AGREEMENT AND PLAN OF MERGER
among
INACOM CORP.,
INACOM ACQUISITION, INC.
and
VANSTAR CORPORATION
Dated as of October 8, 1998
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER ............................................................................3
Section 1.1 The Merger ............................................................................3
Section 1.2 Closing ...............................................................................3
Section 1.3 Effective Time ........................................................................3
Section 1.4 Certificate of Incorporation and By-Laws ..............................................3
Section 1.5 Directors and Officers ................................................................4
ARTICLE II CONVERSION OF SHARES ..................................................................4
Section 2.1 Conversion of Shares ..................................................................4
Section 2.2 Exchange Procedures ...................................................................5
Section 2.3 Dividends; Transfer Taxes; Withholding ................................................6
Section 2.4 Fractional Shares .....................................................................7
Section 2.5 Undistributed Parent Common Stock .....................................................7
Section 2.6 Options................................................................................7
Section 2.7 Closing of Transfer Books .............................................................8
Section 2.8 Further Assurances ....................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY ...........................................................................9
Section 3.1 Organization and Good Standing ........................................................9
Section 3.2 Certificate of Incorporation and By-Laws .............................................11
Section 3.3 Capitalization .......................................................................11
Section 3.4 Company Subsidiaries .................................................................12
Section 3.5 Corporate Authority ..................................................................13
Section 3.6 Compliance with Applicable Law .......................................................14
Section 3.7 Non-Contravention ....................................................................14
Section 3.8 Government Approvals; Required Consents ..............................................15
Section 3.9 SEC Documents and Other Reports ......................................................15
Section 3.10 Absence of Certain Changes or Events .................................................16
Section 3.11 Actions and Proceedings ..............................................................17
Section 3.12 Absence of Undisclosed Liabilities ...................................................17
Section 3.13 Certain Contracts and Arrangements ...................................................17
Section 3.14 Taxes ................................................................................18
Section 3.15 Patents, Trademarks and Similar Rights ...............................................21
Section 3.16 Information in Disclosure Documents and Registration
Statement ............................................................................22
Section 3.17 Employee Benefit Plans; ERISA ........................................................22
Section 3.18 Environmental Matters ................................................................24
Section 3.19 Labor Matters ........................................................................25
Section 3.20 Affiliate Transactions ...............................................................25
Section 3.21 Opinion of Financial Advisor .........................................................25
Section 3.22 Brokers ..............................................................................26
Section 3.23 Pooling...............................................................................26
Section 3.24 Insurance Risk Management.............................................................26
Section 3.25 Computer Software and Databases.......................................................26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB ................................................................27
Section 4.1 Organization and Good Standing .......................................................27
Section 4.2 Certificate of Incorporation and By-Laws .............................................28
Section 4.3 Capitalization .......................................................................29
Section 4.4 Parent Subsidiaries...................................................................30
Section 4.5 Corporate Authority ..................................................................30
Section 4.6 Compliance with Applicable Law........................................................31
Section 4.7 Non-contravention ....................................................................32
Section 4.8 Government Approvals; Required Consents ..............................................32
Section 4.9 SEC Documents and Other Reports ......................................................33
Section 4.10 Absence of Certain Changes or Events .................................................33
Section 4.11 Actions and Proceedings...............................................................34
Section 4.12 Absence of Undisclosed Liabilities....................................................34
Section 4.13 Certain Contracts and Arrangements....................................................35
Section 4.14 Taxes.................................................................................36
Section 4.15 Patents, Trademarks and Similar Rights................................................38
Section 4.16 Information in Disclosure Documents and Registration
Statement ............................................................................39
Section 4.17 Employee Benefit Plans; ERISA.........................................................39
Section 4.18 Environmental Matters.................................................................41
Section 4.19 Labor Matters.........................................................................42
Section 4.20 Affiliate Transactions................................................................42
Section 4.21 Opinion of Financial Advisor..........................................................42
Section 4.22 Brokers...............................................................................42
Section 4.23 Pooling...............................................................................42
Section 4.24 Insurance; Risk Management............................................................43
Section 4.25 Computer Software and Databases.......................................................43
Section 4.26 Interim Operations of Sub.............................................................43
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER ...............................................43
Section 5.1 Conduct of Business by the Company Pending the Merger ................................43
ARTICLE VI ADDITIONAL AGREEMENTS ................................................................47
Section 6.1 Access and Information ...............................................................47
Section 6.2 No Solicitation ......................................................................48
Section 6.3 Third-Party Standstill Agreements ....................................................50
Section 6.4 Joint Proxy Statements; Shareholder Approval .........................................50
Section 6.5 Affiliate Agreements .................................................................52
Section 6.6 Reasonable Best Efforts ..............................................................53
Section 6.7 Public Announcements .................................................................54
Section 6.8 Directors' and Officers' Indemnification and Insurance ...............................54
Section 6.9 Expenses .............................................................................55
Section 6.10 Listing Application ..................................................................55
Section 6.11 [This Section intentionally left blank] ..............................................56
Section 6.12 Pooling of Interests..................................................................56
Section 6.13 Parent Board of Directors.............................................................56
Section 6.14 Letter of the Company's Accountants...................................................56
Section 6.15 Letter of Parent's Accountants........................................................56
Section 6.16 Treatment of Trust Convertible Preferred Securities
and Convertible Debentures............................................................57
Section 6.17 Notification of Certain Matters.......................................................57
Section 6.18 Tax-Free Reorganization Treatment.....................................................57
Section 6.19 Company Employee Benefits.............................................................58
Section 6.20 Schedules.............................................................................58
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER .............................................59
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger ...........................59
Section 7.2 Conditions to Obligations of Parent and Merger Sub to
Effect the Merger ....................................................................60
Section 7.3 Conditions to Obligation of the Company to Effect the
Merger ...............................................................................61
ARTICLE VIII TERMINATION ..........................................................................62
Section 8.1 Termination ..........................................................................62
Section 8.2 Effect of Termination ................................................................64
ARTICLE IX GENERAL PROVISIONS ...................................................................67
Section 9.1 Amendment and Modifications ..........................................................67
Section 9.2 Waiver ...............................................................................67
Section 9.3 Survivability; Investigations ........................................................67
Section 9.4 Notices ..............................................................................67
Section 9.5 Descriptive Headings; Interpretations ................................................69
Section 9.6 Entire Agreement .....................................................................69
Section 9.7 Governing Law ........................................................................69
Section 9.8 Enforcement ..........................................................................69
Section 9.9 Counterparts .........................................................................70
Section 9.10 Assignment; Third-Party Beneficiaries ................................................70
Exhibit "A" Parent Stock Voting Agreement
Exhibit "B" Company Stock Voting Agreement
Exhibit "C-1" Stock Option Agreement
Exhibit "C-2" Company Stock Option Agreement
Exhibit "D" Form of Company Affiliate Letter
Exhibit "E" Form of Parent Affiliate Letter
INDEX OF DEFINED TERMS
"accumulated funding deficiency" has the meaning specified in Sections 3.17(a)
and 4.17(a).
"Acquisition Proposal" has the meaning specified in Section 6.2(c).
"Acquisition Transaction" has the meaning specified in Section 6.2(a)(i).
"Affiliate" has the meaning specified in Section 6.5.
"Affiliate Agreement" has the meaning specified in Section 6.5.
"Agreement" shall mean this Agreement and Plan of Merger.
"Applicable Law" has the meaning specified in Section 3.6.
"Benefit Plans" has the meaning specified in Sections 3.17(a) and 4.17(a).
"Certificate of Merger" has the meaning specified in Section 1.3.
"Certificate Amendment" has the meaning specified in Recital (b).
"Certificates" has the meaning specified in Section 2.1(d).
"Class A Preferred Stock" has the meaning specified in Section 4.3(a).
"Closing" has the meaning specified in Section 1.2.
"Closing Date" has the meaning specified in Section 1.2.
"COBRA" has the meaning specified in Section 3.17(c).
"Code" shall have the meaning set forth in the Recitals.
"Company" shall mean Vanstar Corporation.
"Company 10-K" has the meaning specified in Section 3.12.
"Company Affiliate Group" has the meaning specified in Section 3.14(b).
"Company Affiliate Period" has the meaning specified in Section 3.14(b).
"Company's Assets" has the meaning specified in Section 3.18.
"Company Balance Sheet" has the meaning specified in Section 3.14(b).
"Company Common Stock" has the meaning specified in Section 2.1(a).
"Company Disclosure Schedule" has the meaning specified in Article III.
"Company Intellectual Property Rights" has the meaning specified in Section
3.15(a).
"Company Material Adverse Effect" has the meaning specified in Section 3.1.
"Company Permits" has the meaning specified in Section 3.6.
"Company Plan" has the meaning specified in Section 3.17(a).
"Company Proxy Statement" has the meaning specified in Section 6.4(b)(iii).
"Company SEC Documents" has the meaning specified in Section 3.9(a).
"Company Shareholder Meeting" has the meaning specified in Section 6.4(b)(i).
"Company Stock Voting Agreement" has the meaning specified in the Recitals.
"Company Third Party Intellectual Property Rights" has the meaning specified in
Section 3.15(b).
"Confidentiality Agreement" has the meaning specified in Section 6.2(a).
"Consent" has the meaning specified in Section 6.6(b).
"Convertible Debentures" has the meaning specified in Section 6.16.
"Contract" has the meaning specified in Section 3.7.
"CSFB" shall mean Credit Suisse First Boston Corporation.
"D&O Insurance" has the meaning specified in Section 6.8(b).
"DGCL" shall have the meaning set forth in the Recitals.
"DOJ" has the meaning specified in Section 6.6(d).
"Effective Time" has the meaning specified in Section 1.3.
"ERISA" has the meaning specified in Section 3.17(a).
"Exchange Act" has the meaning specified in Section 3.8.
"Exchange Agent" has the meaning specified in Section 2.2(a).
"Exchange Ratio" has the meaning specified in Section 2.1(a).
"FTC" has the meaning specified in Section 6.6(d).
"G&H" shall mean Xxxxxxx & Xxxxxxxxxx.
"GAAP" has the meaning specified in Section 3.9(a).
"Governmental Entity" has the meaning specified in Section 3.6.
"HSR Act" has the meaning specified in Section 3.8.
"Indemnified Parties" has the meaning specified in Section 6.8(a).
"Indenture" has the meaning specified in Section 6.16.
"Joint Proxy Statement" has the meaning specified in Section 6.4(c).
"JPM" shall mean XX Xxxxxx Securities, Inc.
"Liens" has the meaning specified in Section 3.4.
"Meeting Date" has the meaning specified in Section 8.1(d).
"Merger" shall have the meaning set forth in the Recitals.
"Merger Sub" shall mean InaCom Acquisition, Inc.
"Merger Sub Common Stock" has the meaning specified in Section 2.1(b).
"Multiemployer Plan" has the meaning specified in Section 3.17(b).
"Option Agreement" has the meaning specified in the Recitals.
"Option Amendment" has the meaning specified in Section 4.5(b).
"Option Plans" has the meaning specified in Section 2.6(a).
"Options" has the meaning specified in Section 2.6(a).
"Parent" shall mean InaCom Corp.
"Parent 10-K" has the meaning specified in Section 4.12.
"Parent Affiliate Group" has the meaning specified in Section 4.14(a).
"Parent Affiliate Period" has the meaning specified in Section 4.14(a).
"Parent Assets" has the meaning specified in Section 4.18(a).
"Parent Balance Sheet" has the meaning specified in Section 4.14(a).
"Parent Common Stock" has the meaning specified in Section 2.1(a).
"Parent Disclosure Schedule" has the meaning specified in Article IV.
"Parent Intellectual Property Rights" has the meaning specified in Section
4.15(a).
"Parent Material Adverse Effect" has the meaning specified in Section 4.1.
"Parent Permits" has the meaning specified in Section 4.6.
"Parent Plan" has the meaning specified in Section 4.17(a).
"Parent Proxy Statement" has the meaning specified in Section 6.4(iii).
"Parent SEC Documents" has the meaning specified in Section 4.9.
"Parent Shareholder Meeting" has the meaning specified in Section 6.4(i).
"Parent Stock Voting Agreement" has the meaning specified in the Recitals.
"Parent Third Party Intellectual Property Rights" has the meaning specified in
Section 4.15(b).
"Payment Party" has the meaning specified in Section 8.2(j).
"pension plan" has the meaning specified in Sections 3.17(a) and 4.17(a).
"person" has the meaning specified in Section 9.5.
"Registration Statement" has the meaning specified in Section 3.16.
"reportable event" has the meaning specified in Sections 3.17(a) and 4.17(a).
"Restraints" has the meaning specified in Section 7.1(e).
"Rule 145" has the meaning specified in Section 6.5.
"SEC" has the meaning specified in Section 3.8.
"Securities Act" has the meaning specified in Section 2.6(b).
"Shares" has the meaning specified in Section 2.1(a).
"Subsequent Company SEC Documents" has the meaning specified in Section 3.9(a).
"Subsequent Parent SEC Documents" has the meaning specified in Section 4.7.
"Subsidiary" has the meaning specified in Section 3.1.
"Superior Proposal" has the meaning specified in Section 6.2(b).
"Surviving Corporation" has the meaning specified in Section 1.1.
"Tax Returns" has the meaning specified in Section 3.14.
"Taxes" has the meaning specified in Section 3.14.
"welfare plan" has the meaning specified in Sections 3.17(a) and 4.17(a).
"Year 2000 Complaint" has the meaning specified in Section 3.25(a).
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 8, 1998 (the
"Agreement"), by and among INACOM CORP., a Delaware corporation ("Parent"),
INACOM ACQUISITION, INC., a Delaware corporation and newly formed, wholly owned
subsidiary of Parent (the "Merger Sub"), and VANSTAR CORPORATION, a Delaware
corporation (the "Company").
RECITALS:
(a) The parties hereto desire to effect a reorganization
pursuant to which Merger Sub will merge into the
Company, with the Company continuing as the surviving
corporation (the "Merger");
(b) The Board of Directors of Parent, Merger Sub and the
Company have each approved this Agreement and the
transactions contemplated by this Agreement in
accordance with the provisions of the Delaware
General Corporation Law (the "DGCL"), each of Merger
Sub and the Company has resolved, subject to the
terms of this Agreement, to recommend the adoption of
this Agreement and approval of the transactions
contemplated herein by its shareholders in accordance
with the DGCL and Parent has resolved, subject to the
terms of this Agreement, to recommend approval of the
amendment to its Certificate of Incorporation to
increase the number of authorized shares of Parent
Common Stock (the "Certificate Amendment") and the
issuance of the shares of Parent Common Stock in
connection with the Merger in accordance with the
DGCL and the rules and regulations of the New York
Stock Exchange;
(c) The parties hereto intend that the Merger will
qualify as a nontaxable reorganization under Section
368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations promulgated
thereto, and that this Agreement shall be, and is
hereby, adopted as a plan of reorganization for
purposes of Section 368 of the Code;
(d) As condition and an inducement to Parent and Merger
Sub entering into this Agreement and incurring the
obligations set forth herein, concurrently with the
execution and delivery of this Agreement, Parent is
entering into a Stock Voting Agreement with certain
shareholders of the Company, who own an aggregate of
approximately 45% of the outstanding shares of
Company Common Stock (as hereinafter defined), in the
form of Exhibit "A" hereto (the "Parent Stock Voting
Agreement");
(e) As condition and an inducement to the Company
entering into this Agreement and incurring the
obligations set forth herein, concurrently with the
execution and delivery of this Agreement, the Company
is entering into a Stock Voting Agreement with
certain shareholders of Parent, who own an aggregate
of approximately 2% of the outstanding shares of
Parent Common Stock (as hereunder defined), in the
form of Exhibit "B" hereto (the "Company Stock Voting
Agreement");
(f) Concurrently with the execution and delivery of this
Agreement and as a condition and inducement to each
of Parent's and the Company's willingness to enter
into this Agreement, Parent and the Company are
entering into (a) a Stock Option Agreement dated as
of the date of this Agreement and in the form
attached hereto as Exhibit "C-1", pursuant to which
the Company grants to Parent an option to purchase
shares of common stock of the Company under certain
circumstances and (b) a Stock Option Agreement dated
as of the date of this Agreement and in the form
attached hereto as Exhibit "C-2", pursuant to which
Parent grants the Company an option to purchase
shares of common stock of Parent under certain
circumstances (collectively, the "Option Agreement");
and
(g) The parties intend that the transactions contemplated
herein qualify for treatment as a pooling of
interests pursuant to APB Opinion No. 16.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
contained in this Agreement, and in accordance with the DGCL, at the Effective
Time (as hereinafter defined), Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall thereupon cease,
and the Company shall continue as the surviving corporation (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Delaware, and in accordance
with Section 259 of the DGCL, all of the rights, privileges, powers, immunities,
purposes and franchises of Merger Sub and the Company shall vest in the
Surviving Corporation and all of the debts, liabilities, obligations and duties
of Merger Sub and the Company shall become the debts, liabilities, obligations
and duties of the Surviving Corporation.
Section 1.2 Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of XxXxxxx, North, Xxxxxx & Xxxxx,
P.C., 000 Xxxxx Xxxxxxxxx Xxxxxx, Xxx Xxxxxxx Xxxx Xxxxx, Xxxxx 0000, Xxxxx,
Xxxxxxxx, at 10:00 a.m., local time, as promptly as practicable after all of the
conditions set forth in Article VII are satisfied or waived or on such other
date and at such other time and place as Parent and the Company shall agree (the
date on which the Closing actually occurs being referred to herein as the
"Closing Date").
Section 1.3 Effective Time. The Merger shall become effective at the
time of filing of, or at such later time as is agreed to by the parties and
specified in, a properly executed certificate of merger (the "Certificate of
Merger"), in the form required by and executed in accordance with the DGCL,
filed with the Secretary of State of the State of Delaware, in accordance with
the provisions of the DGCL. Such filing shall be made contemporaneously with, or
immediately after, the Closing. When used in this Agreement, the term "Effective
Time" shall mean the date and time at which the Merger shall become effective.
Section 1.4 Certificate of Incorporation and By-Laws. From and after
the Effective Time, the Certificate of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with Applicable Law (as hereinafter defined). From and after the
Effective Time, the By-Laws of the Company in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with Applicable Law.
Section 1.5 Directors and Officers. From and after the Effective Time,
the directors of Merger Sub immediately prior to the Effective Time shall become
the directors of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Certificate of Incorporation or
By-Laws of the Surviving Corporation or as otherwise provided by law. The
officers of the Company at the Effective Time shall become the officers of the
Surviving Corporation and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Certificate of Incorporation or By-Laws of the Surviving
Corporation or as otherwise provided by law.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of any shares of
Company Common Stock (as defined herein) or any shares of capital stock of
Merger Sub:
(a) Each share of Common Stock, par value $0.001 per share of the
Company ("Company Common Stock" or "Shares") issued and outstanding immediately
prior to the Effective Time (other than Shares to be cancelled pursuant to
Section 2.1(c) hereof) shall be converted into the right to receive .64 shares
of validly issued, fully paid and nonassessable shares of Common Stock, par
value $0.10 per share of Parent ("Parent Common Stock") (the "Exchange Ratio").
