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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE TITAN CORPORATION,
ADVANCED COMMUNICATION SYSTEMS, INC.
AND
A T ACQUISITION CORP.
DATED AS OF DECEMBER 9, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I. THE MERGER....................................................................................1
SECTION 1.1. THE MERGER....................................................................................1
SECTION 1.2. EFFECTIVE TIME................................................................................2
SECTION 1.3. EFFECT OF THE MERGER..........................................................................2
SECTION 1.4. CERTIFICATE OF INCORPORATION; BYLAWS..........................................................2
SECTION 1.5. DIRECTORS AND OFFICERS........................................................................2
SECTION 1.6. CLOSING.......................................................................................2
SECTION 1.7. SUBSEQUENT ACTIONS............................................................................3
SECTION 1.8. TAX AND ACCOUNTING TREATMENT OF THE MERGER....................................................3
ARTICLE II. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES............................................3
SECTION 2.1. CONVERSION OF SECURITIES......................................................................3
SECTION 2.2. EXCHANGE OF CERTIFICATES......................................................................5
SECTION 2.3. ASSUMPTION OF OBLIGATIONS TO ISSUE STOCK......................................................7
SECTION 2.4. STOCK TRANSFER BOOKS.........................................................................10
SECTION 2.5. CERTAIN ADJUSTMENTS..........................................................................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................10
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.................................................10
SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS......................................................11
SECTION 3.3. CAPITALIZATION...............................................................................11
SECTION 3.4. AUTHORITY....................................................................................12
SECTION 3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS...................................................13
SECTION 3.6. SEC FILINGS; FINANCIAL STATEMENTS............................................................14
SECTION 3.7. NO UNDISCLOSED LIABILITIES...................................................................15
SECTION 3.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.........................................................15
SECTION 3.9. ABSENCE OF LITIGATION........................................................................16
SECTION 3.10 LICENSES AND PERMITS; COMPLIANCE WITH LAWS...................................................16
SECTION 3.11. INTELLECTUAL PROPERTY........................................................................17
SECTION 3.12. EMPLOYEE BENEFIT PLANS AND RELATED MATTERS...................................................18
SECTION 3.13. PROPERTIES...................................................................................27
SECTION 3.14. CONTRACTS....................................................................................27
SECTION 3.15. TAXES........................................................................................27
SECTION 3.16. ENVIRONMENTAL MATTERS........................................................................27
SECTION 3.17. INSURANCE....................................................................................27
SECTION 3.18. CERTAIN PRACTICES............................................................................27
SECTION 3.19. YEAR 2000....................................................................................27
SECTION 3.20. INTEREST RATE AND FOREIGN EXCHANGE CONTRACTS.................................................27
SECTION 3.21. STATE TAKEOVER STATUTES......................................................................27
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SECTION 3.22. GOVERNMENT CONTRACTS.........................................................................27
SECTION 3.23. BOARD APPROVAL; VOTE REQUIRED................................................................27
SECTION 3.24. OPINION OF FINANCIAL ADVISOR.................................................................27
SECTION 3.25. BROKERS......................................................................................27
SECTION 3.26. POOLING; TAX MATTERS.........................................................................28
SECTION 3.27. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS...........................................28
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB....................................28
SECTION 4.1. ORGANIZATION AND QUALIFICATION...............................................................29
SECTION 4.2. CERTIFICATE OF INCORPORATION AND BYLAWS......................................................29
SECTION 4.3. CAPITALIZATION...............................................................................29
SECTION 4.4. AUTHORITY....................................................................................29
SECTION 4.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS...................................................29
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF ACQUIROR...................................................30
SECTION 5.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.................................................30
SECTION 5.2. CERTIFICATE OF INCORPORATION AND BYLAWS......................................................31
SECTION 5.3. CAPITALIZATION...............................................................................31
SECTION 5.4. AUTHORITY....................................................................................32
SECTION 5.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS...................................................32
SECTION 5.6. SEC FILINGS; FINANCIAL STATEMENTS............................................................33
SECTION 5.7. NO UNDISCLOSED LIABILITIES...................................................................34
SECTION 5.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.........................................................34
SECTION 5.9. ABSENCE OF LITIGATION........................................................................34
SECTION 5.10 CERTAIN PRACTICES............................................................................34
SECTION 5.11. GOVERNMENT CONTRACTS.........................................................................34
SECTION 5.12. BOARD APPROVAL; VOTE REQUIRED................................................................35
SECTION 5.13. OPINION OF FINANCIAL ADVISOR.................................................................36
SECTION 5.14. BROKERS......................................................................................36
SECTION 5.15. POOLING; TAX MATTERS.........................................................................36
SECTION 5.16. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS...........................................36
SECTION 5.17. SHARE OWNERSHIP..............................................................................36
SECTION 5.18. ENVIRONMENTAL MATTERS........................................................................36
ARTICLE VI. COVENANTS....................................................................................37
SECTION 6.1. AFFIRMATIVE COVENANTS OF THE COMPANY.........................................................37
SECTION 6.2. NEGATIVE COVENANTS OF THE COMPANY............................................................38
SECTION 6.3. AFFIRMATIVE COVENANTS OF ACQUIROR............................................................41
SECTION 6.4. NEGATIVE COVENANTS OF ACQUIROR...............................................................41
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ARTICLE VII. ADDITIONAL AGREEMENTS........................................................................41
SECTION 7.1. ACCESS AND INFORMATION.......................................................................42
SECTION 7.2. CONFIDENTIALITY..............................................................................42
SECTION 7.3. PROXY STATEMENT AND REGISTRATION STATEMENT; STOCKHOLDERS MEETINGS............................42
SECTION 7.4. HSR ACT MATTERS..............................................................................44
SECTION 7.5. PUBLIC ANNOUNCEMENTS.........................................................................44
SECTION 7.6. INDEMNIFICATION..............................................................................44
SECTION 7.7. FURTHER ACTION; REASONABLE BEST EFFORTS......................................................46
SECTION 7.8. NO SOLICITATION..............................................................................46
SECTION 7.9. NYSE LISTING.................................................................................47
SECTION 7.10 EMPLOYEE MATTERS.............................................................................47
SECTION 7.11. AFFILIATES...................................................................................49
SECTION 7.12. EVENT NOTICES................................................................................49
SECTION 7.13. TAX TREATMENT................................................................................50
SECTION 7.14. POOLING OF INTERESTS.........................................................................50
SECTION 7.15. MERGER SUB...................................................................................50
SECTION 7.16. BOARD OF DIRECTORS OF ACQUIROR...............................................................50
SECTION 7.17. PUBLISHING FINANCIAL RESULTS.................................................................50
SECTION 7.18. STAND-STILL..................................................................................50
SECTION 7.19. STOCKHOLDER RIGHTS PLAN......................................................................51
ARTICLE VIII. CLOSING CONDITIONS...........................................................................51
SECTION 8.1. CONDITIONS TO OBLIGATIONS OF THE PARTIES TO EFFECT THE MERGER................................52
SECTION 8.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB..............................53
SECTION 8.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY..........................................54
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER............................................................55
SECTION 9.1. TERMINATION..................................................................................55
SECTION 9.2. EFFECT OF TERMINATION........................................................................57
SECTION 9.3. AMENDMENT....................................................................................57
SECTION 9.4. EXTENSION; WAIVER............................................................................58
SECTION 9.5 TRANSACTION FEES, EXPENSES AND OTHER PAYMENTS................................................58
SECTION 9.6 TERMINATION FEES.............................................................................58
ARTICLE X. GENERAL PROVISIONS...........................................................................60
SECTION 10.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS..................................60
SECTION 10.2 NOTICES......................................................................................60
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SECTION 10.3 CERTAIN DEFINITIONS..........................................................................61
SECTION 10.4 HEADINGS.....................................................................................63
SECTION 10.5 SEVERABILITY.................................................................................64
SECTION 10.6 ENTIRE AGREEMENT.............................................................................64
SECTION 10.7 SPECIFIC PERFORMANCE.........................................................................64
SECTION 10.8 ASSIGNMENT...................................................................................64
SECTION 10.9 THIRD PARTY BENEFICIARIES....................................................................64
SECTION 10.10. GOVERNING LAW................................................................................64
SECTION 10.11. COUNTERPARTS.................................................................................65
SECTION 10.12. WAIVER OF JURY TRIAL.........................................................................65
EXHIBITS
Exhibit A Company Affiliate Agreement
Exhibit B Acquiror Affiliate Agreement
SCHEDULES
Schedule 3.1 Organization and Qualification; Subsidiaries
Schedule 3.3 Capitalization of the Company
Schedule 3.5 Required Filings and Consents
Schedule 3.8 Absence of Certain Changes or Events
Schedule 3.9 Litigation
Schedule 3.10 Licenses and Permits
Schedule 3.11 Company Intellectual Property
Schedule 3.12 Employee Benefit Plans
Schedule 3.14 Contracts
Schedule 3.15 Taxes
Schedule 3.22 Government Contracts
Schedule 3.25 Brokers
Schedule 3.26 Pooling; Tax Matters
Schedule 5.3 Capitalization of Acquiror
Schedule 5.5 Required Filings and Consents
Schedule 5.8 Absence of Certain Changes or Events
Schedule 5.11 Government Contracts
Schedule 5.15 Pooling; Tax Matters
Schedule 5.9 Litigation
Schedule 6.2 Negative Covenants of the Company
Schedule 7.10 Employee Matters
Schedule 7.11 Affiliates of the Company and Acquiror
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INDEX OF DEFINED TERMS
Section
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Acquiror............................................................................ PREAMBLE
Acquiror Common Stock............................................................... 2.1(a)
Acquiror Confidentiality Agreement.................................................. 7.2
Acquiror Counter Proposal........................................................... 7.3(c)
Acquiror Financial Statements....................................................... 5.6(b)
Acquiror Floating Rate Election..................................................... 2.1(c)
Acquiror Preferred Stock............................................................ 5.3(a)
Acquiror SEC Reports................................................................ 5.6(a)
Acquiror Stock Option Plan.......................................................... 5.3(a)
Acquiror Stock Price................................................................ 2.1(c)
Acquiror Stock Purchase Plan........................................................ 5.3(a)
Acquiror Subsidiary and Acquiror Subsidiaries....................................... 5.1
Acquiror's Legal Counsel............................................................ 8.1(i)
Acquisition Agreement............................................................... 3.14(e)
Acquisition Proposal................................................................ 10.3
Affiliate........................................................................... 10.3
Affiliate Agreement................................................................. 2.2(c)
Agreement........................................................................... PREAMBLE
Beneficial owner, beneficial ownership or beneficially own.......................... 10.3
Bid................................................................................. 3.22(b)
Business Day........................................................................ 10.3
Certificate and Certificates........................................................ 2.1(a)
Certificate of Merger............................................................... 1.2
Claim............................................................................... 7.6(b)
Closing............................................................................. 1.6
Closing Date........................................................................ 1.6
Code................................................................................ RECITALS
Company............................................................................. PREAMBLE
Company Acquisition................................................................. 6.2(e)
Company Benefit Plans............................................................... 3.12(a)
Company Common Stock................................................................ 2.1(a)
Company Confidentiality Agreement................................................... 7.2
Company Financial Statements........................................................ 3.6(b)
Company Floating Rate Election...................................................... 2.1(c)
Company Intellectual Property....................................................... 3.11(a)
Company Leases...................................................................... 3.13
Company Permits..................................................................... 3.10
Company Preferred Stock............................................................. 3.3(a)
Company Recommendation.............................................................. 3.4(b)
Company SEC Reports................................................................. 3.6(a)
Company Stock Option Plans........................................................... 2.3(a)
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Company Stockholder Agreement....................................................... PREAMBLE
Company Stockholder Approval........................................................ 3.4(a)
Company Stockholders Meeting........................................................ 7.3(b)
Company Subsidiary and Company Subsidiaries......................................... 3.1
Confidentiality Agreement........................................................... 7.2
Continuing Employees................................................................ 7.10(a)
Contracts........................................................................... 3.14(a)
Control, controlled by, under common control with................................... 10.3
Credit Facility..................................................................... 10.3
D&O Insurance....................................................................... 7.6(b)
Delaware Law........................................................................ RECITALS
Director Option..................................................................... 2.3(c)
Effective Time...................................................................... 1.2
Employee benefit plans.............................................................. 3.12(a)
Encumbrance......................................................................... 10.3
Environmental Laws.................................................................. 3.16(a)
ERISA Affiliate..................................................................... 3.12(a)
ERISA............................................................................... 3.12(a)
Exchange Act........................................................................ 3.5(b)
Exchange Agent...................................................................... 2.2(a)
Exchange Fund....................................................................... 2.2(a)
Exchange Ratio...................................................................... 2.1(b)
GAAP................................................................................ RECITALS
Government Contract................................................................. 3.22(b)
Governmental Entity................................................................. 3.5(b)
Hazardous Substances................................................................ 3.16(a)
Holder and Holders.................................................................. 2.1(a)
HSR Act............................................................................. 3.5(b)
Incentive stock options............................................................. 2.3(a)
Indemnified Parties................................................................. 7.6(b)
Information Technology.............................................................. 3.19
Intellectual Property............................................................... 10.3
Interim Period...................................................................... 7.1
Proxy Statement..................................................................... 3.17
Legal Opinions...................................................................... 8.1(i)
Material Adverse Effect............................................................. 10.3
Material Contract................................................................... 3.14(a)
Merger.............................................................................. RECITALS
Merger Consideration................................................................ 2.1(a)
Merger Sub.......................................................................... PREAMBLE
Merger Sub Stock.................................................................... 2.1(f)
Multiemployer plan.................................................................. 3.12(a)
NASD................................................................................ 3.5(b)
Nasdaq.............................................................................. 3.5(b)
NYSE................................................................................ 2.1(c)
Option.............................................................................. 2.3(a)
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Order............................................................................... 8.1(c)
Outside Date........................................................................ 9.1(e)
Person.............................................................................. 10.3
Pooling of interests................................................................ 3.26(a); 5.15; 6.2(o);
6.4(c); 7.11(b); 7.14;
8.1(g); 8.1(h)
Reasonable best efforts............................................................. 10.3
Receiving Party..................................................................... 7.2
Registration Statement.............................................................. 3.27
Representation Letters.............................................................. 7.13
Representatives..................................................................... 7.8(a)
SEC................................................................................. RECITALS
Securities Act...................................................................... 3.5(b)
Stockholder Vote Election........................................................... 9.1(i)
Subsidiary.......................................................................... 10.3
Superior Proposal................................................................... 10.3
Surviving Corporation............................................................... 1.1
Tax................................................................................. 3.15(g)
Terminating Acquiror Breach......................................................... 9.1(c)
Terminating Company Breach.......................................................... 9.1(b)
Termination Election................................................................ 9.6(b)
Termination Fee..................................................................... 9.6(a)
Treasury Stock...................................................................... 2.1(d)
Year 2000 Compliant................................................................. 3.19
Year 2000 Meeting................................................................... 7.16
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
December 9, 1999, by and among The Titan Corporation, a Delaware corporation
("Acquiror"), Advanced Communication Systems, Inc., a Delaware corporation (the
"Company") and A T Acquisition Corp., a Delaware corporation ("Merger Sub").
WHEREAS, Merger Sub is a newly formed corporation that is a wholly
owned direct subsidiary of Acquiror, organized and existing under the laws of
the State of Delaware;
WHEREAS, the Board of Directors of the Company, Acquiror and Merger Sub
has each determined that it is fair to, advisable, and in the best interests of,
the stockholders of the Company, Acquiror and Merger Sub that Merger Sub be
merged with and into the Company (the "Merger") pursuant to and subject to the
terms and conditions of this Agreement and the Delaware General Corporation Law
("Delaware Law");
WHEREAS, as a condition and inducement to Acquiror's and Merger Sub's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Acquiror and
Merger Sub are entering into a Stockholders Agreement with certain stockholders
of the Company (the "Company Stockholders Agreement"), pursuant to which, among
other things, such stockholders have agreed to vote their Shares of Company
Common Stock in favor of the Merger and granted Acquiror an irrevocable proxy to
vote such shares of Company Common Stock;
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the
Merger be accounted for as a pooling of interests under United States generally
accepted accounting principles ("GAAP") and the rules and regulations of the
Securities and Exchange Commission (the "SEC").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1. THE MERGER.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with Delaware Law, at the Effective Time (as
defined in Section 1.2) the Merger shall be effected and, pursuant thereto,
Merger Sub shall be merged with and into the Company.
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As a result of the Merger, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation of the Merger
(sometimes referred to herein as the "Surviving Corporation") and shall become a
wholly owned subsidiary of Acquiror. The name of the Company shall continue as
the name of the Surviving Corporation.
SECTION 1.2. EFFECTIVE TIME.
On the Closing Date (as defined in Section 1.6), the parties hereto
shall cause the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
as required by, and executed in accordance with the relevant provisions of,
Delaware Law and in such form as approved by the Company and Acquiror prior to
such filing (the time of the filing of the Certificate of Merger or the
effective time specified therein being the "Effective Time").
SECTION 1.3. EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as set forth
herein and as provided in the applicable provisions of Delaware Law. Without
limiting the generality of the foregoing, at the Effective Time, except as
otherwise provided herein, all the rights, privileges, powers and franchises of
Merger Sub and the Company shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Merger Sub and the Company shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
At the Effective Time: (a) the certificate of incorporation of Merger
Sub, as in effect immediately prior to the Effective Time and as amended by the
Certificate of Merger, shall become the certificate of incorporation of the
Surviving Corporation and shall reflect a name change to that of the Surviving
Corporation, and (b) the bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall become the bylaws of the Surviving Corporation.
SECTION 1.5. DIRECTORS AND OFFICERS.
The officers and directors of Merger Sub shall be initial directors and
officers of the Surviving Corporation. Each such officer and director shall hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation and until his or her successor is duly elected or
appointed and qualified in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation.
SECTION 1.6. CLOSING.
Unless this Agreement shall have been terminated and the transactions
herein contemplated shall have been abandoned pursuant to Section 9.1, and
subject to the terms and conditions of this Agreement (including, without
limitation, the satisfaction or, if permissible, waiver of the conditions set
forth in Article VIII hereof) the closing of the Merger (the "Closing") shall
take place at 11 a.m. Washington, D.C. time on the second Business Day after
2
the satisfaction or waiver of the last to be fulfilled or waived of the
conditions set forth in Article VIII (the "Closing Date"), at the offices of
Xxxxx & Xxxxxxx, LLP, 0000 Xxxxxxxxxx Xxxxx, Xxxxx 0000, XxXxxx, Xxxxxxxx 00000,
unless another place or time is agreed to in writing by the parties hereto.
SECTION 1.7. SUBSEQUENT ACTIONS.
If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to
continue, 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, privileges, franchises or assets of either of its constituent
corporations 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 and directors of the Surviving Corporation shall be directed and
authorized to execute and deliver, in the name and on behalf of either of the
Company or the Merger Sub, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of such
corporations or otherwise, 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 and under such rights, properties, privileges, franchises or assets in
the Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.8. TAX AND ACCOUNTING TREATMENT OF THE MERGER.
It is intended by the parties hereto that the Merger shall (a)
constitute a reorganization of Merger Sub and the Company within the meaning of
Section 368(a) of the Code, and (b) be accounted for as a pooling of interests
under GAAP and the rules and regulations of the SEC. The parties hereby adopt
this Agreement as a "plan of reorganization" of Merger Sub and the Company
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Treasury Regulations.
ARTICLE II.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. CONVERSION OF SECURITIES.
