any of their employees, nor has the Company or any of its
Subsidiaries signed any collective bargaining agreement or union
contract recognizing any labor organization as the bargaining agent
of any of their employees; and (C) to the Knowledge of the Company,
there is no active or current union organization activity involving
the employees of the Company or any of its Subsidiaries, nor has
there ever been union representation involving employees of the
Company or any of its Subsidiaries.
(ii) Except as set forth in SECTION 5.2(v) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries is in
34
compliance with all federal, foreign (as applicable), and state laws
regarding employment practices, including laws relating to workers'
safety, sexual harassment or discrimination, except where the failure
to so be in compliance, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
(w) PERMITS. The Company and each of its Subsidiaries hold all
licenses, permits, registrations, orders, authorizations, approvals and
franchises that are required to permit it to conduct its businesses as
presently conducted, except where the failure to hold such licenses,
permits, registrations, orders, authorizations, approvals or franchises
would not reasonably be expected to, individually or in the aggregate, have
a Material Adverse Effect on the Company. All such licenses, permits,
registrations, orders, authorizations, approvals and franchises are now,
and will be after the Closing, valid and in full force and effect, and
Surviving Corporation shall have full benefit of the same, except where the
failure to be valid and in full force and effect or to have the benefit of
any such license, permit, registration, order, authorization, approval or
franchise would not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries has received any notification of any
asserted present failure (or past and unremedied failure) by it to have
obtained any such license, permit, registration, order, authorization,
approval or franchise, except where such failure would not reasonably be
expected to, individually or in the aggregate, have a Material Adverse
Effect on the Company.
(x) TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Company SEC Reports filed prior to the date of this Agreement, since the
date of Company's last proxy statement to its shareholders, no event has
occurred that would be required to be reported by Company pursuant to Item
404 of Regulation S-K promulgated by the SEC.
(y) AMENDMENT TO COMPANY RIGHTS PLAN. The Company has amended, and
the board of directors of the Company has authorized such amendment, the
Rights Agreement, dated as of September 27, 1999, between the Company and
Chasemellon Shareholder Services, L.L.C. (the "COMPANY RIGHTS AGREEMENT"),
so that (i) neither the Parent nor any of it affiliates will become an
"Acquiring Person" (as defined in the Company Rights Agreement) as a result
of the consummation of the transactions contemplated by this Agreement or
(ii) no "Distribution Date" (as such term is defined in the Company Rights
Agreement) will occur as a result of the consummation of the transactions
contemplated by this Agreement.
(z) TAKEOVER STATUTES. Subject to the accuracy of Parent's
representation in SECTION 5.1(t), no "fair price", "moratorium", "control
share acquisition" or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States applicable to the
Company is applicable to the Merger or the other transactions contemplated
hereby.
35
(aa) PARENT COMMON STOCK. Neither the Company nor any of its
Subsidiaries is, nor at any time during the last three
years has any of such been, an "interested stockholder" of Parent as
defined in Section 203 of the DGCL.
(bb) TERMINATION FEES. Except as set forth on Section 5.2(bb) of the
Company Disclosure Schedule, no termination payments, severance payments or
other rights under any employment, severance or similar agreement to which
Company or its Subsidiaries is a party will be accelerated by the execution
of this Agreement, the Merger or the transactions contemplated by this
Agreement.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms and the Effective Time, the Company (which for
the purposes of this SECTION 6.1 shall include the Company and each of its
Subsidiaries) agrees, except to the extent that Parent shall otherwise consent
in writing (which consent shall not be unreasonably withheld, conditioned or
delayed), to carry on its business and to cause each of its Subsidiaries to
carry on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, and to use and cause each of its
Subsidiaries to use all commercially reasonable efforts consistent with past
practices and policies to preserve intact its present business organizations,
keep available the services of its present officers and employees and preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with the Company or any such Subsidiaries,
to the end that the goodwill and ongoing businesses of Company and each of its
Subsidiaries be unimpaired at the Effective Time. Except as provided for by this
Agreement, the Credit Agreement, the Loan Documents, or the Reseller Agreement ,
the Company shall not, and shall not permit any of its Subsidiaries to, prior to
the Effective Time or earlier termination of this Agreement pursuant to its
terms, without the prior written consent of Parent (which consent shall not be
unreasonably withheld, conditioned or delayed):
(a) Except as provided in this Agreement or as described in SECTION
6.1(a) of the Company Disclosure Schedule, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under the Company Option Plans or authorize cash payments in
exchange for any options granted under any of such plans;
(b) Enter into any material partnership arrangements, joint
development agreements or strategic alliances, except in the ordinary
course of business pursuant to the Company's standard form of solution
partner enrollment agreement, a form of which has been delivered to Parent,
except for such changes thereto that are not material;
(c) Terminate any executive officer or other employee with whom the
Company has entered into a retention agreement, including without
limitation, those agreements set forth on Section 5.2(p)(ii) of the Company
Disclosure
36
Schedules, or, except as required by law, grant any severance or
termination pay (i) to any executive officer or (ii) to any other employee,
except payments made (A) in connection with the termination of employees
who are not executive officers in amounts consistent with the Company's
policies and past practices, (B) pursuant to written agreements
outstanding, or benefit plans or policies existing, on the date hereof and
as previously disclosed in writing to Parent or (C) pursuant to written
agreements consistent with the past agreements of the Company or any of its
Subsidiaries under similar circumstances;
(d) Transfer, license or sell to any person or entity or otherwise
extend, amend or modify any rights to the Company Proprietary Rights
(including rights to resell or relicense the Company Proprietary Rights) or
enter into grants to future patent rights, other than on standard forms of
the Company or any of its Subsidiaries (or pursuant to written agreements
negotiated at arm's length) providing for a nonexclusive license entered
into in the ordinary course of business, including nonexclusive,
enterprise-wide or site licenses.