(b) Each share of common stock, par value $1.00, of Merger Sub ("Merger
Sub Common Stock") issued and outstanding immediately prior to the Effective
Time shall be converted into one duly issued, validly authorized, fully paid and
nonassessable share of common stock, par value $1.00 per share, of the Surviving
Corporation.
(c) All Shares that are owned by the Company as treasury stock and any
Shares that are owned by Parent or Merger Sub shall automatically be cancelled
and shall cease to exist and no consideration shall be delivered or deliverable
in exchange therefor.
(d) All Shares converted pursuant to Section 2.1(a) shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist and
each holder of a certificate which immediately prior to the Effective Time
represented such outstanding shares (the "Certificates") shall cease to have any
rights as shareholders of the Company, except the right to receive the
consideration set forth in Section 2.1(a) for each such Share.
Section 2.2 Exchange Procedures.
(a) Parent shall designate a bank or trust company to act as Exchange
Agent hereunder (the "Exchange Agent"). Immediately following the Effective
Time, Parent shall deliver, in trust, to the Exchange Agent, for the benefit of
the holders of Certificates, for exchange in accordance with this Article II
through the Exchange Agent, certificates evidencing the shares of Parent Common
Stock issuable pursuant to Section 2.1(a) in exchange for outstanding Shares and
cash to be paid in lieu of fractional shares pursuant to Section 2.4.
(b) As soon as practicable after the Effective Time, Parent shall cause
the Exchange Agent to mail to each holder of record of Certificates (i) a form
of letter of transmittal (in customary form) specifying 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 surrendering such Certificates in exchange for the Parent Common
Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor (A) that number of
shares of Parent Common Stock equal to the product of the Exchange Ratio
multiplied by the number of Shares formerly represented by the surrendered
Certificate, (B) cash in lieu of fractional shares, and (C) any amounts to which
the holder is entitled pursuant to Section 2.3 hereof after giving effect to any
required tax withholdings and the Certificate so surrendered shall forthwith be
cancelled. Until surrendered as contemplated by this Section 2.2(b), each
Certificate (other than certificates representing shares to be cancelled
pursuant to Section 2.1(c) hereof) shall be deemed from and after the Effective
Time to represent only the right to receive upon such surrender the Parent
Common Stock issuable pursuant to the Merger (and cash in lieu of fractional
shares thereof) contemplated by this Agreement. In no event shall the holder of
any such surrendered Certificate be entitled to receive interest on any cash to
be received in connection with the Merger. Neither the Exchange Agent nor any
party hereto shall be liable to a holder of Shares for any amount paid to a
public official as required by any applicable abandoned property, escheat or
similar law.
(c) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required by Parent, the posting by such
person of a bond, in such reasonable and customary amount as Parent may direct,
as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the number of shares of Parent Common Stock issuable
pursuant to the Merger (and cash in lieu of fractional shares thereof)
contemplated by this Agreement.
Section 2.3 Dividends; Transfer Taxes; Withholding. No dividends or
other distributions that are payable to holders of record of Parent Common Stock
on or after the Effective Time, shall be paid to any person entitled by reason
of the Merger to receive certificates representing shares of Parent Common Stock
(and no such person shall be paid cash in lieu of a fractional share of Parent
Common Stock), until such person shall have surrendered its Certificate(s) as
provided in Section 2.2 hereof. Subject to applicable law, there shall be paid
to each person receiving a certificate representing such shares of Parent Common
Stock, (i) at the time of such surrender, the amount of any cash payable in lieu
of a fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 2.4 and the amount of dividends or other distributions with
a record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of Parent Common Stock. In no event
shall the person entitled to receive such dividends or other distributions be
entitled to receive interest on such dividends or other distributions. If any
cash or certificate representing shares of Parent Common Stock is to be paid to
or 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 such certificate representing shares of Parent Common Stock and the
distribution of such cash payment in a name other than that of the registered
holder of the Certificate so surrendered, or shall establish to the reasonable
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Parent or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Company Common Stock such amounts as Parent or the Exchange Agent
are required to deduct and withhold under the Code or any provision of state,
local or foreign tax law, with respect to the making of such payment. To the
extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Company Common Stock in respect of whom such
deduction and withholding were made by Parent or the Exchange Agent.
Section 2.4 Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to shares
shall be payable on or with respect to any fractional share and such fractional
share interests shall not entitle the owner thereof to vote or to any other
rights of a stockholder of Parent. In lieu thereof each holder of Shares
otherwise entitled to a fraction of a share of Parent Common Stock shall, upon
surrender of his or her Certificate or Certificates, be entitled to receive an
amount of cash (without interest) determined by multiplying the average of the
closing price per share on the NYSE Composite Transactions List (as reprinted by
The Wall Street Journal) for the ten (10) full trading days ending on the fifth
(5th) full trading day preceding the Effective Time by the fractional share
interest to which such holder would otherwise be entitled.
Section 2.5 Undistributed Parent Common Stock. Any portion of the
certificates representing shares of Parent Common Stock issuable upon conversion
of Company Common Stock pursuant to Section 2.1(a) hereof, together with any
dividends or distributions payable in respect thereof pursuant to Section 2.3
hereof and any cash payable in lieu of fractional shares pursuant to Section 2.4
hereof, which remains undistributed to the former holders of Company Common
Stock for six months after the Effective Time shall be delivered to Parent, upon
its request, and any such former holders who have not theretofore surrendered to
the Exchange Agent their certificates in compliance with this Article II shall
thereafter look only to Parent for payment of their claim for such shares of
Parent Common Stock and any dividends or distributions with respect to such
shares of Parent Common Stock or cash in lieu of fractional shares (in each
case, without interest thereon).
Section 2.6 Options.
(a) Options to purchase Shares (collectively "Options") granted by the
Company under the Company's 1988 Stock Option Plan, as amended, 1993 Stock
Option/Stock Issuance Plan, as amended, or 1996 Stock Option/Stock Issuance
Plan, as amended (collectively, the "Option Plans"), that remain outstanding
immediately prior to the Effective Time, whether or not then exercisable, shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be assumed by Parent and converted so as to entitle the holder thereof
to subscribe to, purchase or acquire from Parent the number of shares of Parent
Common Stock which equals the product of the Exchange Ratio times the number of
shares of Company Common Stock subject to the Options immediately prior to the
Effective Time (rounded to the nearest whole share), at an exercise price per
share of Parent Common Stock equal to the exercise price per share of Company
Common Stock then specified with respect to such Option divided by the Exchange
Ratio (rounded to the nearest whole cent); provided, however, in the event of
any Option Plan which is an incentive stock option as defined in Section 422 of
the Code the aggregate adjusted exercise price of such Option and the number of
shares to which such Option is exercisable shall be computed in compliance in
all respects with the requirements of Section 424(a) of the Code, including the
requirements that such adjustments not confer on the holder of any Option any
additional benefits not currently provided under the Option Plans. Material
terms and provisions of each Option as assumed and converted by Parent shall be
at least as favorable to the holder thereof as the terms and conditions of the
Option existing immediately prior to the Effective Time, except that there shall
be substituted the appropriate number of shares of Parent Common Stock for
Company Common Stock at the appropriate exercise prices described above,
effective as of the Effective Time. As promptly as practicable after the
Effective Time, Parent shall issue to each holder of an Option a written
instrument evidencing its assumption by Parent.
(b) The Parent and the Company shall take all corporate action
necessary to effectuate the assumption and conversion of the Options as set
forth in subpart (a) above, and the Parent shall take all corporate actions
necessary to reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery thereunder, assumed in accordance with this Section 2.6.
Within fifteen (15) days after the Effective Time, the Parent shall file a
Registration Statement on Form S-8 (or any successor form) under the Securities
Act of 1933, as amended (the "Securities Act") with respect to all shares of
Parent Common Stock subject to Options that may be registered on a Form S-8, and
shall use commercially reasonable efforts to maintain the effectiveness of such
Registration Statement for so long as such Options remain outstanding.
(c) The provisions of this Section 2.6 are intended to be for the
benefit of, and shall be enforceable by, each holder of Options, and such
holder's heirs and personal representatives and shall be binding upon all
successors and assigns of the Surviving Corporation and Parent.
Section 2.7 Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made. If, after the Effective Time,
Certificates are presented to Parent, they shall be cancelled and exchanged as
provided in this Article II.
Section 2.8 Further Assurances. If, at any time after the Effective
Time, Parent shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to 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 acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of the Company or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to or under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out the purposes of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as set
forth below. Such representations and warranties are made subject to certain
exceptions and qualifications set forth in the Company Disclosure Schedule dated
as of the date hereof and delivered as a separate document and incorporated in
this Agreement by reference (the "Company Disclosure Schedule"). The
representation(s) and warranty(ies) to which each such exception or
qualification relates is (are) specifically identified (by cross-reference or
otherwise) in the Company Disclosure Schedule unless the applicability of such
exception is reasonably apparent on its face.
Section 3.1 Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to carry on
its business as it is now being conducted. The Company is duly qualified as a
foreign corporation to do business, and is in good standing in each jurisdiction
where the character of its properties owned or held under lease or the nature of
its activities makes such qualification necessary, except where the failure to
be so qualified or in good standing would not have a material adverse effect,
individually or in the aggregate, on the assets, liabilities, financial
condition, or results of operations of the Company and its Subsidiaries taken as
a whole, or the ability of the Company to consummate the Merger and the other
transactions contemplated by this Agreement (a "Company Material Adverse
Effect") provided, however, that (i) any adverse change, event or effect that is
demonstrated to be primarily caused by conditions affecting the United States
economy generally that is material to the business of the Company and its
Subsidiaries, taken as a whole, shall not be taken into account in determining
whether there has been or would be a "Company Material Adverse Effect" on or
with respect to the Company and its Subsidiaries, taken as a whole, (ii) any
adverse change, event or effect that is demonstrated to be primarily caused by
conditions generally affecting the computer products or services industry shall
not be taken into account in determining whether there has been or would be a
"Company Material Adverse Effect" on or with respect to the Company and its
Subsidiaries, taken as a whole, (iii) any adverse change in the stock price or
trading volume of the Company Common Stock as quoted on the New York Stock
Exchange, in and of itself, shall not be taken into account in determining
whether there has been or would be a "Company Material Adverse Effect" on or
with respect to the Company and its Subsidiaries, taken as a whole, (iv) any
failure by the Company to meet the revenue or earnings predictions of equity
analysts or any other revenue or earnings predictions or expectations, for any
period ending (or for which earnings are released) on or after the date of this
Agreement and prior to the Closing Date, in and of itself, shall not be taken
into account in determining whether there has been or would be a "Company
Material Adverse Effect" on or with respect to the Company and its Subsidiaries
taken as a whole, (v) any adverse change arising primarily out of or resulting
primarily from actions taken by the Company or any of its Subsidiaries in
connection with (but not in breach of) this Agreement and the transactions
contemplated hereunder, or which is primarily attributable to the announcement
of this Agreement and the transactions contemplated hereby (including, without
limitation, employee attrition or any loss of business resulting from
termination or modification of any vendor, customer or other business
relationships, or otherwise) shall not, other than to the extent such adverse
changes result from the breach by the Company of its obligations under Section
5.1, be taken into account in determining whether there has been or would be a
"Company Material Adverse Effect" on or with respect to the Company and its
Subsidiaries, taken as whole, and (vi) any litigation or threat of litigation
challenging any of the transactions contemplated herein or any shareholder
litigation or threat of shareholder litigation resulting from the Agreement or
the transactions contemplated herein shall not be a "Company Material Adverse
Effect" on or with respect to the Company and its subsidiaries, taken as a
whole. As used in this Agreement, a "Subsidiary" of any person means another
person owned directly or indirectly by such person by reason of such person
owning or controlling an amount of the voting securities, other voting ownership
or voting partnership interests of another person which is sufficient to elect
at least a majority of its Board of Directors or other governing body of another
person or, if there are no such voting interests, at least a majority of the
equity interests of another person.
Section 3.2 Certificate of Incorporation and By-Laws. True, correct and
complete copies of the Certificate of Incorporation and By-laws or equivalent
organizational documents, each as amended to date, of the Company have been
delivered to Parent. The Certificate of Incorporation, By-laws and equivalent
organizational documents of the Company and each of its Subsidiaries are in full
force and effect. Neither the Company nor any of its Subsidiaries is in
violation of any provision of its Certificate of Incorporation, By-laws or
equivalent organizational documents.
Section 3.3 Capitalization.
(a) The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock $0.001 par value. As of August 31, 1998 43,563,243 shares
of Company Common Stock were issued and outstanding and no shares were held in
the treasury of the Company. Since August 31, 1998, the Company has not, except
as set forth in Section 3.3 of the Company Disclosure Schedule, issued any
shares of capital stock, any security convertible into or exchangeable for
shares of such capital stock, including any Option, other than the issuance of
shares of Company Common Stock upon the exercise of Options. All of the issued
and outstanding Shares have been validly issued, and are fully paid and
nonassessable, and are not subject to preemptive rights. As of August 31, 1998,
the Company did not have any outstanding stock appreciation rights, and since
such date, the Company has not issued any stock appreciation rights. As of
August 31, 1998, the Company had granted and there were outstanding Options
entitling the holders thereof to purchase, acquire or receive an aggregate of
6,095,134 shares of the Company Common Stock.
(b) Except as described in Section 3.3(a) hereof, and except as set
forth in Section 3.3 of the Company Disclosure Schedule: (i) there are no
options, warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which the Company or any of its
Subsidiaries is a party relating to the issued or unissued capital stock or
other equity interests of the Company or any of its Subsidiaries, requiring the
Company or any of its Subsidiaries to grant, issue or sell any shares of the
capital stock or other equity interests of the Company or any of its
Subsidiaries; (ii) neither the Company nor its Subsidiaries has any obligation,
contingent or otherwise, to repurchase, redeem or otherwise acquire any shares
of the capital stock or other equity interests of the Company or its
Subsidiaries or to provide funds to or make any material investment (in the form
of a loan, capital contribution or otherwise) in any such Subsidiary or any
other entity other than guarantees of bank obligations entered into in the
ordinary course of business; (iii) neither the Company nor any of its
Subsidiaries, directly or indirectly, owns, or has agreed to purchase or
otherwise acquire, the capital stock or other equity interests of, or any
interest convertible into or exchangeable or exercisable for such capital stock
or such equity interests, of any corporation, partnership, joint venture or
other entity which would be material in value to the Company; and (iv) there are
no voting trusts, proxies or other agreements or understandings to or by which
the Company or any of its Subsidiaries is a party or is bound with respect to
the voting of any shares of capital stock or other equity interests of the
Company or any of its Subsidiaries.
Section 3.4 Company Subsidiaries. Section 3.4 of the Company Disclosure
Schedule sets forth a list of each Subsidiary of the Company. Each Subsidiary of
the Company is a corporation, partnership or other entity duly organized,
validly existing and in good standing (to the extent such concept is recognized
in such jurisdiction) under the laws of its jurisdiction of incorporation or
organization. Each Subsidiary of the Company has the corporate power and
authority to carry on its business as it is now being conducted. Each Subsidiary
of the Company is duly qualified as a foreign corporation or organization
authorized to do business, and is in good standing (to the extent such concept
is recognized in such jurisdiction), in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified or in
good standing would not, individually or in the aggregate, have a Company
Material Adverse Effect. Except as set forth in Section 3.4 of the Company
Disclosure Schedule, all of the outstanding shares of capital stock or other
equity interests in each of the Company's Subsidiaries have been validly issued,
and are fully paid, nonassessable and are owned by the Company or another
Subsidiary of the Company free and clear of all pledges, claims, options, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"), and are not subject to preemptive rights. Other than
the Subsidiaries, neither the Company nor any Subsidiary has any material
(individually or in the aggregate) investment in any other entity or any
material (individually or in the aggregate) investment in any partnership, joint
venture or similar entity, except as disclosed in Section 3.4 of the Company
Disclosure Schedule, all of which investments are owned free and clear of all
Liens. Section 3.4 of the Company Disclosure Schedule sets forth a list of all
individuals and entities (other than the Company) that own shares or interests
in any Subsidiary or in any entity, partnership, joint venture or similar entity
in which the Company owns shares or has an investment.
Section 3.5 Corporate Authority.
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement, the Company Stock Voting Agreement and the
Option Agreement and, in the case of this Agreement, subject to the adoption of
the Agreement by the Company's shareholders, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the Company
Stock Voting Agreement and the Option Agreement by the Company, and the
consummation by the Company of the transactions contemplated hereby and thereby,
have been duly authorized by its Board of Directors and, in the case of this
Agreement, subject to the adoption of the Agreement by the Company's
shareholders, no other corporate action on the part of the Company is necessary
to authorize the execution and delivery by the Company of this Agreement, the
Company Stock Voting Agreement and the Option Agreement and the consummation by
it of the transactions contemplated hereby and thereby. This Agreement, the
Company Stock Voting Agreement and the Option Agreement have been duly executed
and delivered by the Company and constitute valid and binding agreements of the
Company and each is enforceable against the Company in accordance with its
terms.
(b) Prior to execution and delivery of this Agreement, the Board of
Directors of the Company (at a meeting duly called and held) has (i) approved
and declared advisable this Agreement, the Merger and the transactions
contemplated hereby, and the Company Stock Voting Agreement and Option Agreement
and the transactions contemplated thereby, (ii) determined that the transactions
contemplated hereby and thereby are fair to, and in the best interests of, the
holders of Company Common Stock as of such date and (iii) subject to the
provisions hereof, determined to recommend this Agreement, the Merger and the
other transactions contemplated hereby to the Company's shareholders for
approval and adoption at the shareholders meeting contemplated by Section 6.4(a)
hereof. The affirmative vote of the holders of a majority of the shares of
Company Common Stock outstanding on the record date for the Company Shareholder
Meeting, voting together as a single class, is the only vote of the holders of
any class or series of the Company's capital stock necessary for the due
adoption of this Agreement by the Company's stockholders. The Company has taken
all steps necessary to approve and exempt this Agreement, the Company Stock
Voting Agreement and the Option Agreement and the transactions contemplated
hereby and thereby from the restrictions on "business combinations" set forth in
Section 203 of the DGCL, from any other applicable takeover statute and from any
applicable charter or organizational document of the Company containing any
change of control, "anti-takeover" or similar provision.
Section 3.6 Compliance with Applicable Law. Except as set forth in
Section 3.6 of the Company Disclosure Schedule, (i) each of the Company and its
Subsidiaries holds, and is in compliance with the terms of, all permits,
licenses, exemptions, orders and approvals of all Governmental Entities (as
hereinafter defined) necessary for the conduct of their respective businesses as
currently conducted ("Company Permits"), except for failures to hold or to
comply with such Company Permits which would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect;
(ii) with respect to the Company Permits, no action or proceeding is pending or,
to the knowledge of the Company, threatened, and, to the knowledge of the
Company, no fact exists or event has occurred that would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect;
(iii) the business of the Company and its Subsidiaries is being conducted and
has been conducted in compliance with all applicable laws, ordinances,
regulations, judgments, decrees or orders ("Applicable Law") of any federal,
state, local, foreign or multinational court, arbitral tribunal, administrative
agency or commission or other governmental or regulatory authority or
administrative agency or commission (a "Governmental Entity"), except for
violations or failures to so comply that would not, individually, or in the
aggregate, have a Company Material Adverse Effect; and (iv) no investigation or
review by any Governmental Entity with respect to the Company or its
Subsidiaries is pending or, to the knowledge of the Company, threatened that,
individually or in the aggregate are reasonably likely to have a Company
Material Adverse Effect.