At the Effective Time, by virtue of the Merger and without any action
on the part of Acquiror, Merger Sub, the Company or the holders of any of the
securities referred to in this Section 2.1:
(a) COMMON STOCK. Each share of common stock, par value $.01 per share,
of the Company (the "Company Common Stock") (excluding any shares of Treasury
Stock (as hereinafter defined) and any shares held by Acquiror or any Affiliate
of Acquiror) issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive that number, rounded up or down, as the case may be to the
nearest whole number of share(s) of common stock, par value $.01 per share, of
the Acquiror (the "Acquiror Common Stock") equal to the "Exchange Ratio" (as
defined
3
below) upon surrender of the certificate representing such shares in accordance
with Section 2.2. The shares of Acquiror Common Stock issuable to the holders of
Company Common Stock outstanding immediately prior to the Effective Time (each,
a "Holder" and collectively, the "Holders") pursuant hereto shall be referred to
hereinafter as the "Merger Consideration." All such shares of Company Common
Stock shall automatically be canceled and retired and shall cease to exist, and
each certificate previously evidencing any such shares (a "Certificate" and
collectively, the "Certificates") shall thereafter represent only the right to
receive the Merger Consideration. At the Effective Time, the Holders shall cease
to have any rights with respect to such shares of Company Common Stock, except
the right to receive the Merger Consideration and as otherwise provided herein
or afforded by applicable law;
(b) EXCHANGE RATIO.
The "Exchange Ratio" shall be determined as follows:
(i) if the Acquiror Stock Price is less than or equal to $32.50 per
share and greater than or equal to $25.50 per share, the Exchange Ratio equals
the quotient obtained by dividing 20 by the Acquiror Stock Price;
(ii) if the Acquiror Stock Price is less than $25.50 per share and
greater than or equal to $22.95 per share, the Exchange Ratio is .7843;
(iii) if the Acquiror Stock Price is greater than $32.50 per share and
less than or equal to $35.75 per share, the Exchange Ratio is .6154;
(iv) if the Acquiror Stock Price is greater than $35.75 per share and
the Company makes a "Company Floating Rate Election," the Exchange Ratio shall
be equal to the quotient obtained by dividing 22 by the Acquiror Stock Price;
and
(v) if the Acquiror Stock Price is less than $22.95 per share and
Acquiror makes an "Acquiror Floating Rate Election," the Exchange Ratio shall be
equal to the quotient obtained by dividing 18 by the Acquiror Stock Price.
(c) CERTAIN DEFINITIONS. For purposes of this Agreement, (i) the term
"Acquiror Stock Price" shall mean the average of the closing sale prices of a
share of Acquiror Common Stock as reported on the New York Stock Exchange
("NYSE") for the ten (10) trading day period ending two (2) trading days
immediately preceding the Closing Date; (ii) the term "Acquiror Floating Rate
Election" shall mean an election made by Acquiror upon determination of the
Acquiror Stock Price in the event that the Acquiror Stock Price is less than
$22.95 per share, whereby Acquiror agrees to use the Exchange Ratio which equals
the quotient obtained by dividing 18 by the Acquiror Stock Price; and (iii) the
term "Company Floating Rate Election" shall mean an election made by the Company
upon determination of the Acquiror Stock Price in the event that the Acquiror
Stock Price is greater than $35.75 per share, whereby the Company agrees to use
the Exchange Ratio which equals the quotient obtained by dividing 22 by the
Acquiror Stock Price.
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(d) TREASURY STOCK. All shares of capital stock of the Company held by
Acquiror, any Affiliate of Acquiror and in the treasury of the Company
immediately prior to the Effective Time ("Treasury Stock") shall be canceled and
extinguished without any conversion thereof and no consideration shall be
delivered or deliverable in exchange therefor;
(e) OTHER RIGHTS RELATING TO THE COMPANY STOCK. Except as set forth in
Section 2.3, all options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
the Company or obligating the Company to issue or sell any shares of capital
stock of, or other equity interests in the Company, including any securities
directly or indirectly convertible into or exercisable or exchangeable for any
capital stock or other equity securities of the Company that have not been
exercised, or that have not vested, prior to the Effective Time shall be
canceled and extinguished without any conversion thereof and no Merger Stock or
other consideration shall be delivered or deliverable in exchange therefor;
(f) MERGER SUB STOCK. Each share of common stock, par value $.01 per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time ("Merger Sub Stock") shall be converted into and exchanged for one (1) duly
and validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation; and
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Promptly (and in no event later than the third
business day) after the Effective Time, Acquiror shall deposit with First Union
National Bank (the "Exchange Agent") for the benefit of the Holders for issuance
and payment in accordance with this Article II: the shares of Acquiror Common
Stock issuable pursuant to Section 2.1(a) (such shares of Acquiror Common Stock
being hereinafter referred to as the "Exchange Fund"). At the Effective Time,
Acquiror shall cause the Exchange Agent, pursuant to irrevocable instructions
delivered to the Exchange Agent prior thereto, to deliver Acquiror Common Stock
contemplated to be issued pursuant to Section 2.1(a) out of the Exchange Fund.
The Exchange Fund shall not be used for any purpose other than as set forth in
this Section 2.2(a).
(b) PAYMENT PROCEDURES. Promptly (and in no event later than the third
business day) after the Effective Time, Acquiror shall cause the Exchange Agent
to mail to each Holder who, as of the Effective Time, holds a Certificate or
Certificates (excluding any Certificates for Treasury Stock): (i) a form letter
of transmittal; and (ii) instructions for use in effecting the surrender of the
Certificates for cancellation and delivery in exchange for the Merger
Consideration. Upon surrender to the Exchange Agent and cancellation of a
Certificate, together with such letter of transmittal duly executed and any
other reasonably required documents, the Holder of such Certificate shall be
entitled to receive in exchange therefor the applicable amount of the Merger
Consideration as determined pursuant to Section 2.1(a). In the event of a
surrender of a Certificate representing shares of Company Common Stock that are
not registered in the transfer records of the Company under the name of the
Holder surrendering such Certificate, a certificate representing the proper
number of shares of Acquiror Common Stock may be issued to a Person other than
the Holder in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
5
transfer and the Person requesting such issuance shall pay any transfer or other
Taxes required by reason of the issuance of shares of Acquiror Common Stock to a
Person other than the Holder of such Certificate or shall establish to the
satisfaction of Acquiror that such Taxes have been paid or are not applicable.
Until surrendered in accordance with the provisions of this Section 2.2, each
Certificate shall represent for all purposes only the right to receive the
applicable amount of the Merger Consideration with respect thereto as determined
pursuant to Section 2.1(a), in such case without any interest thereon.
(c) ISSUANCES TO AFFILIATES. Notwithstanding anything herein to the
contrary, any Certificate surrendered for exchange by any Affiliate of the
Company shall not be exchanged until Acquiror shall have received a signed
agreement from such Affiliate (an "Affiliate Agreement") as provided in Section
7.11 hereof.
(d) NO FURTHER RIGHTS IN STOCK. All shares of Acquiror Common Stock
issued upon the surrender for exchange of Certificates pursuant to Section 2.1
and in accordance with this Section 2.2 shall be deemed to have been issued in
full satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, and there shall be no further
registration of transfers on the stock transfer books of the Company as the
Surviving Corporation of the shares of Company Common Stock represented by such
Certificates that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, any Certificates are presented to Acquiror, the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided herein, except as otherwise provided by law.
(e) RESERVED.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains undistributed to the Holders for twelve (12) months after the Effective
Time shall be delivered to Acquiror, upon demand, and any Holder that has not
theretofore received Merger Consideration in respect of any shares of Company
Common Stock held thereby shall thereafter look only to the Surviving
Corporation and Acquiror for the applicable amount of the Merger Consideration
to which such Holder is entitled pursuant hereto.
(g) WITHHOLDING OF TAX. Acquiror or the Exchange Agent shall be
entitled to deduct and withhold from the applicable amount of the Merger
Consideration otherwise issuable or payable to, any Holder such amounts as
Acquiror (or any Affiliate thereof) or the Exchange Agent is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by Acquiror (or any Affiliate thereof) or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the Holder in respect of whom such deduction and withholding was
made.
(h) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit setting forth that fact by the Person claiming such loss, theft or
destruction and the granting of a reasonable indemnity against any claim that
may be made against Acquiror or the Exchange Agent with respect to such
6
Certificate (and, if required by Acquiror in the case of any Certificate or
Certificates from any Holder representing more than Seven Thousand Five Hundred
(7,500) shares of Company Common Stock, the posting by such Person of a bond, in
such reasonable amount as Acquiror may direct), Acquiror shall cause the
Exchange Agent to issue to such Person the applicable amount of the Merger
Consideration and any cash payments with respect to such lost, stolen or
destroyed Certificate to which the Holder thereof may be entitled pursuant to
this Article II.
(i) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF ACQUIROR COMMON
STOCK. No dividends or other distributions declared or made after the Effective
Time with respect to Acquiror Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Acquiror Common Stock evidenced thereby until the
holder of such Certificate shall properly surrender such Certificate in
accordance with the requirements of Section 2.2(b). Subject to the effect of
escheat, tax or other applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificates evidencing
whole shares of Acquiror Common Stock issued in exchange therefor, without
interest, (i) promptly the amount of dividends or other distributions with a
record date after the Effective Time and theretofore paid with respect to such
whole shares of Acquiror 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 occurring after
surrender, payable with respect to such whole shares of Acquiror Common Stock.
(j) NO LIABILITY. Neither Acquiror nor the Surviving Corporation shall
be liable to any Holder of shares of Company Common Stock for any shares of
Acquiror Common Stock (or dividends or distributions with respect thereto), or
cash delivered to a public official pursuant to any abandoned property, escheat
or similar law.
SECTION 2.3. ASSUMPTION OF OBLIGATIONS TO ISSUE STOCK.
(a) COMPANY OPTIONS. As of the Effective Time, each outstanding Option
(as hereinafter defined) shall be converted into an option to acquire Acquiror
Common Stock as provided in this Section 2.3(a). The term "Option" shall mean
any option to purchase or acquire shares of Company Common Stock granted under
the Company's 1996 Stock Incentive Plan and 1997 Stock Incentive Plan, as
amended (the "Company Stock Option Plans"). Following the Effective Time, each
Option shall continue to have, and shall be subject to, the terms and conditions
of each agreement pursuant to which such Option was subject immediately prior to
the Effective Time (including, in the case of each Option granted under the
Company Stock Option Plans, the terms and conditions of the Company Stock Option
Plans under which such Option was granted), except that: (i) each Option (as
converted pursuant to this Section 2.3(a)) shall be exercisable for that number
of whole shares of Acquiror Common Stock equal to the product of (A) the
aggregate number of shares of Company Common Stock for which such Option was
exercisable at the Effective Time, multiplied by (B) the Exchange Ratio,
provided, however, that no fractional shares of Acquiror Common Stock shall be
issued upon the exercise of any Option (as converted pursuant to this Section
2.3(a)) and the holder of any Option (as converted pursuant to this Section
2.3(a)) granted under the Company Stock Option Plans otherwise exercisable for a
fractional share of Acquiror Common Stock shall be entitled to
7
receive, upon exercise thereof, cash (without interest) in such amount to which
such holder would otherwise be entitled as determined pursuant to the provisions
of the Company Stock Option Plans and the agreement under which such Option was
granted (provided that all references in such Company Stock Option Plans and
such agreement to the Company shall be references to Acquiror and references to
the Company's Common Stock shall be references to Acquiror Common Stock); and
(ii) the exercise price per share of Acquiror Common Stock issuable pursuant to
each Option (as converted pursuant to this Section 2.3(a)) shall be equal to the
exercise price per share of Company Common Stock under such Option at the
Effective Time divided by the Exchange Ratio, rounded to the nearest whole cent.
The assumption and substitution of Options as provided herein shall not give the
holders of such Options additional benefits or additional (or accelerated)
vesting rights that they did not have immediately prior to the Effective Time or
relieve the holders of such Options from any obligations or restrictions
applicable to their Options or the shares obtainable upon exercise of the
Options. The adjustment provided herein with respect to any Options that are
"incentive stock options" (as defined in Section 422 of the Code) shall be and
is intended to be, effected in a manner that is consistent with continued
treatment of such Options as "incentive stock options" under Section 424(a) of
the Code. The duration and other terms of the converted options provided for in
this Section 2.3(a) shall be the same as the Options except that all references
to the Company shall be references to Acquiror and references to the Company's
Common Stock shall be references to Acquiror Common Stock. Acquiror shall take
all corporate action necessary to reserve for issuance, at all times any
converted options provided for in this Section 2.3(a) are outstanding, a
sufficient number of shares of Acquiror Common Stock for delivery upon the
exercise of such converted Options. The Company will take such action as shall
be reasonably necessary (including but not limited to obtaining waivers from
holders of Options) so that each Option that was unvested or subject to a
repurchase option, risk of forfeiture or other condition under any applicable
Company Stock Option Plans immediately prior to the Effective Time shall
continue to be subject to such vesting, repurchase, forfeiture or other
conditions with respect to the Acquiror Common Stock that may be issuable with
respect thereto after the occurrence of the Effective Time or the consummation
of the transactions contemplated by this Agreement.
(b) FORM S-8. Acquiror shall: (i) promptly following the Effective
Time, file all necessary registration statements on Form S-8 (or amend existing
registration statements on Form S-8) to become effective as soon as practicable
after the Effective Time in order to effectively register the shares of Acquiror
Common Stock subject to Options outstanding as of the Effective Time (as
converted pursuant to Section 2.3(a)) that were granted under the Company Stock
Option Plans; (ii) use reasonable best efforts to maintain the effectiveness of
such registration statement(s) (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such Options (as
converted pursuant to Section 2.3(a)) remain outstanding; and (iii) promptly
following the Effective Time prepare and submit to the NYSE the Supplemental
Listing Application relating to inclusion for quotation on the NYSE of the
shares of Acquiror Common Stock subject to such Options (as converted pursuant
to Section 2.3(a)) and use reasonable best efforts to cause such securities to
be approved for listing on the NYSE as soon as practicable after the Effective
Time, subject to official notice of issuance.
(c) DIRECTOR OPTIONS. As of the Effective Time, each outstanding
Director Option (as hereinafter defined) shall be converted into an option to
acquire Acquiror Common Stock as
8
provided in this Section 2.3(c). The term "Director Option" shall mean any
option to purchase or acquire shares of Company Common Stock granted to any
director of the Company in such individual's capacity as a director
(specifically excluding any Options granted under the Company Stock Option
Plans). Following the Effective Time, each Director Option shall continue to
have, and shall be subject to, the terms and conditions of each agreement to
which such Director Option was subject immediately prior to the Effective Time,
except that: (i) each Director Option (as converted pursuant to this Section
2.3(c)) shall be exercisable for that number of whole shares of Acquiror Common
Stock equal to the product of (A) the aggregate number of shares of Company
Common Stock for which such Director Option was exercisable at the Effective
Time, multiplied by (B) the Exchange Ratio, provided, however, that no
fractional shares of Acquiror Common Stock shall be issued upon the exercise of
any Director Option (as converted pursuant to this Section 2.3(c)) and the
holder of any Director Option (as converted pursuant to this Section 2.3(c))
otherwise exercisable for a fractional share of Acquiror Common Stock shall be
entitled to receive, upon exercise thereof, cash (without interest) in an amount
equivalent to the fair market value (at the time of exercise) of the fractional
share of Acquiror Common Stock to which such holder would otherwise be entitled
(as determined pursuant to the provisions of the applicable Director Option
agreement); and (ii) the exercise price per share of Acquiror Common Stock
issuable pursuant to each Director Option (as converted pursuant to this Section
2.3(c)) shall be equal to the exercise price per share of Company Common Stock
under such Director Option at the Effective Time divided by the Exchange Ratio,
rounded to the nearest whole cent. The assumption and substitution of Director
Options as provided herein shall not give the holders of such Director Options
additional benefits or additional (or accelerated) vesting rights that they did
not have immediately prior to the Effective Time or relieve the holders of such
Director Options from any obligations or restrictions applicable to their
Director Options or the shares obtainable upon exercise of their Director
Options. The duration and other terms of the converted Director Options provided
for in this Section 2.3(c) shall be the same as the Director Options except that
all references to the Company shall be references to Acquiror and references to
the Company's Common Stock shall be references to Acquiror Common Stock.
Acquiror shall take all corporate action necessary to reserve for issuance, at
all times any converted Director Options provided for in this Section 2.3(c) are
outstanding, a sufficient number of shares of Acquiror Common Stock for delivery
upon the exercise of such converted Director Options. The Company will take such
action as shall be reasonably necessary (including but not limited to obtaining
waivers from holders of Director Options) so that each Director Option that was
unvested or subject to a repurchase option, risk of forfeiture or other
condition immediately prior to the Effective Time shall continue to be subject
to such vesting, repurchase, forfeiture or other conditions with respect to the
Acquiror Common Stock that may be issuable with respect thereto after the
occurrence of the Effective Time or the consummation of the transactions
contemplated by this Agreement.
(d) Except as may otherwise be agreed to by Acquiror and the Company or
as otherwise contemplated or required to effectuate the provisions of this
Section 2.3, the Company Stock Option Plans shall terminate as of the Effective
Time and the provisions of any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
the Company or any Company Subsidiary shall expire as of the Effective Time. The
termination of any Company Stock Option Plans shall not affect any Options
granted under such plans prior to the date of termination.
9
(e) COMPANY EMPLOYEE STOCK PURCHASE PLAN The Company's Employee Stock
Purchase Plan under Code Section 423 shall be terminated on or before the
Effective Time, with a refund to participants of any payroll deductions for the
then current Offering Period (as defined therein) which have not been used to
purchase shares of the Company's Common Stock pursuant to the terms of the plan
on or before the Effective Time.
SECTION 2.4. STOCK TRANSFER BOOKS.
At the Effective Time, the transfer books of the Company with respect
to all shares of capital stock or other securities of the Company shall be
closed and no further registration of transfers of such shares of capital stock
or other securities shall thereafter be made on the records of the Company.
SECTION 2.5. CERTAIN ADJUSTMENTS.
If between the date hereof and the Effective Time, the outstanding
shares of Company Common Stock or Acquiror Common Stock shall be changed into a
different number of shares by reason of any reclassification, recapitalization,
split-up, combination or exchange of shares, or any dividend payable in stock or
other securities shall be declared thereon with a record date within such
period, the Exchange Ratio shall be adjusted accordingly to provide the same
economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or dividend.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror and Merger Sub,
subject to the exceptions set forth herein and in the Company's disclosure
schedules (which exceptions shall specifically identify a section, subsection or
clause of a single section or subsection hereof, as applicable, to which such
exception relates, it being understood and agreed that each such exception shall
be deemed to be disclosed both under such section, subsection or clause hereof
and any other section, subsection or clause hereof to which such disclosure
reasonably relates) that:
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Each of the Company and each Subsidiary of the Company (each a "Company
Subsidiary" and collectively, the "Company Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each of the Company and each Company
Subsidiary is duly qualified to conduct its business, and is in good standing,
in each jurisdiction where such qualification is necessary, except for such
failures that would not have a Material Adverse Effect on the Company. Each of
the Company and each Company Subsidiary has the requisite corporate power and
authority to own, operate, lease and otherwise to hold its assets and properties
and to carry on its business as now being conducted, except for such failures
that would not have a Material Adverse Effect on the Company. Section
10
3.1 of the Disclosure Schedule sets forth, as of the date of this Agreement, a
true and complete list of all Company Subsidiaries, together with the
jurisdiction of incorporation of each Company Subsidiary and the percentage of
each Company Subsidiary's outstanding capital stock or other equity interests
owned by the Company and Company Subsidiaries, as the case may be. Except as set
forth in SCHEDULE 3.1, the Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
The Company has heretofore delivered to Acquiror a complete and correct
copy of the certificate or articles of incorporation and the bylaws of the
Company and each Company Subsidiary, each as amended to date. Each such
certificate or articles of incorporation and bylaws is in full force and effect.
None of the Company or any Company Subsidiary is in violation of any of the
provisions of its articles or certificate of incorporation, bylaws or equivalent
organizational documents.
SECTION 3.3. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of forty
million (40,000,000) shares of Company Common Stock and one million (1,000,000)
shares of preferred stock, par value $.01 per share ("Company Preferred Stock").
(1) As of December 6, 1999, (i) 8,776,448 shares of Company
Common Stock are issued and outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable, (ii) no shares of Company
Preferred Stock were issued and outstanding, (iii) 2,679,636 shares of Company
Common Stock are held in the treasury of the Company, and (iv) 648,323 shares of
Company Common Stock are reserved for future issuance pursuant to outstanding
Options and Director Options for an aggregate exercise price of $6,395,659.00.