(e) Commence any material litigation other than (i) for the routine
collection of bills, (ii) for software piracy, or (iii) in such cases where
the Company in good faith determines that failure to commence suit would
result in the material impairment of a valuable aspect of the business of
the Company or any of its Subsidiaries, provided that the Company consults
with the Parent prior to the filing of such a suit and keeps Parent advised
of the status and details of such litigation (provided that,
notwithstanding the foregoing, the Company shall not be required to obtain
Parent's consent to any claim, suit or proceeding against Parent, Merger
Sub, any other Subsidiary of Parent, or any of their affiliates, nor shall
the Company be required to consult with Parent with respect thereto);
(f) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company;
(g) Repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock;
(h) Issue, deliver, sell or authorize or propose the issuance,
delivery, grant or sale of, any shares of its capital stock of any class or
securities convertible into, or any subscriptions, rights, warrants or
options to acquire, or enter into other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities, other than the issuance of shares of Company Stock (with
Company Rights attached thereto) pursuant to the exercise of stock options
or warrants outstanding as of the date of this Agreement;
(i) Cause, permit or propose any amendments to the Company's
articles of incorporation or bylaws;
37
(j) Sell, lease, license, encumber or otherwise dispose of any of
the properties or assets of the Company or any of its Subsidiaries or
terminate or waive any contracts, claims, or rights;
(k) Incur any material indebtedness for borrowed money or guarantee
any such prohibited indebtedness or issue or sell any debt securities or
warrants or rights to acquire debt securities of the Company or any of its
Subsidiaries or guarantee any debt securities of others;
(l) Except as required by law, adopt or amend any Company Scheduled
Plan or increase the salary or wage rate of any of its employees (except
for wage increases in the ordinary course of business and consistent with
past practices), including but not limited to (but without limiting the
generality of the foregoing), the adoption or amendment of any stock
purchase or option plan, the entering into of any employment contract or
the payment of any special bonus or special remuneration to any director or
employee;
(m) Revalue any of the assets of the Company or any of its
Subsidiaries, including without limitation writing down the value of
inventory, writing off notes or accounts receivable, other than in the
ordinary course of business consistent with past practice or as required by
GAAP or applicable law;
(n) Except as set forth in SECTION 6.1(n) of the Company Disclosure
Schedule, pay, discharge or satisfy in an amount in excess of $100,000 (in
any one case) or $400,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise) other than claims, liabilities or obligations (i) as and when
required under contracts or agreements entered into prior to the date
hereof and disclosed or provided to Parent or (ii) set forth in a schedule
delivered to and approved by Parent, including, without limitation, under
any employment contract or with respect to any bonus or special
remuneration, other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities of the type reflected or
reserved against in the Company Financial Statements (or in the notes
thereto);
(o) Waive any rights of material value or, except as required by
applicable Tax law, make or change any material election in respect of
Taxes, adopt or change in any material respect any accounting method in
respect of Taxes, file any material Return or any amendment to a material
Return, enter into any closing agreement, settle any claim or assessment in
respect of Taxes (except settlements effected solely through payment of
immaterial sums of money), or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of
Taxes;
(p) Except for any change that is required by reason of a
concurrent change in GAAP, the Company will not, and will not permit any of
its Subsidiaries to, change any method of accounting or accounting practice
used by it;
38
(q) Except as otherwise permitted pursuant to SECTION 6.2 AND 6.3,
take any action to exempt or make any person, entity or action (other than
Parent) not subject to the provision of Article 13.03 of the TBCA or any
other potentially applicable antitakeover or similar statute or regulation;
(r) Release or permit the release of any Person from, or waive or
permit the waiver of any provision of, any confidentiality, "standstill" or
similar agreement to which any of the Company or any of its Subsidiaries is
a party or under which the Company or any of its Subsidiaries has any
rights, and will use its best efforts to enforce or cause to be enforced
each such agreement at the request of Parent, except as otherwise required
by the fiduciary duties of the Company's board of directors, as determined
in good faith thereby (after consultation with and based on the advice of
outside legal counsel). Promptly after the S-4 Registration Statement is
declared effective by the SEC, the Company will also request each Person
that has executed, within 12 months prior to the date of this Agreement, a
confidentiality agreement in connection with such Person's consideration of
a possible Acquisition Transaction or equity or debt investment in the
Company to return all confidential information heretofore furnished to such
Person by or on behalf of the Company or any of its Subsidiaries;
(s) Purchase or renew any of the Company Insurance Policies except
in compliance with the provisions of SECTION 6.9 hereof; or
(t) Take, or agree in writing or otherwise to take, any of the
actions described in SECTION 6.1(a) THROUGH (s) above, or any action which
would cause or would be reasonably likely to cause any of the conditions to
the Merger set forth in SECTIONS 7.1 OR 7.3, not to be satisfied.
6.2 NO SOLICITATION.
(a) From and after the date of this Agreement until the Effective
Time or the earlier termination of this Agreement in accordance with its
terms, the Company will not, and will not permit any of its Subsidiaries or
its or their respective directors, officers, investment bankers,
affiliates, representatives and agents to, (i) solicit, initiate or
encourage (including by way of furnishing unsolicited information), or take
any other action to facilitate, any inquiries or proposals that constitute,
or could reasonably be expected to lead to, any Company Acquisition
Proposal, or (ii) engage in, or enter into, any negotiations or discussions
concerning any Company Acquisition Proposal. Notwithstanding the foregoing,
in the event that, notwithstanding compliance with the preceding sentence,
prior to receipt of the approval of this Agreement and the Merger by the
Company's shareholders, (x) the Company receives a Company Acquisition
Proposal that is or may reasonably be expected to lead to a Company
Superior Proposal that was not solicited in violation of this Section 6.2,
(y) prior to receipt of the approval of this Agreement and the Merger by
the Company's shareholders, the board of directors of the Company
determines in good faith (after consultation
39
with and based upon the advice of its outside counsel) that in light of
such Company Acquisition Proposal, if the Company fails to participate in
such discussions and negotiations with, or provide nonpublic information
to, the party making such Company Acquisition Proposal, there is a
reasonable probability that the board of directors of the Company would be
in violation of its fiduciary duties under applicable law, and (z) the
Company gives the Parent prompt (and in any event within 24 hours) written
notice of doing so, the Company may participate in discussions regarding
such Company Acquisition Proposal in order to be informed and make a
determination with respect thereto and may provide nonpublic information to
the party making such Company Acquisition Proposal. In such event, the
Company shall (i) promptly inform Parent of the material terms and
conditions of such Company Acquisition Proposal, including the identity of
the Person making such Company Acquisition Proposal, and (ii) promptly keep
Parent informed of the status, including any material change to the terms,
of any such Company Acquisition Proposal. As used herein, the term "COMPANY
ACQUISITION PROPOSAL" shall mean any inquiry, proposal or offer relating to
any (i) merger, consolidation, business combination, or similar transaction
involving the Company or any Subsidiary of the Company, (ii) sale, lease or
other disposition, directly or indirectly, by merger, consolidation, share
exchange or otherwise, of any assets of the Company or any Subsidiary of
the Company in one or more transactions, (iii) issuance, sale, or other
disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities (or options, rights or warrants to
purchase such securities, or securities convertible into such securities)
of the Company or any Subsidiary of the Company, (iv) liquidation,
dissolution, recapitalization or other similar type of transaction with
respect to the Company or any Subsidiary of the Company, (v) tender offer
or exchange offer for Company securities; in the case of (i), (ii), (iii),
(iv) or (v) above, which transaction would result in a third party
acquiring beneficial ownership of more than fifty percent (50%) of the
voting power of the Company or the assets representing more than fifty
percent (50%) of the net income, net revenue or assets of the Company on a
consolidated basis, (vi) transaction that is similar in form, substance or
purpose to any of the foregoing transactions, or (vii) public announcement
of an agreement, proposal, plan or intention to do any of the foregoing,
PROVIDED, HOWEVER, that the term "Company Acquisition Proposal" shall not
include the Merger and the transactions contemplated hereby or any
transaction proposed by Parent or any of its Subsidiaries. For purposes of
this Agreement, "COMPANY SUPERIOR PROPOSAL" means any offer not solicited
after the date of this Agreement by the Company or by other Persons in
violation of the first sentence of this SECTION 6.2(a), and made by a third
party other than Parent or any of its Subsidiaries to consummate a tender
offer, exchange offer, merger, consolidation or similar transaction that
would result in such third party beneficially owning, directly or
indirectly, more than fifty percent (50%) of the shares of Company Stock
then outstanding (or of the surviving entity in a merger) or all or
substantially all of the assets of Company and its Subsidiaries, taken
together, and that the board of directors of the Company determines in good
faith has a reasonable likelihood of closing and otherwise on terms which
the board of
40
directors of the Company determines in good faith (based on its
consultation with a financial advisor of nationally recognized reputation
and considering such other matters that it deems relevant) would, if
consummated, result in a transaction more favorable to the Company's
shareholders from a financial point of view than the Merger, taking into
account, in the reasonable good faith judgment of the board of directors of
the Company after consultation with its financial advisor, the availability
to the person or entity making such Company Superior Proposal of the
financial means to conclude such transaction. The Company will immediately
cease any and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
(b) From and after the date of this Agreement until the Effective
Time or the earlier termination of this Agreement in accordance with its
terms, neither the board of directors of the Company nor any committee
thereof shall, except as required by its fiduciary duties as determined in
good faith thereby (after consultation with and based upon the advice of
its outside counsel), (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Merger Sub, the approval or
recommendation by the board of directors of the Company or such committee
of this Agreement or the Merger, (ii) approve, recommend, or otherwise
support or endorse any Company Acquisition Proposal, or (iii) cause the
Company to enter into any letter of intent, agreement in principle,
acquisition agreement or similar agreement with respect to any Company
Acquisition Proposal. Nothing contained in this Agreement shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 or 14e-2 promulgated under the Exchange Act or
from making any disclosure to the Company's shareholders if, in the good
faith judgment of the board of directors of the Company (after consultation
with and based upon the advice of its outside counsel), such disclosure is
necessary for the board of directors to comply with its fiduciary duties
under applicable law.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this SECTION 6.2, the Company will promptly (and
in any event within twenty-four (24) hours) advise Parent, in writing, if
any Company Acquisition Proposal is made or any information or access to
properties, books or records of the Company is requested in connection with
a Company Acquisition Proposal, (i) the principal terms and conditions of
any such Company Acquisition Proposal or inquiry, (ii) the identity of the
party making such Company Acquisition Proposal or inquiry, and (iii) any
written materials received by the Company in connection with such Company
Acquisition Proposal. The Company will keep Parent advised of the status
and details (including amendments and proposed amendments) of any such
request or Company Acquisition Proposal.