Section 3.7 Non-Contravention. Except as set forth in Section 3.7 of
the Company Disclosure Schedule, the execution and delivery by the Company of
this Agreement, the Company Stock Voting Agreement and the Option Agreement do
not, and the consummation of the transactions contemplated hereby and thereby
and compliance with the provisions hereof and thereof will not, (i) result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under any loan, guarantee of
indebtedness or credit agreement, note, bond, mortgage, indenture, lease,
agreement, contract, instrument, permit, concession, franchise, right or license
(any of the foregoing, a "Contract") binding upon the Company or any of its
Subsidiaries, or result in the creation of any Lien upon any of the properties
or assets of the Company or any of its Subsidiaries, (ii) conflict with or
result in any violation of any provision of the Certificate of Incorporation or
By-Laws or other equivalent organizational document, in each case as amended, of
the Company or any of its Subsidiaries, or (iii) conflict with or violate any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or any of their respective properties
or assets, other than, in the case of clauses (i) and (iii), any such violation,
conflict, default, right, loss or Lien that, individually or in the aggregate,
would not have a Company Material Adverse Effect.
Section 3.8 Government Approvals; Required Consents. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement, the Company
Stock Voting Agreement or the Option Agreement by the Company or is necessary
for the consummation of the transactions contemplated hereby and thereby
(including, without limitation, the Merger) except: (i) the filing with (and
declaration of effectiveness by) the Securities and Exchange Commission ("SEC")
of the Joint Proxy Statement under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any applicable state securities or "blue sky"
law as may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (ii) the filing of a notification under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act")
(and all approvals or termination of applicable waiting periods contemplated
thereby), (iii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, and (iv) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
obtain or make would not, individually or in the aggregate, have a Company
Material Adverse Effect.
Section 3.9 SEC Documents and Other Reports.
(a) The Company has filed all documents required to be filed prior to
the date hereof by it and its Subsidiaries with the SEC since March 1, 1996 (the
"Company SEC Documents"). As of their respective dates, or if amended, as of the
date of the last such amendment, the Company SEC Documents complied, and all
documents required to be filed by the Company with the SEC after the date hereof
and prior to the Effective Time (the "Subsequent Company SEC Documents") will
comply, in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the applicable rules and regulations
promulgated thereunder and none of the Company SEC Documents contained when
filed, and the Subsequent Company SEC Documents will not contain, any untrue
statement of a material fact or omitted, or will omit, to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, or are to be made, not
misleading. The consolidated financial statements of the Company included in the
Company SEC Documents when filed fairly presented, and included in the
Subsequent Company SEC Documents will fairly present, the consolidated financial
position of the Company and its consolidated Subsidiaries, as at the respective
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the respective periods then ended (subject, in the
case of the unaudited statements, to normal year-end audit adjustments) in
conformity with United States generally accepted accounting principles ("GAAP")
(except, in the case of the unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto). Since April 30, 1998, the
Company has not made any change in the accounting practices or policies applied
in the preparation of its financial statements, except as may be required by
GAAP. All restructuring charges and expenses taken by the Company since April
30, 1998, are properly chargeable to the Company's current fiscal year and are
not required by GAAP to be charged to any other accounting period.
Section 3.10 Absence of Certain Changes or Events. Except for entering
into this Agreement and consummation of the transactions contemplated hereby and
except as set forth in Section 3.10 of the Company Disclosure Schedule and the
Company's previously announced restructuring plan, since April 30, 1998, the
Company and its Subsidiaries have conducted their respective businesses and
operations only in the ordinary and usual course consistent with past practice
and, except as set forth in Section 3.10 of the Company Disclosure Schedule,
there has not occurred (i) through the date of this Agreement, any change in the
assets, liabilities, financial condition or the results of the Company and the
Subsidiaries having a Company Material Adverse Effect; (ii) any damage,
destruction or loss (whether or not covered by insurance) having a Company
Material Adverse Effect; (iii) any declaration, setting aside or payment of any
dividend or distribution of any kind by the Company on any class of its capital
stock; (iv) any material increase in the compensation payable or to become
payable by the Company or any Subsidiary to its directors, officers or key
employees or any material increase in any bonus, insurance, pension or other
employee benefit plan, payment or arrangement made to, for or with such
directors, officers or key employees, other than in the ordinary course of
business; (v) any labor dispute, other than routine matters none of which has,
or would be reasonably expected to have, a Company Material Adverse Effect; (vi)
any entry by the Company or the Subsidiaries into any commitment or transaction
(including, without limitation, any borrowing or capital expenditure) material
(individually or in the aggregate) to the Company or its Subsidiaries other than
in the ordinary course of business; (vii) any material change by the Company or
its Subsidiaries in accounting methods, principles or practices except as
required by concurrent changes in GAAP or concurred with by the Company's
independent public accountants; (viii) any material agreement, whether in
writing or otherwise, to take any action described in this Section 3.10; or (ix)
any event or action that, if occurring or taken during the period from the date
of this Agreement through the Effective Time, would constitute a breach of
Section 5.1 hereof and would constitute a Company Material Adverse Effect.
Section 3.11 Actions and Proceedings. Except as set forth in the
Company SEC Documents or Section 3.11 or Section 3.14 of the Company Disclosure
Schedule, (a) there are no outstanding orders, judgments, injunctions, awards or
decrees of any Governmental Entity against the Company or any of its
Subsidiaries, any of their properties, assets or business, or, to the knowledge
of the Company, any of the Company's or its Subsidiaries' current or former
directors or officers (during the period served as such) or any other person
whom the Company or any of its Subsidiaries has agreed to indemnify, as such,
that, individually or in the aggregate have a Company Material Adverse Effect,
and (b) there are no actions, suits or legal, administrative, regulatory or
arbitration proceedings pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, any of their properties, assets
or business, or, to the knowledge of the Company, any of the Company's or its
Subsidiaries' current or former directors or officers or any other person whom
the Company or any of its Subsidiaries has agreed to indemnify that are,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect.
Section 3.12 Absence of Undisclosed Liabilities. Except (a) as set
forth Section 3.12 or Section 3.14 of the Company Disclosure Schedule, (b) for
liabilities or obligations which are accrued or reserved against on the balance
sheet (or reflected in the notes thereto) included in the Company's Annual
Report on Form 10-K for the year ended April 30, 1998 (the "Company 10-K"), (c)
for liabilities arising out of the Company's previously announced restructuring
plan, and (d) for normal and recurring liabilities since April 30, 1998, neither
the Company nor any of its Subsidiaries has any liabilities or obligations
(including, without limitation, Tax (as hereinafter defined) liabilities)
(whether absolute, accrued, contingent or otherwise), and whether due or to
become due, which individually or in the aggregate are reasonably likely to have
a Company Material Adverse Effect.
Section 3.13 Certain Contracts and Arrangements. The Company has not
breached or defaulted (nor has any event occurred which, with passage of time or
giving of notice would constitute a default), or received in writing any claim
or notice that it has breached or defaulted under, any of the terms or
conditions of any agreement, contract or commitment in such a manner as,
individually or in the aggregate, are reasonably likely to have a Company
Material Adverse Effect. In addition, the Company has used reasonable best
efforts to identify and disclose on Section 3.13 of the Company Disclosure
Schedule all of the following to which the Company or any of its Subsidiaries is
a party (and which are not listed as exhibits to the Company's 10-K): (a)
material employment, consulting, noncompete, severance or similar agreement with
any director, officer or salaried employee; (b) collective bargaining agreement;
(c) material indenture, mortgage, note, installment obligation, agreement or
other instrument relating to the borrowing of money by the Company or any
Subsidiary or the guaranty by the Company or any Subsidiary of any material
obligation for the borrowing of money; (d) real property lease in excess of
20,000 square feet and any other material lease (i.e., a lease (other than
leases that have been properly capitalized by the Company in accordance with
GAAP) with future yearly rental payments in excess of $150,000 or aggregate
future rental payments in excess of $500,000 over the term thereof); (e) any
non-competition agreement or any other agreement or obligation which purports to
limit in any material respect the manner in which, or the localities in which,
the Company or any of its Subsidiaries is entitled to conduct all or any
material portion of the business of the Company and its Subsidiaries taken as a
whole; (f) any joint venture, partnership or similar arrangement extending
beyond six (6) months or involving a commitment for future equity or investment
of more than $500,000; (g) a listing of the top fifty (50) customers based on
estimated annual revenue, including a listing of the contracts in place with the
top ten (10) customers; (h) a listing of the vendors with whom the Company has
contracts involving purchases in excess of $500,000 on an annualized basis,
including a listing of the contracts in place with the top ten (10) vendors; (i)
any material agreement the benefits of which are contingent or increased, or the
terms of which are materially altered, or the vesting of benefits of which will
be accelerated, upon the occurrence of a transaction of the nature contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement; (j) any material agreement of indemnification or guaranty not entered
into in the ordinary course of business; (k) any agreement, capitalized lease,
contract or commitment relating to capital expenditures and involving future
obligations in excess of $1,500,000, and not cancelable without penalty; (l) any
agreement, contract or commitment currently in force relating to any ownership
interest in any corporation, partnership, joint venture or other business
enterprise that is material in value to the Company; or (m) any other contract
or agreement that is otherwise material to the Company or the Subsidiaries taken
as a whole, except for purchase and sales orders and similar contracts entered
into in the ordinary course of business.
Section 3.14 Taxes.
(a) For the purposes of this Agreement, a "Tax" or, collectively,
"Taxes" means any and all federal, state, local and foreign taxes, assessments
and other governmental charges, duties, impositions and liabilities, including,
without limitation, taxes based upon or measured by gross receipts, income,
profits, sales, use or occupation, and value added, ad valorem, transfer, gains,
franchise, withholding, payroll, recapture, employment, excise, unemployment
insurance, social security, business license, occupation, business organization,
stamp, environmental and property taxes, together with all interest, penalties
and additions imposed with respect to such amounts and any obligations under any
law or any agreements or arrangements with any other person with respect to such
amounts and including, without limitation, any primary, contingent, transferee
or successor liability for taxes of another person, a predecessor entity or
former affiliate. "Tax Returns" means all reporting, returns, declarations,
statements or other information required to be supplied to a taxing authority in
connection with Taxes.
(b) Except as disclosed in Section 3.14 of the Company Disclosure
Schedule, each of the Company and its Subsidiaries has filed all Tax Returns
that it was required to file, and, except to the extent that a reserve for Taxes
was reflected on the Company's balance sheet included in the Company's 10-K (the
"Company Balance Sheet") (exclusive of any accruals for "deferred taxes" or
similar items that reflect timing differences between Tax and financial
accounting principles), all such Tax Returns were correct and complete. Except
as disclosed in Section 3.14 of the Company Disclosure Schedule, each group of
corporations with which the Company or any Subsidiary has filed (or was required
to file) consolidated, combined, unitary or similar Tax Returns (a "Company
Affiliated Group") has filed all such Tax Returns that it was required to file
with respect to any period in which the Company or a Subsidiary was a member of
such Company Affiliated Group (a "Company Affiliated Period"), and, except to
the extent that a reserve for Taxes was reflected on the Company Balance Sheet
(exclusive of any accruals for "deferred taxes" or similar items that reflect
timing differences between Tax and financial accounting principles), all such
Tax Returns were correct and complete. Except as disclosed in Section 3.14 of
the Company Disclosure Schedule, and except to the extent that a reserve for
Taxes was reflected on the Company Balance Sheet (exclusive of any accruals for
"deferred taxes" or similar items that reflect timing differences between Tax
and financial accounting principles), each of the Company and its Subsidiaries
has paid all Taxes (whether or not shown on such Tax Returns) that were due and
payable, and each Company Affiliated Group has paid all Taxes (whether or not
shown on such Tax Returns) that were due and payable with respect to all Company
Affiliated Periods and with respect to which the Company or any of its
Subsidiaries may be liable by operation of law or otherwise. Except as disclosed
in Section 3.14 of the Company Disclosure Schedule, the unpaid Taxes of the
Company and the Subsidiaries for Tax periods through the date of the Company
Balance Sheet do not exceed the accruals and reserves for Taxes set forth on the
Company Balance Sheet (exclusive of any accruals for "deferred taxes" or similar
items that reflect timing differences between Tax and financial accounting
principles). The unpaid Taxes of the Company and the Subsidiaries for Tax
periods from the date of the Company Balance Sheet through the Closing Date are
normal recurring taxes attributable solely to the conduct of their businesses in
the ordinary course and in a manner consistent with past practices. All Taxes
that the Company or any Subsidiary is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity. Each of the representations
contained in the this Section 3.14(b) shall be (i) limited in its application to
items which are reasonably likely, individually or in the aggregate, to have a
Company Material Adverse Effect, and (ii) qualified to the extent of any adverse
determination of matters set forth in Section 3.14 of the Company Disclosure
Schedule.
(c) The Company is not and never has been a party to or bound by any
Tax indemnity, Tax sharing or Tax allocation agreement (whether written or
unwritten or arising under operation of federal law as a result of being a
member of a group filing consolidated Tax Returns, under operation of certain
state laws as a result of being a member of a unitary group, or under comparable
laws of other states or foreign jurisdictions) which includes a party other than
the Company nor does the Company owe any amount under any such agreement. Except
as set forth in Section 3.14 of the Company Disclosure Schedule, no examination
or audit by any Governmental Entity of any Tax Return of the Company, any of its
Subsidiaries or any Company Affiliated Group with respect to a Company
Affiliated Period is currently in progress or, to the knowledge of the Company
and its Subsidiaries, threatened or contemplated, in each case, which involve
claims that individually or in the aggregate are reasonably likely to have a
Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries
has been informed by any jurisdiction that the jurisdiction believes that the
Company or any of its Subsidiaries was required to file any Tax Return that was
not filed which failure or failures individually, or in the aggregate, are
reasonably likely to have a Company Material Adverse Effect.
(d) Neither the Company nor any of its Subsidiaries is a "consenting
corporation" within the meaning of Section 341(f) of the Code, and none of the
assets of the Company or its Subsidiaries are subject to an election under
Section 341(f) of the Code.
(e) Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(f) Except as set forth in Section 3.14 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has made any payments,
is obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments that will not be deductible under either Code
Section 162(m) or Code Section 280G (or cause the Company or any of its
Subsidiaries to incur an obligation to reimburse a person for a tax imposed
under Code Section 4999).
(g) The interest paid or payable by the Company to Vanstar Financing
Trust pursuant to the Company's 6-3/4% Convertible Subordinated Debentures due
2016 is deductible as interest payments under Code Section 163.
(h) Except as set forth in Section 3.14 of the Company Disclosure
Schedule, to the knowledge of the Company, no state of facts or circumstances
exist which are reasonably likely to constitute grounds for the assessment of
Taxes against the Company or any Subsidiary where such assessment, individually
or in the aggregate, would have a Company Material Adverse Effect.
Section 3.15 Patents, Trademarks and Similar Rights.
(a) The Company and its Subsidiaries own, or are licensed or otherwise
possess and, after the Effective Time, will continue to own, license or
otherwise possess, legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights and mask works, and all processes,
formulae, methods, schematics, technology, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
that are necessary to conduct the business of the Company and its Subsidiaries
as currently conducted, the absence of which would be reasonably likely to have
a Company Material Adverse Effect (the "Company Intellectual Property Rights").
(b) Neither the Company nor any of its Subsidiaries is, or will as a
result of the execution and delivery of this Agreement or the performance of the
Company's obligations under this Agreement or otherwise be, in breach of any
license, sublicense or other agreement relating to the Company Intellectual
Property Rights, or any material licenses, sublicenses and other agreements as
to which the Company or any of its Subsidiaries is a party and pursuant to which
the Company or any of its Subsidiaries is authorized to use any third party
patents, trademarks or copyrights ( " Company Third Party Intellectual Property
Rights"), including software that is used in the manufacture of, incorporated
in, or forms a part of any product sold by or expected to be sold by the Company
or any of its Subsidiaries, the breach of which would be reasonably likely to
have a Company Material Adverse Effect.
(c) All patents, registered trademarks, service marks and copyrights
which are held by the Company or any of its Subsidiaries and which are material
to the business of the Company and its Subsidiaries, taken as a whole, are valid
and subsisting. The Company (i) has not been sued in any suit, action or
proceeding, or received in writing any claim or notice, which involves a claim
of infringement of any patent, trademarks, service marks, copyrights or
violation of any trade secret or other proprietary right of any third party
which, if adversely determined, would be reasonably likely to have a Company
Material Adverse Effect; and (ii) has no knowledge that the manufacturing,
marketing, licensing or sale of its products infringes any patent, trademark,
service xxxx, copyright, trade secret or other proprietary right of any third
party, which infringement would reasonably be expected to have a Company
Material Adverse Effect.
Section 3.16 Information in Disclosure Documents and Registration
Statement. None of the information supplied or to be supplied by the Company
specifically for inclusion in (i) the Registration Statement on Form S-4 to be
filed with the SEC under the Securities Act for the purpose of registering the
shares of Parent Common Stock to be issued in connection with the Merger (the
"Registration Statement") or (ii) the Joint Proxy Statement will, in the case of
the Registration Statement, at the time it becomes effective or, in the case of
the Proxy Statement or any amendments thereof or supplements thereto, at the
time of the initial mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of the Company Shareholder Meeting and the
Parent Shareholder Meeting contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. As of the date of its initial mailing and as of
the date of the Company Shareholder Meeting and the Parent Shareholder Meeting,
the Joint Proxy Statement will comply (with respect to information relating to
the Company) as to form in all material respects with the applicable
requirements of the Exchange Act, and the rules and regulations promulgated
thereunder. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any statement made or incorporated by reference in
the foregoing documents based upon information supplied by or on behalf of
Parent or Merger Sub for inclusion or incorporation by reference therein.
Section 3.17 Employee Benefit Plans; ERISA.
(a) Section 3.17 of the Company Disclosure Schedule sets forth the name
of each Company Plan (as defined below) and of each bonus, deferred
compensation, incentive compensation, profit sharing, salary continuation,
employee benefit plan, stock purchase, stock option, employment, severance,
termination, golden parachute, consulting or supplemental retirement plan or
agreement to which the Company or any Subsidiary is a party to or contributes to
or pursuant to which any employee of the Company or any Subsidiary is entitled
to benefits (collectively, the "Benefit Plans"), true copies of which have
heretofore been delivered to Parent. Except as set forth in Section 3.17 of the
Company Disclosure Schedule, each Company Plan and Benefit Plan complies with
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the
Code and all other applicable laws and administrative or governmental rules and
regulations except for any such noncompliance that, individually or in the
aggregate, is not reasonably likely to have a Company Material Adverse Effect.