(b) All outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except for the shares of Company Common Stock outstanding as of the date
hereof, the shares of Company Common Stock issuable pursuant to the Options and
Director Options and such Options and Director Options, each of which Options
and Director Options are described in SCHEDULE 3.3 (which Schedule sets forth
the (w) the name of the optionee, (x) the particular plan pursuant to which such
Option or Director Option was granted, (y) the date of grant and number of
shares of Company Common Stock subject to such Option or Director Option and (z)
whether the exercisability of such option will be accelerated by the transaction
contemplated by this Agreement) and the shares of Company Common Stock issuable
pursuant to the Company's Employee Stock Purchase Plan: (i) there are not
issued, reserved for issuance or outstanding (A) any shares of capital stock or
other voting securities of the Company or any Company Subsidiary, (B) any
securities of the Company or any Company Subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting securities or
ownership interests of the Company or any Company Subsidiary, (C) any warrants,
calls, options or other rights to
11
acquire from the Company or any Company Subsidiary, or any obligation of the
Company or any Company Subsidiary to issue, any capital stock, voting securities
or other ownership interests in, or securities convertible into or exchangeable
or exercisable for capital stock or voting securities of or other ownership
interests in, the Company or any Company Subsidiary, and (ii) there are no
outstanding obligations of the Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. The conversion of
the Options and the Director Options into options to acquire Acquiror Common
Stock pursuant to and in accordance with the terms set forth in Section 2.3 of
this Agreement may be effected in all respects without the consent of any holder
of an Option or a Director Option.
(c) Except as described in SCHEDULE 3.3, neither the Company nor any
Company Subsidiary is a party to or aware of, any stockholder agreement, voting
trust or agreement (i) restricting or requiring the purchase or transfer of,
relating to the voting or disposition of, requiring registration of, or granting
any preemptive or, except as provided by the terms of the Company Stock Option
Plans and Director Options, antidilutive rights with respect to, any of the
securities of the Company or any of the Company Subsidiaries that are
outstanding or that may be subsequently issued upon the conversion or exercise
of any instrument or otherwise or (ii) granting to any person or group the right
to elect or to designate or nominate for election a director to the board of
directors of the Company or any Company subsidiary.
(d) All the outstanding shares of capital stock of each Company
Subsidiary have been validly issued and are fully paid and nonassessable and are
owned by the Company, and other than in connection with the Credit Facility, are
free and clear of all Encumbrances, options, rights of first refusal,
agreements, limitations on the Company's or such Company Subsidiary's voting
rights, charges and other Encumbrances of any nature whatsoever.
(e) Except as previously disclosed to Acquiror, as of the date of this
Agreement, none of the Company or any Company Subsidiary directly or indirectly
owns, or has agreed to purchase or otherwise acquire, 5% or more of the capital
stock of, or any interest convertible into or exchangeable or exercisable for 5%
or more of the capital stock of, any corporation, partnership, joint venture or
other business association or entity (other than the Company Subsidiaries set
forth in SCHEDULE 3.1) other than a Company Acquisition as permitted pursuant to
the provisions of Section 6.3(i). There are no material outstanding contractual
obligations of the Company or any Company Subsidiary to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in, any Company Subsidiary or any other person except as permitted pursuant to
the provisions of Section 6.3(i).
SECTION 3.4. AUTHORITY.
(a) The Company has the necessary corporate power and authority to
enter into this Agreement and the other agreements referred to herein (the
"Ancillary Agreements") and, subject to obtaining the requisite approval of this
Agreement, the Merger and the other transactions contemplated hereby by the
Company's stockholders as required by Delaware Law and as contemplated in
Section 7.3(b) ("Company Stockholder Approval"), to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
12
and thereby. Except for Company Stockholder Approval, the execution and delivery
of this Agreement and the Ancillary Agreements by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Ancillary Agreements or to consummate the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Acquiror and Merger Sub, constitutes a legal, valid
and binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity (it being understood that, with respect to the
Company's obligation to consummate the Merger, the Company Stockholder Approval
is required as set forth herein and that nothing in this Agreement shall be
construed or interpreted as a guaranty by the Company that such approval will be
obtained).
(b) The Board of Directors of the Company has, on December 8, 1999, by
unanimous resolution (i) approved and adopted this Agreement and the
transactions contemplated by this Agreement, (ii) determined that the Merger is
in the best interests of the Company and its stockholders and that the terms of
this Agreement are fair to the Company and its stockholders and (iii) declared
the advisability of this Agreement and recommended that the stockholders of the
Company approve and adopt this Agreement and the transactions contemplated by
this Agreement and directed that this Agreement and such transactions be
submitted for approval by the Company's stockholders at the Company Stockholders
Meeting (as hereinafter defined) (the "Company Recommendation").
SECTION 3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company do not,
and the performance by the Company of its obligations under this Agreement will
not: (i) conflict with or violate the certificate or articles of incorporation
or bylaws of the Company or any Company Subsidiary; (ii) subject to obtaining
the approvals and compliance with the requirements set forth in Section 3.5(b),
conflict with or violate any Order applicable to the Company or any Company
Subsidiary or by which any of their respective properties or assets is bound or
affected; or (iii) except as set forth in SCHEDULE 3.5, result in any breach of
or constitute a default (or an event that with or without notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of an Encumbrance on any of the properties or assets of the Company or
any Company Subsidiary pursuant to any Material Contract, except, in the case of
clauses (ii) and (iii) above, for any such conflicts, violations, breaches,
defaults or other alterations or occurrences that would not: (x) prevent or, to
the knowledge of the Company, delay in any material respect, consummation of the
Merger; (y) otherwise prevent the Company from performing its obligations under
this Agreement in any material respect; or (z) have a Material Adverse Effect on
the Company.
(b) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company will not, require by, with
respect to or on behalf
13
of the Company or any Company Subsidiary any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic or foreign (each a "Governmental Entity"), except: (i) for
(A) applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act of 1933, as amended (the
"Securities Act"), the National Association of Securities Dealers, Inc. (the
"NASD"), the Nasdaq National Market, Inc. ("Nasdaq") and the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (B) applicable
requirements, if any, of the consents, approvals, authorizations or permits
described in SCHEDULE 3.5, and (C) filing and recordation of appropriate merger
documents as required by Delaware Law; or (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not: (x) prevent or delay in any material respect the
consummation of the Merger; (y) otherwise prevent the Company from performing
its obligations under this Agreement in any material respect; or (z) would not
individually, or in the aggregate, have a Material Adverse Effect on the
Company.
SECTION 3.6. SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports, statements and other
documents required to be filed with the SEC since January 1, 1997, and has
heretofore furnished to Acquiror, in the form filed with the SEC since such
date, together with any amendments thereto, all of such forms, reports,
statements and other documents, including without limitation, its: (i) Annual
Reports on Form 10-K; (ii) Quarterly Reports on Form 10-Q; (iii) proxy
statements relating to meetings of stockholders (whether annual or special);
(iv) reports on Form 8-K; and (v) other reports or registration statements filed
by the Company and such Company Subsidiaries (collectively, the "Company SEC
Reports"). As of their respective filing dates, the Company SEC Reports
(including all Company SEC Reports filed after the date of this Agreement and
prior to the Effective Time): (x) complied (or will comply when filed) as to
form in all material respects with the requirements of the Exchange Act and the
Securities Act, as applicable; and (y) did not or shall not at the time they are
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. No Company Subsidiary is required to file any form, report,
statement or other document with the SEC other than in conjunction with the
filing of the Company SEC Reports.
(b) The audited consolidated financial statements and unaudited interim
financial statements of the Company (including the notes and schedules thereto)
contained or incorporated by reference in the Company SEC Reports (including all
Company SEC Reports filed after the date of this Agreement and prior to the
Effective Time) (the "Company Financial Statements") complied or shall comply in
all material respects with applicable GAAP accounting requirements and with the
rules and regulations of the SEC with respect thereto. The Company Financial
Statements present or shall present fairly in all material respects the
consolidated financial position of the Company and the Company Subsidiaries at
the respective dates thereof and the consolidated results of operations and cash
flows of the Company and the Company Subsidiaries for the periods indicated, in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be noted therein) and subject in the case of interim
financial statements to normal year-end adjustments.
14
(c) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement, none of the Company or any of the Company Subsidiaries
is indebted to any director, officer, employee, agent or consultant of the
Company or any of the Company Subsidiaries (except for amounts due as normal
salaries and bonuses, retention bonuses or retirement payments that have been
previously disclosed to Acquiror, and in reimbursement of ordinary or relocation
expenses) and no such person is indebted to the Company or any of the Company
Subsidiaries, and there have been no other transactions of the type required to
be disclosed pursuant to Items 402 and 404 of Regulation S-K under the Exchange
Act.
(d) The Company has filed all exhibits to the Company SEC Reports
required by Item 601 of SEC Regulation S-K and has filed all contracts required
to be filed pursuant to paragraph (b)(10) of such Item 601.
SECTION 3.7. NO UNDISCLOSED LIABILITIES.
Neither the Company nor any of the Company Subsidiaries has any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, except: (a) liabilities or obligations reflected in the Company SEC
Reports; (b) liabilities or obligations incurred since September 30, 1999, in
the ordinary course of business consistent with past practices that have not had
and are not reasonably likely to have a Material Adverse Effect on the Company
(without taking into account the effects of the consummation of the Merger); and
(c) liabilities or obligations that have not had and are not reasonably likely
to have a Material Adverse Effect on the Company (without taking into account
the effects of the consummation of the Merger).
SECTION 3.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since September 30, 1999, except as contemplated by this Agreement or
as disclosed in any Company SEC Report filed since September 30, 1999, or as set
forth in SCHEDULE 3.8, the Company and the Company Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since such date, there has not been (a) any change in the
business, operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of the
Company or any Company Subsidiary having, individually or in the aggregate, a
Material Adverse Effect on the Company, (b) any material change by the Company
in its accounting methods, principles or practices, (c) any material revaluation
by the Company of any material asset (including, without limitation, any writing
down of the value of inventory or writing off of notes or accounts receivable),
other than in the ordinary course of business consistent with past practice, (d)
any entry by the Company or any Company Subsidiary into any commitment or
transaction material to the Company and the Company Subsidiaries taken as a
whole, except in the ordinary course of business and consistent with past
practice, (e) any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of its capital stock or any redemption,
purchase or other acquisition of any of its securities, (f) except as previously
disclosed to Acquiror, any increase in the benefits under, or the establishment
or amendment of, any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards,
15
or restricted stock awards), stock purchase or other employee benefit plan, or
any other increase in the compensation payable or to become payable to any
officers or employees of the Company or any Company Subsidiary, except in the
ordinary course of business consistent with past practice, (g) except as
previously disclosed to Acquiror, any entry by the Company or any Company
Subsidiary into any employment, consulting, severance, termination or
indemnification agreement with any officer or employee of the Company or any
Company Subsidiary or entry into any such agreement with any other person
outside the ordinary course of business, or (h) any agreement by the Company or
any Company Subsidiary to take any of the actions described in this Section 3.8
except as expressly contemplated by this Agreement. Between September 30, 1999,
and the date of this Agreement (inclusive), neither the Company nor any of the
Company Subsidiaries has taken, or agreed to take, any action that would
constitute a material breach of Section 6.1 or Section 6.2 if taken after the
date of this Agreement.
SECTION 3.9. ABSENCE OF LITIGATION.
Except as set forth in the Company SEC Reports or in SCHEDULE 3.9,
there are: (a) no claims, actions, suits, investigations or proceedings pending
or, to the Company's knowledge, threatened against the Company or any of the
Company Subsidiaries, or any material asset thereof, before any court,
administrative, governmental, arbitral, mediation or regulatory authority or
body, domestic or foreign, that have had or are reasonably likely to have a
Material Adverse Effect on the Company (without taking into account the effects
of the consummation of the Merger) or that would prevent or enjoin, or, to the
knowledge of the Company, delay in any material respect, consummation of the
Merger or any of the other transactions contemplated hereby; and (b) no Orders
of any Governmental Entity or arbitrator outstanding against the Company or any
Company Subsidiary that have had or are reasonably likely to have a Material
Adverse Effect on the Company (without taking into account the effects of the
consummation of the Merger) or that would prevent or enjoin, or, to the
knowledge of the Company, delay in any material respect, consummation of the
Merger or any of the other transactions contemplated hereby. As of the date
hereof, to the actual knowledge of the Company, no event has occurred, and no
claim, dispute or other condition or circumstance exists, that will, or that
would reasonably be expected to, cause or provide a bona fide basis for a
director or officer of the Company or any Company Subsidiary to seek
indemnification from the Company or any Company Subsidiary, except for events,
claims, disputes and other conditions or circumstances that would not be
reasonably expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company.
SECTION 3.10 LICENSES AND PERMITS; COMPLIANCE WITH LAWS.
Except as set forth on SCHEDULE 3.10, the Company and Company
Subsidiaries hold and at all applicable times hereunder held, all material
permits, licenses, franchises, authorizations and approvals from all
Governmental Entities that are required for the operation of the businesses of
the Company and the Company Subsidiaries as presently conducted and the
ownership, operation, lease and holding by the Company and the Company
Subsidiaries of their respective properties and assets (the "Company Permits").
As of the date hereof, no suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company,
16
threatened, except where the failure to have, or the suspension or cancellation
of, any of the Company Permits would not, individually or in the aggregate, have
a Material Adverse Effect on the Company. Except where individually or in the
aggregate the existence of a conflict with, a violation of, or a default under
would have a Material Adverse Effect on the Company, none of the Company or any
Company Subsidiary is in conflict with, or in default under or violation of, (i)
any Order applicable to the Company or any Company Subsidiary or by which any
asset of the Company or any Company Subsidiary is bound or affected, (ii) any
Material Contract or (iii) any Company Permits.
SECTION 3.11. INTELLECTUAL PROPERTY.
(a) Except as set forth on SCHEDULE 3.11, the Company and the Company
Subsidiaries have good title to or the right to use all the Intellectual
Property owned, utilized or licensed by the Company and the Company Subsidiaries
(all of the foregoing items collectively referred to as the "Company
Intellectual Property") and all material inventions, processes, designs,
formulae, trade secrets and know-how necessary for the conduct of the businesses
of the Company and the Company Subsidiaries, as presently conducted. To the
Company's knowledge, none of the Company or any of the Company Subsidiaries is
infringing on any Intellectual Property right of others, and the Company has no
knowledge of any infringement by others of such rights owned by the Company or
any of the Company Subsidiaries, except where such infringement is not
reasonably likely to have a Material Adverse Effect on the Company.
(b) Except as set forth on SCHEDULE 3.11 and except as is not
reasonably likely to have a Material Adverse Effect on the Company, with respect
to each item of Company Intellectual Property necessary for the conduct of the
business of the Company and the Company Subsidiaries as currently conducted: (i)
the owner thereof (if such owner is the Company or any Company Subsidiary)
possesses all right, title and interest in and to the item, subject to and
except as may be limited by the Credit Facility; (ii) the item is not subject to
any outstanding Order or charge; (iii) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand is pending or, to the
knowledge of the Company, is threatened that challenges the legality, validity,
enforceability, use or ownership of the item.
(c) The Company's disclosure in the Company's SEC Reports with respect
to all of the computer software, computer firmware, computer hardware (whether
general or special purpose), and other similar or related items of automated,
computerized, and/or software system(s) that are developed and sold by the
Company or any of the Company Subsidiaries (other than third-party software) or
that are used or relied on by the Company or any Company Subsidiary in the
administration and conduct of their respective businesses does not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(d) RESERVED.
(e) Company and each Company Subsidiary has taken all steps that are
required to protect Company and each Company Subsidiary's rights in confidential
information and trade
17
secrets of the Company and each Company Subsidiary or provided by any other
Person to Company or any Company Subsidiary.
(f) Neither this Agreement nor the assignment to Acquiror or the
Surviving Corporation, by operation of law or otherwise, of title to or the
rights to use all of the Company Intellectual Property will, after the Closing
(a) cause or result in an infringement or misappropriation of any Intellectual
Property right of any person; (b) cause or prevent Acquiror or the Surviving
Corporation from using the Company Intellectual Property in substantially the
same manner as it is used by Company and each Company Subsidiary prior to the
Closing; or (c) subject Acquiror or the Surviving Corporation to any obligation
to pay royalties or other amounts to any third party in excess of those payable
by the Company or any Company Subsidiary, respectively, prior to the Closing.
SECTION 3.12. EMPLOYEE BENEFIT PLANS AND RELATED MATTERS.
(a) The Company has made available to Acquiror copies of the governing
documents with respect to each pension, retirement, profit sharing, deferred
compensation, bonus, stock option, stock purchase, severance pay, vacation,
tuition reimbursement, cafeteria plan or other employee benefit plan, including,
but not limited to, any "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which
the Company, or any entity required to be aggregated with the Company under Code
Sections 414(b), (c), (m) or (o) (an "ERISA Affiliate"), maintains, sponsors, or
contributes to and under which employees or former employees (or their
respective beneficiaries) of the Company or an ERISA Affiliate are covered
("Company Benefit Plans"). None of the Company Benefit Plans is a "multiemployer
pension plan," as such term is defined in section 3(37) of ERISA, or a "single
employer plan", as defined in ERISA Section 4001(a)(15). None of the Company
Benefit Plans is a "Employee Stock Ownership Plan" ("ESOP") within the meaning
of Section 4975(e)(7) of the Code. With respect to each of the Company Benefit
Plans; Company has made available to Acquiror copies of each of the following
documents: (i) the most recent annual report (Form 5500), if any; (ii) the most
recent summary plan description and subsequent summaries of material
modifications required under ERISA, if any; (iii) the most recent determination
letter received from the Internal Revenue Service with respect to each Company
Benefit Plan that is intended to be tax-qualified under Section 401(a) of the
Code; (iv) all related trust agreements or annuity agreements (and any other
funding Document for each Plan; (v) all DOL opinions on any Plan and all
correspondence relating to the request for and receipt of each opinion; (vi) all
IRS rulings, opinions or technical advice relating to any Plan and all
correspondence relating to the request for and receipt of each ruling, opinion
or technical advice; and (vii) all Agreements with service providers or
fiduciaries for providing services on behalf of any Plan.
(b) Except where noncompliance would not have a Material Adverse Effect
on the Company or where otherwise disclosed on SCHEDULE 3.12, the Company
Benefit Plans are in compliance with all applicable provisions of the Code,
ERISA, the National Labor Relations Act, Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act,
the Securities Act, the Securities Exchange Act of 1934, and all other Laws
pertaining to the Plans.
18
(c) Except as set forth on SCHEDULE 3.12, to Company's knowledge, there
are no pending unfair labor practice charges, contract grievances under any
collective bargaining agreement, other administrative charges, claims,
grievances or suits, claims or actions filed in any court or with any
administrative agency or arbiter by any current or former employee of the
Company or an ERISA Affiliate relating to or arising out of any conduct, action
or event occurring prior to the date hereof with respect to the employment or
termination of employment of any such current or former employee of the Company
or ERISA Affiliate or relating to any Plan, nor are there any pending suits,
investigations or audits by any governmental agencies regarding any of the
Company Benefit Plans that would reasonably be expected to result in a Material
Adverse Effect on the Company, and to the knowledge of the Company, there exist
no facts that could reasonably be expected to give rise to such a claim.
(d) Neither the Company nor any Company Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary and no collective bargaining
agreement is being negotiated by the Company or any Company Subsidiary. As of
the date hereof, there is no labor dispute, strike or work stoppage against the
Company or any Company Subsidiary pending or threatened in writing that may
interfere with the respective business activities of the Company or any Company
Subsidiary, except where such dispute, strike or work stoppage would not have a
Material Adverse Effect on the Company. As of the date hereof, to the knowledge
of the Company, none of the Company, any Company Subsidiary, or their respective
representatives or employees, has committed any unfair labor practices in
connection with the operation of the respective businesses of the Company or any
Company Subsidiary, and there is no charge or complaint against the Company or
any Company Subsidiary by the National Labor Relations Board or any comparable
state agency pending or threatened in writing, except where such unfair labor
practice, charge or complaint would not have a Material Adverse Effect on the
Company.