6.3 MEETING OF STOCKHOLDERS/SHAREHOLDERS.
(a) Except as contemplated in SECTION 6.2(b), the board of directors
of the Company shall recommend to the Company's shareholders the approval
of the Merger and this Agreement and, promptly after the date hereof, the
Company
41
shall take all action necessary in accordance with the TBCA and its
articles of incorporation and bylaws to convene a meeting of shareholders
("COMPANY SHAREHOLDERS MEETING") to be held as promptly as practicable
after the S-4 Registration Statement is declared effective by the SEC for
the purposes of voting upon the adoption of this Agreement and the Merger.
(b) If, in the reasonable judgment of Parent, the issuance of
Parent Shares pursuant to this Agreement would require the approval of the
stockholders of Parent pursuant to the rules of the NNM, Parent shall take
all action necessary in accordance with the DGCL and its certificate of
incorporation and bylaws to convene a meeting of stockholders (the "PARENT
STOCKHOLDERS MEETING") to be held as promptly as practicable after the S-4
Registration Statement is declared effective by the SEC for the purposes of
voting upon the issuance of Parent Shares pursuant to this Agreement and
the Merger. In the event that a Parent Stockholders Meeting is so required,
the board of directors of Parent shall recommend to Parent's stockholders
approval of the issuance of the Parent Shares hereunder, pursuant to the
requirements of the NNM, except as otherwise required by the fiduciary
duties of Parent's board of directors, as determined in good faith thereby
(after consultation with and based on the advice of outside legal counsel).
In the event that prior to the date of the Parent Stockholders Meeting, the
rules of the NNM permit Parent to consummate the Merger without the
approval of Parent's stockholders, Parent shall be entitled to cancel the
Parent Stockholders Meeting and/or the vote on the issuance of Parent
Shares pursuant to this Agreement and the Merger.
6.4 REGISTRATION STATEMENT. Parent will, within 14 days after the date
hereof (except for delays attributable to the Company or any of its Authorized
Representatives (defined below)), prepare and file with the SEC a registration
statement on Form S-4 (the "S-4 REGISTRATION STATEMENT"), containing a proxy
statement/prospectus and a form of proxy, in connection with the registration
under the Securities Act of the Parent Shares issuable in respect of the shares
of Company Common Stock in connection with the Merger and the other transactions
contemplated hereby. The Company and, if necessary, Parent will, as promptly as
practicable, prepare and file with the SEC a proxy statement that will be the
same proxy statement/prospectus contained in the S-4 Registration Statement and
a form of proxy, in connection with the vote of the Company's (and Parent's, if
necessary) stockholders with respect to the adoption of this Agreement and the
Merger (such proxy statement/prospectus, together with any amendments thereof or
supplements thereto, in each case in the form or forms mailed to the Company's
(and Parent's, if necessary) stockholders is herein called the "PROXY
STATEMENT"). The Company and Parent will, and will cause their accountants and
lawyers to, use their reasonable best efforts to have or cause the S-4
Registration Statement declared effective as promptly as practicable thereafter,
including, without limitation, causing their accountants to deliver necessary or
required instruments such as opinions, consents and certificates, and will take
any other action required or necessary to be taken under federal or state
securities laws or otherwise in connection with the registration process it
being understood that Xxxxxxxx & Xxxxxx, L.L.P., special tax counsel to the
Company, will render the tax opinion referred to in SECTION 6.12 below on the
date the preliminary proxy is first filed with the SEC. The Company and Parent
(if necessary) will each use its reasonable efforts to cause the Proxy Statement
to be mailed to its stockholders at
42
the earliest practicable date and the Company and Parent (if necessary) shall
each use its commercially reasonable efforts to hold the Company Shareholders
Meeting and, if necessary, the Parent Stockholders Meeting, as the case may be,
in accordance with SECTION 6.3 as soon as practicable after the S-4 Registration
Statement is declared effective by the SEC. Parent shall also take any action
required to be taken under state blue sky or other securities laws in connection
with the issuance of Parent Shares in the Merger.
6.5 REASONABLE EFFORTS.
(a) Subject to the terms and conditions of this Agreement, the
Parties shall: (i) promptly make their respective filings and thereafter
make any other required submissions under all applicable laws with respect
to the Merger and the other transactions contemplated hereby; and (ii) use
their reasonable best efforts to take promptly, or cause to be taken, all
other actions and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by this Agreement as soon as practicable.
(b) Parent and the Company shall keep each other reasonably
apprised of the status of matters relating to the completion of the
transactions contemplated hereby and work cooperatively in connection with
obtaining all required approvals or consents, including approvals or
consents of any governmental authority (whether domestic, foreign or
supranational). In that regard, each party shall without limitation: (i)
promptly notify the other of, and if in writing, furnish the other with the
copies of (or, in the case of material oral communications, advise the
other orally of) any communications from or with any governmental authority
(whether domestic, foreign of supranational) with respect to the Merger or
any of the other transactions contemplated by this Agreement, (ii) permit
the other to review and discuss in advance, and consider in good faith the
views of the other in connection with, any proposed written (or any
material proposed oral) communication with any such governmental authority,
(iii) not participate in any meeting with any such governmental authority
unless it consults with the other in advance and to the extent permitted by
such governmental authority gives the other the opportunity to attend and
participate thereat, and (iv) furnish the other with copies of all
correspondence, filings and communications (and memoranda setting forth the
substance thereof) between it and any such governmental authority with
respect to this Agreement and the Merger.
(c) Each of the Company and Parent shall promptly notify the other
party of:
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with
the transactions contemplated by this Agreement if the failure of the
Company or Parent, as the case may be, to obtain such consent would
be material to the Company or Parent as applicable; and
43
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the
transactions contemplated by this Agreement.
(d) The Company and Parent shall promptly notify the other party of
any actions, suits, claims, investigations or proceedings commenced or, to
its Knowledge, threatened against, relating to or involving or otherwise
affecting such party or any of its Subsidiaries which relate to the
consummation of the transactions contemplated by this Agreement.
6.6 ACCESS TO INFORMATION. Upon reasonable notice, Parent, on the one
hand, and the Company, on the other, shall (and shall cause each of their
Subsidiaries to) afford to officers, employees, counsel, accountants and other
authorized representatives of the other such party (the "AUTHORIZED
REPRESENTATIVES") reasonable access, during normal business hours throughout the
period prior to the Effective Time, to their properties, assets, personnel,
books and records and, during such period, shall (and shall cause each of their
Subsidiaries to) furnish promptly to such Authorized Representatives all
information concerning their business, properties, assets and personnel as may
reasonably be requested for purposes of appropriate and necessary due diligence,
provided that no investigation pursuant to this SECTION 6.6 shall affect or be
deemed to modify any of the representations or warranties made by the Parties in
this Agreement. The Parties each agree to treat (and cause their Authorized
Representatives to treat) any and all information provided pursuant to this
SECTION 6.6 in strict compliance with the terms of that certain Confidentiality
Agreement, entered by and between the Company and Parent, dated October 5, 2001
(the "CONFIDENTIALITY AGREEMENT").