No "reportable event" (within the meaning of Section 4043 of ERISA) has occurred
and no notice of such event is pending with respect to any Company Plan; neither
the Company nor any of its ERISA Affiliates has withdrawn from any Company Plan
under Section 4063 of ERISA or has taken, or is currently considering taking,
any action to do so; and no action has been taken, or is currently being
considered, to terminate any Company Plan subject to Title IV of ERISA, in any
such case, where such event, withdrawal or action, individually or in the
aggregate, is reasonably likely to have a Company Material Adverse Effect. No
Company Plan, nor any trust created thereunder, has incurred any material
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived. Except as set forth in Section 3.17 of the Company Disclosure
Schedule, there are no (individually or in the aggregate) actions, suits or
claims pending or, to the knowledge of the Company, threatened (other than
routine claims for benefits) with respect to any Company Plan or Benefit Plan
and that is, individually, or in the aggregate, reasonably likely to result in a
Company Material Adverse Effect. Neither the Company nor any of its ERISA
Affiliates has incurred or would reasonably be expected to incur any liability
under or pursuant to Title IV of ERISA that has not been satisfied in full and
that are, individually, or in the aggregate, reasonably likely to result in a
Company Material Adverse Effect. To the knowledge of the Company, no non-exempt
prohibited transactions described in Section 406 of ERISA or Section 4975 of the
Code have occurred. Except as set forth in Section 3.17 of the Company
Disclosure Schedule, all Company Plans and Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received a favorable
determination letter as to such qualification from the Internal Revenue Service,
and no event has occurred, either by reason of any action or failure to act,
which could be expected to cause the loss of any such qualification, and the
Company is not aware of any reason why any Company Plan and Benefit Plan is not
so qualified in operation. As used herein: "Company Plan" means a "pension plan"
(as defined in Section 3(2) of ERISA), or a "welfare plan" (as defined in
Section 3(l) of ERISA) established or maintained by the Company or any of its
ERISA Affiliates or to which the Company or any of its ERISA Affiliates has
contributed in the last six years or otherwise may have any liability.
(b) None of the Benefit Plans is (i) a plan subject to Title IV of
ERISA or (ii) a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
(herein a "Multiemployer Plan"). Neither the Company or its ERISA Affiliates has
ever contributed to or had an obligation to contribute to any Multiemployer
Plan.
(c) Except as set forth on Section 3.17(c) of the Company Disclosure
Schedule, no Benefit Plan which is a "welfare plan" (as defined in Section 3(1)
of ERISA) provides for continuing benefits or coverage for any participant or
any beneficiary of a participant after such participant's termination of
employment except as may be required by the Consolidated Omnibus Budget
Reconciliation Action of 1985, as amended ("COBRA"), and the regulations
thereunder at the expense of the participant or the beneficiary of the
participant.
(d) Except as disclosed in Section 3.17(d) of the Company Disclosure
Schedule, (i) no amount payable under any Company Plan will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code; and (ii) the consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with any other event that is
reasonably likely to occur, (A) entitle any current or former director, officer
or employee of the Company or any of its ERISA Affiliates to severance pay,
golden parachute payments, unemployment compensation or any other payment,
except as expressly provided in this Agreement, or (B) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
director, officer or employee.
Section 3.18 Environmental Matters. Except as set forth in the Company
SEC Documents, (i) no person, entity or governmental agency has asserted against
the Company or any of its Subsidiaries any requests, claims or demands for
damages, costs, expenses or causes of action arising out of or due to the
emission, disposal, discharge or other release or threatened release of any
Hazardous Substances or Pollutants or Contaminants (in each case, as defined in
or governed by any applicable federal, state or local statute, law or
regulation) in connection with or related to any past or present facilities,
properties or assets, owned, leased or operated by the Company or any of its
Subsidiaries (collectively, the "Company's Assets"), arising out of or due to
any injury to human health or the environment by reason of the current condition
or operation of the Company's Assets, or past conditions and operations or
activities on the Company's Assets; (ii) neither the Company nor any Subsidiary
is a party to any pending, or to the knowledge of the Company, threatened
actions for damages, costs, expenses, demands, causes of action, claims, losses,
administrative proceedings, enforcement actions, or investigations relating to
the emission, disposal, discharge or release of Hazardous Substances or
Pollutants or Contaminants associated with the Company's Assets or operations;
(iii) there is no environmental condition, situation or incident on, at or
concerning the Company's Assets that could give rise to a action or liability
under applicable environmental law, rule, ordinance or common law theory
relating to Hazardous Substances, Pollutants or Contaminants; and (iv) there is
no liability associated with the Company's Assets under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Resource Conservation and Recovery Act or the Toxic Substances and Control Act,
or any other similar state or local law, in any such case where such event,
individually or in the aggregate, is reasonably likely to have a Company
Material Adverse Effect.
Section 3.19 Labor Matters. Neither the Company nor any of its
Subsidiaries has any labor contracts or collective bargaining agreements.. There
is no material unfair labor practice complaint pending or, to the knowledge of
the Company, threatened, against the Company or any of its Subsidiaries with
respect to the Company Business. Since April 30, 1998, there has not been any
labor strike, dispute, slowdown or stoppage pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, and neither
the Company nor any of its Subsidiaries has experienced any primary work
stoppage or other labor difficulty involving its employees, in either such case,
which has had or would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.20 Affiliate Transactions. Except as set forth in Section
3.20 of the Company Disclosure Schedule, to the knowledge of Company, no
director, officer, executive employee or shareholder beneficially owning 5% or
more of the total number of issued and outstanding shares of Common Stock: (i)
has any material contractual relationship with the Company, other than
employment contracts and contracts made on an arm's-length basis in the ordinary
course of business; or (ii) has any direct or indirect interest in any material
right, property or asset which is used by the Company or any of its Subsidiaries
in the conduct of its or their business.
Section 3.21 Opinion of Financial Advisor. The Company has received the
written opinion of Credit Suisse First Boston Corporation ("CSFB") to the effect
that as of the date of this Agreement, the Exchange Ratio is fair to the holders
of Company Common Stock, other than Parent or Merger Sub, from a financial point
of view. A true, correct and complete copy of the written opinion delivered by
CSFB, which opinion shall be included in the Joint Proxy Statement in its
entirety, as well as a true and correct copy of the Company's engagement of
CSFB, have been delivered to Parent by the Company.
Section 3.22 Brokers. Other than CSFB, no broker, finder or financial
advisor retained by the Company is entitled to any brokerage, finder's or other
fee or commission from the Company in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. A true and correct copy of the Company's engagement letter with
CSFB has been delivered to Parent by the Company.
Section 3.23 Pooling. The Company does not know of any reason why the
Merger will not qualify as a pooling of interests transaction under APB 16, and
neither the Company nor any of its Subsidiaries has, to its knowledge after
consultation with its independent accountants, taken any action that will
prevent the Merger from qualifying as a pooling of interests transaction under
APB 16.
Section 3.24 Insurance; Risk Management. All material fire and
casualty, general liability, business interruption, product liability, and
sprinkler and water damage insurance policies maintained by the Company or any
of its Subsidiaries are with reputable insurance carriers, provide full and
adequate coverage for all normal risks incident to the business of the Company
and its Subsidiaries and their respective properties and assets, and are in
character and amount at least equivalent to that carried by persons engaged in
similar businesses and subject to the same or similar perils or hazards, except
for any such failures to maintain insurance policies that, individually or in
the aggregate, are not reasonably likely to have a Company Material Adverse
Effect. The steps taken by the Company to manage the various risks incident to
the business and operations of the Company and its Subsidiaries and their
respective properties and assets are at least equivalent to those taken by
persons engaged in similar businesses, except for any failures to take such
steps that, individually or in the aggregate, are not reasonably likely to have
a Company Material Adverse Effect.
Section 3.25 Year 2000.
(a) The term "Year 2000 Compliant", as used herein, shall mean that the
applicable systems, processes, software, hardware and/or equipment is able to
perform the following functions without human intervention:
handle date information before, during and after January 1, 2000,
including but not limited to accepting date input, providing date output, and
performing calculations on dates or portions of dates
function accurately and without interruption before, during and after
January 1, 2000, without any change in operations associated with the advent of
the new century
respond to two-digit year-date input in a way that resolves the
ambiguity as to century in a disclosed, defined and predetermined manner
store and provide output of date information in ways that are
unambiguous as to century.
(b) The Company has conducted an assessment of its and its
Subsidiaries' internal operating systems, processes, software, hardware and
equipment and based upon this assessment has developed a plan designed to ensure
that the same are Year 2000 Compliant on or before December 31, 1999. To the
knowledge of the Company, such plan will be implemented and successfully
completely on or before December 31, 1999, and the implementation and completion
of such plan will not have a Company Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB
Parent represents and warrants to the Company as set forth below. Such
representations and warranties are made subject to certain exceptions and
qualifications set forth in the Parent Disclosure Schedule dated as of the date
hereof and delivered as a separate document and incorporated in this Agreement
by reference (the "Parent Disclosure Schedule"). The representation(s) and
warranty(ies) to which each such exception or qualification relates is (are)
specifically identified (by cross-reference or otherwise) in the Parent
Disclosure Schedule unless the applicability of such exception is reasonably
apparent on its face.
Section 4.1 Organization and Good Standing. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the States of Delaware, and each has the corporate power and
authority to carry on its business as it is now being conducted. Parent is duly
qualified as a foreign corporation to do business, and is in good standing in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified or in good standing would not have a
material adverse effect, individually or in the aggregate, on the assets,
liabilities, financial condition or results of operations of Parent and its
Subsidiaries taken as a whole, or the ability of Parent or Merger Sub to
consummate the Merger and the other transactions contemplated by this Agreement
(a "Parent Material Adverse Effect"); provided, however, that (i) any adverse
change, event or effect that is demonstrated to be primarily caused by
conditions affecting the United States economy generally that is material to the
business of Parent and its Subsidiaries, taken as a whole, shall not be taken
into account in determining whether there has been or would be a "Parent
Material Adverse Effect" on or with respect to the Parent and its Subsidiaries,
taken as a whole, (ii) any adverse change, event or effect that is demonstrated
to be primarily caused by conditions generally affecting the computer products
or services industry shall not be taken into account in determining whether
there has been or would be a "Parent Material Adverse Effect" on or with respect
to Parent and its Subsidiaries, taken as a whole, (iii) any adverse change in
the stock price or trading volume of the Parent Common Stock as quoted on the
New York Stock Exchange, in and of itself, shall not be taken into account in
determining whether there has been or would be a "Parent Material Adverse
Effect" on or with respect to Parent and its Subsidiaries, taken as a whole,
(iv) any failure by Parent to meet the revenue or earnings predictions of equity
analysts or any other revenue or earnings predictions or expectations for any
period ending (or for which earnings are released) on or after the date of this
Agreement and prior to the Closing Date, in and of itself, shall not be taken
into account in determining whether there has been or would be a "Parent
Material Adverse Effect" on or with respect to Parent and its Subsidiaries taken
as a whole, (v) any adverse change arising primarily out of or resulting
primarily from actions taken by Parent or any of its Subsidiaries in connection
with (but not in breach of) this Agreement and the transactions contemplated
hereunder, or which is primarily attributable to the announcement of this
Agreement and the transactions contemplated hereby (including, without
limitation, employee attrition or any loss of business resulting from
termination or modification of any vendor, customer or other business
relationships, or otherwise) shall not, other than to the extent such adverse
changes result from the breach by Parent of its obligations under Section 5.1,
be taken into account in determining whether there has been or would be a
"Parent Material Adverse Effect" on or with respect to Parent and its
Subsidiaries, taken as a whole, and (vi) any litigation or threat of litigation
challenging any of the transactions contemplated herein shall not be a "Parent
Material Adverse Effect" on or with respect to Parent and its subsidiaries,
taken as a whole.
Section 4.2 Certificate of Incorporation and By-Laws. True, correct and
complete copies of the Certificates of Incorporation and By-laws, each as
amended to date, of Parent and Merger Sub have been delivered to the Company.
The Certificates of Incorporation and By-laws of and equivalent documents of
Parent and each of its Subsidiaries are in full force and effect. Neither Parent
nor any of its Subsidiaries is in violation of any provision of its Certificate
of Incorporation, By-laws or equivalent documents.
Section 4.3 Capitalization.
(a) The authorized capital stock of Parent consists of (i) 30,000,000
shares of Parent Common Stock, and (ii) 1,000,000 shares of Parent Class A
Preferred Stock, $1.00 par value ("Class A Preferred Stock"). As of August 7,
1998, (i) 16,740,261 shares of Parent Common Stock were issued and outstanding.
Currently, there are no shares of Class A Preferred Stock issued and
outstanding. Since August 7, 1998 through the date hereof, Parent has not,
except as set forth in Section 4.3 of the Parent Disclosure Schedule, issued any
shares of its capital stock, or any security convertible into or exchangeable
for shares of such capital stock, other than the issuance of options and
restricted stock pursuant to the plans and arrangements described in the Parent
SEC Documents and other than upon the exercise of stock options. The authorized
capital stock of Merger Sub consists of 10,000 shares of Common Stock, par value
$1.00 per share, constituting the Merger Sub Common Stock. As of the date
hereof, 1,000 shares of Merger Sub Common Stock are issued and outstanding, all
of which are owned by Parent, and no shares of Merger Sub Common Stock are held
in the treasury of Merger Sub. All of the issued and outstanding shares of
Parent Common Stock and Merger Sub Common Stock have been validly issued, and
are fully paid and nonassessable, and are not subject to preemptive rights.
(b) Except as described in Section 4.3(a) hereof, and except as set
forth in Section 4.3 of the Parent Disclosure Schedule, (i) there are no
options, warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which Parent or Merger Sub or
any of their respective Subsidiaries is a party relating to the issued or
unissued capital stock or other equity interests of Parent and any of its
Subsidiaries, requiring Parent or Merger Sub or any of its Subsidiaries to
grant, issue or sell any shares of the capital stock or other equity interests
of Parent or any of its Subsidiaries; (ii) neither Parent nor any of its
Subsidiaries have any obligation, contingent or otherwise, to repurchase, redeem
or otherwise acquire any shares of the capital stock or other equity interests
of Parent or its Subsidiaries, or to provide funds to or make any material
investment (in the form of a loan, capital contribution or otherwise) in any
such Subsidiary or any other entity other than guarantees of bank obligations
entered into in the ordinary course of business; (iii) neither Parent nor any of
its Subsidiaries, directly or indirectly, owns, or has agreed to purchase or
otherwise acquire, the capital stock or other equity interests of, or any
interest convertible into or exchangeable or exercisable for such capital stock
or such equity interests, of any corporation, partnership, joint venture or
other entity which would be material in value to Parent; and (iv) there are no
voting trusts, proxies or other agreements or understandings to or by which
Parent or Merger Sub or any of their respective Subsidiaries is a party or is
bound with respect to the voting of any shares of capital stock or other equity
interests of Parent or Merger Sub.
Section 4.4 Parent Subsidiaries. Section 4.4 of the Parent Disclosure
Schedule sets forth a list of each Subsidiary of Parent. Each Subsidiary of
Parent is a corporation, partnership or other entity duly organized, validly
existing and in good standing (to the extent such concept is recognized in such
jurisdiction) under the laws of its jurisdiction of incorporation or
organization. Each Subsidiary of Parent has the corporate power and authority to
carry on its business as it is now being conducted. Each Subsidiary of Parent is
duly qualified as a foreign corporation or organization authorized to do
business, and is in good standing (to the extent such concept is recognized in
such jurisdiction), in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a Parent Material
Adverse Effect. Except as set forth in Section 4.4 of the Parent Disclosure
Schedule, all of the outstanding shares of capital stock or other equity
interests in each of Parent's Subsidiaries have been validly issued, and are
fully paid, nonassessable and are owned by Parent or another Subsidiary of
Parent free and clear of all Liens, and are not subject to preemptive rights.
Other than the Subsidiaries, neither Parent nor any Subsidiary has any material
(individually or in the aggregate) investment in any other entity or any
material (individually or in the aggregate) investment in any partnership, joint
venture or similar entity, except as disclosed in Section 4.4 of the Parent
Disclosure Schedule, all of which investments are owned free and clear of all
Liens. Section 4.4 of the Parent Disclosure Schedule sets forth a list of all
individuals and entities (other than Parent) that own shares or interests in any
Subsidiary or in any entity, partnership, joint venture or similar entity in
which Parent owns shares or has an investment.
Section 4.5 Corporate Authority.
(a) Each of Parent and Merger Sub has the requisite corporate power and
authority to execute and deliver this Agreement, the Parent Stock Voting
Agreement and the Option Agreement and to consummate the transactions
contemplated hereby and thereby . The execution and delivery of this Agreement,
the Parent Stock Voting Agreement and the Option Agreement by Parent and Merger
Sub and the consummation by Parent and Merger Sub of the transactions
contemplated hereby have been duly authorized by its respective Board of
Directors and, in the case of this Agreement, subject to the approval of the
Certificate Amendment and the issuance of the Parent Common Stock pursuant to
the Merger by Parent's shareholders, no other corporate action on the part of
Parent or Merger Sub is necessary to authorize the execution and delivery by
Parent and Merger Sub of this Agreement and the consummation by it of the
transactions contemplated hereby and thereby. This Agreement, the Parent Stock
Voting Agreement and the Option Agreement have been duly executed and delivered
by Parent and Merger Sub constitute valid and binding agreements of Parent and
Merger Sub and each is enforceable against Parent and Merger Sub in accordance
with its terms.
(b) Prior to the execution and delivery of this Agreement, the Board of
Directors of each of Parent and Merger Sub (at a meeting duly called and held)
has (i) approved and declared advisable this Agreement, the Merger and the other
transactions contemplated hereby and the Parent Stock Voting Agreement and the
Option Agreement and the transactions contemplated thereby as of such date, and
(ii) subject to the provisions hereof, determined to recommend the issuance of
the Parent Common Stock pursuant to the Merger, the amendment of Parent's option
plan in connection with Section 2.6 ("Option Amendment") and the Certificate
Amendment to the Parent's shareholders for approval at the shareholders meeting
contemplated by Section 6.4 hereof. Pursuant to the DGCL, the affirmative vote
of the holders of a majority of the shares of the Parent Common Stock
outstanding on the record date for the Parent Shareholder Meeting, voting
together as a single class is necessary to approve the Certificate Amendment.
Pursuant to the rules of the New York Stock Exchange, the issuance of the shares
of Parent Common Stock in connection with the Merger and the Option Agreement
must be approved by a majority of the votes cast on the proposal, provided that
the total number of votes cast on the proposal represents a majority of the
shares of Parent Common Stock entitled to vote on the proposal. The foregoing is
the only vote of holders of any series of Parent Common Stock required to
approve the transactions contemplated hereby. Parent has taken all steps
necessary to approve and exempt this Agreement, the Parent Stock Voting
Agreement and the Option Agreement and the transactions contemplated hereby and
thereby from the restrictions on " business combinations" set forth in Section
203 of the DGCL, from any other applicable takeover statute and from any
applicable charter, or organizational document of Parent containing any change
of control, "anti-takeover" or similar provision.