(e) Neither the Company nor any Company Subsidiary maintains or
contributes to any multiemployer or single employer plan as defined in Section
4001 of ERISA nor any pension plan subject to Section 412 of the Code or Title
IV of ERISA.
(f) The Company and the Company Subsidiaries have made and/or accrued
all contributions and other payments required by and due under the terms of each
Plan.
(g) The Disclosure Schedule sets forth a list of all Qualified Plans.
The trusts established under such Plans are exempt from federal income taxes
under Section 501(a) of the Code. Except as disclosed on SCHEDULE 3.12, the
Company and the Company Subsidiaries have received determination letters issued
by the IRS with respect to each Qualified Plan, and the Company has Furnished to
Acquiror true and complete copies of all such determination letters. Except as
disclosed on SCHEDULE 3.12, to the knowledge of the Company, nothing has
occurred since the date of the most recent applicable determination letter that
would reasonably be expected to adversely affect the tax-qualified status of any
Qualified Plan.
(h) The Disclosure Schedule identifies any Plan that covered any
current or former the Company or Company Subsidiary employees that has been
terminated and under which the
19
Company or any Company Subsidiary currently has or can reasonably be expected in
the future to have any current liability.
(i) No Plan or Other Arrangement, individually or collectively,
provides for any payment by the Company or any Company Subsidiary to any
employee or independent contractor that is not deductible under Section
162(a)(1) or 404 of the Code or that is an "excess parachute payment" pursuant
to Section 280G of the Code.
(j) No Plan is a "qualified foreign plan" (as such term is defined in
Section 404A(e) of the Code), and no Plan is subject to the Laws of any
jurisdiction other than the United States of America or one of its political
subdivisions.
(k) No Plan is a Voluntary Employees' Beneficiary Association ("VEBA")
within the meaning of Section 501(c)(9) of the Code.
(l) The Disclosure Schedule (i) identifies all post-retirement medical,
life insurance or other benefits promised, provided or otherwise due now or in
the future to current, former or retired employees of the Company or any Company
Subsidiary, (ii) identifies the method of funding (including, without
limitation, any individual accounting) for all such benefits, (iii) discloses
the funded status of the Plans providing or promising such benefits and (iv)
sets forth the method of accounting for such benefits to any key employees (as
defined in Section 416(i) of the Code) of the Company or any Company Subsidiary.
(m) Except as disclosed in SCHEDULE 3.12, the Company and the Company
Subsidiaries have filed or caused to be filed all Forms 5500 (and Forms 5500
C/R) for the Company Benefit Plans that they are required to file. If not, on or
before Closing the Company and/or Company Subsidiary shall cause the required
Forms 5500 (and Form(s) 5500 C/R) to be filed.
(n) For any Code Section 125 Plans maintained, the Company has filed or
caused to be filed any required Form 5500 (or Form 5500 C/R), with Schedule F
attached, to satisfy the requirements of Code Section 6039(D)(a). If not, on or
before Closing the Company shall cause the required Form(s) 5500 (or Form(s)
5500 C/R), with Schedule F attached, to be filed to satisfy the requirements of
Code Section 6039(D)(a).
SECTION 3.13 PROPERTIES.
Each of the Company and the Company Subsidiaries has good, valid and,
in the case of real property, marketable fee simple, title to all the material
assets and properties that it owns and that are reflected on the Company's
consolidated balance sheet as of September 30, 1999, or that were thereafter
acquired (except for assets and properties sold, consumed or otherwise disposed
of in the ordinary course of business by them since such date), and such assets
and properties are owned free and clear of all liens, claims and Encumbrances,
except for (a) liens for taxes and assessments not yet due and payable or for
taxes the validity of which is being contested in good faith, (b) liens, claims
and Encumbrances to secure indebtedness reflected on the Company's consolidated
balance sheet as of September 30, 1999, or indebtedness (including purchase
money indebtedness) incurred in the ordinary course of business and consistent
with past practice after
20
the date thereof, (c) mechanic's, materialmen's and other liens, claims and
Encumbrances that have arisen in the ordinary course of business and (d)
imperfections of title and liens, claims and Encumbrances the existence of which
do not have a Material Adverse Effect on the Company. The Company and each
Company Subsidiary is not, nor will the Company or any Company Subsidiary be as
a result of the execution and delivery of this Agreement or the performance of
its obligations under this Agreement or the consummation of the transactions
contemplated by this Agreement, in breach of any lease agreement to which the
Company or any Company Subsidiary is a party (the "Company Leases") the breach
of which could reasonably be expected to have a Material Adverse Effect on the
Company or cause a loss of material rights under any Company Lease, and such
execution, delivery and performance will not otherwise give rise to any right of
any third party to terminate any Company Lease, the termination of which could
reasonably be expected to have a Material Adverse Effect on the Company or cause
a loss or impairment of material rights under any Company Lease. All the
material buildings, structures, equipment and other tangible assets of the
Company and the Company Subsidiaries (whether owned or leased) are in normal
operating condition (normal wear and tear excepted) and are fit for use in the
ordinary course of business of the Company. Notwithstanding anything to the
contrary, no representations or warranties set forth in this Section 3.13 shall
apply to any personal property of the Company or any Company Subsidiary that is
surplus to the operating needs of the business of the Company or any Company
Subsidiary as presently conducted.
SECTION 3.14. CONTRACTS.
(a) For the purposes of this Agreement, (i) with respect to any party,
the term "Contracts" means all contracts, agreements, leases (including leases
of real property), licenses, commitments, sales and purchase orders,
intercompany work transfer agreements) with respect to work by or for another of
such party's businesses) and other instruments of any kind, whether written or
oral and (ii) the term "Material Contract" shall mean any Contract that is
material to the business of the Company or any Company Subsidiary including
without limitation all (i) employment, severance, termination, consulting (to
the extent any thereof (A) involve any payments to officers and directors of the
Company or (B) involve annual payments of at least $100,000 or are not
terminable on less than thirty days' notice without material penalty) and
retirement agreements to which the Company or any Company Subsidiary is a party,
(ii) collective bargaining agreements to which the Company or any Company
Subsidiary is a party, (iii) agreements (excluding agreements that constitute
Government Contracts) that require aggregate future payments by or to the
Company or any Company Subsidiary of, more than $250,000 that are not terminable
by the Company or such Company Subsidiary on less than thirty days' notice
without material penalty, (iv) Government Contracts having a backlog in excess
of $20,000,000, (v) material agreements containing covenants limiting the
freedom of the Company or any Company Subsidiary to compete with any person in
any line of business in which the Company or any Company Subsidiary engages or
in any area or territory, or requiring the exclusive or minimum use or otherwise
restricting the use by the Company or any Company Subsidiary of any services,
products or technology to those provided by or available through any third
party, (vi) agreements of the Company or any Company Subsidiary with any
stockholder, executive officer or director of the Company, (vii) agreements
under which the Company or any Company Subsidiary has advanced or loaned any
amount in excess of $10,000 to any of its directors, officers or employees
except for reimbursement of ordinary or relocation expenses,
21
and (viii) all contracts listed as an exhibit to any of the Company SEC Reports
under the rules and regulations of the SEC relating to the business of the
Company and the Company Subsidiaries and any contracts that would be required to
be so listed but for the exceptions with respect to listing contracts set forth
in Item 601(b)(10) of Regulation S-K (collectively, the "Material Contracts").
(b) All the Material Contracts are valid and in full force and effect
except to the extent they have previously expired in accordance with their
terms, and none of the Company or any of the Company Subsidiaries has violated
any material provision of, or committed or failed to perform any material act
that, with or without notice, lapse of time, or both, would constitute a default
under the provisions of, any Material Contract, except for defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
(c) To the knowledge of the Company, no counterparty to any Material
Contract has violated any material provision of, or committed or failed to
perform any act that, with or without notice, lapse of time, or both, would
constitute a default or other breach under the provisions of, such Material
Contract, except for defaults or breaches that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company.
(d) Except as set forth in SCHEDULE 3.14, no officer or director of the
Company or any Company Subsidiary, or any "associate" (as such term is defined
in Rule 14a-1 under the Exchange Act) of any such officer or director, has any
material interest in any material contract or material property (real or
personal, tangible or intangible), used in, or pertaining to the business of the
Company or any Company Subsidiary.
(e) The Company has delivered or made available to Acquiror a complete
and correct copy of each acquisition agreement (including all material
schedules, exhibits, amendments, supplements, modifications, assignments and all
other documents delivered pursuant thereto or in connection therewith (the
"Acquisition Agreement") pursuant to which it or a Company Subsidiary has
acquired or proposes to acquire any assets or securities of a third party other
than in the ordinary course of business. The Company and the Company
Subsidiaries and, to the knowledge of the Company, no other person party thereto
is in default in the performance or compliance with any material provisions
thereof. Each Acquisition Agreement has been consummated; is in full force and
effect; and has not been terminated, rescinded or withdrawn. The consummation
thereof has not had, and is not reasonably expected to cause, a Material Adverse
Effect on the Company. All requisite approvals by and permits from Governmental
Entities with respect to the transactions contemplated by the Acquisition
Agreements and the Company's ownership of the assets and business of the third
parties so acquired have been obtained, and no such approvals or permits impose
any burdensome conditions on the Company or any Company Subsidiary. To the
Company's knowledge, none of the representations or warranties in any
Acquisition Agreement contain any untrue statement of a material fact or omit
any material fact necessary to make the statements therein not misleading.
22
SECTION 3.15 TAXES.
Except as set forth in SCHEDULE 3.15:
(a) The Company and each of the Company Subsidiaries has timely filed,
or will timely file, all material Tax Returns and reports required to be filed
by or with respect to any of them, either separately or as a member of a
combined, consolidated or unitary group of which the Company or any of the
Company Subsidiaries is or has been a member, for all periods ending prior to
the Effective Time and for the period from the date hereof up to and including
the Effective Time and has timely paid all Taxes shown on such Tax Returns. All
such returns and reports were true, complete and correct when they were filed
and will be true, correct and complete when they are filed on or before the
Effective Time. The Company and each of the Company Subsidiaries has timely paid
(or the Company has timely paid on behalf of the Company Subsidiaries), or made
provision for payment of (in accordance with GAAP), or accrued or reserved for
on the consolidated balance sheet as at September 30, 1999, (or in the case of
amounts becoming due after the date hereof prior to the Effective Time will have
paid, accrued or reserved for) whether asserted or unasserted, contingent or
otherwise, all Taxes that may have or may become due (including any withholding,
sales, value added or similar taxes that may have or may become due) for all
periods ending on or before the Effective Time. The Company has made available
to Acquiror complete copies of all Tax Returns that the Company and each of the
Company Subsidiaries has filed for the past three years and will, before
Closing, indicate which of those Tax Returns have been audited and which of
those Tax Returns are currently the subject of audit. The Company also will
deliver or make available to Acquiror correct and complete copies of all
examination reports and statements of deficiencies assessed against or agreed to
by any of the Company and the Subsidiaries during the past three years..
(b) To the Company's knowledge, there are no pending, proposed,
threatened, audits, judicial proceedings, assessments or deficiencies with
respect to material Taxes of the Company or any of the Company Subsidiaries. To
the Company's knowledge, there is no pending proposed, or threatened, claim by
any Tax authority in any jurisdiction in which the Company or any of the Company
Subsidiaries does not pay Tax or file Tax Returns that the Company or any of the
Company Subsidiaries is required to pay material Taxes or file material Tax
Returns. The Company has not given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of Taxes by
the Company or any of the Company Subsidiaries or for which they may be liable.
Prior to Closing, the Company will indicate where there is any dispute or claim
concerning any Tax Liability of any of the Company or the Company Subsidiaries
either (A) claimed or raised by any authority in writing or (B) as to which any
of the Company or the Company Subsidiaries has knowledge based upon personal
contact with any agent of such authority.
(c) The Company shall deliver or make available on or before Closing
any Tax sharing agreement, Tax allocation agreement, Tax indemnity or assumption
obligation or similar written or unwritten agreement, arrangement, understanding
or practice with respect to Taxes (including any advance pricing agreement,
closing agreement or other agreement relating to Taxes with any Tax authority)
to which the Company or any of the Company Subsidiaries is a party, subject,
obligated or bound in any manner.
23
(d) No property of the Company or any of the Company Subsidiaries (i)
is "tax-exempt use property" within the meaning of Section 168(h) of the Code,
or (ii) secures any debt the interest on which is exempt from tax under Section
103 of the Code.
(e) The Company is a "United States Person," as defined in Section
7701(a)(30) of the Code.
(f) The charges, accruals, and reserves with respect to Taxes on the
books of the Company are adequate and are at least equal to the Company's and
any of the Company Subsidiaries' liability for Taxes. No consent to the
application of Section 341(f)(2) of the Code, has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company or any of
the Company Subsidiaries.
(g) As used in this Agreement, "Tax" or "Taxes" means (i) any and all
taxes (whether federal, state and local, domestic or foreign) including, without
limitation, income, gross receipts, profits, property, sales, use, capital
stock, net worth, occupation, value added, ad valorem, transfer, franchise,
recapture, excise, windfall, withholding, payroll, social security, workers'
compensation, unemployment compensation or employment taxes, tariffs, imposts,
duties, levies, fees or governmental charges of any nature whatsoever, together
with any interest, penalties or additions to tax imposed with respect to any of
the foregoing, and (ii) any obligations under any agreements or arrangements
with respect to any tax or taxes described in clause (i) above. As used in this
Agreement, "Tax Return" means any return, declaration, report, claim for refund,
information return, or statement, estimated return or statement or other
document (including any related or supporting estimates, elections, schedules,
statements or information) filed or required to be filed in connection with the
determination, assessment or collection of any Tax or the administration of any
laws, regulations or administrative requirements relating to any Tax.
SECTION 3.16 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) those substances
defined in or regulated under the following federal statutes and their state
counterparts, as each may be amended from time to time, and any regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
Act and the Clean Air Act; (B) petroleum and petroleum products including crude
oil and any fractions thereof; (C) natural gas, synthetic gas, and mixtures
thereof; (D) radon; (E) asbestos; (F) any other contaminant; and (G) any
substance with respect to which a federal, state or local agency requires
environmental investigation, monitoring, reporting or remediation; and (ii)
"Environmental Laws" means any federal, state or local law relating to (A)
releases or threatened releases of Hazardous Substances or materials containing
Hazardous Substances; (B) the manufacture, handling, transport, use, treatment,
storage or disposal of Hazardous Substances or materials containing Hazardous
Substances; or (C) otherwise relating to pollution of the environment.
24
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company: (i) the Company and each Company
Subsidiary is not in violation of any Environmental Law; (ii) none of the
properties owned or, to the Company's knowledge, leased by the Company or any
Company Subsidiary is contaminated with any Hazardous Substance; (iii) to the
Company's knowledge, the Company and each Company Subsidiary is not liable for
any off-site contamination; (iv) to the Company's knowledge, the Company and
each Company Subsidiary is not liable under any Environmental Law; (v) the
Company and each Company Subsidiary has all permits, licenses and other
authorizations required under any Environmental Law ("Environmental Permits");
(vi) the Company and each Company Subsidiary is in compliance with its
Environmental Permits and (vii) there are no pending, or, to the knowledge of
the Company, threatened claims against the Company or any Company Subsidiary
relating to any Environmental Law or Hazardous Substance.
SECTION 3.17 INSURANCE.
The Company and the Company Subsidiaries have obtained and maintained
in full force and effect insurance with responsible and reputable insurance
companies or associations in such amounts, on such terms and covering such
risks, including fire, earthquake and other risks insured against by extended
coverage, as is customarily carried by reasonably prudent persons conducting
businesses or owning assets similar to those of the Company and the Company
Subsidiaries, and each has maintained in full force and effect public liability
insurance, insurance against claims for personal injury or death or property
damage occurring in connection with the activities of the Company and the
Company Subsidiaries or any properties owned, occupied or controlled by the
Company or any Company Subsidiary, in such amount as is customarily carried by
reasonably prudent persons conducting businesses or owning assets similar to
those of the Company and the Company Subsidiaries.
SECTION 3.18 CERTAIN PRACTICES.
Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, none of the Company or any Company Subsidiary or
any director, officer, agent, consultant or employee of the Company or any
Company Subsidiary has: (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b)
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item or property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
which is in any manner related to the business or operations of the Company or
any Company Subsidiary, that was illegal under any federal, state or local Laws
of the United States or any other country having jurisdiction; (c) made any
payment to any customer or supplier of the Company or any Company Subsidiary or
any officer, director, partner, employee, consultant or agent of any such
customer or supplier, for the unlawful sharing of fees or to any such customer
or supplier or any such officer, director, partner, employee, consultant or
agent for the unlawful rebating of charges, or engaged in any other unlawful
reciprocal practice, or made any other unlawful payment or given any other
unlawful consideration to any such customer or supplier or any such officer,
director, partner, employee, consultant or agent, in respect of the business of
the Company or any Company Subsidiary; (d) made any other unlawful payment; or
(e) established or maintained any fund or
25
asset that has not been appropriately recorded in the books and records of the
Company that would be in violation of law.
SECTION 3.19 YEAR 2000.
To the Company's knowledge, each of the Company's and each Company
Subsidiary's products: (i) will record, store, process, calculate and present
calendar dates falling on and after January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products record,
store, process, calculate and present calendar dates on or before December 31,
1999, or calculate any information dependent on or relating to such dates
(collectively, "YEAR 2000 COMPLIANT"). To the Company's knowledge, all of the
Company's and each Company's Subsidiary's Information Technology (as defined
below) is Year 2000 Compliant. To the Company's knowledge, all of the Company's
and each Company's Subsidiary's essential hardware, software and services
received from vendors and suppliers is Year 2000 Compliant. For purposes of the
foregoing, the term "INFORMATION TECHNOLOGY" shall mean the internal mission
critical systems, including local and wide area networks, financial systems and
embedded microcontrollers within facility, security, telephone and other systems
(other than general utility services including gas, electric, telephone and
postal) that are owned by the Company or any Company Subsidiary in the conduct
of its business.
SECTION 3.20. INTEREST RATE AND FOREIGN EXCHANGE CONTRACTS.
Neither the Company nor any Company Subsidiary has entered into any
material interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements or foreign exchange contracts either
for the account of the Company or any Company Subsidiary.
SECTION 3.21. STATE TAKEOVER STATUTES.
The Company has taken all actions required to be taken by it in order
to exempt this Agreement and the transactions contemplated hereby from the
provisions of Section 203 of Delaware Law, and accordingly, such Sections do not
apply to the Merger or any of such transactions. No other "control share
acquisition," "fair price" or other anti-takeover laws or regulations enacted
under state or federal laws in the United States apply to this Agreement or any
of the transactions contemplated hereby.
SECTION 3.22. GOVERNMENT CONTRACTS.
(a) Except as disclosed in SCHEDULE 3.22, to the knowledge of the
Company, with respect to Government Contracts held by the Company or any of its
Subsidiaries, there is, as of the date hereof, no (i) civil fraud or criminal
investigation by any government investigative agency that is reasonably likely
to have a Material Adverse Effect on the Company, (ii) suspension or debarment
proceeding (or equivalent proceeding) against the Company or any Company
Subsidiaries that is reasonably likely to have a Material Adverse Effect on the
Company, (iii) request by the government for a contract price adjustment based
on a claimed disallowance by Defense Contract Audit Agency or claim of defective
pricing, (iv) claim or
26
equitable adjustment by the Company or any Company Subsidiaries against the U.S.
Government or any third party in excess of $500,000, (v) written notice
challenging, questioning or disallowing any cost(s) in excess of $500,000, or
(vi) notice of contract termination, cure notice or show cause notice.