6.7 PUBLICITY. The Parties agree that they will consult with each other
concerning any proposed press release or public announcement pertaining to this
Agreement or the Merger in order to agree upon the text of any such press
release or the making of such public announcement, which agreement shall not be
unreasonably withheld or delayed, except as may be required by applicable law or
by obligations pursuant to any listing agreement with a national securities
exchange or national automated quotation system, in which case the party
proposing to issue such press release or make such public announcement shall use
reasonable efforts to consult in good faith with the other party before issuing
any such press release or making any such public announcement. The Parties will
prepare a joint release for the announcement of the execution of this Agreement.
6.8 AFFILIATES OF THE COMPANY AND PARENT. The Company has identified the
Persons listed on SECTION 6.8 of the Company Disclosure Schedule as "affiliates"
of the Company for purposes of Rule 145 promulgated under the Securities Act
(each, a "COMPANY AFFILIATE") and the Company will use its reasonable efforts to
obtain as promptly as practicable from each Company Affiliate written agreements
in the form attached hereto as EXHIBIT E (the "COMPANY AFFILIATE LETTER") that
such Company Affiliate will not sell, pledge, transfer or otherwise dispose of
any Parent Shares issued to such Company Affiliate pursuant to the Merger,
except in compliance with Rule 145 promulgated under the Securities Act, an
exemption from the registration requirements of the Securities Act or pursuant
to the Shelf Registration Statement to be filed by Parent as provided in SECTION
6.16 hereof.
44
6.9 MAINTENANCE OF INSURANCE. Between the date hereof and through the
Effective Time, the Company will use commercially reasonable efforts to maintain
in full force and effect all of its and its Subsidiaries' presently existing
policies of insurance or insurance comparable to the coverage afforded by such
policies. The Company agrees that any and all additional, renewed or replacement
insurance coverage for any liability of the Company, the Surviving Corporation,
or their respective officers and directors, including, without limitation,
coverage for directors and officers liability (including any insurance purchased
in satisfaction of Parent's obligations under SECTION 6.14 of this Agreement),
employment practices liability, fiduciary liability, errors and omissions,
property, general liability, automobile liability, workers' compensation, or
umbrella liability, shall be placed by the Company only after consultation with
Parent using an insurance broker mutually satisfactory to the Company and
Parent. The Company further agrees (i) to fully cooperate with Parent and to
provide Parent (and its Affiliates) and such insurance broker with any documents
or information requested by Parent and to allow Parent (or its Affiliate) and
such insurance broker to approach the current insurance carriers of the Company
and any additional carriers to negotiate and acquire any such insurance coverage
on behalf of the Company and (ii) if mutually satisfactory to the Company and
Parent, to cancel all existing directors' and officers' liability insurance
policies prior to the Effective Time in connection with the simultaneous
effectiveness of replacement coverage or extensions.
6.10 REPRESENTATIONS AND WARRANTIES. Each of the Company and Parent shall
give prompt notice to the other, of any circumstances that would cause any of
its representations and warranties set forth in SECTION 5.1 OR 5.2, as the case
may be, that are qualified as to materiality or Material Adverse Effect not to
be true and correct, and those that are not so qualified not to be true and
correct in all material respects, in each case at and as of the Effective Time.
Parent shall give prompt notice to the Company of any determination by Parent
that the Parent Stockholders Meeting will not be required under the rules of the
NNM and delivery of such notice shall be deemed to satisfy the condition with
respect to approval of the issuance of the Parent Shares by the stockholders of
Parent set forth in Section 7.1(a) hereof.
6.11 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, the Parties shall: (a) promptly make their respective filings and
thereafter make any other required submissions under the HSR Act, the Securities
Act and the Exchange Act, and comparable foreign laws, rules and regulations,
with respect to the Merger; (b) cooperate in the preparation of such filings or
submissions under the HSR Act, the Securities Act and the Exchange Act and other
comparable foreign laws, rules and regulations; and (c) use reasonable efforts
promptly to take, or cause to be taken, all other actions and do, or cause to be
done, all other things necessary, proper or appropriate under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement as soon as practicable. Notwithstanding anything to the
contrary contained herein, nothing in this Agreement will require Parent,
whether pursuant to an order of the Federal Trade Commission or the United
States Department of Justice or otherwise, to dispose of any assets, lines of
business or equity interests in order to obtain the consent of the Federal Trade
Commission or the United States Department of Justice to the transactions
contemplated by this Agreement.
6.12 TAX-FREE REORGANIZATION TREATMENT. The Parties shall use their
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code and shall not
take or fail to take any action (before or after the
45
Effective Time), which action or failure to act would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code. Each of Parent, Merger Sub, and the Company (i) shall not
file any Return or take any position inconsistent with the treatment of the
Merger as a reorganization described in Section 368(a) of the Code, and (ii)
shall comply with the record keeping and information-reporting requirements set
forth in Treas. Reg. Section 1.368-3. Furthermore, prior to the Effective Time,
the Parties shall use their commercially reasonable efforts to obtain the tax
opinions specified in SECTION 7.2(d) of this Agreement.
6.13 NASDAQ LISTING. Parent agrees to authorize for listing on the NNM the
shares of Parent Common Stock issuable in connection with the Merger, including
shares issuable upon exercise of Substitute Options, upon official notice of
issuance.
6.14 INDEMNIFICATION.
(a) From and after the Effective Time, the Surviving Corporation
shall indemnify, and hold harmless the Company's and its Subsidiaries'
present and former directors, officers, employees, and agents and their
heirs, executors and assigns (collectively, the "COVERED Parties") against
all claims, losses, liabilities, damages, judgments, fines and reasonable
fees, costs and expenses, including attorneys' fees and disbursements and
amounts paid in settlement, incurred in connection with any threatened or
pending claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
(i) the fact that the Covered Party is or was an officer, director,
employee or agent of the Company or any of its Subsidiaries or (ii) matters
existing or occurring at or prior to the Effective Time (including this
Agreement and the transactions and actions contemplated hereby), whether
asserted or claimed prior to, at or after the Effective Time, to the
fullest extent permitted under applicable law.
(b) The articles of incorporation and bylaws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification, advancement of expenses and exculpation of present and
former directors, officers, employees and agents of the Company and its
subsidiaries than are presently set forth in the certificate of
incorporation and bylaws of the Company and for a period of six (6) years
from the Effective Time, those provisions will not be repealed or amended
or otherwise modified or construed in any manner that would adversely
affect the rights thereunder of the Covered Parties, except to the extent,
if any, that such modification or construction is required by applicable
law.
(c) In compliance with SECTION 6.9 hereof, Parent will either (i)
use commercially reasonable efforts to cause to be maintained in effect for
a period of six (6) years after the Effective Time directors' and officers'
liability insurance covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy on terms
comparable to those applicable to the current directors and officers of the
Company; PROVIDED, HOWEVER, that in no
46
event will Parent be required to expend in the aggregate in excess of 200%
of the annual premium paid or payable in the fourth quarter of calendar
year 2001 by the Company for such coverage (or such coverage as is
available for such 200% of such annual premium), or (ii) if mutually agreed
between the Company and the Parent prior to the Effective Time, purchase a
directors' and officers' liability insurance policy for such six (6) year
period covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms comparable to
those applicable to the current directors and officers of the Company
covering all periods prior to the Effective Time.
6.15 SALE OF COMPANY SERVICES. Parent and the Company, as soon a
practicable after the date hereof, will enter into a Reseller Agreement pursuant
to which the Company will grant Parent a license to market, sell, distribute,
license and sublicense certain services sold by the Company on the terms
specified in the Reseller Agreement, which shall be on such terms and conditions
as Parent and the Company may mutually agree (the "RESELLER AGREEMENT").