Section 4.6 Compliance with Applicable Law. Except as set forth in
Section 4.6 of the Parent Disclosure Schedule, (i) each of Parent and its
Subsidiaries holds, and is in compliance with the terms of, all permits,
licenses, exemptions, orders and approvals of all Governmental Entities (as
hereinafter defined) necessary for the conduct of their respective businesses as
currently conducted ("Parent Permits"), except for failures to hold or to comply
with such Parent Permits which would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect; (ii) with
respect to the Parent Permits, no action or proceeding is pending or, to the
knowledge of Parent, threatened, and, to the knowledge of Parent, no fact exists
or event has occurred that would, individually or in the aggregate, reasonably
be expected to have a Parent Material Adverse Effect; (iii) the business of
Parent and its Subsidiaries is being conducted and has been conducted in
compliance with all Applicable Laws, except for violations or failures to so
comply that would not, individually, or in the aggregate, have a Parent Material
Adverse Effect; and (iv) no investigation or review by any Governmental Entity
with respect to Parent or its Subsidiaries is pending or, to the knowledge of
Parent, threatened that, individually or in the aggregate are reasonably likely
to have a Parent Material Adverse Effect.
Section 4.7 Non-contravention. Except as set forth in Section 4.7 of
the Parent Disclosure Schedule, the execution and delivery by Parent and Merger
Sub of this Agreement, the Company Stock Voting Agreement and the Option
Agreement do not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the provisions hereof and thereof will not, (i)
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit under any
Contract binding upon Parent or any of its Subsidiaries, or result in the
creation of any Lien upon any of the properties or assets of Parent or any of
its Subsidiaries, (ii) conflict with or result in any violation of any provision
of the Certificate of Incorporation or By-Laws or other equivalent
organizational document, in each case as amended, of Parent or any of its
Subsidiaries, or (iii) conflict with or violate any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (i) and (iii), any such violation, conflict, default, right,
loss or Lien that, individually or in the aggregate, would not have a Parent
Material Adverse Effect.
Section 4.8 Government Approvals; Required Consents. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Parent or is
necessary for the consummation of the transactions contemplated hereby
(including, without limitation, the Merger) except: (i) the filing with (and
declaration of effectiveness by) the SEC of the Registration Statement under the
Securities Act and the filing with the SEC of the Joint Proxy Statement under
the Exchange Act, and any applicable state securities or "blue sky" law as may
be required in connection with this Agreement and the transactions contemplated
by this Agreement, (ii) the filing of a notification under the HSR Act (and all
approvals or termination of applicable waiting periods contemplated thereby),
(iii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware, and (iv) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to obtain or make
would not, individually or in the aggregate, have a Parent Material Adverse
Effect.
Section 4.9 SEC Documents and Other Reports. Parent has filed all
documents required to be filed by it and its Subsidiaries with the SEC since
January 1, 1996 (the "Parent SEC Documents"). As of their respective dates, or
if amended as of the date of the last such amendment, the Parent SEC Documents
complied, and all documents required to be filed by Parent with the SEC after
the date hereof and prior to the Effective Time ("Subsequent Parent SEC
Documents") will comply, in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the applicable rules
and regulations promulgated thereunder and none of the Parent SEC Documents
contained when filed, and the Subsequent Parent SEC Documents will not contain,
any untrue statement of a material fact or omitted, or will omit, to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, or are to be
made, not misleading. Except as disclosed in Section 4.9 of the Parent
Disclosure Schedule, the consolidated financial statements of Parent included in
the Parent SEC Documents when filed fairly present, and included in the
Subsequent Parent SEC Documents will fairly present, the consolidated financial
position of Parent and its consolidated Subsidiaries, as at the respective dates
thereof and the consolidated results of their operations and their consolidated
cash flows for the respective periods then ended (subject, in the case of the
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein) in conformity with GAAP (except, in the case of
the unaudited statements as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto). Except as disclosed in Section 4.9 of the Parent
Disclosure Schedule, since December 27, 1997, Parent has not made any change in
the accounting practices or policies applied in the preparation of its financial
statements, except as may be required by GAAP.
Section 4.10 Absence of Certain Changes or Events. Except for entering
into this Agreement and consummation of the transactions contemplated hereby,
and except as set forth in Section 4.10 of the Parent Disclosure Schedule, since
December 27, 1997, Parent and its Subsidiaries have conducted their respective
businesses and operations in the ordinary and usual course consistent with past
practice, and, except as set forth in Section 4.10 of the Parent Disclosure
Schedule, there has not occurred (i) through the date of this Agreement, any
change in the assets, liabilities, financial condition or the results of Parent
and the Subsidiaries having a Parent Material Adverse Effect; (ii) any damage,
destruction or loss (whether or not covered by insurance) having a Parent
Material Adverse Effect; (iii) any declaration, setting aside or payment of any
dividend or distribution of any kind by Parent on any class of its capital
stock; (iv) any material increase in the compensation payable or to become
payable by Parent or any Subsidiary to its directors, officers or key employees
or any material increase in any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with such directors,
officers or key employees, other than in the ordinary course of business; (v)
any labor dispute, other than routine matters none of which has, or would be
reasonably expected to have, a Parent Material Adverse Effect; (vi) any entry by
Parent or the Subsidiaries into any commitment or transaction (including,
without limitation, any borrowing or capital expenditure) material (individually
or in the aggregate) to Parent or its Subsidiaries other than in the ordinary
course of business; (vii) any material change by Parent or its Subsidiaries in
accounting methods, principles or practices except as required by concurrent
changes in GAAP or concurred with by Parent's independent public accountants;
(viii) any material agreement, whether in writing or otherwise, to take any
action described in this Section 4.10; or (ix) any event or action that, if
occurring or taken during the period from the date of this Agreement through the
Effective Time, would constitute a breach of Section 5.1 hereof and would
constitute a Parent Material Adverse Effect.
Section 4.11 Actions and Proceedings. Except as set forth in the Parent
SEC Documents or Section 4.11 or Section 4.14 of the Parent Disclosure Schedule,
(a) there are no outstanding orders, judgments, injunctions, awards or decrees
of any Governmental Entity against Parent or any of its Subsidiaries, any of
their properties, assets or business, or, to the knowledge of Parent, any of
Parent's or its Subsidiaries' current or former directors or officers (during
the period served as such) or any other person whom Parent or any of its
Subsidiaries has agreed to indemnify, as such, that, individually or in the
aggregate have a Parent Material Adverse Effect, and (b) there are no actions,
suits or legal, administrative, regulatory or arbitration proceedings pending
or, to the knowledge of Parent, threatened against Parent or any of its
Subsidiaries, any of their properties, assets or business, or, to the knowledge
of Parent, any of Parent's or its Subsidiaries' current or former directors or
officers or any other person whom Parent or any of its Subsidiaries has agreed
to indemnify that are, individually or in the aggregate, reasonably likely to
have a Parent Material Adverse Effect.
Section 4.12 Absence of Undisclosed Liabilities. Except (a) as set
forth Section 4.12 or Section 4.14 of the Parent Disclosure Schedule, (b) for
liabilities or obligations which are accrued or reserved against on the balance
sheet (or reflected in the notes thereto) included in the Parent's Annual Report
on Form 10-K for the year ended December 27, 1997 (the "Parent 10-K"), and (c)
for normal and recurring liabilities since April 30, 1998, neither Parent nor
any of its Subsidiaries has any liabilities or obligations (including, without
limitation, Tax liabilities) (whether absolute, accrued, contingent or
otherwise), and whether due or to become due, which individually or in the
aggregate are reasonably likely to have a Parent Material Adverse Effect.
Section 4.13 Certain Contracts and Arrangements. Parent has not
breached or defaulted (nor has any event occurred which, with passage of time or
giving of notice would constitute a default), or received in writing any claim
or notice that it has breached or defaulted under, any of the terms or
conditions of any agreement, contract or commitment in such manner as,
individually or in the aggregate, are reasonably likely to have a Parent
Material Adverse Effect. In addition, Parent has used reasonable best efforts to
identify and disclose on Section 4.13 of the Parent Disclosure Schedule all of
the following to which Parent or any of its Subsidiaries is a party (and which
are not listed as exhibits to the Parent's 10-K): (a) material employment,
consulting, non-compete, severance or similar agreement with any director,
officer or salaried employee; (b) collective bargaining agreement; (c) material
indenture, mortgage, note, installment obligation, agreement or other instrument
relating to the borrowing of money by Parent or any Subsidiary or the guaranty
by Parent or any Subsidiary of any material obligation for the borrowing of
money; (d) real property lease in excess of 20,000 square feet and any other
material lease (i.e., a lease (other than leases that have been properly
capitalized by Parent in accordance with GAAP) with future yearly rental
payments in excess of $150,000 or aggregate future rental payments in excess of
$500,000 over the term thereof); (e) any non-competition agreement or any other
agreement or obligation which purports to limit in any material respect the
manner in which, or the localities in which, Parent or any of its Subsidiaries
is entitled to conduct all or any material portion of the business of the
Company and its Subsidiaries taken as a whole; (f) any joint venture,
partnership or similar arrangement extending beyond six (6) months or involving
a commitment for future equity or investment of more than $500,000; (g) a
listing of the top fifty (50) customers/franchisees based on sales during the
six (6) months ended June 30, 1998, including a listing of the contracts in
place with the top ten (10) end user clients; (h) a listing of the vendors with
whom Parent has contracts involving purchases in excess of $500,000 on an
annualized basis, including a listing of the contracts in place with the top ten
(10) vendors; (i) any material agreement the benefits of which are contingent or
increased, or the terms of which are materially altered, or the vesting of
benefits of which will be accelerated, upon the occurrence of a transaction of
the nature contemplated by this Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by
this Agreement; (j) any material agreement of indemnification or guaranty not
entered into in the ordinary course of business; (k) any agreement, capitalized
lease, contract or commitment relating to capital expenditures and involving
future obligations in excess of $1,500,000, and not cancelable without penalty;
(l) any agreement, contract or commitment currently in force relating to any
ownership interest in any corporation, partnership, joint venture or other
business enterprise that is material in value to Parent; or (m) any other
contract or agreement that is otherwise material to Parent or the Subsidiaries
taken as a whole, except for purchase and sales orders and similar contracts
entered into in the ordinary course of business.
Section 4.14 Taxes.
(a) Except as disclosed in Section 4.14 of the Parent Disclosure
Schedule, each of Parent and its Subsidiaries has filed all Tax Returns that it
was required to file, and, except to the extent that a reserve for Taxes was
reflected on Parent's balance sheet included in Parent ' s 10-K (the "Parent
Balance Sheet") (exclusive of any accruals for "deferred taxes" or similar items
that reflect timing differences between Tax and financial accounting
principles), all such Tax Returns were correct and complete. Except as disclosed
in Section 4.14 of the Parent Disclosure Schedule, each group of corporations
with which Parent or any Subsidiary has filed (or was required to file)
consolidated, combined, unitary or similar Tax Returns (a "Parent Affiliated
Group") has filed all such Tax Returns that it was required to file with respect
to any period in which Parent or a Subsidiary was a member of such Parent
Affiliated Group (a "Parent Affiliated Period"), and, except to the extent that
a reserve for Taxes was reflected on the Parent Balance Sheet (exclusive of any
accruals for "deferred taxes" or similar items that reflect timing differences
between Tax and financial accounting principles), all such Tax Returns were
correct and complete. Except as disclosed in Section 4.14 of the Parent
Disclosure Schedule, except to the extent that a reserve for Taxes was reflected
on the Parent Balance Sheet (exclusive of any accruals for "deferred taxes" or
similar items that reflect timing differences between Tax and financial
accounting principles), each of Parent and its Subsidiaries has paid all Taxes
(whether or not shown on such Tax Returns) that were due and payable, and each
Parent Affiliated Group has paid all Taxes (whether or not shown on such Tax
Returns) that were due and payable with respect to all Parent Affiliated Periods
and with respect to which Parent or any of its Subsidiaries may be liable by
operation of law or otherwise. Except as disclosed in Section 4.14 of the Parent
Disclosure Schedule, the unpaid Taxes of Parent and the Subsidiaries for Tax
periods through the date of the Parent Balance Sheet do not exceed the accruals
and reserves for Taxes set forth on the Parent Balance Sheet (exclusive of any
accruals for "deferred taxes" or similar items that reflect timing differences
between Tax and financial accounting principles). The unpaid Taxes of Parent and
the Subsidiaries for Tax periods from the date of the Parent Balance Sheet
through the Closing Date are normal recurring taxes attributable solely to the
conduct of their businesses in the ordinary course and in a manner consistent
with past practices. All Taxes that Parent or any Subsidiary is or was required
by law to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Governmental Entity. Each of the
representations contained in the this Section 4.14(a) shall be (i) limited in
its application to items which are reasonably likely, individually or in the
aggregate, to have a Parent Material Adverse Effect, and (ii) qualified to the
extent of any adverse determination of matters set forth in Section 4.14 of the
Parent Disclosure Schedule.
(b) Except as disclosed in Section 4.14 of the Parent Disclosure
Schedule, Parent is not and never has been a party to or bound by any Tax
indemnity, Tax sharing or Tax allocation agreement (whether written or unwritten
or arising under operation of federal law as a result of being a member of a
group filing consolidated Tax Returns, under operation of certain state laws as
a result of being a member of a unitary group, or under comparable laws of other
states or foreign jurisdictions) which includes a party other than Parent nor
does Parent owe any amount under any such agreement. Except as disclosed in
Section 4.14 of the Parent Disclosure Schedule, no examination or audit by any
Governmental Entity of any Tax Return of Parent, any of its Subsidiaries or any
Parent Affiliated Group with respect to a Parent Affiliated Period is currently
in progress or, to the knowledge of Parent and its Subsidiaries, threatened or
contemplated, in each case, which involve claims that individually or in the
aggregate are reasonably likely to have a Parent Material Adverse Effect.
Neither Parent nor any of its Subsidiaries has been informed by any jurisdiction
that the jurisdiction believes that Parent or any of its Subsidiaries was
required to file any Tax Return that was not filed which failure or failures
individually, or in the aggregate, are reasonably likely to have a Parent
Material Adverse Effect.
(c) Neither Parent nor any of its Subsidiaries is a "consent
corporation" within the meaning of Section 341(f) of the Code, and none of the
assets of Parent or the Subsidiaries are subject to an election under Section
341(f) of the Code.
(d) Neither Parent nor any of its Subsidiaries has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(e) Except as set forth in Section 4.14 of the Parent Disclosure
Schedule, neither Parent nor any of its Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments that will not be deductible under either Code
Section 162(m) or Code Section 280G (or cause Parent or any of its Subsidiaries
to incur an obligation to reimburse a person for a tax imposed under Code
Section 4999).
(f) Except as set forth in Section 4.14 of the Parent Disclosure
Schedule, to the knowledge of Parent, no state of facts or circumstances exist
which are reasonably likely to constitute grounds for the assessment of taxes
against Parent or any subsidiary where such assessment would, individually or in
the aggregate, have a Parent Material Adverse Effect.
Section 4.15 Patents, Trademarks and Similar Rights.
(a) Parent and its Subsidiaries own, or are licensed or otherwise
possess and, after the Effective Time, will continue to own, license or
otherwise possess, legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights and mask works, and all processes,
formulae, methods, schematics, technology, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
that are necessary to conduct the business of Parent and its Subsidiaries as
currently conducted, the absence of which would be reasonably likely to have a
Parent Material Adverse Effect (the "Parent Intellectual Property Rights").
(b) Neither Parent nor any of its Subsidiaries is, or will as a result
of the execution and delivery of this Agreement or the performance of Parent's
obligations under this Agreement or otherwise be, in breach of any license,
sublicense or other agreement relating to Parent Intellectual Property Rights,
or any material licenses, sublicenses and other agreements as to which Parent or
any of its Subsidiaries is a party and pursuant to which Parent or any of its
Subsidiaries is authorized to use any third party patents, trademarks or
copyrights ("Parent Third Party Intellectual Property Rights"), including
software that is used in the manufacture of, incorporated in, or forms a part of
any product sold by or expected to be sold by Parent or any of its Subsidiaries,
the breach of which would be reasonably likely to have a Parent Material Adverse
Effect.
(c) All patents, registered trademarks, service marks and copyrights
which are held by Parent or any of its Subsidiaries and which are material to
the business of Parent and its Subsidiaries, taken as a whole, are valid and
subsisting. Parent (i) has not been sued in any suit, action or proceeding, or
received in writing any claim or notice, which involves a claim of infringement
of any patent, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party which, if adversely
determined, would be reasonably likely to have a Company Material Adverse
Effect; and (ii) has no knowledge that the manufacturing, marketing, licensing
or sale of its products infringes any patent, trademark, service xxxx,
copyright, trade secret or other proprietary right of any third party, which
infringement would reasonably be expected to have a Parent Material Adverse
Effect.
Section 4.16 Information in Disclosure Documents and Registration
Statement. None of the information supplied or to be supplied by Parent or
Merger Sub specifically for inclusion in (i) the Registration Statement or (ii)
the Joint Proxy Statement will, in the case of the Registration Statement, at
the time it becomes effective or, in the case of the Joint Proxy Statement or
any amendments thereof or supplements thereto, at the time of the initial
mailing of the Proxy Statement and any amendments or supplements thereto, and at
the time of the Company Shareholder Meeting and the Parent Shareholder Meeting
to be held in connection with the Merger, 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. The Registration
Statement, as of its effective date, will comply (with respect to information
relating to Parent and Merger Sub) as to form in all material respects with the
requirements of the Securities Act, and the rules and regulations promulgated
thereunder. As of the date of its initial mailing and as of the date of the
Company Shareholder Meeting and the Parent Shareholder Meeting, the Joint Proxy
Statement will comply (with respect to information relating to the Parent) as to
form in all material respects with the applicable requirements of the Exchange
Act, and the rules and regulations promulgated thereunder. Notwithstanding the
foregoing, neither Parent nor Merger Sub makes any representation or warranty
with respect to any statement made or incorporated by reference in the foregoing
documents based upon information supplied by or on behalf of the Company for
inclusion or incorporation by reference therein.
Section 4.17 Employee Benefit Plans; ERISA.