(b) For the purposes of this Agreement, with respect to any party,
"Government Contract" means any prime contract, subcontract, teaming agreement
or arrangement, joint venture, basic ordering agreement, pricing agreement,
letter contract, purchase order, delivery order, change order, Bid or other
arrangement of any kind between such party or any of its Subsidiaries and (i)
the U.S. Government (acting on its own behalf or on behalf of another country or
international organization), (ii) any prime contractor of the U.S. Government or
(iii) any subcontractor with respect to any contract of a type described in
clauses (i) or (ii) above. For the purposes of this Agreement, with respect to
any party, "Bid" means any quotation, bid or proposal made by such party or any
of its Subsidiaries that if accepted or awarded would lead to a Contract with
the U.S. Government or any other person for the design, manufacture and sale of
products or the provision of services.
SECTION 3.23. BOARD APPROVAL; VOTE REQUIRED.
The Board of Directors of the Company has determined that the
transactions contemplated by this Agreement are fair to, advisable and in the
best interests of the Company and its stockholders and has resolved to recommend
to such stockholders that they vote in favor of this Agreement. The affirmative
vote at the Company Stockholders Meeting of a majority of all outstanding shares
of Company Common Stock to adopt this Agreement is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated hereby, including the Merger.
SECTION 3.24. OPINION OF FINANCIAL ADVISOR.
The Board of Directors of the Company has received the written opinion
dated the date hereof of Banc of America Securities LLC, the Company's financial
advisor, to the effect that the Exchange Ratio is fair from a financial point of
view to the Holders as of the date of such opinion. A copy of such opinion has
been delivered to Acquiror.
SECTION 3.25. BROKERS.
Other than Banc of America Securities LLC, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. Prior to the date
of this Agreement, the Company has provided to Acquiror a complete and correct
copy of all agreements between the Company and any Person set forth on SCHEDULE
3.25 pursuant to which such firm will be entitled to any payment relating to the
transactions contemplated by this Agreement.
27
SECTION 3.26. POOLING; TAX MATTERS.
Neither the Company nor any of its Affiliates has taken or agreed to
take any action or failed to take any action that would prevent the Merger from
(a) being treated for financial accounting purposes as a "pooling of interests"
in accordance with GAAP and the regulations and interpretations of the SEC; or
(b) constituting a reorganization within the meaning of Section 368(a) of the
Code. SCHEDULE 3.26 contains a true and complete list of all persons who may be
deemed to be Affiliates of the Company.
SECTION 3.27. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.
The information supplied by the Company or required to be supplied by
the Company (except to the extent revised or superseded by amendments or
supplements) for inclusion in the registration statement on Form S-4, or any
amendment or supplement thereto, relating to the registration under the
Securities Act of the shares of Acquiror Common Stock to be issued in the Merger
(including any amendments or supplements, the "Registration Statement") shall
not, at the time the Registration Statement is declared effective by the SEC,
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 were made, not
misleading. The information supplied by the Company or required to be supplied
by the Company (except to the extent revised or superseded by amendments or
supplements) for inclusion in the proxy statement relating to the Company
Stockholders Meeting (as hereinafter defined) (such proxy statement, as amended
or supplemented from time to time, the "Proxy Statement") shall not, on the date
the Proxy Statement is first mailed to the Holders, at the time of the Company
Stockholders Meeting and at the Effective Time, contain any untrue statement of
a material fact, or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they are
made, not false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies by or on behalf of the Company for the Company
Stockholders Meeting that has become false or misleading. Notwithstanding the
foregoing, the Company makes no representation, warranty or covenant with
respect to any information supplied or required to be supplied by Acquiror that
is contained in or omitted from any of the foregoing documents. If at any time
prior to the Effective Time any event or circumstance relating to the Company or
any Company Subsidiary, or their respective officers or directors, should be
discovered by the Company that should be set forth in an amendment or a
supplement to the Registration Statement or the Proxy Statement, as the case may
be, the Company shall promptly inform Acquiror. All documents that the Company
is responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF
ACQUIROR AND MERGER SUB
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Acquiror and Merger Sub jointly and severally represent and warrant to
the Company as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION.
Merger Sub is a corporation duly organized, validly existing and in
good standing under Delaware Law. Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement. As of the date
of this Agreement, except for obligations or liabilities incurred in connection
with its incorporation and organization and otherwise in connection with the
transactions contemplated by this Agreement, Merger Sub has not incurred,
directly or indirectly, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person.
SECTION 4.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
Merger Sub has heretofore delivered to the Company a complete and
correct copy of the certificate of incorporation and the bylaws of Merger Sub,
each as amended to date. Such certificate of incorporation and bylaws are in
full force and effect. Merger Sub is not in violation of any of the provisions
of its certificate of incorporation or bylaws.
SECTION 4.3. CAPITALIZATION.
The authorized capital of Merger Sub is as set forth in its certificate
of incorporation. As of the date hereof, there are One Hundred (100) shares of
Merger Sub Stock issued and outstanding, all of which are owned by Acquiror.
SECTION 4.4. AUTHORITY.
Merger Sub has the necessary corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Merger Sub and the consummation by Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Merger Sub
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Merger Sub and, assuming the due authorization, execution and delivery of this
Agreement by the Company and Acquiror, constitutes a legal, valid and binding
obligation of Merger Sub, enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
SECTION 4.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Merger Sub do not,
and the performance by Merger Sub of its obligations under this Agreement will
not: (i) conflict with or violate the certificate of incorporation or bylaws of
Merger Sub; (ii) subject to compliance with
29
the requirements set forth in Section 4.5(b) below, conflict with or violate any
Order applicable to Merger Sub or by which any of its properties or assets is
bound or affected; or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any Encumbrance on any of the
properties or assets of Merger Sub pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Merger Sub is a party or by which Merger Sub
or any of its properties or assets is bound or affected, except, in the case of
clauses (ii) and (iii) above, for any such conflicts, violations, breaches,
defaults or other alterations or occurrences that would not: (x) prevent or, to
the knowledge of Acquiror, delay in any material respect consummation of the
Merger; (y) otherwise prevent Merger Sub from performing its obligations under
this Agreement in any material respect; or (z) have a Material Adverse Effect on
Merger Sub.
(b) The execution and delivery of this Agreement by Merger Sub does
not, and the performance of this Agreement by Merger Sub will not, require by,
with respect to or on behalf of Merger Sub any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity,
except: (i) for (A) applicable requirements, if any, of the Exchange Act, the
Securities Act, state securities or blue sky laws, state takeover laws, the
NASD, and the HSR Act, (B) applicable requirements, if any, of the consents,
approvals, authorizations or permits described in SCHEDULE 5.5, and (C) filing
and recordation of appropriate merger documents as required by Delaware Law; or
(ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not: (x) prevent or, to
the knowledge of Acquiror, delay in any material respect consummation of the
Merger; (y) otherwise prevent Merger Sub from performing its obligations under
this Agreement in any material respect; or (z) have a Material Adverse Effect on
Merger Sub.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR
Acquiror hereby represents and warrants to the Company, subject to the
exceptions set forth herein and in the Acquiror's disclosure schedules (which
exceptions shall specifically identify a section, subsection or clause of a
single section or subsection hereof, as applicable, to which such exception
relates, it being understood and agreed that each such exception shall be deemed
to be disclosed both under such section, subsection or clause hereof and any
other section, subsection or clause hereof to which such disclosure reasonably
relates) that:
SECTION 5.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Each of Acquiror and each Subsidiary of Acquiror (each an "Acquiror
Subsidiary" and collectively, the "Acquiror Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each of Acquiror and each Acquiror Subsidiary
is duly qualified to conduct its business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its business makes such qualification necessary, except for such
failures that would not have a
30
Material Adverse Effect on Acquiror. Each of Acquiror and each Acquiror
Subsidiary has the requisite corporate power and authority to own, operate,
lease and otherwise to hold its assets and properties and to carry on its
business as now being conducted, except for such failures that would not have a
Material Adverse Effect on Acquiror.
SECTION 5.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
Acquiror has heretofore delivered to the Company a complete and correct
copy of the certificate of incorporation and the bylaws of Acquiror, each as
amended to date. Such articles of incorporation and bylaws are in full force and
effect. Acquiror is not in violation of any of the provisions of its certificate
of incorporation or bylaws.
SECTION 5.3. CAPITALIZATION.
(a) The authorized capital stock of Acquiror consists of one hundred
million (100,000,000) shares of Acquiror Common Stock and two million five
hundred thousand (2,500,000) shares of preferred stock, par value $.01 per share
("Acquiror Preferred Stock"). As of December 6, 1999: (i) 45,346,383 shares of
Acquiror Common Stock were issued and outstanding; (ii) 694,872 shares of
Acquiror Preferred Stock were issued and outstanding; (iii) 5,000,000 shares of
Acquiror Common Stock were reserved for issuance upon the exercise of
outstanding employee stock options or other rights to purchase or receive
Acquiror Common Stock granted under Acquiror's Stock Option Plan of 1997 (the
"Acquiror Stock Option Plan"); (iv) 500,000 shares of Acquiror Common Stock were
reserved for issuance pursuant to Acquiror's Employee Stock Purchase Plan (the
"Acquiror Stock Purchase Plan"); and (v) 966,398 shares of Acquiror Common Stock
were held by Acquiror in Acquiror's treasury.
(b) All outstanding shares of capital stock of Acquiror are, and all
shares that may be issued pursuant to the Acquiror Stock Option Plan or Acquiror
Stock Purchase Plan will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. Except as set forth
in this Section 5.3 and except for changes since September 30, 1999 resulting
from the issuance of shares of Acquiror Common Stock pursuant to the Acquiror
Stock Option Plan or the Acquiror Stock Purchase Plan or as expressly permitted
by this Agreement: (i) there are not issued, reserved for issuance or
outstanding (A) any shares of capital stock or other voting securities of
Acquiror, (B) any securities of Acquiror or any Acquiror Subsidiary convertible
into or exchangeable or exercisable for shares of capital stock or voting
securities of or ownership interests in Acquiror or any Acquiror Subsidiary, (C)
any warrants, calls, options or other rights to acquire from Acquiror or any
Acquiror Subsidiary, or any obligation of Acquiror or any Acquiror Subsidiary to
issue, any capital stock, voting securities or other ownership interests in, or
securities convertible into or exchangeable or exercisable for capital stock or
voting securities of or other ownership interests in, Acquiror or any Acquiror
Subsidiary; and (ii) there are no outstanding obligations of Acquiror or any
Acquiror Subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities.
(c) Except as described in SCHEDULE 5.3, neither Acquiror nor any
Acquiror Subsidiary is a party to any agreement restricting the purchase or
transfer of, relating to the
31
voting of, requiring registration of, or granting any preemptive or, except as
provided by the terms of Acquiror Stock Option Plans or the Acquiror Stock
Purchase Plan, antidilutive rights with respect to, any securities of the type
described in this Section 5.3.
SECTION 5.4. AUTHORITY.
(a) Acquiror has the necessary corporate power and authority to enter
into this Agreement and to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Acquiror and the consummation by Acquiror of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other proceedings on the part of Acquiror are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby. Acquiror has taken all steps necessary, as the sole stockholder of
Merger Sub, to authorize and approve the execution, delivery and performance of
the terms of this Agreement by Merger Sub. This Agreement has been duly executed
and delivered by Acquiror and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
Acquiror, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
(b) The Board of Directors of Acquiror has, on December 8, 1999, by
unanimous resolution (i) approved and adopted this Agreement and the
transactions contemplated by this Agreement and (ii) determined that the Merger
is in the best interests of Acquiror and its stockholders and that the terms of
this Agreement are fair to Acquiror and its stockholders.
SECTION 5.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Acquiror do not,
and the performance by Acquiror of its obligations under this Agreement will
not: (i) conflict with or violate the certificate of incorporation or bylaws of
Acquiror; (ii) subject to obtaining the approvals and compliance with the
requirements set forth in Section 5.5(b) below, conflict with or violate any
Order applicable to Acquiror or any Acquiror Subsidiary or by which any of their
respective properties or assets is bound or affected; or (iii) except as set
forth in SCHEDULE 5.5, result in any breach of or constitute a default (or an
event that with or without notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an Encumbrance on
any of the properties or assets of Acquiror or any Acquiror Subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Acquiror or any
Acquiror Subsidiary is a party or by which Acquiror, any Acquiror Subsidiary or
any of their respective properties or assets is bound or affected, except, in
the case of clauses (ii) and (iii) above, for any such conflicts, violations,
breaches, defaults or other alterations or occurrences that would not: (x)
prevent or, to the knowledge of Acquiror, delay in any material respect
consummation of the Merger; (y) otherwise prevent Acquiror from performing its
obligations under this Agreement in any material respect; or (z) have a Material
Adverse Effect on Acquiror.
32
(b) The execution and delivery of this Agreement by Acquiror does not,
and the performance of this Agreement by Acquiror will not, require by, with
respect to or on behalf of Acquiror or any Acquiror Subsidiary any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of the
Securities Act, state securities or blue sky laws, Exchange Act, state takeover
laws, the NYSE, the NASD and the HSR Act, (B) applicable requirements, if any,
of the consents, approvals, authorizations or permits described in SCHEDULE 5.5,
and (C) filing and recordation of appropriate merger documents as required by
Delaware Law, or (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not:
(x) prevent or, to the knowledge of Acquiror, delay in any material respect
consummation of the Merger; (y) otherwise prevent Acquiror from performing its
obligations under this Agreement in any material respect; or (z) have a Material
Adverse Effect on Acquiror.
SECTION 5.6. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Acquiror, and each Acquiror Subsidiary required to file, has filed
all forms, reports, statements and other documents required to be filed with the
SEC since January 1, 1997, and has heretofore furnished to the Company, in the
form filed with the SEC since such date, together with any amendments thereto,
all of such forms, reports, statements and other documents, including without
limitation, its (i) Annual Reports on Form 10-K; (ii) Quarterly Reports on Form
10-Q; (iii) proxy statements relating to meetings of stockholders (whether
annual or special); (iv) reports on Form 8-K; and (v) other reports or
registration statements filed by Acquiror and/or such Acquiror Subsidiaries
(collectively, the "Acquiror SEC Reports"). As of their respective filing dates,
the Acquiror SEC Reports (including all Acquiror SEC Reports filed after the
date of this Agreement and prior to the Effective Time): (x) complied (or will
comply when filed) as to form in all material respects with the requirements of
the Exchange Act and the Securities Act, as applicable; and (y) did not or shall
not at the time they are filed contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. No Acquiror Subsidiary is required to file any form,
report, statement or other document with the SEC except in conjunction with the
filling of the Acquiror SEC Reports.
(b) The audited consolidated financial statements and unaudited interim
financial statements of Acquiror (including the notes and schedules thereto)
contained or incorporated by reference in the Acquiror SEC Reports (including
all Acquiror SEC Reports filed after the date of this Agreement and prior to the
Effective Time) (the "Acquiror Financial Statements") complied or shall comply
in all material respects with applicable GAAP accounting requirements and with
the rules and regulations of the SEC with respect thereto. The Acquiror
Financial Statements present or shall present fairly in all material respects
the consolidated financial position of Acquiror and the Acquiror Subsidiaries at
the respective dates thereof and the consolidated results of operations and cash
flows of Acquiror and the Acquiror Subsidiaries for the periods indicated, in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be noted therein) and subject in the case of interim
financial statements to normal year-end adjustments.
33
(c) Except as disclosed in the Acquiror SEC Reports filed prior to the
date of this Agreement, none of Acquiror or any of the Acquiror Subsidiaries is
indebted to any director, officer, employee, agent or consultant of Acquiror or
any of the Acquiror Subsidiaries (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses) and no such person is
indebted to Acquiror or any of the Acquiror Subsidiaries, and there have been no
other transactions of the type required to be disclosed pursuant to Items 402
and 404 of Regulation S-K under the Exchange Act.
(d) Acquiror has filed all exhibits to the Acquiror SEC Reports
required by Item 601 of SEC Regulation S-K and has filed (or made available to
the Company) all material contracts that would have been required to be filed if
there were no exclusions or exceptions in paragraph (b)(10) of such Item 601.
SECTION 5.7. NO UNDISCLOSED LIABILITIES.
Neither Acquiror nor any of the Acquiror Subsidiaries has any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, except: (a) liabilities or obligations reflected in the Acquiror SEC
Reports; (b) liabilities or obligations incurred since September 30, 1999, in
the ordinary course of business consistent with past practices that have not
had, and are not reasonably likely to have (without taking into account the
effects of the consummation of the Merger), a Material Adverse Effect on
Acquiror; and (c) liabilities or obligations that have not had, and are not
reasonably likely to have (without taking into account the effects of the
consummation of the Merger), a Material Adverse Effect on Acquiror.
SECTION 5.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since September 30, 1999, except as contemplated by this Agreement or
as disclosed in any Acquiror SEC Report filed since September 30, 1999, or as
set forth in SCHEDULE 5.8, Acquiror and the Acquiror Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since such date, there has not been (a) any change in the
business, operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of Acquiror
or any Acquiror Subsidiary having, individually or in the aggregate, a Material
Adverse Effect on Acquiror, (b) any declaration, setting aside or payment of any
dividend or distribution in respect of the shares of its capital stock or any
redemption, purchase or other acquisition of any of its securities, or (c) any
agreement by Acquiror or any Acquiror Subsidiary to take any of the actions
described in this Section 5.8 except as expressly contemplated by this
Agreement. Between September 30, 1999, and the date of this Agreement
(inclusive), neither Acquiror nor any of the Acquiror Subsidiaries has taken, or
agreed to take, any action that would constitute a material breach of Section
6.3 or Section 6.4 if taken after the date of this Agreement.
SECTION 5.9. ABSENCE OF LITIGATION.
Except as set forth in the Acquiror SEC Reports or in SCHEDULE 5.9,
there are: (a) no claims, actions, suits, investigations, or proceedings pending
or, to Acquiror's knowledge,
34
threatened against Acquiror or any of the Acquiror Subsidiaries before any
court, administrative, governmental, arbitral, mediation or regulatory authority
or body, domestic or foreign, that would be reasonably likely to have a Material
Adverse Effect on Acquiror or that would prevent or enjoin, or delay in any
material respect, consummation of the Merger or the transactions contemplated
hereby; and (b) no Orders of any Governmental Entity or arbitrator outstanding
against Acquiror or any Acquiror Subsidiary that would reasonably be likely to
have a Material Adverse Effect on Acquiror or that would prevent or enjoin, or
delay in any material respect, consummation of the Merger or the transactions
contemplated hereby.
SECTION 5.10 CERTAIN PRACTICES.
Except as would not, individually or in the aggregate, have a Material
Adverse Effect on Acquiror, none of Acquiror or any Acquiror Subsidiary or any
director, officer, agent, consultant or employee of Acquiror or any Acquiror
Subsidiary has: (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b)
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item or property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
which is in any manner related to the business or operations of Acquiror or any
Acquiror Subsidiary, that was illegal under any federal, state or local Laws of
the United States or any other country having jurisdiction; (c) made any payment
to any customer or supplier of Acquiror or any Acquiror Subsidiary or any
officer, director, partner, employee, consultant or agent of any such customer
or supplier, for the unlawful sharing of fees or to any such customer or
supplier or any such officer, director, partner, employee, consultant or agent
for the unlawful rebating of charges, or engaged in any other unlawful
reciprocal practice, or made any other unlawful payment or given any other
unlawful consideration to any such customer or supplier or any such officer,
director, partner, employee, consultant or agent, in respect of the business of
Acquiror or any Acquiror Subsidiary; (d) made any other unlawful payment; or (e)
established or maintained any fund or asset that has not been appropriately
recorded in the books and records of Acquiror that would be in violation of law.
SECTION 5.11. GOVERNMENT CONTRACTS.