6.16 REGISTRATION ON FORM S-8; REGISTRATION ON FORM S-3.
(a) Parent agrees to cause the shares of Parent Stock issuable upon
exercise of the Substitute Options and other options granted in replacement
of Terminated Options to be covered by a Form S-8 Registration Statement
(the "S-8 REGISTRATION STATEMENT") filed with the SEC within 30 days of the
Effective Time. Parent further agrees to cause the shares of Parent Stock
issuable upon exercise of the Substitute Options and other options granted
in replacement of Terminated Options to be (i) listed on the NNM, upon
notice of official issuance, and (ii) registered or exempt from the
registration requirements of all applicable state securities laws, rules
and regulations.
(b) Parent agrees to cause the Parent Shares issued to Company
Affiliates pursuant to the Merger (the "AFFILIATE SHARES") to be covered by
a Form S-3 registration statement (the "SHELF REGISTRATION STATEMENT")
filed with the SEC within 30 days of the Effective Time. Parent shall take
such actions as are necessary to maintain the effectiveness of the Shelf
Registration Statement for one year after the Effective Time or until, if
earlier, such time as Parent reasonably determines, based on an opinion of
counsel, that the Company Affiliates will be eligible to sell all of the
Affiliate Shares then owned by the Company Affiliates without the need for
continued registration of the Affiliate Shares in the three-month period
immediately following the termination of the effectiveness of the Shelf
Registration Statement. Parent shall give holders of Affiliate Shares not
less than 10 days written notice of its intent to withdraw the Shelf
Registration Statement prior to the first anniversary of the Effective
Time.
(c) Notwithstanding the foregoing, Parent may delay filing the Form
S-8 Registration Statement or the Shelf Registration Statement, and in the
case of the Shelf Registration Statement, may withhold efforts to cause the
such registration statement to become effective, if Parent determines in
good faith that such registration might (i) interfere with or affect the
negotiation or completion of
47
any material acquisition, divestiture or financing transaction that is
being contemplated by Parent (whether or not a final decision has been made
to undertake such transaction) at the time the right to delay is exercised,
or (ii) involve initial or continuing disclosure obligations of Parent that
are premature and inadvisable in the reasonable judgment of Parent. In no
event shall Parent be entitled to so delay the filing of the either the
Form S-8 Registration Statement or the Shelf Registration Statement, or
withhold efforts to cause the Shelf Registration Statement to become
effective, for a period of more than 90 days in the aggregate. If, after
the either such registration statement becomes effective, Parent advises
the holders of the Substitute Options or the Company Affiliates, as the
case may be, that Parent considers it appropriate for the applicable
registration statement to be amended, such holders shall suspend any
further sales of their registered shares until Parent advises them that an
amendment to the applicable registration statement has become effective.
6.17 SECTION 16(b). Parent, Merger Sub and the Company shall take all
such steps reasonably necessary to cause the transactions contemplated hereby
and any other dispositions of equity securities of the Company (including
derivative securities) or acquisitions of Parent equity securities (including
derivative securities) in connections with this Agreement by each individual who
(a) is a director or officer of the Company or (b) at the Effective Time, will
become a director or officer of Parent, to be exempt under Rule 16b-3
promulgated under the Exchange Act.
6.18 TAKEOVER STATUTES. If any "fair price", "moratorium", "control
share acquisition" or other form of antitakeover statute or regulation is or
shall become applicable to the transactions contemplated hereby, each of the
Parties and its board of directors shall grant such approvals and take all such
actions as are reasonably necessary so that the transactions contemplated hereby
may be consummated as promptly as practicable on the terms contemplated hereby
and thereby and otherwise act to eliminate or minimize the effects of such
statute or regulation on the transactions contemplated hereby and thereby.
6.19 FURTHER AMENDMENTS TO RIGHTS PLAN. (a) Prior to the Effective
Time, the Board of Directors of the Company shall not take any action that would
amend, or have the effect of amending, the Company Rights Agreement so that (i)
the Parent would become an "Acquiring Person" (as such term is defined in the
Company Rights Agreement) as a result of the consummation of the transactions
contemplated by this Agreement or the Loan Documents or (ii) a "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Company Rights Agreement) would occur as a result of the consummation of the
transactions contemplated by this Agreement or the Loan Documents.
Notwithstanding anything to the contrary in this Agreement, this SECTION 6.19(a)
will survive the termination of this Agreement.
(b) Prior to the Effective Time or the earlier termination of this
Agreement in accordance with its terms, the Board of Directors of the Company
shall not take any action that would amend, or have the effect of amending, the
Company Rights Agreement so that any other person would be excluded from
becoming an "Acquiring Person".
48
6.20 EMPLOYEES. (a) From and after the Effective Time, the Surviving
Corporation shall honor in accordance with their terms all Company Scheduled
Plans and all employment and severance agreements in each case listed in Section
6.20 of the Company Disclosure Schedule, and all accrued benefits vested
thereunder; it being understood and agreed that nothing in this Section 6.20
shall prevent Parent from terminating any Company Scheduled Plan or other
agreement in accordance with its terms.
(b) Parent agrees to provide employees of the Company and its
Subsidiaries retained by Parent with employee benefits in the aggregate no less
favorable than those benefits provided to Parent's similarly situated employees;
provided that Parent shall be under no obligation to retain any employee or
group of employees of the Company or its Subsidiaries.
(c) For purposes of all employee benefit plans, programs and arrangements
maintained by or contributed to by Parent and its Subsidiaries (including, after
the Effective Time, the Surviving Corporation), Parent shall, or shall cause its
Subsidiaries to, cause each such plan, program or arrangement to treat the prior
service with the Company and its affiliates of each person who is an employee or
former employee of the Company or its Subsidiaries immediately prior to the
Closing (a "COMPANY EMPLOYEE") (to the same extent such service is recognized
under analogous plans, programs or arrangements of the Company or its affiliates
prior to the Closing) as service rendered to Parent or its Subsidiaries, as the
case may be, for purposes of eligibility to participate in and vesting
thereunder (but not benefit accrual); PROVIDED, HOWEVER, that such crediting of
service shall not operate to duplicate any benefit or the funding of such
benefit. Company Employees shall also be given credit for any deductible or
co-payment amounts paid in respect of the plan year in which the Closing occurs,
to the extent that, following the Closing, they participate in any other plan
for which deductibles or co-payments are required. Parent shall also cause each
Parent benefit plan to waive any preexisting condition that was waived under the
terms of any Benefit Plan immediately prior to the Closing or waiting period
limitation that would otherwise be applicable to a Company Employee on or after
the Closing. Parent shall recognize any accrued but unused vacation time of the
Company Employees as of the Closing Date, in accordance with the terms of such
Company policies and Parent shall cause the Company and its Subsidiaries to
provide such vacation time in accordance with the terms of such Company policies
but in no event will Parent be obligated to extend or enlarge the benefits
available under such Company policies.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each Party to consummate the Merger are subject to the
satisfaction or waiver by each of the Parties of the following conditions:
(a) this Agreement and the Merger shall have been adopted by the
requisite vote under applicable law of the shareholders of the Company and
this Agreement and the issuance of Parent Shares in connection with this
Merger shall have been approved by the requisite vote under the rules and
regulations of the NNM by the stockholders of Parent (if necessary);
49
(b) the SEC shall have declared the S-4 Registration Statement
effective; no stop order suspending the effectiveness of the S-4
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the
Proxy Statement, shall have been initiated or threatened in writing by the
SEC; and all requests for additional information on the part of the SEC
shall have been complied with to the reasonable satisfaction of the
Parties;
(c) no judgment, order, decree, statute, law, ordinance, rule or
regulation, entered, enacted, promulgated, enforced or issued by any court
or other Governmental Entity of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger or
making the Merger illegal (collectively, "RESTRAINTS") shall be in effect;
PROVIDED, HOWEVER, that each of the Parties shall have used reasonable
efforts to prevent the entry of such Restraints and to appeal as promptly
as possible any such Restraints that may be entered;
(d) the Parent Shares issuable to stockholders of the Company
pursuant to this Agreement shall have been authorized for listing on the
NNM upon official notice of issuance; and
(e) (i) all required filings or submissions to, or approvals or
consents of, any Governmental Entity or third party shall have been made or
obtained (and all relevant statutory, regulatory or other governmental
waiting periods, whether domestic, foreign or supranational, shall have
expired), except, in the case of approvals or consents the absence of which
could not result in civil or criminal sanctions being imposed on Parent or
the Surviving Corporation or their respective affiliates, where the
failures to obtain any such consents or approvals would not reasonably be
expected to have a Material Adverse Effect on the Company, the Surviving
Corporation or the Parent and (ii) all such approvals and consents that
have been obtained shall be on terms that would not reasonably be expected
to have a Material Adverse Effect on the Company, the Surviving Corporation
or the Parent.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation of
the Company to consummate the Merger is subject to the fulfillment at or prior
to the Effective Time of the following additional conditions, any or all of
which may be waived in whole or in part by the Company to the extent permitted
by applicable law:
(a) the representations and warranties set forth in SECTION 5.1
that are qualified as to materiality or Material Adverse Effect shall be
true and correct, and those that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement, and as of the Effective Time with the same force and effect as
if made on and as of the Effective Time (except to the extent expressly
made as of an earlier date, in which case as of such date), in each case
except as permitted or contemplated by this Agreement (it being understood
that for purposes of determining the accuracy of such representations and
50
warranties any update or modification to the Parent Disclosure Schedule
made or purported to have been made without the Company's written consent
thereto shall be disregarded), except, in all cases where the failure of
such representations and warranties to be true and correct would not,
individually or in the aggregate, have a Material Adverse Effect on Parent;
(b) Parent shall have performed or complied in all material
respects with its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time;
(c) Parent shall have delivered to the Company a certificate of its
chief executive officer or chief financial officer to the effect that each
of the conditions specified in SECTION 7.1 (as it relates to Parent) and
clauses (a) and (b) of this SECTION 7.2 has been satisfied in all respects;
and
(d) The Company shall have received a written opinion from its
special tax counsel (Xxxxxxxx & Xxxxxx, L.L.P.), in form and substance
reasonably satisfactory to it, 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 and such opinion shall not have been withdrawn;
PROVIDED, HOWEVER, that if special counsel to the Company does not render
such opinion, this condition shall nonetheless be deemed to be satisfied
with respect to the Company if regular counsel to the Company or if counsel
for the Parent renders such opinion to the Company. The Parties to this
Agreement agree to make such reasonable and customary representations as
requested by such counsel for the purpose of rendering such opinion.