(a) Section 4.17 of the Parent Disclosure Schedule sets forth the name
of each Parent Plan (as defined below) and of each bonus, deferred compensation,
incentive compensation, profit sharing, salary continuation, employee benefit
plan, stock purchase, stock option, employment, severance, termination, golden
parachute, consulting or supplemental retirement plan or agreement to which
Parent or any Subsidiary is a party to or contributes to or pursuant to which
any employee of Parent or any Subsidiary is entitled to benefits (collectively,
the "Benefit Plans"), true copies of which have heretofore been delivered to the
Company. Except as set forth in Section 4.17 of the Parent Disclosure Schedule,
each Parent Plan and Benefit Plan complies with ERISA, the Code and all other
applicable laws and administrative or governmental rules and regulations except
for any such noncompliance that, individually or in the aggregate, is not
reasonably likely to have a Parent Material Adverse Effect. No "reportable
event" (within the meaning of Section 4043 of ERISA) has occurred and no notice
of such event is pending with respect to any Parent Plan; neither Parent nor any
of its ERISA Affiliates has withdrawn from any Parent Plan under Section 4063 of
ERISA or has taken, or is currently considering taking, any action to do so; and
no action has been taken, or is currently being considered, to terminate any
Parent Plan subject to Title IV of ERISA, in any such case, where such event,
withdrawal or action, individually or in the aggregate, is reasonably likely to
have a Parent Material Adverse Effect. No Parent Plan, nor any trust created
thereunder, has incurred any material "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived. Except as set forth in
Section 4.17 of the Parent Disclosure Schedule, there are no (individually or in
the aggregate) actions, suits or claims pending or, to the knowledge of Parent,
threatened (other than routine claims for benefits) with respect to any Parent
Plan or Benefit Plan and that is, individually, or in the aggregate, reasonably
likely to result in a Parent Material Adverse Effect. Neither Parent nor any of
its ERISA Affiliates has incurred or would reasonably be expected to incur any
liability under or pursuant to Title IV of ERISA that has not been satisfied in
full and that are, individually, or in the aggregate, reasonably likely to
result in a Parent Material Adverse Effect. To the knowledge of Parent, no
non-exempt prohibited transactions described in Section 406 of ERISA or Section
4975 of the Code have occurred. Except as set forth in Section 4.17 of the
Parent Disclosure Schedule, all Parent Plans and Benefit Plans that are intended
to be qualified under Section 401(a) of the Code have received a favorable
determination letter as to such qualification from the Internal Revenue Service,
and no event has occurred, either by reason of any action or failure to act,
which could be expected to cause the loss of any such qualification, and Parent
is not aware of any reason why any Parent Plan and Benefit Plan is not so
qualified in operation. As used herein: "Parent Plan" means a "pension plan" (as
defined in Section 3(2) of ERISA), or a "welfare plan" (as defined in Section
3(l) of ERISA) established or maintained by Parent or any of its ERISA
Affiliates or to which Parent or any of its ERISA Affiliates has contributed in
the last six years or otherwise may have any liability.
(b) None of the Benefit Plans is (i) a plan subject to Title IV of
ERISA or (ii) a Multiemployer Plan. Neither Parent or its ERISA Affiliates has
ever contributed to or had an obligation to contribute to any Multiemployer
Plan.
(c) Except as set forth on Section 4.17 of the Parent Disclosure
Schedule, no Benefit Plan which is a "welfare plan" (as defined in Section 3(1)
of ERISA) provides for continuing benefits or coverage for any participant or
any beneficiary of a participant after such participant's termination of
employment except as may be required by the Consolidated Omnibus Budget
Reconciliation Action of 1985, as amended ("COBRA"), and the regulations
thereunder at the expense of the participant or the beneficiary of the
participant.
(d) Except as disclosed in Section 4.17 of the Parent Disclosure
Schedule, (i) no amount payable under any Parent Plan will fail to be deductible
for federal income tax purposes by virtue of Section 280G of the Code; and (ii)
the consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with any other event that is reasonably likely to
occur, (A) entitle any current or former director, officer or employee of Parent
or any of its ERISA Affiliates to severance pay, golden parachute payments,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, or (B) accelerate the time of payment or vesting, or increase
the amount of compensation due any such director, officer or employee.
Section 4.18 Environmental Matters. Except as set forth in the Parent
SEC Documents, (i) no person, entity or governmental agency has asserted against
Parent or any of its Subsidiaries any requests, claims or demands for damages,
costs, expenses or causes of action arising out of or due to the emission,
disposal, discharge or other release or threatened release of any Hazardous
Substances or Pollutants or Contaminants (in each case, as defined in or
governed by any applicable federal, state or local statute, law or regulation)
in connection with or related to any past or present facilities, properties or
assets, owned, leased or operated by Parent or any of its Subsidiaries
(collectively, "Parent's Assets"), arising out of or due to any injury to human
health or the environment by reason of the current condition or operation of
Parent's Assets, or past conditions and operations or activities on Parent's
Assets; (ii) neither Parent nor any Subsidiary is a party to any pending, or to
the knowledge of Parent, threatened actions for damages, costs, expenses,
demands, causes of action, claims, losses, administrative proceedings,
enforcement actions, or investigations relating to the emission, disposal,
discharge or release of Hazardous Substances or Pollutants or Contaminants
associated with Parent's Assets or operations; (iii) there is no environmental
condition, situation or incident on, at or concerning Parent's Assets that could
give rise to an action or liability under applicable environmental law, rule,
ordinance or common law theory relating to Hazardous Substances, Pollutants or
Contaminants; and (iv) there is no liability associated with Parent's Assets
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, the Resource Conservation and Recovery Act or the Toxic
Substances and Control Act, or any other similar state or local law, in any such
case where such event, individually or in the aggregate, is reasonably likely to
have a Parent Material Adverse Effect.
Section 4.19 Labor Matters. Neither Parent nor any of its Subsidiaries
has any labor contracts or collective bargaining agreements. There is no
material unfair labor practice complaint pending or, to the knowledge of Parent,
threatened, against Parent or any of its Subsidiaries with respect to the Parent
Business. Since April 30, 1998, there has not been any labor strike, dispute,
slowdown or stoppage pending or, to the knowledge of Parent, threatened against
Parent or any of its Subsidiaries, and neither Parent nor any of its
Subsidiaries has experienced any primary work stoppage or other labor difficulty
involving its employees, in either such case, which has had or would reasonably
be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
Section 4.20 Affiliate Transactions. Except as set forth in Section
4.20 of the Parent Disclosure Schedule, to the knowledge of Parent, no director,
officer, executive employee or shareholder beneficially owning 5% or more of the
total number of issued and outstanding shares of Common Stock: (i) has any
material contractual relationship with Parent, other than employment contracts
and contracts made on an arm's-length basis in the ordinary course of business;
or (ii) has any direct or indirect interest in any material right, property or
asset which is used by Parent or any of its Subsidiaries in the conduct of its
or their business.
Section 4.21 Opinion of Financial Advisor. Parent has received the
written opinion of X.X. Xxxxxx Securities, Inc. ("JPM") to the effect that as of
the date of this Agreement, the consideration to be paid by the Company in the
Merger is fair, from a financial point of view. A true, correct and complete
copy of the written opinion delivered by JPM, which opinion shall be included in
the Joint Proxy Statement, as well as a true and correct copy of the Parent's
engagement of JPM, have been delivered to the Company by Parent.
Section 4.22 Brokers. Other than JPM and Xxxxxxx & Hoenemeyer ("G&H"),
no broker, finder or financial advisor retained by Parent is entitled to any
brokerage, finder's or other fee or commission from Parent in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent. A true and correct copy of Parent's engagement letters
with JPM and G&H has been delivered to the Company by Parent.
Section 4.23 Pooling. Parent does not know of any reason why the Merger
will not qualify as a pooling of interests transaction under APB 16, and neither
Parent nor any of its Subsidiaries has, to its knowledge after consultation with
its independent accountants, taken any action that will prevent the Merger from
qualifying as a pooling of interests transaction under APB 16.
Section 4.24 Insurance; Risk Management. All material fire and
casualty, general liability, business interruption, product liability, and
sprinkler and water damage insurance policies maintained by Parent or any of its
Subsidiaries are with reputable insurance carriers, provide full and adequate
coverage for all normal risks incident to the business of Parent and its
Subsidiaries and their respective properties and assets, and are in character
and amount at least equivalent to that carried by persons engaged in similar
businesses and subject to the same or similar perils or hazards, except for any
such failures to maintain insurance policies that, individually or in the
aggregate, are not reasonably likely to have a Parent Material Adverse Effect.
The steps taken by Parent to manage the various risks incident to the business
and operations of Parent and its Subsidiaries and their respective properties
and assets are at least equivalent to those taken by persons engaged in similar
businesses, except for any failures to take such steps that, individually or in
the aggregate, are not reasonably likely to have a Parent Material Adverse
Effect.
Section 4.25 Year 2000. The Parent has conducted an assessment of its
and its Subsidiaries' internal operating systems, processes, software, hardware
and equipment and based upon this assessment has developed a plan designed to
ensure that the same are Year 2000 Compliant on or before December 31, 1999. To
the knowledge of Parent, such plan will be implemented and successfully
completely on or before December 31, 1999, and the implementation and completion
of such plan will not have a Parent Material Adverse Effect.
Section 4.26 Interim Operations of Sub. Merger Sub was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement,
has engaged in no other business activities and has conducted its operations
only as contemplated by this Agreement.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Conduct of Business Pending the Merger. Prior to the
Effective Time, Parent and the Company each agree as to itself and its
respective Subsidiaries (except to the extent expressly contemplated by this
Agreement or the Disclosure Schedules or that the other party shall otherwise
consent in writing) to conduct its and its Subsidiaries business only in the
ordinary and usual course consistent with the manner as heretofore conducted. In
addition, during such time, Parent, the Company and their respective
Subsidiaries shall use their reasonable best efforts to, and shall use their
reasonable best efforts to cause their officers, directors and employees to, (i)
preserve intact its present business organization, (ii) keep available the
services of its present officers and key employees, (iii) preserve its business
relationships and preserve its relationships with customers, suppliers,
distributors, licensors, licensees and others having business dealings with it
or its Subsidiaries, all to the end that its and its Subsidiaries' goodwill and
ongoing business shall be unimpaired at the Effective Time. Without limiting the
foregoing, during such time, Parent and its Subsidiaries , on one hand, and the
Company and its Subsidiaries , on the other hand, shall use their best efforts,
not to, and shall use their reasonable best efforts to cause their respective
officers, directors and employees not to, take any action that interferes with,
or impedes, such party's ongoing relationships (including such relationships
after the Effective Time) with such party's employees, customers or suppliers.
Parent and the Company each shall promptly notify the other party of any
material event or occurrence not in the ordinary course of business. Except as
expressly contemplated by this Agreement, Parent and the Company each shall not
(and shall not permit any of its respective Subsidiaries to), without the
written consent of the other party:
(a) accelerate, amend or change the period of exercisability of options
or restricted stock granted under any employee stock plan of such party or
authorize cash payments in exchange for any options granted under any of such
plans except as required by the terms of such plans or any related agreements in
effect as of the date of this Agreement and except as contemplated by this
Agreement;
(b) (i) amend its Certificate of Incorporation, as amended, By-Laws or
other organizational documents, (ii) split, combine or reclassify any shares of
its outstanding capital stock, (iii) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property, other than dividends and
distributions by a wholly-owned Subsidiary to its parent entity, or (iv)
directly or indirectly purchase, redeem or otherwise acquire any shares of its
capital stock or shares of the capital stock of any of its Subsidiaries;
(c) authorize for issuance, issue (except upon the exercise of
outstanding stock options, or warrants or upon the conversion of convertible
securities) or sell or agree to issue or sell any shares of, or rights or
options to acquire or convertible into any shares of, its capital stock or
shares of the capital stock of any of its Subsidiaries (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) or any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
(d) subject to Sections 6.2 and 6.4 hereof, (i) merge, combine or
consolidate with another entity, (ii) acquire or purchase an equity interest in
or a substantial portion of the assets of another corporation, partnership or
other business organization or otherwise acquire any material assets outside the
ordinary course of business and consistent with past practice or (iii) sell,
lease, license, waive, release, transfer, encumber or otherwise dispose of any
of its material (individually or in the aggregate) assets outside the ordinary
course of business and consistent with past practice; provided that,
acquisitions which do not involve, individually or in the aggregate,
consideration (including assumed indebtedness) of not more than $10,000,000 that
are otherwise permitted pursuant to this Agreement, shall not require any such
consent;
(e) (i) incur, assume or prepay any indebtedness for borrowed money
other than in each case pursuant to credit agreements in effect as of the date
hereof in the ordinary course of business and consistent with past practice,
(ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any person
other than a Subsidiary, in each case other than (A) in the ordinary course of
business and consistent with past practice, (B) existing indebtedness of a
Subsidiary, (C) short-term borrowings incurred in the ordinary course of
business consistent with the manner as heretofore conducted and (D) borrowings
pursuant to existing credit facilities in the ordinary course of business or any
modifications, renewals or replacements of such credit facilities, or (iii) make
any loans, advances or capital contributions to, or investments in, any other
person, other than to any Subsidiary;
(f) pay, satisfy, discharge or settle any material claim, liabilities
or obligations (absolute, accrued, contingent or otherwise), other than in the
ordinary course of business and consistent with past practice or pursuant to
mandatory terms of any contract in effect on the date hereof and other than any
settlement that does not require the payment of any material sum, or the
performance of any material obligation;
(g) modify or amend, or waive any benefit of, any material
non-competition agreement to which it or any of its Subsidiaries is a party;
(h) authorize or make capital expenditures in excess of $2,000,000 in
the aggregate except for those projects set forth in Section 5.1 of the Company
Disclosure Schedule or Section 5.1 of the Parent Disclosure Schedule, as the
case may be;
(i) (i) adopt, enter into, terminate, make or agree to make any new
grants or awards under or amend (except as may be required by Applicable Law)
any employee plan, agreement, bonus, contract, arrangement or other Company Plan
or Parent Plan, or pay, or agree to pay, any bonus, stay bonus, or other similar
payment, as the case may be, to or for the current or future benefit or welfare
of any director, officer or employee or take any action which would result in
the acceleration or early vesting of any Options, other than paying or making
grants, awards or other payments required to be made pursuant to plans and
agreements disclosed in the Company Disclosure Schedule or Parent Disclosure
Schedule as the case may be; (ii) except in the ordinary course of business
consistent with past practice, increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee; or (iii)
take any action to fund or in any other way secure, or to accelerate or
otherwise remove restrictions with respect to, the payment of compensation or
benefits under any employee plan, agreement, contract, arrangement or other
Company Plan or Parent Plan, as the case may be;
(j) make any material change in its accounting or tax policies or
procedures, except as required by Applicable Law or to comply with GAAP;
(k) enter into any material contract or material agreement other than
in the ordinary course of business or modify, amend or terminate any material
contract or material agreement except in the ordinary course of business;
(l) reclassify, combine, split, subdivide, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(m) grant any severance or termination pay to, or enter into any
employment or severance agreement with, any of its, or any of its Subsidiary's
directors, officers or employees except in connection with the termination
(voluntary or involuntary) or resignation of such person on terms that are
consistent with past practice
(n) commit a breach of, or default under, any contract, agreement,
license or instrument to which it is a party or to which any of its assets may
be subject, or violate any applicable law, regulation, ordinance, order,
injunction or decree or any other requirement of any governmental body or court,
relating to its assets or business if such breach, default or violation is
reasonably likely to result in a Company Material Adverse Effect or Parent
Material Adverse Effect, as the case may be;
(o) fail to file all reports and returns required to be filed with
federal, state, local and foreign authorities, where such failure is reasonably
likely to result in a Company Material Adverse Effect or Parent Material Adverse
Effect, as the case may be;
(p) except those being contested for which adequate reserves have been
established, fail to (i) promptly pay all Taxes of any nature lawfully levied or
assessed upon it or any of its or its Subsidiaries' properties or (ii) withhold
or collect and pay to the proper governmental authorities or hold in separate
bank accounts for such payment all Taxes and other assessments that are required
by law to be so withheld or collected;
(q) pay, loan or advance any material amount to, or sell, transfer or
lease any material property or asset to, or enter into any material agreement or
arrangement with, any of its affiliates, officers, employees or directors,
except for its directors' fees and compensation to officers and employees
consistent with past practices;
(r) except as expressly permitted by this Agreement, take any action
that would or is reasonably likely to result in any of its representations and
warranties set forth in this Agreement being untrue in any material respect, or
in any of the conditions to the Merger set forth in Article VII not being
satisfied; or
(s) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Access and Information. Each party hereto shall (and shall
cause its Subsidiaries and its and their respective officers, directors,
employees, auditors and agents to) afford to the other party and to such other
party's officers, employees, financial advisors, legal counsel, accountants,
consultants and other representatives (except to the extent not permitted under
Applicable Law as advised by counsel) reasonable access during normal business
hours throughout the period prior to the Effective Time to all of its books and
records and its properties, plants and personnel and, during such period, shall
furnish promptly to the other party a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal
securities laws. Unless otherwise required by Applicable Law, each party hereto
agrees that it shall, and it shall cause its Subsidiaries and its and their
respective officers, directors, employees, auditors and agents to, hold and use
all information confidential pursuant to the Confidentiality Agreement.
Section 6.2 No Solicitation.
(a) Prior to the Effective Time, the Company and Parent each agree that
it and its respective Subsidiaries shall not, and each shall use its best
efforts to cause its respective affiliates, directors, officers, employees,
agents or representatives not to, directly or indirectly, (i) encourage, solicit
or initiate, directly or indirectly, (including by way of furnishing or
disclosing non-public information) any inquiries or the making of any proposal
with respect to any merger, tender offer, consolidation or other business
combination involving such party or the acquisition (directly or indirectly) of
all or any significant part of the assets or capital stock of such party or any
of its Subsidiaries (other than pursuant to this Agreement) (an "Acquisition
Transaction") (ii) negotiate, explore or otherwise engage in discussions with,
or provide confidential information or data to, any person (other than each
other and each other's representatives, Subsidiaries and affiliates) with
respect to any Acquisition Transaction, or which may reasonably be expected to
lead to a proposal for an Acquisition Transaction or (iii) enter into any
agreement, arrangement or understanding with respect to any Acquisition
Transaction or which would require it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this Agreement;
provided, however, that, at any time prior to the adoption of this Agreement by
the stockholders of the Company, the Company may, and at any time prior to the
approval of the issuance of Parent Common Stock in connection with the Merger by
the Parent stockholders, Parent may, in each case, acting through its board of
directors, in response to an unsolicited written proposal from a third party
setting forth a Superior Proposal (as hereinafter defined), furnish information
to, negotiate or otherwise engage in discussions with such third party, if its
Board of Directors determines in good faith, based upon the advice of outside
counsel, that such action is reasonably necessary for the Board of Directors to
comply with its fiduciary duties under Applicable Law, including, without
limitation the DGCL; provided, however, prior to furnishing such non-public
information to, or entering into discussions or negotiations with, such person
or entity, such Board of Directors receives from such person or entity an
executed confidentiality agreement with terms no less favorable to such party
than those contained in the Non-Disclosure Agreement dated July 24, 1998 between
the Company and Parent (the "Confidentiality Agreement"), and such non-public
information has been previously delivered to the Board of Directors of the other
party hereto. The Company and Parent each agree to promptly advise in writing
the other of any inquiries or proposals received by, any such information
requested from, and any requests for negotiations or discussions sought to be
initiated or continued with it, its Subsidiaries or affiliates, or any of the
respective directors, officers, employees, agents or representatives of the
foregoing, in each case from a person with respect to an Acquisition
Transaction. In addition, the Company and Parent shall promptly advise in
writing the other of the substance and content of any such inquiry, proposal,
information request, negotiations or discussions. As used herein, "Superior
Proposal" means a bona fide, written and unsolicited proposal or offer with
respect to an Acquisition Transaction on terms which the Board of Directors of
the party receiving such proposal or offer determines in good faith (based on
and consistent with the advice of independent financial advisors and outside
legal counsel), would, if consummated, be more favorable over the long-term from
a financial point of view than the transactions contemplated hereby, taking into
consideration all elements of the transactions contemplated hereby including,
without limitation, the non-taxable element of said transaction and strategic
benefits anticipated to be derived from the Merger and the long-term prospects
of Parent and the Company as a combined company, and for which financing, to the
extent required, is then committed or which, in the good faith judgment of the
Board of Directors of such party is reasonably capable of being obtained by such
third party.