Except as disclosed in SCHEDULE 5.11, to the knowledge of the Acquiror,
with respect to Government Contracts held by Acquiror or any of its
Subsidiaries, there is, as of the date hereof, no (i) civil fraud or criminal
investigation by any government investigative agency that is reasonably likely
to have a Material Adverse Effect on the Acquiror, (ii) suspension or debarment
proceeding (or equivalent proceeding) against the Acquiror or any Acquiror
Subsidiaries that is reasonably likely to have a Material Adverse Effect on the
Acquiror, (iii) request by the government for a contract price adjustment based
on a claimed disallowance by Defense Contract Audit Agency or claim of defective
pricing, (iv) claim or equitable adjustment by the Acquiror or any Acquiror
Subsidiaries against the U.S. Government or any third party in excess of
$500,000, (v) written notice challenging, questioning or disallowing any cost(s)
in excess of $500,000, or (vi) notice of contract termination, cure notice or
show cause notice.
35
SECTION 5.12 BOARD APPROVAL; VOTE REQUIRED.
The Board of Directors of Acquiror has determined that the transactions
contemplated by this Agreement are advisable and in the best interests of
Acquiror and its stockholders. The affirmative vote of the Board of Directors to
approve the transactions contemplated by this Agreement is the only vote
necessary for consummation by Acquiror of the Merger and the other transactions
contemplated hereby.
SECTION 5.13. OPINION OF FINANCIAL ADVISOR.
The Board of Directors of Acquiror has received the written opinion of
Credit Suisse First Boston Corporation, Acquiror's financial advisor, addressed
to the stockholders of Acquiror, to the effect that, as of the date of such
opinion, the Exchange Ratio is fair from a financial point of view to the
holders of Acquiror Common Stock. A copy of such opinion has been delivered to
the Company and such opinion has not been withdrawn or modified in any material
respect.
SECTION 5.14. BROKERS.
Other than Credit Suisse First Boston Corporation, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Acquiror. Within two (2)
days subsequent to the date of this Agreement, the Acquiror shall provide to the
Company a complete and correct copy of all agreements between the Acquiror and
any Person pursuant to which such Person will be entitled to any payment
relating to the transactions contemplated by this Agreement.
SECTION 5.15. POOLING; TAX MATTERS.
Neither Acquiror nor any of its Affiliates has taken or agreed to take
any action or failed to take any action that would prevent the Merger from: (a)
being treated for financial accounting purposes as a "pooling of interests" in
accordance with GAAP and the regulations and interpretations of the SEC; or (b)
constituting a reorganization within the meaning of Section 368(a) of the Code.
SCHEDULE 5.15 contains a true and complete list of all persons who may be deemed
to be Affiliates of Acquiror.
SECTION 5.16. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.
The information supplied by Acquiror or required to be supplied by
Acquiror (except to the extent revised or superseded by amendments or
supplements) for inclusion in the Registration Statement shall not, at the time
the Registration Statement is declared effective by the SEC, 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 were made, not misleading. The information
supplied by Acquiror or required to be supplied by Acquiror (except to the
extent revised or superseded by amendments or supplements) for inclusion in the
Proxy Statement shall not, on the date the
36
Proxy Statement is first mailed to the Company's stockholders, at the time of
the Company Stockholders Meeting and at the Effective Time, contain any
statement that, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies by or on behalf of the Company for the Company
Stockholders Meeting that has become false or misleading. Notwithstanding the
foregoing, Acquiror makes no representation, warranty or covenant with respect
to any information supplied or required to be supplied by the Company that is
contained in or omitted from any of the foregoing documents. If at any time
prior to the Effective Time any event or circumstance relating to Acquiror or
any Acquiror Subsidiary, or their respective officers or directors, should be
discovered by Acquiror that should be set forth in an amendment or a supplement
to the Registration Statement or the Proxy Statement, as the case may be,
Acquiror shall promptly inform the Company. All documents that Acquiror is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act.
SECTION 5.17. SHARE OWNERSHIP
Neither Acquiror nor any Affiliate of Acquiror, beneficially owned, as
of the date of this Agreement, any Shares of the Company and none of the
forgoing is an "Interested Stockholder" for purposes of Section 203 of the
Delaware Law.
SECTION 5.18 ENVIRONMENTAL MATTERS.
Except as would not, individually or in the aggregate, have a Material
Adverse Effect on Acquiror: (i) Acquiror and each Acquiror Subsidiary is not in
violation of any Environmental Law; (ii) none of the properties owned or to
Acquiror's knowledge, leased by Acquiror or any Acquiror Subsidiary is
contaminated with any Hazardous Substance; (iii) to Acquiror's knowledge,
Acquiror and each Acquiror Subsidiary is not liable for any off-site
contamination; (iv) to Acquiror's knowledge, Acquiror and each Acquiror
Subsidiary is not liable under any Environmental Law; (v) Acquiror and each
Acquiror Subsidiary has all Environmental Permits; (vi) Acquiror and each
Acquiror Subsidiary is in compliance with its Environmental Permits and (vii)
there are no pending, or, to the knowledge of Acquiror, threatened claims
against Acquiror or any Acquiror Subsidiary relating to any Environmental Law or
Hazardous Substance.
ARTICLE VI.
COVENANTS
SECTION 6.1. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company hereby covenants and agrees that, prior to the Effective
Time, unless otherwise expressly contemplated by this Agreement or consented to
in writing by Acquiror (which consent shall not be unreasonably withheld,
delayed or conditioned), the Company shall, and shall cause each Company
Subsidiary to: (a) operate its business in the usual and ordinary course
consistent with past practices; (b) use its reasonable best efforts to preserve
substantially
37
intact its business organization, maintain its rights and franchises, retain the
services of its respective principal officers and key employees and maintain its
relationship with its respective principal customers and suppliers; (c) use its
reasonable best efforts to maintain and keep its properties and assets in as
good repair and condition as at present, ordinary wear and tear excepted; (d)
use its reasonable best efforts to keep in full force and effect insurance
comparable in amount and scope of coverage to that currently maintained; (e)
prepare and file all Tax returns required to be filed in a timely manner, and in
a manner consistent with past practices and applicable laws and regulations; (f)
timely file with the SEC all reports required to be filed under the Exchange
Act, which reports (including the unaudited interim financial statements
included in such reports) shall comply in all material respects with the
Exchange Act, the rules and regulations promulgated thereunder and all
applicable accounting requirements; and (g) operate its business in accordance
with the terms of its licenses and in all material respects with all applicable
laws.
SECTION 6.2. NEGATIVE COVENANTS OF THE COMPANY.
Except as set forth in SCHEDULE 6.2 or as expressly contemplated by
this Agreement or otherwise consented to in writing by Acquiror (which consent
shall not be unreasonably withheld, delayed or conditioned), from the date
hereof until the Effective Time the Company shall not, and shall cause each
Company Subsidiary not to, do any of the following:
(a) (i) increase the periodic compensation payable to or to become
payable to any of its directors, executive officers or any key employees; (ii)
grant any severance or termination pay (other than pursuant to existing
severance arrangements or policies as in effect on the date of this Agreement)
to, or enter into or modify any employment or severance agreement with, any of
its directors, officers or employees; (iii) adopt or amend any employee benefit
plan or arrangement, except as may be required by applicable law; or (iv) pay
any cash bonuses; provided, however, without the prior written consent of
Acquiror, the Company shall be permitted during each full fiscal quarter of the
Company, beginning with the fiscal quarter of the Company beginning on December
31, 1999, between the date hereof and the Effective Time to pay cash bonuses and
increase periodic compensation as described in clause (i) hereof as long as the
aggregate amount of any such cash bonuses and the annualized effect of such
compensation increases does not exceed $2,000,000 from the date hereof until
Closing (except any retention bonuses previously disclosed to Acquiror) or (v)
except as previously disclosed to Acquiror, make any loans to any officer,
director or key employee of the Company.
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of Company Common Stock;
(c) (i) redeem, repurchase or otherwise reacquire any shares of Company
Common Stock or any securities or obligations convertible into or exchangeable
for any shares of Company Common Stock or other securities or obligations of the
Company, or any options, warrants or conversion or other rights to acquire any
shares of Company Common Stock or any such other securities or obligations
(except in connection with the exercise of the Options and Director Options in
accordance with their terms); (ii) effect any merger, consolidation,
restructuring, reorganization or recapitalization or adopt a plan of complete or
partial liquidation
38
or dissolution; or (iii) split, combine or reclassify any shares of Company
Common Stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for, shares of Company
Common Stock or other securities;
(d) (i) issue, pledge, deliver, award, grant or sell, or register under
the Securities Act or the Exchange Act or otherwise file any registration
statement under any such statute covering, or authorize or propose the issuance,
pledge, delivery, award, grant or sale of (including the grant of any
Encumbrances on) or registration of or filing of any registration statement
covering, any shares of any class of its capital stock (including shares of
Treasury Stock) or other securities (except in connection with the Options and
Director Options), any securities convertible into or exercisable or
exchangeable for any such shares or other securities, or any rights, warrants or
options to acquire any such shares or other securities (except for the issuance
of options to acquire shares of Company Common Stock: (A) to new employees of
the Company that are hired after the date hereof; (B) to employees of the
Company on a quarterly basis pursuant to the Company's performance-based equity
incentive program; provided that the number of shares of Company Common Stock
subject to options issued by the Company pursuant to this clause (B) shall not
exceed 50,000 in the aggregate per any fiscal quarter of the Company beginning
with the fiscal quarter of the Company beginning on December 31, 1999; and (C)
to directors of the Company (in their capacity as directors) in connection with
annual grants of stock options by the Company to the members of the Company's
Board of Directors; provided that the number of shares of Company Common Stock
subject to options issued by the Company pursuant to this clause (C) shall not
exceed options covering 20,000 shares of Company Common Stock; provided, that
any issuances of options by the Company pursuant to clauses (A), (B) and (C)
shall only be to the extent such issuances are in the ordinary course of
business and consistent with past practice); or (ii) amend or otherwise modify
the terms of any such rights, warrants or options (including, without
limitation, any Option or Director Option);
(e) (i) acquire or agree to acquire, by merging or consolidating with,
by purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or any division (other than a Company Subsidiary) thereof
(except that prior to the initial filing of the Registration Statement, the
Company may enter into a transaction to acquire substantially all the equity
securities or assets of an entity (a "Company Acquisition") so long as the
aggregate consideration payable for such target entity in a Company Acquisition
consists solely of cash in an amount not to exceed $10 million) or (ii) make or
commit to make any investments or capital expenditures, other than investments
or capital expenditures not exceeding in the aggregate $1,000,000 from the date
hereof until Closing, and that are solely for purposes related to computer
hardware and software, leaseholds, furniture and fixtures;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
encumber or dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise encumber or dispose of, any of its assets, except for
dispositions in the ordinary course of business and consistent with past
practice or sales that do not exceed $200,000 in the aggregate;
(g) propose or adopt any amendment to its certificate or articles of
incorporation or its bylaws;
39
(h) (i) make any material change in any of its methods of accounting;
or (ii) make or rescind any express or deemed election relating to Taxes, settle
or compromise any claim, action, lawsuit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes (except where the amount
of such settlements or controversies, individually or in the aggregate, does not
exceed $100,000), or change any of its methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ended December 31, 1998, except,
in the case of clause (i) or clause (ii), as may be required by applicable law
or regulations or GAAP;
(i) incur or increase any obligation for borrowed money (except that
the Credit Facility may be increased by no more than $10 million in general and
an additional $10 million in the case that the Company undertakes a Company
Acquisition), whether or not evidenced by a note, bond, debenture or similar
instrument, or capitalized lease obligation or issue or sell any debt securities
or any warrants or rights to acquire any debt securities of the Company or any
Company Subsidiary, or any guarantee of any obligation for borrowed money, other
than purchase money indebtedness not to exceed $500,000 in the aggregate, except
in the ordinary course of business under existing loan agreements or capitalized
leases, or prepay, before the scheduled maturity thereof, any of its long-term
debt;
(j) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any Affiliate
(except a Company Subsidiary) which involves the transfer of consideration or
has a financial impact on such entity, other than pursuant to such agreements,
arrangements, or understandings existing on the date of this Agreement;
(k) except in the ordinary course of business, enter into any contract,
agreement, commitment, arrangement, lease (including with respect to personal
property), policy or other instrument that has a value in excess of $50,000;
(l) adjust, split, combine or reclassify any capital stock;
(m) except for transactions in the ordinary course of business,
terminate or amend in a material way, or waive any provision of, any material
Company Contract; provided that this provision shall not prohibit the Company
from entering into customer and service contracts in the ordinary course of
business;
(n) settle any material claim, action or proceeding involving money
damages, except any settlement in the ordinary course of business where the
amount of such settlement individually does not exceed $25,000, and in the
aggregate with all other such settlements, does not exceed $50,000;
(o) take any action that would, or would be reasonably likely to,
prevent the Merger from being accounted for as a "pooling of interests" in
accordance with GAAP and the rules and regulations of the SEC;
40
(p) take any action that is intended or would reasonably be expected to
result in any of the Company's representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time prior to
the Effective Time, or in any of the conditions to the Merger set forth in
Article VIII not being satisfied or in a violation of any provision of this
Agreement; or
(q) agree in writing or otherwise to do any of the foregoing.
SECTION 6.3. RESERVED.
SECTION 6.4. NEGATIVE COVENANTS OF ACQUIROR.
Except as expressly contemplated by this Agreement, from the date
hereof until the Effective Time, without the written consent of the Company
(which consent shall not be unreasonably withheld, delayed or conditioned)
Acquiror shall not, and shall not permit any Acquiror Subsidiary to, do any of
the following:
(a) (i) declare or pay any dividend on, or make any other distribution
in respect of, outstanding shares of Acquiror Common Stock; (ii) repurchase,
redeem or otherwise acquire any outstanding shares of capital stock or other
securities of, or other ownership interests in, Acquiror or any Acquiror
Subsidiary (except for those repurchases related to shares owned by employees or
former employees of Acquiror or any Acquiror Subsidiary); or (iii) except to the
extent not accounted for in Section 2.5 hereof, split, combine or reclassify any
shares of Acquiror Common Stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of, or in substitution for, shares
of Acquiror Common Stock or other securities;
(b) take any action that is intended or would reasonably be expected to
result in any of Acquiror's representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time prior to
the Effective Time, or in any of the conditions to the Merger set forth in
Article VIII not being satisfied or in a violation of any provision of this
Agreement;
(c) take any action that would, or would be reasonably likely to,
prevent the Merger from being accounted for as a "pooling of interests" in
accordance with GAAP and the rules and regulations of the SEC;
(d) take any action that would, or would be reasonably likely to,
prevent the Merger from qualifying as a reorganization under the provisions of
Section 368(a) of the Code; or
(e) agree in writing or otherwise to do any of the foregoing.
ARTICLE VII.
ADDITIONAL AGREEMENTS
41
SECTION 7.1. ACCESS AND INFORMATION.
During the period from the date hereof to the Effective Time (the
"Interim Period"), the Company and Acquiror shall, and shall cause the Company
Subsidiaries and the Acquiror Subsidiaries, respectively, to, afford to each
other and their respective officers, employees, accountants, consultants, legal
counsel and other representatives reasonable access during normal business hours
(and at such other times as the parties may mutually agree) to the properties,
executive personnel and all information concerning the business, properties,
contracts, records and personnel of the Company and the Company Subsidiaries or
Acquiror and the Acquiror Subsidiaries, as the case may be, as such other party
may reasonably request; provided that no investigation pursuant to this Section
7.1 shall affect any representations or warranties made herein or the conditions
to the obligations of the respective parties to consummate the Merger.
SECTION 7.2. CONFIDENTIALITY.
Acquiror and the Company each acknowledge and agree that all
information received by it (the "Receiving Party") from or on behalf of the
other party in connection with the transactions contemplated under this
Agreement shall be deemed received pursuant to the confidentiality letter
agreements, effective as of November 23, 1999 (the "Company Confidentiality
Agreement"), and October 25, 1999 (the "Acquiror Confidentiality Agreement"),
between the Company and Acquiror (together, the "Confidentiality Agreements"),
and such Receiving Party shall, and shall cause its officers, directors,
employees, Affiliates, financial advisors and agents to, comply with the
provisions of the Confidentiality Agreements with respect to such information,
and the provisions of the Confidentiality Agreements are hereby incorporated
herein by reference with the same effect as if fully set forth herein, provided,
however, that (i) in the event the Merger is consummated, the term of the
Confidentiality Agreements shall survive the Closing Date with respect to the
safeguarding of confidential information and (ii) in the event this Agreement is
terminated pursuant to Article IX, the Confidentiality Agreements shall survive
such termination in their entirety and remain in full force and effect.
SECTION 7.3. PROXY STATEMENT AND REGISTRATION STATEMENT; STOCKHOLDERS
MEETINGS.
(a) As soon as practicable following the date of this Agreement but no
later than January 15, 2000, the Company shall prepare and file with the SEC the
Proxy Statement and Acquiror shall prepare and file with the SEC the
Registration Statement in which the Proxy Statement will be included as a
prospectus. Each of the Company and Acquiror shall use reasonable best efforts
to have the Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing. The Company shall use reasonable
best efforts to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act. Acquiror also shall take any action
required to be taken by the SEC, NYSE or under any applicable state securities
laws in connection with the issuance of Acquiror Common Stock in the Merger and
the Company shall furnish all information concerning the Company and the holders
of Company Common Stock as may be reasonably requested in connection with any
such action. No filing of, or amendment or supplement to, the Registration
Statement will be
42
made by Acquiror without the Company's prior consent (which shall not be
unreasonably withheld, delayed or conditioned) and without providing the Company
the reasonable and adequate opportunity to review and comment thereon. Acquiror
shall advise the Company, promptly after it receives notice thereof, of the time
when the Registration Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of Acquiror Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
If at any time prior to the Effective Time any information relating to the
Company or Acquiror, or any of their respective Affiliates, officers or
directors, should be discovered by the Company or Acquiror that should be set
forth in an amendment or supplement to any of the Registration Statement or the
Proxy Statement, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party that discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the stockholders of the Company and
Acquiror.
(b) The Company shall, as promptly as practicable after the
Registration Statement is declared effective under the Securities Act, duly
call, give notice of, convene and hold a meeting of its stockholders (the
"Company Stockholders Meeting") in accordance with Delaware Law and its
certificate of incorporation and bylaws for the purpose of obtaining the Company
Stockholder Approval as required by Delaware Law and otherwise, and shall,
through the unanimous action of its Board of Directors, declare that this
Agreement is advisable and recommend to its stockholders the approval and
adoption of this Agreement, the Merger and the other transactions contemplated
hereby; provided, however, that the Board of Directors of the Company shall
submit this Agreement to the Company's stockholders, whether or not the Board of
Directors of the Company at any time subsequent to the date hereof determines
that this Agreement is no longer advisable or recommends that the stockholders
of the Company reject it. Unless the Board of Directors of the Company has
withdrawn its recommendation of this Agreement in compliance herewith, the
Company shall use reasonable best efforts to solicit from its stockholders
proxies in favor of the approval and adoption of this Agreement and the Merger
and to secure the vote or consent of stockholders required by Delaware Law and
its certificate of incorporation and bylaws to approve and adopt this Agreement
and the Merger.
(c) Notwithstanding the provisions of Section 7.3(b), in the event that
an Acquisition Proposal for the Company received by the Company in writing
constitutes a Superior Proposal and the Board of Directors of the Company has
resolved to recommend such Superior Proposal to its stockholders, the Board of
Directors of the Company may, at any time prior to the Stockholders Meeting,
withdraw its recommendation of this Agreement as required under Section 7.3(b)
hereof and recommend such the Superior Proposal to its stockholders (i) if, but
only if, the Company (A) complies fully with this Section 7.3(c) and (B)
provides Acquiror with at least five (5) Business Days' prior written notice of
its intent to withdraw its recommendation of this Agreement along with a
description in writing of all of the material terms and conditions of such
Superior Proposal and (ii) if, in the event that during such five (5) Business
Days
43
Acquiror makes a counter proposal to such Superior Proposal (the "Acquiror
Counter Proposal"), the Company's Board of Directors in good faith, taking into
account the advice of its outside financial advisors, determines that the
Acquiror Counter Proposal is not at least as favorable to the Company's
stockholders as the Superior Proposal (taking into account all financial and
strategic considerations and other relevant factors, including relevant legal,
financial, regulatory and other aspects of such proposals, and the conditions,
prospects and time required for completion of such proposal).