7.3 CONDITIONS TO THE OBLIGATIONS OF PARENT. The obligation of
Parent to consummate the Merger is subject to the fulfillment at or prior to the
Effective Time of the following additional conditions, any or all of which may
be waived in whole or in part by Parent to the extent permitted by applicable
law:
(a) the representations and warranties of the Company set forth in
SECTION 5.2 that are qualified as to materiality or Material Adverse Effect
shall be true and correct and those that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement, and as of the Effective Time with the same force and effect as
if made on and as of the Effective Time (except to the extent expressly
made as of an earlier date, in which case as of such date), in each case
except as permitted or contemplated by this Agreement (it being understood
that for purposes of determining the accuracy of such representations or
warranties any update or modifications to the Company Disclosure Schedule
made or purported to have been made without Parent's written consent
thereto shall be disregarded), except, in all cases, where the failure of
such representations and warranties to be so true and correct would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company;
51
(b) the Company shall have performed or complied with in all
material respects its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time;
(c) the Company shall have delivered to Parent a certificate of its
chief executive officer and chief financial officer to the effect that each
of the conditions specified in SECTION 7.1 (as it relates to the Company)
and clauses (a) and (b) of this SECTION 7.3 has been satisfied in all
respects; and
(d) the Company shall have received the written consents,
assignments, waivers, authorizations or other certificates set forth in
SECTION 7.3(d) of the Company Disclosure Schedule.
ARTICLE VIII
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption of this Agreement by the shareholders of the Company or
Merger Sub and the approval (if necessary) of the issuance of the Parent Shares
in connection with the Merger by the stockholders of Parent, by the mutual
written consent of the Company and Parent.
8.2 TERMINATION BY EITHER THE COMPANY OR PARENT. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time, in the case of SECTIONS 8.2(a) AND 8.2(b), before or after the adoption of
this Agreement by the shareholders of the Company or Merger Sub and the approval
(if necessary) of the issuance of the Parent Shares in connection with the
Merger by the stockholders of Parent, by action of the board of directors of
either the Company or Parent if:
(a) the Merger shall not have been consummated by February 28, 2002
(as adjusted in the manner set forth below, the "TERMINATION DATE")
otherwise than as a result of any material breach of any provision of this
Agreement by the Party seeking to effect such termination; PROVIDED,
HOWEVER, that if (x) the Effective Time has not occurred by the Termination
Date by reason of nonsatisfaction of any of the conditions set forth in
SECTION 7.1 and (y) all other conditions set forth in ARTICLE VII have
theretofore been satisfied or waived or are then capable of being
satisfied, then the Termination Date shall automatically be extended to
March 31, 2002;
(b) any Restraint shall be in effect and shall have become final
and nonappealable, provided that neither the Company nor Parent may
terminate this Agreement pursuant to this Section 8.2(b) if it has not
complied with its obligations under Section 7.1(c); or
(c) at the duly held Company Shareholders Meeting (including any
adjournments thereof), the requisite approval of the Company's shareholders
shall not have been obtained; PROVIDED, HOWEVER, that the Company's right
to terminate
52
this Agreement under this SECTION 8.2(c) shall not be available to the
Company if the Company has not complied with its obligations under SECTIONS
6.2 AND 6.3(a); or
(d) the Parent Stockholders Meeting is required and at the duly
held Parent Stockholders Meeting (including any adjournments thereof), the
requisite approval of Parent's stockholders shall not have been obtained;
PROVIDED, HOWEVER, that Parent's right to terminate this Agreement under
this SECTION 8.2(d) shall not be available to Parent if Parent has not
complied with its obligations under SECTION 6.3(b).
8.3 TERMINATION BY THE COMPANY. This Agreement may be terminated by
the Company upon written notice to Parent and the Merger may be abandoned at any
time prior to the Effective Time, before or after adoption of this Agreement by
the shareholders of the Company or Merger Sub, by action of the board of
directors of the Company:
(a) if Parent shall have breached or failed to perform any of the
covenants or other agreements contained in this Agreement, or if any
representation or warranty shall have become untrue, in either case such
that (i) the conditions set forth in SECTION 7.2(a) OR (b) would not be
satisfied as of the time of such breach or as of such time as such
representation or warranty shall have become untrue and (ii) such breach or
failure to be true has not been or is incapable of being cured within
twenty (20) business days following receipt by Parent of notice of such
breach or failure to be true; or
(b) if the Parent Stockholders Meeting is required and the board of
directors of Parent, or any committee thereof, shall have withdrawn or
modified in a manner adverse to the Company its approval or recommendation
of the Merger or this Agreement, or Parent shall have failed to include in
the Proxy Statement the recommendation of the board of directors of Parent
in favor of approval of the Merger and this Agreement; or
(c) if the closing sale price per share of the Parent Shares as
reported on the NNM is equal to or less than 70% of the closing sale price
per share as reported on the NNM on the date of this Agreement for ten
consecutive trading days.