(b) The Company and Parent each agree that, as of the date hereof, it,
its Subsidiaries and affiliates, and the respective directors, officers,
employees, agents and representatives of the foregoing, shall immediately cease
and cause to be terminated any existing activities, discussions and negotiations
with any person (other than Parent and its representatives) conducted heretofore
with respect to any Acquisition Transaction.
(c) The Company and Parent shall each notify the other party
immediately after receipt by the Company and Parent (or their advisors),
respectively, of any inquiry or proposal involving an Acquisition Transaction
("Acquisition Proposal") or any request for non-public information in connection
with an Acquisition Proposal or for access to the properties, books or records
of such party or any of its Subsidiaries by any person or entity that informs
such party that it is considering making, or has made, an Acquisition Proposal.
Such notice shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact, and shall describe, if applicable, any material
disclosed or provided to the party making the Acquisition Proposal which had not
previously been disclosed or provided to the Company or Parent as applicable.
Such party shall continue to keep the other party hereto informed, on a current
basis, of the status of any such discussions or negotiations and the terms being
discussed or negotiated.
(d) Nothing contained in this Section 6.2 or elsewhere in this
Agreement shall prohibit either party from (i) filing with the SEC a report on
Form 8-K with respect to this Agreement, including a copy of this Agreement and
any related agreements as an exhibit to such report, (ii) taking and disclosing
to its shareholders a position contemplated by Rule 14d-9 or 14e-2 promulgated
under the Exchange Act, or (iii) making any disclosure to its shareholders if,
in the good faith judgment of the Board of Directors upon the advice of outside
counsel, failure to so disclose would be inconsistent with any Applicable Law or
the fiduciary duties of the Board of Directors. The Company and Parent shall be
entitled to provide copies of this Section 6.2 to third parties who, on an
unsolicited basis after the date of this Agreement, contact such party regarding
an Acquisition Transaction.
Section 6.3 Third-Party Standstill Agreements. During the period from
the date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it or any of its Subsidiaries is a party that was
entered into in contemplation of discussions or negotiations regarding a
possible Acquisition Transaction.
Section 6.4 Joint Proxy Statement; Stockholder's Meetings. (a) In order
to consummate the Merger, Parent, acting through the Parent Board of Directors,
shall, in accordance with its Certificate of Incorporation and By-Laws and
Applicable Law:
(i) subject to its fiduciary duties under Applicable
Laws as determined, in good faith, by the Parent Board of Directors, following
consultation with outside counsel, duly call, give notice of, convene and hold a
special meeting (the "Parent Shareholder Meeting") of its stockholders and a
special meeting (or a consent in lieu thereof) of the stockholders of Merger Sub
(at which latter meeting Parent shall vote all of its shares of Merger Sub in
favor of the adoption and approval of this Agreement) as soon as practicable
following the date hereof for the purposes of adopting this Agreement or, in the
case of the Parent, approving the Certificate Amendment, the Option Amendment
and the issuance of Parent Common Stock pursuant to the Merger;
(ii) subject to its fiduciary duties under
Applicable Law as determined, in good faith, by the Parent Board of Directors,
following consultation with outside counsel, include in the Joint Proxy
Statement the recommendation of the Parent Board of Directors that stockholders
of the Parent vote in favor of the Certificate Amendment, the Option Amendment
and the issuance of Parent Company Stock pursuant to the Merger and use its
reasonable best efforts to solicit votes and proxies in favor of the matters set
forth in (i) above; and
(iii) obtain and furnish any information required to
be included in the proxy or information statement (together with any related
letter to stockholders, notice of meeting and form of proxy, the "Parent Proxy
Statement") to be included in the Joint Proxy Statement, and cause the Joint
Proxy Statement to be mailed to the Parent's stockholders at the earliest
practicable date.
(b) In order to consummate the Merger, the Company, acting through its
Board of Directors, shall in accordance with its Certificate of Incorporation
and By-Laws and applicable law:
(i) subject to its fiduciary duties under Applicable
Law as determined, in good faith, by the Company Board of Directors, following
consultation with outside counsel, duly call, give notice of, convene and hold a
special meeting (the "Company Shareholder Meeting") of its stockholders as soon
as practicable following the date hereof for the purpose of adopting this
Agreement;
(ii) subject to its fiduciary duties under
applicable law as determined, in good faith, by the Company's Board of
Directors, following consultation with outside counsel, include in the Joint
Proxy Statement the recommendation of its board of directors that stockholders
of the Company vote in favor of, and use its reasonable best efforts to solicit
votes and proxies in favor of, the adoption and approval of this Agreement; and
(iii) obtain and furnish any information required to
be included in the proxy or information statement (together with any related
letters to stockholders, notice of meeting and form of proxy, the "Company Proxy
Statement") to be included in the Joint Proxy Statement, and cause the Joint
Proxy Statement to be mailed to the Company's stockholders at the earliest
practicable date.
(c) As promptly as reasonably practicable following the date hereof,
the Parent, the Merger Sub and the Company will prepare and file with the SEC
the Registration Statement under the Securities Act and the rules and
regulations promulgated thereunder with respect to the Parent Shares to be
issued in connection with the Merger which shall include as a part thereof the
Parent Proxy Statement with respect to the Parent Shareholder Meeting and the
Company's Proxy Statement with respect to the Company Shareholder Meeting (the
"Joint Proxy Statement"). The Parent, Merger Sub and the Company shall cooperate
and use all reasonable efforts in the preparation and filing of the Registration
Statement and Joint Proxy Statement and to have the Registration Statement
declared effective by the SEC. The Parent, Merger Sub, and the Company shall
also take any reasonable action required to be taken under the state "blue sky"
laws or other securities laws in connection with the Merger.
(d) Subject to the provisions of this Article VI, Parent and the
Company shall use their best efforts to hold such meetings on the same day and
as soon as practicable after the date hereof and shall not postpone or adjourn
(other than for the absence of a quorum) their respective stockholders' meetings
without the consent of the other party. Subject to Sections 6.2, 6.4(a) and
6.4(b), each party shall use all reasonable efforts to solicit from stockholders
of such party proxies in favor of such matters.
Section 6.5 Affiliate Agreements. Prior to the execution of this
Agreement, the Company and Parent have provided each other with a list of those
persons who are, in the Company's and Parent's respective reasonable judgment,
"affiliates" of the Company or Parent, respectively, within the meaning of Rule
145 promulgated under the Securities Act ("Rule 145") (each such person who is
an "affiliate" of the Company or Parent within the meaning of Rule 145 is
referred to as an "Affiliate"). The Company and Parent shall provide each other
with such information and documents as Parent or the Company shall reasonably
request for purposes of reviewing such list and shall notify the other party in
writing regarding any change in the identity of its Affiliates prior to the
Closing Date. The Company and Parent have delivered to the other, or shall each
cause to be delivered to the other at least thirty (30) days prior to the
Effective Time, from each of its Affiliates, an executed Affiliate Agreement, in
form attached hereto as Exhibit "D", in the case of Affiliates of the Company,
and in the form attached hereto as Exhibit "E", in the case of Affiliates of
Parent (each, an "Affiliate Agreement"). Parent shall be entitled to place
appropriate legends on the certificates evidencing any Parent Common Stock to be
received by such Affiliates of the Company pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Parent Common Stock, consistent with the terms of the Affiliate
Agreements (provided that such legends or stop transfer instructions shall be
removed, two years after the Effective Date, upon the request of any stockholder
that is not then an Affiliate of Parent.
Section 6.6 Reasonable Best Efforts.
(a) Subject to the terms and conditions herein provided and applicable
legal requirements, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, and to assist and cooperate with the other parties hereto in doing, as
promptly as practicable, all things necessary, proper or advisable under
applicable laws and regulations to ensure that the conditions set forth in
Article VII are satisfied and to consummate and make effective the transactions
contemplated by this Agreement; provided, however, that the Company shall not,
without Parent's prior written consent, and Parent shall not be required to,
divest or hold separate or otherwise take or commit to take any other similar
action with respect to any assets, businesses or product lines of Parent, the
Company or any of their respective Subsidiaries or otherwise take action that
could reasonably be expected to have a Company Material Adverse Effect, a Parent
Material Adverse Effect or an effect to Parent combined with the Surviving
Corporation comparable to either a Parent Material Adverse Effect or Company
Material Adverse Effect.
(b) Subject to Section 6.6(a) hereof, each of the parties shall use its
reasonable best efforts to obtain as promptly as practicable all consents,
waivers, approvals, authorizations or permits of, or registration or filing with
or notification to (any of the foregoing being a "Consent"), of any Governmental
Entity or any other person required in connection with, and waivers of any
violations, defaults or breaches that may be caused by, the consummation of the
transactions contemplated by this Agreement.
(c) Each party hereto shall promptly inform the other of any material
communication from the SEC, the United States Federal Trade Commission, the
United States Department of Justice or any other Governmental Entity regarding
any of the transactions contemplated by this Agreement. If any party hereto or
any affiliate thereof receives a request for additional information or
documentary material from any such Governmental Entity with respect to the
transactions contemplated by this Agreement, then such party shall use
commercially reasonable efforts to cause to be made, as soon as reasonably
practicable and after consultation with the other party, an appropriate response
in compliance with such request.
(d) Without limiting the generality of the foregoing and subject to the
proviso to Section 6.6(a) hereof, Parent and the Company will use their
respective reasonable best efforts to obtain all authorizations or waivers
required under the HSR Act to consummate the transactions contemplated hereby,
including, without limitation, making all filings with the Antitrust Division of
the Department of Justice ("DOJ") and the Federal Trade Commission ("FTC")
required in connection therewith (the initial filing to occur no later than ten
business days following the execution and delivery of this Agreement) and
responding as promptly as practicable to all inquiries received from the DOJ or
FTC for additional information or documentation. Each of Parent and the Company
shall furnish to the other such necessary information and reasonable assistance
as the other may request in connection with its preparation of any filing or
submission which is necessary under the HSR Act. Parent and the Company shall
keep each other apprised of the status of any communications with, and any
inquiries or requests for additional information from, the FTC and the DOJ.
(e) The parties hereto intend the Merger to qualify as a reorganization
under Section 368(a) of the Code. Each of the parties hereto shall, and shall
cause its respective Subsidiaries to, and shall use its reasonable best efforts
to cause its respective affiliates to, use its and their respective reasonable
best efforts to cause the Merger to so qualify. No party hereto shall take any
action prior to or after the Effective Time that would cause the Merger not to
qualify under these Sections of the Code (and each party shall use their
reasonable best efforts to ensure that their respective affiliates not take any
such action), and the parties hereto shall report and take the position for all
purposes that the Merger qualifies as a reorganization under such Sections of
the Code.
Section 6.7 Public Announcements. Parent and the Company shall consult
with each other before issuing any press releases with respect to the
transactions by this Agreement and shall not issue any such press release prior
to such consultation and without the approval of the other (which approval shall
not unreasonably be withheld), except as may be required by applicable law or
obligations pursuant to any listing agreement with any national securities
exchange. The parties shall cooperate to the extent practicable with respect to
other public statements (including employee announcements) made in connection
with the transactions contemplated herein, including the timing and contents
thereof.
Section 6.8 Directors' and Officers' Indemnification and Insurance.
(a) Parent and the Company agree that all rights to indemnification now
existing in favor of any employee, agent, director or officer of the Company and
its Subsidiaries (the "Indemnified Parties"), as provided in their respective
Certificate of Incorporation or By-Laws or other agreements existing as of the
date hereof and listed in Section 3.13 of the Company Disclosure Schedule, shall
survive the Merger and shall continue in full force and effect for a period of
six (6) years after the Effective Time; provided that in the event any claim or
claims are asserted or made within such six (6) year period, all rights to
indemnification in respect of any such claim shall continue until final
disposition of such claim.
(b) The Company shall obtain continuation coverage under the Company's
existing Directors and Officers and Company Liability Insurance Policy to
provide coverage with respect to any claims made during the six (6) years period
following the Effective Time for events occurring prior to the Effective Time
(the "D&O Insurance") or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, that the one time
premium for the D&O Insurance shall not exceed150% of the annual premiums
currently paid by the Company for such coverage, but if such premium would but
for this proviso exceed such amount, the Company may purchase as much coverage
as possible for such amount.
(c) In the event the Parent or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
6.8, Parent shall cause proper provision to be made so that the successors and
assigns of the Surviving Corporation and/or Parent, as the case may be, assume
the obligations set forth in this Section 6.8 and none of the actions described
in clauses (i) or (ii) shall be taken until such provision is made.
(d) The provisions of this Section 6.8 are intended to be for the
benefit of, and shall be enforceable by, each such Indemnified Party, and such
Indemnified Party's heirs and personal representatives and shall be binding on
all successors and assigns of the Surviving Corporation and Parent.
Section 6.9 Expenses. Except as otherwise set forth in Sections 8.2(b),
(c) and (d), the Company and Parent shall share equally all fees and expenses,
other than attorneys' fees, incurred in connection with the printing, filing and
mailing of the Joint Proxy Statement and Registration Statement (including
financial statements and exhibits) and any amendments or supplements, and each
party hereto shall otherwise bear its own costs and expenses in connection with
this Agreement and the transactions contemplated hereby.
Section 6.10 Listing Application. Parent shall use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued pursuant to this
Agreement in the Merger to be listed for trading on the New York Stock Exchange
or on any securities exchange on which shares of Parent Common Stock shall be
listed at the Effective Time so that appraisal rights are not available to
stockholders of the Company under Section 262 of the DGCL.
Section 6.11 [This Section has been intentionally left blank.]
Section 6.12 Pooling of Interests. Each of the Company and Parent will
use best efforts to cause the transactions contemplated by this Agreement,
including the Merger, to be accounted for as a pooling of interests under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, and such accounting treatment to be accepted by each of the
Company's and Parent's independent public accountants, and by the SEC,
respectively, and each of the Company and Parent agrees that it will not
voluntarily take any action that would cause such accounting treatment not to be
obtained. Each of the Company and Parent shall use their best efforts to cause
its respective affiliates not to take any action that would adversely affect
Parent's ability to account for the Merger as a pooling of interests.
Section 6.13 Parent Board of Directors. At or immediately following the
Effective Time, Parent shall take such action as may be necessary to cause (i)
two persons designated by the Company prior to Closing and reasonably acceptable
to Parent, which persons shall, unless Parent agrees otherwise, be two of the
Company's current outside directors, together with Xxxxxxx Xxxxxxxx, to be
elected to Parent's Board of Directors, and (ii) one person designated by
Warburg, Xxxxxx Capital Company, L.P. prior to Closing and reasonably acceptable
to Parent to be elected to Parent's Board of Directors.
Section 6.14 Letter of the Company's Accountants. The Company shall use
all reasonable efforts to cause to be delivered to Parent and the Company a
letter from Ernst & Young, LLP, the Company's independent auditors, dated a date
within two (2) business days before the date on which the Registration Statement
shall become effective and addressed to Parent, in form reasonably satisfactory
to Parent and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
Section 6.15 Letter of Parent's Accountants. Parent shall use all
reasonable efforts to cause to be delivered to Parent and the Company a letter
of KPMG Peat Marwick, LLP, Parent's independent auditors, dated a date within
two (2) business days before the date on which the Registration Statement shall
become effective and addressed to Purchaser, in form reasonably satisfactory to
Purchaser and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
Section 6.16 Treatment of Trust Convertible Preferred Securities and
Convertible Debentures. Prior to or concurrently with the Closing, Parent and
the Company shall take such steps as are necessary to ensure the resignation of
the as regular Trustee of Vanstar Financing Trust and the substitution therefor
of a person as regular trustee reasonably satisfactory to Parent. In addition,
Parent and the Company shall take such actions as may be necessary to ensure
compliance by the Parent and the Company with the Indenture dated as of October
2, 1996 (the "Indenture") (including without limitation, Section 1304 thereof),
relating to $207,474,200 of 6-3/4% Convertible Subordinated Debentures due 2016
(the "Convertible Debentures"), and, without limitation thereof, shall take such
steps as are necessary to ensure that holders of the Convertible Debentures
shall, after the Effective Time of the Merger, have the right to convert such
securities into (or exchange such securities for) shares of Parent Common Stock
on the terms and conditions set forth in the Indenture.
Section 6.17 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Merger Sub, and Parent and Merger Sub shall give
prompt notice to the Company of (i) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective time, (ii) any
material failure of the Company, Parent or Merger Sub, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder, (iii) any notice of, or other communication
relating to a default or event which, with notice or lapse of time or both,
would become a default, receive by it or any of its Subsidiaries subsequent to
the date of this Agreement and prior to the Effective time, under any contract
or agreement material to the financial condition, properties, businesses or
results of operations of it and its Subsidiaries taken as a whole or which it or
any of its Subsidiaries is a party or is subject, and (iv) the occurrence of any
Company Material Adverse Effect or Parent Material Adverse Effect, provided,
however, that the delivery of any notice pursuant to this Section 6.17 shall not
cure such breach or noncompliance or limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 6.18 Tax-Free Reorganization Treatment. The Company, Parent and
Merger Sub shall execute and deliver to Xxxxx & Xxxxxx LLP, counsel to the
Company, and XxXxxxx, North, Xxxxxx & Xxxxx, P.C., counsel to Parent,
certificates containing customary representations substantially in the form
agreed to by the parties on or prior to the date hereof (with such changes as
may be reasonably requested by such law firms) at such time or times as may be
reasonably requested by such law firms in connection with their respective
deliveries of opinions, pursuant to Sections 7.2(e) and 7.3(c) hereof, with
respect to the tax-free reorganization treatment of the Merger. Prior to the
Effective time, none of the Company, Parent or Merger Sub shall take or cause to
be taken any action which would cause to be untrue (or fail to take or cause not
to be taken any action which would cause to be untrue) any of the
representations in such previously agreed upon certificates.
Section 6.19 Company Employee Benefits. For one (1) year following the
Effective Time, the employees of the Company who remain employees of the Company
shall continue to receive employee benefits substantially comparable in the
aggregate to those provided for under Company Employee Plans provided by the
Company on the date prior to the Effective Time provided, however, Parent may,
at its option, terminate the Company's Employee Stock Purchase Plans, provided,
however, (i) until such plan is terminated, Parent shall cause to be performed
all of the Company's obligations under such plan, and (ii) such termination
shall not affect, and Parent shall cause to be performed, the Company's
obligations existing under such plan at the time of such termination. The
provisions of this Section 6.19 are intended to be for the benefit of, and shall
be enforceable by, the employees of the Company and shall be binding upon all
successors and assigns of the Surviving Corporation and Parent.