SECTION 7.4. HSR ACT MATTERS
Acquiror, Merger Sub and the Company (as may be required pursuant to
the HSR Act) promptly will complete all documents required to be filed with the
Federal Trade Commission and the United States Department of Justice in order to
comply with the HSR Act and, not later than fifteen (15) calendar days after the
date hereof, together with the Persons, if any, who are required to join in such
filings, shall file such documents with the appropriate Governmental Entities.
Acquiror, Merger Sub and the Company shall promptly furnish all materials
thereafter required by any of the Governmental Entities having jurisdiction over
such filings, and shall take all reasonable actions and shall file and use all
reasonable best efforts to have declared effective or approved all documents and
notifications with any such Governmental Entity, as may be required under the
HSR Act or other federal or state antitrust laws for the consummation of the
Merger and the other transactions contemplated hereby. Acquiror and the Company
shall each pay one-half of the filing fees related to compliance with the HSR
Act in connection with the transactions contemplated hereby.
SECTION 7.5. PUBLIC ANNOUNCEMENTS.
The initial press release relating to this Agreement shall be a joint
press release and thereafter Acquiror and the Company shall consult with each
other and use reasonable efforts to agree upon the text of any press release or
public statement before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated hereunder and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with
Nasdaq or the NYSE.
SECTION 7.6. INDEMNIFICATION.
(a) The certificate of incorporation and bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the certificate of incorporation and bylaws of the Company on the date
of this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six (6) years after the Effective Time in any manner
that would adversely affect the rights thereunder of persons who at any time
prior to the Effective Time were identified as prospective indemnitees under the
certificate of incorporation or bylaws of the Company in respect of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), unless such
modification is required by applicable law.
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(b) From and after the Effective Time, Acquiror shall cause the
Surviving Corporation to indemnify, defend and hold harmless the present and
former officers, directors and employees of the Company and the Company
Subsidiaries (collectively, the "Indemnified Parties") against all losses,
expenses, claims, damages, liabilities or amounts that are paid, with the
approval of Acquiror, in settlement of or otherwise in connection with, any
claim, action, suit, proceeding or investigation (a "Claim"), based in whole or
in part on the fact that such person is or was such a director, officer or
employee and arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement), in each case to the fullest extent permitted under Delaware Law
(and shall pay expenses in advance of the final disposition of any such action
or proceeding to each Indemnified Party to the fullest extent permitted under
Delaware Law upon receipt from the Indemnified Party to whom expenses are
advanced of the undertaking to repay such advances contemplated by Section
145(e) of Delaware Law), provided, however, that no Indemnified Party shall be
entitled to any indemnification or expenses pursuant to this Section 7.6 in
respect of any Claim, issue or matter as to which such Indemnified Party shall
have been adjudged to be grossly negligent or to have committed or engaged in
willful misconduct. To that end, Acquiror shall maintain the Company's existing
officers' and directors' liability insurance policy ("D&O Insurance") for a
period of not less than six (6) years after the Effective Time, but only to the
extent related to actions or omissions prior to the Effective Time; provided,
however, that Acquiror may substitute therefor policies of substantially similar
coverage and amounts containing terms no less advantageous to such former
directors or officers of the Company and provided, further, Acquiror shall not
be required to pay an annual premium for such insurance in excess of $100,000.
(c) In the event any Claim or Claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such Claim or
Claims shall continue until disposition of any and all such claims. Any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under Delaware Law, the Company's
certificate of incorporation or bylaws or such agreements, as the case may be,
shall be made by any method permitted under Delaware Law. Nothing set forth
herein shall impair any rights or obligations of any Indemnified Party. In the
event that any Claim or Claims are brought against any Indemnified Party
(whether arising before or after the Effective Time), Acquiror may select
counsel for the defense of such Claim, which counsel shall be reasonably
acceptable to such Indemnified Party.
(d) Any Indemnified Party seeking indemnification under this Section
7.6, promptly upon learning of any such Claim, shall notify Acquiror and the
Surviving Corporation (although the failure so to notify Acquiror and the
Surviving Corporation shall not relieve Acquiror and the Surviving Corporation
from any liability that Acquiror and the Surviving Corporation may have under
this Section 7.6, except to the extent such failure prejudices Acquiror or the
Surviving Corporation), and shall deliver to Acquiror and the Surviving
Corporation the undertaking contemplated by Section 145(e) of Delaware Law.
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SECTION 7.7. FURTHER ACTION; REASONABLE BEST EFFORTS.
(a) Each of the parties hereto shall use all reasonable best efforts to
take, or cause to be taken, all appropriate action, and do, or cause to be done,
all things necessary, proper or advisable under applicable laws or otherwise to
consummate and make effective the transactions contemplated by this Agreement as
promptly as practicable, including, without limitation, using all reasonable
best efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities and parties
to contracts with the Company, Acquiror or any Company Subsidiary or Acquiror
Subsidiary as are necessary for the transactions contemplated herein. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each party to this Agreement shall use all reasonable best efforts to take
all such action. Without limiting the generality of the foregoing, Acquiror
shall use all reasonable best efforts to cause Merger Sub to perform its
obligations under this Agreement and to effect the transactions contemplated
hereby.
(b) During the Interim Period, each of the parties hereto shall
promptly notify the other in writing of any pending or, to the knowledge of such
party, threatened action, proceeding or investigation by any Governmental Entity
or any other Person: (i) challenging or seeking damages in connection with the
Merger or the conversion of Company Common Stock into the Merger Consideration
pursuant to the Merger; or (ii) seeking to restrain or prohibit the consummation
of the Merger or any of the transactions contemplated by this Agreement or
otherwise to limit the right of Acquiror to own or operate all or any portion of
the business or assets of the Company.
(c) Each of the parties hereto shall use reasonable best efforts to
refrain from taking any action, or entering into any transaction, which would
cause any of its representations or warranties contained in this Agreement to be
untrue or that would result in a breach of any covenant made by it in this
Agreement.
SECTION 7.8. NO SOLICITATION.
(a) From the date of this Agreement until the Effective Time or the
termination of this Agreement pursuant to the terms of this Agreement, the
Company shall not and shall not permit any of its Subsidiaries, Affiliates,
directors, officers, employees, agents or representatives, including, without
limitation, any investment banker, attorney or accountant of the Company or any
of its Subsidiaries (collectively, "Representatives"), directly or indirectly,
to: (i) initiate, solicit, knowingly facilitate or encourage the submission of
an Acquisition Proposal for the Company; (ii) participate in any discussions or
negotiations regarding, or furnish to any Person any information with respect
to, or take any other action knowingly to facilitate any inquiries or the making
of any proposal that constitutes an Acquisition Proposal for the Company; (iii)
grant any waiver or release under any standstill or similar agreement with
respect to any class of equity securities of the Company; or (iv) enter into any
agreement with respect to any Acquisition Proposal for the Company, other than
with Acquiror. The Company shall notify its Representatives of the terms of this
Section 7.8 and use reasonable efforts to cause such Representatives to comply
with such terms. The Company shall cease and cause to be
46
terminated immediately all existing discussions or negotiations with any persons
conducted heretofore with respect to, or that could be reasonably expected to
lead to, any Acquisition Proposal for the Company.
(b) Nothing contained in this Section 7.8 shall prohibit the Company
from: (i) taking and disclosing to its stockholders a position contemplated by
Rule 14e-2 promulgated under the Exchange Act; (ii) making a recommendation in
compliance with Rule 14d-9 promulgated under the Exchange Act; or (iii)
furnishing information to, or engaging in discussions or negotiations with, any
Person that makes a bona fide proposal or offer with respect to the Company that
constitutes an Acquisition Proposal for the Company, if: (1) the Board of
Directors of the Company determines in good faith, taking into account the
advice of outside counsel, that such action is reasonably likely to be required
for the Board of Directors to comply with its fiduciary duties to stockholders
under applicable law, (2) prior to furnishing such information to, or entering
into discussions or negotiations with, such Person the Company provides written
notice to Acquiror of the existence of such Acquisition Proposal for the Company
and that it intends to furnish information to, or enter into discussions or
negotiations with respect to such Acquisition Proposal for the Company, (3) the
Company enters into a confidentiality agreement with the Person making such
Acquisition Proposal for the Company on terms in the aggregate not more
favorable to such Person than the terms of the Confidentiality Agreements, (4)
the Company shall keep Acquiror informed on a timely basis of the status of such
negotiations and all material terms and conditions thereof and promptly provide
Acquiror with copies of any and all written inquiries or proposals relating
thereto, and (5) such Acquisition Proposal was not solicited in violation of
this Agreement.
SECTION 7.9. NYSE LISTING.
Acquiror shall, prior to the Closing Date file with the NYSE a
Supplemental Listing Application providing for inclusion for quotation on the
NYSE of the shares of Acquiror Common Stock issuable pursuant to Section 2.1(a)
and shall use reasonable best efforts to cause the shares of Acquiror Common
Stock to be issued pursuant to Section 2.1(a) of this Agreement to be approved
for listing on the NYSE, subject to official notice of issuance, prior to the
Closing Date.
SECTION 7.10 EMPLOYEE MATTERS
(a) For a period of one (1) year following the Effective Time, to the
extent that Acquiror provides continued employment to employees of the Company
and its Subsidiaries ("Continuing Employees") after the Effective Time, such
employment shall be (x) at a base salary or base hourly wage that, in the
aggregate, is not less favorable than that which the Continuing Employee was
receiving immediately prior to the Effective Time, (y) at a level of and current
value of incentive compensation which, in the aggregate is no less favorable
than incentive compensation provided to similarly situated employees of Acquiror
and its Subsidiaries and (z) at a level of and current value of employee
benefits (including, but not limited to, the provision of vacation, sick leave,
pension and welfare benefits but excluding any incentive compensation, retention
compensation or bonuses) which, in the aggregate and including any increase in
base salary or base hourly wage that Acquiror reasonably believes, are no less
47
favorable than those applicable to each such employee immediately prior to the
Effective Time; and (ii) provide to Continuing Employees employee benefit plans,
programs and arrangements under Acquiror Benefit Plans that in the aggregate are
no less favorable to those employee benefit plans, programs and arrangements
generally provided to the Continuing Employees under any Company Benefit Plans
(excluding any incentive compensation, retention compensation or bonuses)
immediately prior to the Effective Time.
(b) Following the Effective Time, Acquiror shall cause the Acquiror
Benefit Plans to (i) treat credited employment and service of the Continuing
Employees with the Company, its Affiliates and any predecessor employers through
the Effective Time as employment and service with Acquiror for all purposes
under the Acquiror Benefit Plans except for benefit accrual purposes under any
"defined benefit" pension plans; and (ii) give full credit to the Continuing
Employees under the Acquiror Benefit Plans that provide vacation and sick leave
benefits for all unused vacation days and sick leave accrued by the Continuing
Employees while employees of the Company.
(c) In the event of any change in coverage that applies generally to
the Continuing Employees during the two-year period following the Effective Time
under any Acquiror Benefit Plan that provides medical or health benefits, the
Acquiror shall cause such plan to recognize credit toward satisfying deductible
expense requirements, out-of-pocket expense limits and maximum lifetime benefit
limits of such Continuing Employees or their eligible dependents, and to waive
any pre-existing condition, exclusion or limitation, as and to the extent any
such matter would previously have been recognized or waived (as the case may be)
under the applicable Company Benefit Plan.
(d) The Acquiror shall cause the Surviving Corporation to honor in
accordance with their terms and to perform the obligations of the Surviving
Corporation under the severance and retention plans and agreements listed on
SCHEDULE 7.10.
(e) Immediately following the Effective Time, the Acquiror shall cause
the Surviving Corporation to enter into retention agreements with not more than
twenty-eight (28) of its key employees to be identified and selected by the
Company after consultation with the Acquiror.
(f) Following the Effective Time, the Acquiror shall cause Continuing
Employees who have previously been eligible to participate in the Company Stock
Option Plans to be eligible to participate in the Acquiror Stock Option Plans.
At each meeting of the Compensation Committee of the Acquiror Board of Directors
during the two-year period following the Effective Time at which stock options
are granted to Acquiror employees generally, Acquiror shall cause a
recommendation to be made to the Compensation Committee to grant options under
the Acquiror Stock Option Plans to such Continuing Employees on a basis that
takes into consideration prior performance and service of the Continuing
Employees to the Company prior to the Effective Time.
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SECTION 7.11. AFFILIATES.
(a) Each of the Company and Acquiror: (i) has disclosed to the other in
SCHEDULE 7.11 hereto all Persons who are, or may be, as of the date hereof its
Affiliates; and (ii) shall use all reasonable best efforts to cause each Person
who is identified as an Affiliate of it in SCHEDULE 7.11 to deliver to the other
as promptly as practicable but in no event later than thirty-one (31) days prior
to the Closing Date, a signed Affiliate Agreement substantially in the form
attached hereto as Exhibit A, in the case of the Company, and Exhibit B, in the
case of Acquiror. The Company and Acquiror shall notify each other from time to
time of all other Persons who then are or may be such an Affiliate and use all
reasonable best efforts to cause each additional Person who is identified as an
Affiliate to execute an Affiliate Agreement as set forth in this Section
7.11(a).
(b) Shares of Company Common Stock and shares of Acquiror Common Stock
held by such Affiliates of the Company or Acquiror, as the case may be, shall
not be transferable during the thirty (30) day period prior to the Effective
Time, and shares of Acquiror Common Stock issued to, or as of the Effective Time
held by, such Affiliates shall not be transferable until such time as financial
results covering at least thirty (30) days of combined operations of the Company
and Acquiror have been published within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies, regardless of whether each
such Affiliate has provided the signed Affiliate Agreement referred to in
Section 7.11(a), except to the extent permitted by, and in accordance with, SEC
Accounting Series Release 135 and SEC Staff Accounting Bulletins 65 and 76. Any
Company Common Stock and any Acquiror Common Stock held by any such Affiliate
shall not be transferable, regardless of whether such Affiliate has provided the
applicable signed agreement referred to in Section 7.11(a), if such transfer,
either alone or in the aggregate with other transfers by Affiliates, would
preclude the ability of the parties hereto to have the Merger and the
transactions contemplated hereby accounted for as a "pooling of interests" in
accordance with GAAP, Accounting Principles Board Opinion No. 16 and all rules,
regulations and policies of the SEC. Neither the Company nor Acquiror shall
register the transfer of any shares of Company Common Stock or Acquiror Common
Stock, as applicable, unless such transfer is made in compliance with the
foregoing.
SECTION 7.12. EVENT NOTICES.
From and after the date of this Agreement until the Effective Time,
each party hereto will promptly notify the other parties hereto of (a) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any condition to the obligations of such party to
effect the Merger and the other transactions contemplated by this Agreement not
to be satisfied and (b) the failure of such party to comply with any covenant or
agreement to be complied with by it pursuant to this Agreement that would be
likely to result in any condition to the obligations of such party to effect the
Merger and the other transactions contemplated by this Agreement not to be
satisfied. No delivery of any notice pursuant to this Section 7.12 will cure any
breach of any representation or warranty, covenant, condition or agreement of
such party contained in this Agreement or otherwise limit or affect the remedies
available hereunder to the party receiving such notice.
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SECTION 7.13. TAX TREATMENT.
Each of Acquiror and the Company shall use all reasonable best efforts
to cause the Merger to qualify as a reorganization under the provisions of
Section 368(a) of the Code and will characterize the Merger as such a
reorganization for purposes of all Tax returns and other relevant filings. The
Company and Acquiror shall cooperate and use their best efforts in obtaining the
Legal Opinions. In connection therewith, each of the Company, Acquiror and
Merger Sub shall deliver to the other a representation letter (collectively, the
"Representation Letters"), dated as of the Closing Date, in form and substance
to be reasonably agreed upon by the Company, Acquiror and Merger Sub, on which
each party shall be entitled to rely in rendering its Legal Opinion pursuant to
Section 8.1(i); provided, however, that the failure of any of the Company,
Acquiror or Merger Sub to make any statement in a Representation Letter because
of an event, or a change in facts or law, in either case outside of such party's
control, shall not constitute a breach of this covenant.
SECTION 7.14. POOLING OF INTERESTS.
Each of the Company and Acquiror shall use all reasonable best efforts
to cause the Merger to be accounted for as a "pooling of interests" in
accordance with GAAP, Accounting Principles Board Opinion 16 and applicable SEC
rules, regulations and policies and shall take no action that would cause such
accounting treatment not to be obtained.
SECTION 7.15. MERGER SUB.
Acquiror shall cause Merger Sub to approve and adopt, and to perform
its obligations in accordance with, this Agreement and shall take any and all
steps necessary to cause Merger Sub to effect the transactions contemplated
hereby.
SECTION 7.16. BOARD OF DIRECTORS OF ACQUIROR.
Promptly following the Effective Time, the Board of Directors of
Acquiror will take all actions necessary such that Xxxxxx X. Xxxxxxxx, who as of
the date hereof is the Chief Executive Officer of the Company, shall be
appointed to Acquiror's Board of Directors with a term expiring at the annual
meeting of Acquiror's stockholders to be held in calendar year 2000 (the "Year
2000 Meeting") and shall include Xxxxxx X. Xxxxxxxx in the slate of nominees
recommended by Acquiror's Board of Directors to the stockholders of Acquiror at
the Year 2000 Meeting.
SECTION 7.17. PUBLISHING FINANCIAL RESULTS.
If the Effective Time shall occur after February 29, 2000, Acquiror
shall prepare and publicly release, as soon as practicable following the end of
the first complete accounting month ending at least thirty (30) days after the
Closing Date, a report filed with the SEC on Form 8-K or any other public
filing, statement or announcement that includes the combined financial results
(including combined sales and net income) of the Acquiror and the Company for a
period of at least thirty (30) days of combined operations of the Acquiror and
the Company following
50
the Closing Date; provided, however, that the Acquiror shall not be obligated to
make such public release if the Acquiror determines based on Acquiror's good
faith business judgment that such public release would be reasonably likely to
(a) limit in any material respect the Acquiror's ability to undertake a planned
underwritten public offering of Acquiror's securities to be covered by a
registration statement to be filed with the SEC, or (b) cause a Material Adverse
Effect on Acquiror.
SECTION 7.18. STAND-STILL
From the date of this Agreement until the Effective Time or the
termination of this Agreement pursuant to the terms of this Agreement, except as
provided herein, the Acquiror shall not and shall not permit any of its
Representatives, directly or indirectly, to: (i) acquire or agree, offer, seek
or propose to acquire, or cause to be acquired, directly or indirectly, by
purchase or otherwise, ownership (including, without limitation, beneficial
ownership as defined in Rule 13d-3 of the Exchange Act) of any voting securities
or direct or indirect rights or options to acquire any voting securities of the
Company or any Subsidiary thereof, or of any successor to or person in control
of the Company, any of the assets or businesses of the Company or any Subsidiary
or division thereof or of any such successor or controlling person or any bank
debt, claims or other obligations of the Company or any rights or options to
acquire (other than those currently owned) such ownership (including from a
third party); (ii) seek or propose to influence or control the management or
policies of the Company or to obtain representation on the Company's Board of
Directors, or solicit, or participate in the solicitation of, any proxies or
consents with respect to any securities of the Company, or make any public
announcement with respect to any of the foregoing or request permission to do
any of the foregoing; (iii) make any public announcement with respect to, or
submit a proposal for, or offer of (with or without conditions) any
extraordinary transaction involving the Company or its securities or assets;
(iv) enter into any discussions, negotiations, arrangements or understandings
with any third party with respect to any of the foregoing, or otherwise form,
join or in any way participate in a "group" (as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) in connection with
any of the foregoing; (v) seek or request permission or participate in any
effort to do any of the foregoing or make or seek permission to make any public
announcement with respect to the foregoing; or (vi) request the Company or any
of its Representatives, directly or indirectly, to amend or waive any provision
of this paragraph. Acquiror shall promptly advise the Company of any inquiry or
proposal made to it with respect to any of the foregoing.