8.4 TERMINATION BY PARENT. This Agreement may be terminated by Parent
upon written notice to the Company and the Merger may be abandoned at any time
prior to the Effective Time, before or after the approval (if necessary) of the
issuance of the Parent Shares in connection with the Merger by the stockholders
of Parent, by action of the board of directors of Parent, if:
(a) the Company shall have breached or failed to perform any of the
covenants or other agreements contained in this Agreement, or if any
representation or warranty shall have become untrue, in either case such
that (i) the conditions set forth in SECTION 7.3(a) OR (b) would not be
satisfied as of the
53
time of such breach or as of such time as such representation or warranty
shall have become untrue and (ii) such breach or failure to be true has not
been or is incapable of being cured within twenty (20) business days
following receipt by the Company of notice of such breach or failure to be
true; or
(b) (i) the board of directors of the Company or any committee
thereof, shall have withdrawn or modified in a manner adverse to Parent its
approval or recommendation of the Merger or this Agreement, (ii) the
Company shall have failed to include in the Proxy Statement the
recommendation of the board of directors of the Company in favor of
adoption of this Agreement, (iii) in connection with a Rule 14d-9
disclosure concerning an unsolicited Company Acquisition Proposal, the
board of directors of the Company shall have taken any action other than a
rejection of such proposal, (iv) the board of directors of the Company or
any committee thereof shall have recommended to the Company's shareholders
any Company Acquisition Proposal, (v) the board of directors of the Company
or any committee thereof shall have resolved to do any of the foregoing, or
(vi) any Company Acquisition Proposal is consummated or an agreement with
respect to any Company Acquisition Proposal is validly signed on behalf of
the Company.
8.5 EFFECT OF TERMINATION; TERMINATION FEE.
(a) Except as set forth in this SECTION 8.5, in the event of
termination of this Agreement by either Parent or the Company as provided
in this ARTICLE VIII, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of the Parties or their
respective affiliates, officers, directors or stockholders except (x) with
respect to the treatment of confidential information pursuant to SECTION
6.6, the limitation on further amendments to the Company Rights Agreement
contained in SECTION 6.19(a), the payment of expenses pursuant to SECTION
9.1, and ARTICLE IX generally, (y) to the extent that such termination
results from the willful or intentional breach of a Party of any of its
representations or warranties, or any of its covenants or agreements and
(z) with respect to any intentional or misrepresentations with Knowledge in
connection with or pursuant to this Agreement or the transactions
contemplated hereby.
(b) In the event that (i) this Agreement is terminated by either
the Company or Parent (x) pursuant to SECTION 8.2(a) due solely to the
Company Shareholder Meeting not occurring as a result of a Company
Acquisition Proposal or (y) pursuant to SECTION 8.2(c), or (ii) this
Agreement is terminated by Parent pursuant to SECTIONS 8.4(a) OR 8.4 (b),
then the Company shall promptly, but in no event later than the date of
such termination, pay Parent a fee equal to $1,700,000 (the "TERMINATION
FEE"), payable by wire transfer of same day funds. The Company acknowledges
that the agreements contained in this SECTION 8.5(b) are an integral part
of the transactions contemplated by this Agreement, and that, without these
agreements, Parent would not enter into this Agreement, and accordingly, if
the Company fails promptly to pay the amount due pursuant to this
54
SECTION 8.5(b), and, in order to obtain such payment, Parent commences a
suit that results in a judgment against the Company for the fee set forth
in this SECTION 8.5(b), the Company shall pay to Parent its costs and
expenses (including reasonable 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.
(c) In the event that this Agreement is terminated by the Company
pursuant to SECTION 8.3(b), then Parent shall promptly, but in no event
later than the date of such termination, pay the Company a fee equal to the
Termination Fee, payable by wire transfer of same day funds. Parent
acknowledges that the agreements contained in this SECTION 8.5(c) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the Company would not enter into this Agreement,
and accordingly, if Parent fails promptly to pay the amount due pursuant to
this SECTION 8.5(c), and, in order to obtain such payment, the Company
commences a suit that results in a judgment against Parent for the fee set
forth in this SECTION 8.5(c), Parent shall pay to the Company its costs and
expenses (including reasonable 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.
(d) In the event this Agreement is terminated by either Parent or
the Company pursuant to SECTION 8.2(c), by the Company pursuant to Section
8.3(c), or by Parent pursuant to SECTIONS 8.4(a) OR 8.4(b), the Company
shall pay to Parent an amount (the "EXPENSES FEE") equal to the lesser of
(i) $500,000 and (ii) all Transaction Expenses (as defined below) incurred
by Parent prior to such termination, such payment to be made promptly but
in no event later than the fifth business day after receipt of an invoice
from Parent for such Transaction Expenses, including reasonably detailed
backup therefor. In the event this Agreement is terminated by the Company
pursuant to SECTIONS 8.3(a) OR 8.3(b), Parent shall pay the Company the
Expenses Fee, such payment to be made promptly but in no event later than
the fifth business day after receipt of an invoice from the Company for
such Transaction Expenses, including reasonably detailed backup therefor.
(e) In the event both Parent and the Company would otherwise be
entitled to receive the Termination Fee under this SECTION 8.5 in
connection with the termination of this Agreement, neither party shall be
required to make any payment under this SECTION 8.5.
(f) If this Agreement is terminated under circumstances in which
Parent or the Company is entitled to receive the Termination Fee, (i) the
obligation to pay the Termination Fee shall survive the termination of this
Agreement and (ii) the payment of the Termination Fee shall be the sole and
exclusive remedy available to Parent or the Company, as applicable, except
in the event of (A) a willful or intentional breach of any provision of
this Agreement or
55
(B) an intentional or misrepresentation with Knowledge in connection with
this Agreement or the transactions contemplated hereby, in which event the
party entitled to the Termination Fee shall have all rights, powers and
remedies against the other party that may be available at law or in equity.
All rights, powers and remedies provided under this Agreement or otherwise
available in respect hereof at law or in equity shall be cumulative and not
alternative, and the exercise of any such right, power or remedy by any
Party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such Party.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 PAYMENT OF EXPENSES. Except as set forth in SECTION 8.5 hereof,
whether or not the Merger shall be consummated, each Party shall pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby (the
"TRANSACTION EXPENSES").
9.2 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties made in SECTIONS 5.1 AND 5.2 hereof shall not survive beyond the
Effective Time or a termination of this Agreement, except in the case of
termination, to the extent a willful or intentional breach of such
representation or intentional or misrepresentation with Knowledge formed the
basis for such termination. This SECTION 9.2 shall not limit any covenant or
agreement of the Parties, which by its terms contemplates performance after the
Effective Time or after termination of this Agreement pursuant to ARTICLE VIII,
including the payment of any Termination Fee.
9.3 MODIFICATION OR AMENDMENT. Subject to the applicable provisions
of the TBCA, at any time prior to the Effective Time, the Parties, by resolution
of their respective boards of directors, may modify or amend this Agreement, by
written agreement executed and delivered by duly authorized officers of the
respective Parties; PROVIDED, HOWEVER, that after approval of this Agreement by
the shareholders of the Company is obtained, no amendment that requires further
shareholder approval shall be made without such approval of shareholders.
9.4 WAIVER OF CONDITIONS. The conditions to each of the Parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.5 COUNTERPARTS. For the convenience of the Parties, this Agreement
may be executed in any number of counterparts, each such counterpart being
deemed to be an original instrument, and all such counterparts shall together
constitute the same agreement.
9.6 GOVERNING LAW; JURISDICTION.
(a) Except to the extent that the Merger and related provisions of
this Agreement are governed by the TBCA, this Agreement shall be governed
by and construed in accordance with the laws of the State of
Delaware,
without giving effect to the principles of conflicts of law thereof.
56
(b) Each of Parent, Merger Sub and the Company hereby irrevocably
submits in any suit, action or proceeding arising out of or related to this
Agreement or any other instrument, document or agreement executed or
delivered in connection herewith and the transactions contemplated hereby
and thereby, whether arising in contract, tort, equity or otherwise, to the
exclusive jurisdiction of any state or federal court located in the State
of
Delaware and waives any and all objections to jurisdiction that it may
have under the laws of the United States or of any state.
(c) Each of Parent, Merger Sub and the Company waives any objection
that it may have (including, without limitation, any objection of the
laying of venue or based on FORUM NON CONVENIENS) to the location of the
court in any proceeding commenced in accordance with this SECTION 9.6.