Section 6.20 Schedules. From time to time prior to the Closing Date,
each of the Company and Parent will promptly supplement or amend the Company or
Parent Disclosure Schedules, as the case may be, with respect to any matter
hereafter arising that, if existing or occurring at or prior to the date of this
Agreement, would have been required to be set forth or described in the Company
or Parent Disclosure Schedules, as the case may be, or that is necessary to
correct any information in the Company or Parent Disclosure Schedules, as the
case may be, or in any representation and warranty of each of the Company and
Parent that has been rendered inaccurate thereby. For purposes of determining
the accuracy of the respective representations and warranties contained in
Articles III and IV, and in order to determine the fulfillment of the conditions
set forth in Article VII, the Company or Parent Disclosure Schedules, as the
case may be, shall be deemed to include only that information contained therein
on the date of this Agreement and shall be deemed to exclude any information
contained in any subsequent supplement or amendment thereto unless such changes
reflect actions taken in compliance with the provisions of Articles V and VI
hereof.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction or waiver at or prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite vote
(as described in Section 3.5(b)) of the Company's shareholders in accordance
with Applicable Law, and the Certificate Amendment, Option Amendment and the
issuance of Parent Common Stock pursuant to the Merger shall have been approved
by the requisite vote of Parent shareholders in accordance with Applicable Law
and applicable rules of the New York Stock Exchange.
(b) Governmental Approvals. All authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or expirations of
waiting periods imposed by, any Governmental Entity, which the failure to
obtain, make or occur would have the effect of making the Merger or any of the
transactions contemplated hereby illegal or would have a Material Adverse Effect
on Parent or the Company (as the Surviving Corporation) or would materially
impair the operations of the Surviving Corporation, assuming the Merger had
taken place, shall have been obtained, shall have been made or shall have
occurred.
(c) HSR Act. The waiting period under the HSR Act shall have expired or
been terminated.
(d) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and remain in effect and no proceedings for that purpose
shall have been initiated and continuing by the SEC, and no similar proceedings
in respect of the Joint Proxy Statement shall have been initiated and continuing
by the SEC.
(e) No Injunction. No Governmental Entity having jurisdiction over the
Company or Parent, or any of their respective Subsidiaries, shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) (collectively, the "Restraints") which is then in effect and has the
effect of making the Merger or the Stock Voting Agreement illegal or otherwise
prohibiting consummation of the Merger; provided, however, that each of the
parties hereto shall have used their respective reasonable efforts to prevent
the entry of any such Restraints and to appeal as promptly as possible any such
Restraints that may be entered.
(f) NYSE. The Parent Company Stock to be issued in connection with the
Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance.
(g) Accountant's Letters. Each of the Company and the Parent shall
have received from the other's independent public accountants, a letter dated
the Closing Date in form and substance reasonably acceptable to the receiving
party with statements and information of the type ordinarily included in
accountant's letter with respect to unaudited financial quarterly information
for fiscal quarters and subsequent periods ended following its last fiscal year
end.
(h) Pooling Letters. The Company shall have received a letter from
Ernst & Young, LLP, addressed to the Company, and Parent shall have received a
letter from KPMG Peat Marwick, LLP, addressed to Parent, each regarding its
concurrence with management's conclusions, as to the appropriateness of the
pooling of interests accounting, under Accounting Principles Board Opinion No.
16 for the Merger, if closed and consummated in accordance with this Agreement,
it being agreed that the Company and Parent shall each provide reasonable
cooperation to Ernst & Young, LLP and KPMG Peat Marwick, LLP and to enable them
to issue such letters.
Section 7.2 Conditions to Obligation of Parent and Merger Sub to Effect
the Merger. The obligation of Parent and Merger Sub to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following additional conditions, unless waived in writing by Parent:
(a) Representations and Warranties. The representations and warranties
of the Company that are qualified with reference to materiality shall be true
and correct, and the representations and warranties that are not so qualified
shall be true and correct in all material respects, in each case as of the date
hereof, and, except to the extent such representations and warranties speak as
of an earlier date, as of the Effective Time as though made at and as of the
Effective Time, and Parent shall have received a certificate signed on behalf of
the Company by the Chief Executive Officer and the Chief Financial Officer of
the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Parent shall have
received a certificate signed on behalf of the Company by the Chief Executive
Officer and the Chief Financial Officer of the Company to such effect.
(c) Company Affiliate Agreements. Parent shall have received an
Affiliate Agreement from Affiliates of the Company in accordance with Section
6.5 of this Agreement and each such Affiliate Agreement shall remain valid and
in force and effect.
(d) Consents Under Agreements. The Company shall have obtained the
consent or approval of each person (other than the Governmental Entities
referred to in Section 7.1(b)) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any indenture,
mortgage, evidence of indebtedness, lease or other agreement or instrument,
except where the failure to obtain the same would not reasonably be expected,
individually or in the aggregate, to have a Parent Material Adverse Effect or
Company Material Adverse Effect (as the Surviving Corporation).
(e) Tax Opinion. Parent shall have received an opinion of XxXxxxx,
North, Xxxxxx & Xxxxx, P.C. to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code, and such
opinion shall not have been withdrawn.
Section 7.3 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions, unless waived in writing by the Company:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub that are qualified with reference to materiality shall
be true and correct, and the representations and warranties that are not so
qualified shall be true and correct in all material respects, in each case as of
the date hereof, and, except to the extent such representations and warranties
speak as of an earlier date, as of the Effective Time as though made on and as
of the Effective Time, and the Company shall have received a certificate signed
on behalf of Parent by the Chief Executive Officer and Chief Financial Officer
of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Each of Parent
and Merger Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Effective
Time, and the Company shall have received a certificate signed on behalf of
Parent by the Chief Executive Officer and the Chief Financial Officer of Parent
to such effect.
(c) Tax Opinion. The Company shall have received an opinion of Xxxxx &
Xxxxxx, L.L.P., counsel to the Company, to the effect that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code,
and such opinion shall not have been withdrawn.
(e) Parent Affiliate Agreements. The Company shall have received an
Affiliate Agreement from Affiliates of Parent in accordance with Section 6.5 of
this Agreement and each such Agreement shall remain valid and in force and
effect.
(f) Consents Under Agreements. Parent shall have obtained the consent
or approval of each person (other than the Governmental Entities referred to in
Section 7.1(b)) whose consent or approval shall be required in connection with
the transactions contemplated hereby under any indenture, mortgage, evidence of
indebtedness, lease or other agreement or instrument, except where the failure
to obtain the same would not reasonably be expected, individually or in the
aggregate, to have a Parent Material Adverse Effect or Company Material Adverse
Effect (as the Surviving Corporation).
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated, and the
Merger and the other transactions contemplated hereby may be abandoned, at any
time prior to the Effective Time, whether before or after approval by the
shareholders of the Company or Parent:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company, if (i) the Merger shall not have
been consummated on or before March 31, 1999, provided that the right to
terminate this Agreement under this Section 8.1(b)(i) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Merger to occur on or before such
date, (ii) the shareholders of the Company do not approve this Agreement by the
requisite vote at a meeting duly convened therefor or any adjournment thereof or
(iii) the shareholders of Parent do not approve the Certificate Amendment,
Option Amendment and the issuance of Company Common Stock pursuant to the Merger
by the requisite vote at a meeting duly convened therefor or any adjournment
thereof;
(c) by either Parent or the Company, if any permanent injunction,
order, decree or ruling by any Governmental Entity of competent jurisdiction
preventing the consummation of the Merger shall have become final and
nonappealable; provided, however, subject to the proviso to Section 6.6(a)
hereof, that the party seeking to terminate this Agreement pursuant to this
Section 8.1(c) shall have used reasonable best efforts to remove such injunction
or overturn such action;
(d) by Parent, if (i) there has been a material breach of the
representations or warranties, covenants or agreements of the Company set forth
in this Agreement, which breach is not curable or, if curable, is not cured
within thirty (30) days after written notice of such breach is given by Parent
to the Company, or (ii) the Board of Directors of the Company (x) fails to
convene a meeting of the Company's shareholders to adopt this Agreement on or
before March 15, 1999 (the "Meeting Date"), or postpones the date scheduled for
the meeting of the shareholders of the Company to adopt this Agreement beyond
the Meeting Date, except with the written consent of Parent, (y) fails to
recommend the adoption of this Agreement and approval of the Merger to the
Company's shareholders in accordance with Section 6.4(b) hereof, or (z)
withdraws or amends or modifies in a manner adverse to Parent its recommendation
or approval in respect of this Agreement or the Merger or fails to reconfirm
such recommendation within two business days of a written request for such
confirmation by Parent;
(e) by the Company if the Board of Directors of the Company shall
reasonably determine that a proposal for an Acquisition Transaction constitutes
a Superior Proposal; provided, however, that the Company may not terminate this
Agreement pursuant to this subsection (e) unless (i) three business days shall
have elapsed after delivery to Parent of a written notice of such determination
by such Board of Directors and, during such three day period, the Company shall
have informed Parent of the terms and conditions of such proposal for an
Acquisition Transaction and the identity of the person or group making such
proposal for an Acquisition Transaction, and (ii) at the end of such three day
period, the Board of Directors of the Company believes that such proposal for
Superior Proposal is superior to the transaction contemplated under this
Agreement; and
(f) by the Company, if (i) there has been a material breach of the
representations or warranties, covenants or agreements of Parent or Merger Sub
set forth in this Agreement, which breach is not curable or, if curable, is not
cured within 30 days after written notice of such
breach is given by the Company to Parent, or (ii) the Board of Directors of
Parent (x) fails to convene a meeting of the Parent's shareholders to approve
the Certificate Amendment, the Option Amendment and the issuance of Parent
Common Stock pursuant to the Merger on or before the Meeting Date, or postpones
the date schedule for the meeting of the shareholders of the Parent to approve
such matters beyond the Meeting Date, except with the written consent of the
Company, (y) fails to recommend the approval of the Certificate Amendment,
Option Amendment and issuance of Company Common Stock pursuant to the Merger in
accordance with Section 6.4(a) hereof, or (z) withdraws or amends or modifies in
a manner adverse to the Company such recommendation or fails to reconfirm such
recommendation within two (2) business days of a written request for such
confirmation by the Company.
Section 8.2 Effect of Termination.
(a) In the event of termination of this Agreement pursuant to this
Article VIII, the Merger shall be deemed abandoned and this Agreement shall
forthwith become void, and there shall be no liability or obligations on the
part of Parent, Merger Sub, the Company or their respective officers, directors
or Affiliates except that the provisions of the last sentence of Section 6.1,
Section 6.7, Section 6.9 and this Section 8.2 shall survive any termination of
this Agreement; provided, that any such termination and any payment pursuant to
this Section 8.2 shall not limit liability for any willful breach of this
Agreement; and provided further, that the Confidentiality Agreement shall remain
in full force and effect and survive any termination of this Agreement.
(b) Parent shall pay the Company a termination fee of $12,000,000 upon
the termination of this Agreement by the Company or Parent pursuant to Section
8.1(b)(iii); provided that, as set forth in Section 8.2(g) below, such fee shall
be increased to $18,000,000 under the circumstances as set forth in Section
8.2(g) below.
(c) Parent shall pay the Company a termination fee of $18,000,000 upon
the termination of this Agreement by the Company pursuant to Section 8.1(f)(ii).
(d) The Company shall pay Parent a termination fee of $12,000,000 upon
the termination of this Agreement by the Company or Parent pursuant to Section
8.1(b)(ii); provided that, as set forth in Section 8.2(f)(ii) below, such fee
shall be increased to $18,000,000 under the circumstances set forth in Section
8.2(f)(ii) below.
(e) The Company shall pay Parent a termination fee of $18,000,000 upon
the termination of this Agreement by Parent pursuant to Section 8.1(d)(ii).
(f) The Company shall pay Parent a termination fee of $18,000,000 upon
the earliest to occur of the following events:
(i) the termination of this Agreement by the Company
pursuant to Section 8.1(e); or
(ii) the termination of this Agreement by Parent or
the Company pursuant to Section 8.1(b)(ii), and, in such event, either before
such termination or within twelve (12) months after the date of such termination
the Company (i) consummates an Acquisition Transaction, or
(ii) enters into an agreement with respect to an Acquisition Transaction, or a
tender offer or similar transaction with respect thereto is commenced, that is
subsequently consummated.
(g) The Parent shall pay the Company a termination fee of $18,000,000
upon termination of this Agreement by the Company or Parent pursuant to Section
8.1(b)(iii) and, in such event, either before such termination or within twelve
(12) months after the date of such termination Parent (i) consummates an
Acquisition Transaction, or (ii) enters into an agreement with respect to an
Acquisition Transaction, or a tender offer or similar transaction with respect
thereto is commenced, that is subsequently consummated.
(h) If the Company shall have terminated this Agreement pursuant to
Section 8.1(f)(i), or if Parent shall have termination this Agreement pursuant
to Section 8.1(d)(i), the non-terminating party shall reimburse the terminating
party, the actual expenses incurred by the terminating party in connection with
the transaction contemplated by this Agreement (including, without limitation,
attorneys' fees, accountants' fees and fees of financial advisors) in an amount
up to $7,000,000.
(i) If a party has paid to the other party the amount required to be
paid under any of Sections 8.2(b), 8.2(c), 8.2(d), 8.2(e), 8.2(f), 8.2(g) or
8.2(h), such paying party shall not be required to make any payment required
under any of such other Sections, other than to the extent a $12,000,000 payment
made pursuant to Section 8.2(b) or 8.2(d) is increased to $18,000,000 pursuant
to Section 8.2(g) and 8.2(f)(ii), respectively. If an event occurs that would
require a party to make payments under more than one of Sections 8.2(b), 8.2(c),
8.2(d), 8.2(e), 8.2(f), 8.2(g) and 8.2(h), only the Section requiring the higher
payment shall apply.
(j) In no event shall either party (the "Paying Party") be required to
make a payment pursuant to Sections 8.2(b), 8.2(c), 8.2(d), 8.2(e), 8.2(f) or
8.2(g) to the extent that such payment, together with Net Proceeds (as defined
in the Option Agreement) received by the other party, and together with payments
made by the Paying Party (other than payments of the Exercise Price, as defined
in the Option Agreement) pursuant to Sections 7(a)(i)(y), 7(a)(ii), 7(b)(ii),
8(c) and/or 9(c) of the Option Agreement, exceeds $18,000,000.
(k) The expenses and fees, if applicable, payable pursuant to Section
8.2(b), 8.2(c), 8.2(d), 8.2(e), 8.2(f) and 8.2(g) shall be paid within two (2)
business days after the first to occur of the events described in Section
8.2(b), 8.2(c), 8.2(d), 8.2(e), 8.2(f)(i), 8.2(f)(ii) or 8.2(g); provided that
in no event shall the Company or Parent, as the case may be, be required to pay
the expenses and fees, if applicable, to the other, if, immediately prior to the
termination of this Agreement, the party to receive the expenses and fees, if
applicable, was in material breach of its obligations under this Agreement.
(l) The parties hereto acknowledge that the agreements contained in
this Section 8.2 are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, the Parent and the Company would
not enter into this Agreement; accordingly, if the Parent or the Company, as the
case may be, fails promptly to pay the amount due pursuant to this Section 8.2,
and, in order to obtain such payment, the other party commences a suit which
results in a judgment for the fee and expenses set forth in this Section 8.2,
the party required to pay the fee shall pay to the other party its costs and
expenses (including attorneys' fees) in connection with such suit, together with
interest on such amount of the fee and expenses at the base rate publicly
announced by Citibank, N.A., on the date such payment was required to be made.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Amendment and Modification. At any time prior to the
Effective Time, this Agreement may be amended, modified or supplemented only by
written agreement (referring specifically to this Agreement) of Parent, Merger
Sub and the Company with respect to any of the terms contained herein; provided,
however, that after any approval and adoption of this Agreement by the
shareholders of the Company, no such amendment, modification or supplementation
shall be made which under Applicable Law requires the approval of such
shareholders, without the further approval of such shareholders.
Section 9.2 Waiver. At any time prior to the Effective Time, Parent, on
the one hand, and the Company, on the other hand, may (i) extend the time for
the performance of any of the obligations or other acts of the other, (ii) waive
any inaccuracies in the representations and warranties of the other contained
herein or in any documents delivered pursuant hereto and (iii) subject to the
provisions of Section 9.1, waive compliance by the other with any of the
agreements or conditions contained herein which may legally be waived. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
specifically referring to this Agreement and signed on behalf of such party. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
Section 9.3 Survivability; Investigations. The respective
representations and warranties of Parent and Merger Sub, on the one hand, and
the Company, on the other hand, contained herein or in any certificates or other
documents delivered prior to or as of the Effective Time (i) shall not be deemed
waived or otherwise affected by any investigation made by any party hereto and
(ii) shall not survive beyond the Effective Time. The covenants and agreements
of the parties hereto (including the Surviving Corporation after the Merger)
shall survive the Effective Time, without limitation (except for those which, by
their terms, contemplate a shorter survival period).
Section 9.4 Notices. All notices and other communications hereunder
shall be in writing and shall be delivered personally or by next-day courier or
telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof). Any such notice shall be effective upon receipt, if
personally delivered or telecopied, or one day after delivery to a courier for
next-day delivery.
If to Parent or Merger Sub to:
InaCom Corp.
00000 Xxxxxx Xxxxx
Xxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx
Telecopier: 000-000-0000
with a copy to:
XxXxxxx, North, Xxxxxx & Xxxxx, P.C.
Xxx Xxxxxxx Xxxx Xxxxx, Xxxxx 0000
000 Xxxxx Xxxxxxxxx Street
Attention: Xxxxx X. Xxxxxxxxxx
Telecopier: 000-000-0000
If to the Company,:
Vanstar Corporation
0000 Xxxxxxxxx Xxxx
Xxxxxxxx 000, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: General Counsel
Telecopier: 000-000-0000
with a copy to:
Xxxxx & Xxxxxx, LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xx. Xxxx Xxxxxx
Telecopier: 000-000-0000
Section 9.5 Descriptive Headings; Interpretation. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. References in this
Agreement to Sections, Exhibits or Articles mean a Section, Exhibit or Article
of this Agreement unless otherwise indicated. References to this Agreement shall
be deemed to include the Exhibits hereto, the Company Disclosure Schedule and
the Parent Disclosure Schedule, unless the context otherwise requires. The term
"person" shall mean and include an individual, a partnership, a limited
liability company, a joint venture, a corporation, a trust, a Governmental
Entity or an unincorporated organization.
Section 9.6 Entire Agreement. This Agreement (including the Exhibits,
the Company Disclosure Schedule, the Parent Disclosure Schedule and the
Confidentiality Agreement between the parties) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, among the parties or any of them, with respect to the subject matter
hereof and except for Article II and Sections 2.6, 6.8, 6.19 and 9.10, are not
intended to confer upon any person other than the parties hereto any rights or
remedies.
Section 9.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the provisions thereof relating to conflicts of law.
Section 9.8 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of Delaware.
Section 9.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
Section 9.10 Assignment. This Agreement and the rights, interests and
obligations hereunder shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns; provided, however, that no party hereto may assign or otherwise
transfer its rights, interests or obligations hereunder without the prior
written consent of the other parties hereto.
IN WITNESS WHEREFORE, Parent, Merger Sub and the Company have caused
this Agreement and Plan of Merger to be executed on its behalf by their
respective officers thereunto duly authorized, all as of the date first above
written.
INACOM CORP. VANSTAR CORPORATION
/s/ Xxxx Xxxxxxxxx /s/ Xxxxxxx X. Xxxxxxxx
By: _______________________________ By: ________________________________
Its: President and Chief Executive Its: Chairman of the Board and Chief
Officer Executive Officer
INACOM ACQUISITION, INC.
/s/ Xxxx Xxxxxxxxx
By: _______________________________
Its: President