9.7 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the other Parties shall be deemed delivered upon
actual receipt and shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, reputable overnight courier, or
by facsimile transmission (with a confirming copy sent by reputable overnight
courier), as follows:
(a) if to Parent or Merger Sub, to:
divine, inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer and General Counsel
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Xxxx & Xxxxx LLC
00 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: D. Xxxx XxXxxxxx
Facsimile: (000) 000-0000
(b) if to the Company, to:
Data Return Corporation
000 Xxxx Xxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with copies to:
57
Xxxxx Xxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice.
9.8 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, including the
Exhibits and Disclosure Schedules and the Loan Documents, together with the
Confidentiality Agreement, (i) constitutes the entire agreement among the
Parties with respect to the subject matter hereof and supersedes all other prior
or contemporaneous agreements and understandings, both written and oral, among
the Parties or any of them with respect to the subject matter hereof, and (ii)
shall not be assigned by operation of law or otherwise (and any attempt to do so
shall be void).
9.9 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its respective successors
and assigns. Nothing in this Agreement, express or implied, other than the right
to receive the consideration payable in connection with the Merger pursuant to
ARTICLE IV hereof and other than as expressly contemplated in SECTIONS 6.14,
6.16 AND 6.17 hereof, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
9.10 CERTAIN DEFINITIONS. As used herein:
(a) "ACQUISITION TRANSACTION" shall mean any transaction or series
of transactions involving: (1) any merger, consolidation, amalgamation,
share exchange, business combination, issuance of securities, acquisition
of securities, tender offer, exchange offer or other similar transaction
(i) in which any of the Company or its Subsidiaries is a constituent
corporation, (ii) in which a Person or "group" (as defined in the Exchange
Act and the rules promulgated thereunder) of Persons directly or indirectly
acquires beneficial or record ownership of securities representing more
than 20% of the outstanding securities of any class of voting securities of
any of the Company or its Subsidiaries, or (iii) in which any of the
Company or its Subsidiaries issues securities representing more than 20% of
the outstanding securities of any class of voting securities of any of the
Company or its Subsidiaries; (2) any sale, lease, exchange, transfer,
license, acquisition or disposition of any business or businesses or assets
that constitute or account for 20% or more of the consolidated net
revenues, net income or assets of any of the Company or its Subsidiaries;
or (3) any liquidation or dissolution of any of the Company or its
Subsidiaries.
(b) "COMPANY INTELLECTUAL PROPERTY RIGHT" or "COMPANY INTELLECTUAL
PROPERTY RIGHTS" means all Intellectual Property Rights owned or licensed
and used or held for use by the Company or any of its Subsidiaries.
58
(c) "ENCUMBRANCE" means any claim, lien, pledge, charge, security
interest, equitable interest, option, right of first refusal or preemptive
right, condition, or other restriction of any kind, including any
restriction on use, voting (in the case of any security), transfer, receipt
of income, or exercise of any other attribute of ownership.
(d) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(e) "GOVERNMENTAL ENTITY" means the United States or any state,
local or foreign government, or instrumentality, division, subdivision,
agency, department or authority of any thereof.
(f) "INTELLECTUAL PROPERTY RIGHT" or "INTELLECTUAL PROPERTY RIGHTS"
means any and all rights in, to, and under any trademark, service-xxxx,
trade-name, trade dress, mask-work, Internet domain-name, patent, trade
secret, copyright, know-how, (including any registrations or applications
for registration of any of the foregoing), or any other similar type of
proprietary intellectual property right in any jurisdiction.
(g) "KNOWLEDGE" with respect to a party hereto shall mean the
actual knowledge of any of the executive officers of such party.
(h) "MATERIAL ADVERSE EFFECT" shall mean any adverse effect or
change in the business, operations, liabilities (contingent or otherwise),
results of operations or financial performance or condition of Parent or
any of its Subsidiaries or the Company or any of its Subsidiaries, as the
case may be, that is material to the Parent and its Subsidiaries, taken as
a whole, or the Company and its Subsidiaries, taken as a whole, as the case
may be; PROVIDED, HOWEVER, that in no event shall any of the following, in
and of themselves, constitute a Material Adverse Effect: (i) any change in
or effect on the business of Parent or any of its Subsidiaries or the
Company or any of its Subsidiaries, as applicable, caused by, relating to
or resulting from, directly or indirectly, the transactions contemplated by
this Agreement or the announcement thereof; (ii) any change in the market
price or trading volume of the shares of Company Stock or Parent Stock, as
applicable, on or after the date of this Agreement; (iii) any adverse
change, effect or occurrence attributable to the United States or European
or other foreign economies as a whole, the industries in which Parent or
the Company, as applicable, compete or such other foreign economies where
Parent or the Company, as applicable, have operations or sales or (iv) any
change or effect relating to or resulting from any known business
conditions (including the state of such person's liquidity and capital
resources) disclosed in the applicable disclosure schedules to this
Agreement.
(i) "MATERIAL SUBSIDIARY" means with reference to any entity, any
Subsidiary of such entity that, as of the date hereof or as of the Closing
Date,
59
would qualify as a "significant subsidiary" within the meaning of Rule
1-02(w) of Regulation S-X promulgated under the Exchange Act.
(j) "PARENT INTELLECTUAL PROPERTY RIGHT" or "PARENT INTELLECTUAL
PROPERTY RIGHTS" means all Intellectual Property Rights owned or licensed
and used or held for use by the Parent or any of its Subsidiaries.
(k) "PERSON" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated association, corporation,
entity or Governmental Entity.
(l) "RETURNS" means all returns, declarations, reports, statements
and other documents required to be filed in respect of Taxes, and any
claims for refund for Taxes, including any amendments or supplements to any
of the foregoing.
(m) "SIGNIFICANT TAX AGREEMENT" is any agreement to which the
Company or any Subsidiary of the Company is a party under which the Company
or any Subsidiary could reasonably be expected to be liable to another
party under such agreement in an amount in excess of $50,000 in respect of
Taxes payable by such other party to any taxing authority.
(n) "SUBSIDIARY" shall mean, when used with reference to any
entity, any entity of which fifty percent (50%) or more of (i) the
outstanding voting securities or interests or (ii) the economic interests,
are owned directly or indirectly by such former entity.
(o) "TAX" or "TAXES" refers to any and all federal, state, local
and foreign, taxes, assessments and other governmental charges, duties,
impositions and liabilities in the nature of and relating to such taxes,
including without limitation taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, net worth, capital stock, withholding,
payroll, recapture, employment, excise and property taxes, together with
all interest, penalties and additions imposed with respect to such amounts
and including any liability for taxes of a predecessor entity; PROVIDED,
HOWEVER, that the term "TAX" or "TAXES" shall not be deemed to include
claims by any governmental authority under an escheat, unclaimed property,
or similar provision of applicable law.
9.11 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or unenforceable, all other provisions of this Agreement
shall 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.
9.12 SPECIFIC PERFORMANCE. The Parties acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the Parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall, however, not be
60
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
9.13 RECOVERY OF ATTORNEY'S FEES. In the event of any litigation
between the Parties relating to this Agreement, the prevailing party shall be
entitled to recover its reasonable attorney's fees and costs (including court
costs) from the nonprevailing party, provided that if both Parties prevail in
part, the reasonable attorney's fees and costs shall be awarded by the court in
such manner as it deems equitable to reflect the relative amounts and merits of
the Parties' claims.
9.14 CAPTIONS. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
9.15 NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be used against any party
hereto.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK;
THE SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the Parties hereto and shall be effective as
of the date first hereinabove written.
PARENT:
DIVINE, INC.
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
Its: Senior Vice President, General Counsel and
Secretary
MERGER SUB:
TD ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
Its: President
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK;
THE SIGNATURE PAGE FOR THE COMPANY FOLLOWS]
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
62
COMPANY:
DATA RETURN CORPORATION
By: /s/ Sunny X. Xxxxxxxxxx
-----------------------------------------
Name: Sunny X. Xxxxxxxxxx
Its: Chairman and Chief Executive Officer
[Signature Page to Agreement and Plan of Merger]
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