SECTION 7.19. STOCKHOLDER RIGHTS PLAN
From and after the date hereof until the termination of this Agreement,
without the Acquiror's prior written consent, the Company shall not amend its
Certificate of Incorporation or otherwise take any action to provide for the
issuance of securities pursuant to a stockholder rights plan ("poison pill") or
any other program or plan having a similar effect.
ARTICLE VIII.
CLOSING CONDITIONS
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SECTION 8.1. CONDITIONS TO OBLIGATIONS OF THE PARTIES TO EFFECT THE
MERGER.
The respective obligations of the parties hereto to effect the Merger
and the other transactions contemplated herein shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) STOCKHOLDER APPROVAL. The Company Stockholder Approval shall have
been obtained.
(b) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective by the SEC under the Securities Act prior to
the mailing of the Proxy Statement by the Company to its stockholders and no
stop order suspending the effectiveness of such Registration Statement shall
have been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the knowledge of Acquiror or the Company, be threatened by the
SEC.
(c) NO ORDER. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, statute, rule, ordinance, regulation, executive order, decree,
judgment, stipulation, injunction or other order (whether temporary, preliminary
or permanent) (collectively, an "Order"), in any case, that is in effect and
that prevents or prohibits consummation of the Merger or any other transactions
contemplated in this Agreement; provided, however, that the parties shall use
their reasonable best efforts to cause any such Order to be vacated or lifted.
(d) NYSE LISTING. Acquiror Common Stock issuable to the holders of
Company Common Stock pursuant to Section 2.1(a) of this Agreement shall have
been included for listing on the NYSE upon official notice of issuance.
(e) HSR ACT. Any waiting period with any extensions thereof under the
HSR Act shall have expired or been terminated.
(f) PERMITS. Each of the Company and Acquiror shall have obtained such
permits, authorizations, consents and approvals required to consummate the
transactions contemplated hereby except for such permits, authorizations,
consents and approvals the failure of which to obtain would not have a Material
Adverse Effect on the Company or Acquiror.
(g) COMPANY POOLING LETTER. There shall have been delivered to Acquiror
and the Company a letter from the Company's independent accountants, dated as of
the Closing Date and addressed to Acquiror and the Company, reasonably
satisfactory in form and substance to Acquiror, setting forth the concurrence of
the Company's independent accountants with the conclusion of the Company's
management that the transactions contemplated herein will qualify as a "pooling
of interests" and to the effect that (i) after reasonable investigation, the
Company's independent accountants are not aware of any fact concerning the
Company or any of the Holders or any Affiliates of the Company that could
preclude Acquiror from accounting for the
52
Merger as a "pooling of interests" in accordance with GAAP, Accounting
Principles Board Opinion No. 16 and all rules, regulations and policies of the
SEC, and (ii) the Merger is eligible to be accounted for as a "pooling of
interests" in accordance with GAAP, Accounting Principles Board Opinion No. 16
and all rules, regulations and policies of the SEC;
(h) ACQUIROR POOLING LETTER. There shall have been delivered to
Acquiror and the Company a letter from Acquiror's independent accountants, dated
as of the Closing Date and addressed to the Company and Acquiror, reasonably
satisfactory in form and substance to Acquiror, to the effect that (i) after
reasonable investigation, Acquiror's independent accountants are not aware of
any fact concerning Acquiror or any of its Affiliates that could preclude
Acquiror from accounting for the Merger as a "pooling of interests" in
accordance with GAAP, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC, and (ii) the Merger is
eligible to be accounted for as a "pooling of interests" in accordance with
GAAP, Accounting Principles Board Opinion No. 16 and all rules, regulations and
policies of the SEC; and
(i) LEGAL OPINIONS. (A) The Company and the Holders shall have received
a legal opinion addressed to the Company and the Holders from Xxxxx & Xxxxxxx
L.L.P. ("Acquiror's Legal Counsel"), dated as of the Closing Date to the effect
that the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code; and (B) the Acquiror shall have received a legal opinion
addressed to the Acquiror from Venable, Baetjer, Xxxxxx & Civiletti, LLP
("Company's Legal Counsel"), dated as of the Closing Date to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code. The legal opinions to be delivered by Company's Legal Counsel and
Acquiror's Legal Counsel pursuant to this Section 8.1(i) shall be referred to
herein as the "Legal Opinions."
SECTION 8.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND
MERGER SUB.
The obligations of Acquiror and Merger Sub to effect the Merger and the
other transactions contemplated in this Agreement shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived by Acquiror, in whole or in part, to the extent
permitted by applicable law:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company made in this Agreement shall be true and correct in all material
respects when made and on and as of the Closing Date (except for representations
and warranties that speak as of a specific date or time, which need only be true
and correct in all material respects as of such date or time). Acquiror shall
have received a certificate of the Chief Executive Officer or Chief Financial
Officer of the Company to such effect.
(b) AGREEMENTS AND COVENANTS. The agreements and covenants of the
Company required to be performed on or before the Effective Time shall have been
performed in all material respects. Acquiror shall have received a certificate
of the Chief Executive Officer or Chief Financial Officer of the Company to such
effect.
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(c) NO MATERIAL ADVERSE CHANGES.
There shall have been no Material Adverse Effect on the
Company since the date of this Agreement (it being understood that a decline in
the price of a share of Company Common Stock shall not constitute a Material
Adverse Effect on the Company for purposes of any provision of this Agreement).
(d) NO LITIGATION. There shall not be pending or threatened any suit,
action, proceeding or investigation: (i) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (ii) relating to the Merger and seeking to
obtain from Acquiror or any Acquiror Subsidiary any damages that may be material
to Acquiror, (iii) seeking to prohibit or limit in any material respect
Acquiror's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporation; (iv) which would materially and adversely affect the right of the
Surviving Corporation to own the assets or operate the business of the Company;
or (v) which, if adversely determined, could have a Material Adverse Effect on
the Company or Acquiror.
(e) AFFILIATE AGREEMENT. Each of the Affiliates shall have entered into
an Affiliate Agreement and each of such Agreements shall be in full force and
effect as of the Effective Time.
SECTION 8.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the satisfaction
at or prior to the Effective Time of the following conditions any or all of
which may be waived by the Company, in whole or in part, to the extent permitted
by applicable law:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Acquiror and Merger Sub made in this Agreement shall be true and correct in
all material respects when made and on and as of the Closing Date (except for
representations and warranties that speak as of a specific date or time, which
need only be true and correct in all material respects as of such date and
time). The Company shall have received a certificate of the Chief Executive
Officer or Chief Financial Officer of Acquiror to such effect.
(b) AGREEMENTS AND COVENANTS. The agreements and covenants of Acquiror
and Merger Sub required to be performed on or before the Effective Time shall
have been performed in all material respects. The Company shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of
Acquiror to such effect.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been no Material
Adverse Effect on Acquiror since the date of this Agreement (it being understood
that a decline in the price of a share of Acquiror Common Stock shall not
constitute a Material Adverse Effect on Acquiror for purposes of any provision
of this Agreement).
54
(d) NO LITIGATION. There shall not be pending or threatened any suit,
action, proceeding or investigation: (i) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (ii) relating to the Merger and seeking to
obtain from the Company or any Company Subsidiary any damages that may be
material to the Company, or (iii) which, if adversely determined, could have a
Material Adverse Effect on the Company or Acquiror.
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, whether before or after approval of this
Agreement and the Merger by the stockholders of the Company (except as
specifically provided below):
(a) by mutual written consent of Acquiror and the Company;
(b) by Acquiror, upon a material breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement such that the conditions set forth in Section 8.2(a) or Section 8.2(b)
would not be satisfied (a "Terminating Company Breach"); PROVIDED that, if such
Terminating Company Breach is curable by the Company through the exercise of
reasonable best efforts and for so long as the Company continues to exercise
such reasonable best efforts, Acquiror may not terminate this Agreement under
this Section 9.1(b);
(c) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of Acquiror set forth in this
Agreement such that the conditions set forth in Section 8.3(a) or Section 8.3(b)
would not be satisfied (a "Terminating Acquiror Breach"); PROVIDED that, if such
Terminating Acquiror Breach is curable by Acquiror through the exercise of
reasonable best efforts and for so long as Acquiror continues to exercise such
reasonable best efforts, the Company may not terminate this Agreement under this
Section 9.1(c);
(d) by either Acquiror or the Company, if there shall be any Order that
is final and nonappealable preventing the consummation of the Merger; PROVIDED
that the party seeking to terminate this Agreement pursuant to this Section
9.1(d) shall have used reasonable best efforts to cause any such Order to be
vacated or lifted;
(e) by either Acquiror or the Company, if the Merger shall not have
been consummated on or before that date that is One Hundred Eighty (180)
calendar days after the date hereof (the "Outside Date"); provided, however,
that the right to terminate this Agreement under this Section 9.1(e) shall not
be available to any party whose material breach of its obligations under this
Agreement has been the cause of the failure of the Merger to occur on or before
the Outside Date;
55
(f) by the Company or Acquiror at any time after the Company
Stockholders Meeting (including any adjournment or postponement thereof), if the
requisite vote of the stockholders of the Company required by this Agreement
shall not have been obtained at the Company Stockholders Meeting (including any
adjournment or postponement thereof); PROVIDED that the right to terminate this
Agreement under this Section 9.1(f) shall not be available to the Company if it
has not complied with its obligations under Section 7.3(b) and taking into
account the provisions of Section 7.3(c);
(g) (i) by Acquiror, if the Acquiror Stock Price is greater than $35.75
per share unless the Company makes a Company Floating Rate Election, in which
case the Acquiror shall have no right of termination pursuant to this Section
9.1(g) or (ii) by the Company, if the Acquiror Stock Price is less than $22.95
per share unless Acquiror makes an Acquiror Floating Rate Election, PROVIDED
that in no event shall Acquiror have the right to make such election if the
Acquiror Stock Price is equal to or less than $14.00 per share; PROVIDED FURTHER
that any such termination pursuant to this Section 9.1(g) shall be without any
liability to the parties hereto solely by virtue of the fact that the Acquiror
Stock Price is greater than $35.75 or less than $22.95 per share or equal to or
less than $14.00 per share, as the case may be;
(h) by the Company, if the Board of Directors of the Company determines
in good faith, taking into account the advice of outside counsel, that such
action is reasonably likely to be required for the Board of Directors to comply
with its fiduciary duties to stockholders under applicable law (other than in
connection with an Acquisition Proposal);
(i) by the Company, if the Board of Directors of the Company shall have
withdrawn its recommendation of this Agreement and recommended a Superior
Proposal to its stockholders pursuant to and in compliance with Section 7.3(c);
PROVIDED that any termination of this Agreement by the Company pursuant to this
Section 9.1(i) shall not be effective if, prior to the close of business on the
second full business day after Acquiror receives written notice of such
termination, Acquiror elects, and Acquiror provides written notice to the
Company of its election, to have the Company hold the Company Stockholders'
Meeting (the "Stockholder Vote Election") in which event this Agreement,
including without limitation the obligation to hold a Company Stockholders'
Meeting, shall remain in full force and effect; PROVIDED FURTHER that in the
event that Acquiror has not made the Stockholder Vote Election, this Agreement
shall terminate on the date on which payment of a Termination Fee required by
Section 9.6(b) is paid; or
(j) by Acquiror, if (i) the Board of Directors of the Company (A) fails
to recommend approval and adoption of this Agreement, the Merger and the
transactions contemplated by this Agreement by the Company's stockholders, (B)
withdraws, modifies or changes such recommendation in a manner adverse to
Acquiror or Merger Sub, (C) fails to include such recommendation (without
withdrawal, modification or change) in the Proxy Statement or (D) fails to
reaffirm its recommendation in favor of the adoption and approval of this
Agreement, the Merger and transactions contemplated by this Agreement within ten
(10) days after Acquiror requests in writing that such recommendation be
reaffirmed; PROVIDED that subsequent to the Acquiror's first such request,
Acquiror may make further requests only after Acquiror has received written
notice from the Company (or a public announcement has been made) of the
56
existence of an Acquisition Proposal for the Company, (ii) the Board of
Directors of the Company makes any recommendation to the Company's stockholders
with respect to any proposal involving an Acquisition Proposal for the Company
(or shall have resolved to do so), other than a recommendation to reject such
proposal, (iii) a tender offer or exchange offer for 26% or more of the
outstanding shares of capital stock of the Company is commenced (or any person
or "group" (as defined in Section 13(d)(3) of the Exchange Act) shall have
commenced or threatened to commence either with respect to the Company), and the
Board of Directors of the Company, within ten (10) business days after such
tender offer or exchange offer is so commenced, either recommends to the
stockholders of the Company that they tender their shares into such tender or
exchange offer, fails to unconditionally recommend to the stockholders of the
Company that they not accept such tender offer or exchange offer or makes no
recommendation to the Company's stockholders with respect to the acceptance of
such tender offer or exchange offer by the Company's stockholders, (iv) after
the date hereof, any person or "group" (as defined in Section 13(d)(3) of the
Exchange Act) (other than Acquiror or any Acquiror Subsidiaries) shall have
acquired (or agreed to acquire) beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as defined in Section 13(d)(3) of the
Exchange Act) shall have been formed that beneficially owns or has the right to
acquire beneficial ownership of, or has agreed to acquire beneficial ownership
of, 26% or more of the then outstanding shares of capital stock of the Company,
or (v) the Board of Directors of the Company shall have resolved or publicly
announced an intention to do any of the foregoing.
The right of any party hereto to terminate this Agreement pursuant to this
Section 9.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Affiliate of
such party or any of their respective officers, directors, representatives or
agents, whether prior to or after the execution of this Agreement.
SECTION 9.2. EFFECT OF TERMINATION.
Except as provided in Section 9.5 and Section 9.6 of this Agreement, in
the event of the termination of this Agreement pursuant to Section 9.1, this
Agreement shall forthwith become void, there shall be no liability on the part
of Acquiror or the Company or any of their respective officers, directors,
stockholders or Affiliates to the other, and all rights and obligations of any
party hereto shall cease, except that nothing herein shall relieve any party
from liability for any willful breach by a party of any of its representations,
warranties, covenants or agreements in this Agreement; and PROVIDED that the
provisions of Section 7.2 (Confidentiality), Section 9.5 (Transaction Fees,
Expenses and Other Payments) and Section 9.6 (Termination Fees) of this
Agreement will remain in full force and effect and survive any termination of
this Agreement.
SECTION 9.3. AMENDMENT.
This Agreement may be amended by the parties hereto by action taken or
authorized by their respective Boards of Directors at any time prior to the
Effective Time; PROVIDED, HOWEVER, that, after approval of the Merger by the
stockholders of the Company, no amendment may be made that by law or rule of the
NYSE requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by each of the parties hereto.
57
SECTION 9.4. EXTENSION; WAIVER.
At any time prior to the Effective Time, any party hereto may (a)
extend the time for the performance of any of the obligations or other acts of
any other party hereto, (b) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by any other party with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
SECTION 9.5 TRANSACTION FEES, EXPENSES AND OTHER PAYMENTS.
Except as otherwise set forth in this Section 9.5, all costs and
expenses incurred by the parties hereto shall be borne solely and entirely by
the party that has incurred such costs and expenses, whether or not the Merger
is consummated; PROVIDED, HOWEVER, that in the event that the Merger and the
other transactions contemplated hereby are not consummated, Acquiror and the
Company shall share equally all costs and expenses (other than attorneys' and
accountants' fees and expenses) incurred in relation to printing and filing and,
as applicable, mailing the Registration Statement and the Proxy Statement and
any amendments or supplements thereto and all SEC and other regulatory filing
fees incurred in connection with the Registration Statement and the Proxy
Statement and the fees required under the HSR Act and applicable foreign laws,
if any, incurred in connection with the transactions contemplated under this
Agreement.
SECTION 9.6 TERMINATION FEES.
(a) If this Agreement is terminated by the Company pursuant to Section
9.1(h), (i) the Company shall pay to Acquiror an amount equal to all of
Acquiror's reasonable expenses incurred in connection with the transactions
contemplated by this Agreement not to exceed $1,000,000 payable within ninety
(90) days from the date of such termination and (ii) and in the event the
Company enters into a definitive agreement in connection with, or consummates,
an Acquisition Proposal within six (6) months from the date of such termination,
the Company shall pay to Acquiror the difference between four million dollars
($4,000,000) (the "Termination Fee") and the aggregate amount paid to Acquiror
pursuant to Section 9.6(a)(i) above, within five (5) Business Days after the
closing date of such transaction.
(b) If this Agreement is terminated by the Company pursuant to Section
9.1(i), Acquiror may, within five (5) business days thereafter, make an election
(the "Termination Election") to receive the Termination Fee, in which event the
Company shall pay to Acquiror the Termination Fee within five (5) Business Days
after the date of such Termination Election and this Agreement (except those
provisions that, pursuant to Section 9.2, survive termination) shall be deemed
to terminate, become void and be of no further force or effect immediately upon
the Termination Election. Acquiror shall not have any right to receive, and the
Company shall not have any obligation to pay, the Termination Fee except
pursuant to a valid and timely Termination Election.
(c) If this Agreement is terminated by Acquiror pursuant to Section
9.1(j) (excluding
58
Sections 9.1(j)(i)(D), 9.1(iv) and 9.1(v) (only to the extent Section 9.1(j)(v)
relates to Sections 9.1(j)(i)(D) or 9.1(j)(iv)), then (i) if the Board of
Directors of the Company has recommended to its stockholders an Acquisition
Proposal with a third party, then the Company shall pay to Acquiror the
Termination Fee or (ii) if the Board of Directors of the Company has not
recommended to its stockholders an Acquisition Proposal with a third party, then
(A) the Company shall pay to Acquiror an amount equal to all of Acquiror's
reasonable expenses incurred in connection with the transactions contemplated by
this Agreement not to exceed $1,000,000 payable within ninety (90) days from the
date of such termination and (B) if the Company thereafter enters into a
definitive agreement in connection with, or consummates, an Acquisition Proposal
within nine (9) months from the date of such termination, the Company shall pay
to Acquiror the difference between the Termination Fee and the aggregate amount
paid to Acquiror pursuant to Section 9.6(c)(ii)(A) above, within five (5)
Business Days after the closing date of such transaction.
(d) If this Agreement is terminated by the Company pursuant to Section
9.1(c) as a result of a Terminating Acquiror Breach that has not been cured by
Acquiror pursuant to Section 9.1(c), then Acquiror shall pay to the Company
within thirty (30) days after such termination an amount equal to all of the
Company's reasonable expenses incurred in connection with the transactions
contemplated by this Agreement and all damages caused to the Company as a result
of such Terminating Acquiror Breach.
(e) If this Agreement is terminated by Acquiror pursuant to Section
9.1(b) as a result of a Terminating Company Breach that has not been cured by
the Company pursuant to Section 9.1(b), then the Company shall pay to Acquiror
within thirty (30) days after such termination an amount equal to all of
Acquiror's reasonable expenses incurred in connection with the transactions
contemplated by this Agreement and all damages caused to Acquiror as a result of
such Terminating Company Breach. Notwithstanding any of the foregoing, to the
extent that subsequent to the date hereof Acquiror terminates this Agreement by
reason of the Company entering into an agreement to purchase substantially all
of the assets or equity securities of an entity, such acquisition is not a
Company Acquisition and Acquiror has not consented to such acquisition, then the
Company shall be obligated to pay to Acquiror its reasonable expenses incurred
in connection with the transactions contemplated by this Agreement but shall
have no liability to Acquiror for any damages.
(f) Any payment required to be made by either the Company or the
Acquiror pursuant to Section 9.6 of this Agreement shall be made by wire
transfer of immediately available funds to an account designated by the party
receiving payment. If any party fails to pay any termination fee or any expenses
or damages in connection with a termination when due and payable, such party
shall pay all costs and expenses (including reasonable legal fees and expenses)
in connection with any action, including the filing of any lawsuit or other
legal action, taken to collect payment, together with interest on the amount of
any unpaid fee, expense and/or damages at the publicly announced prime rate of
Citibank, N.A. from the date such fee was required to be paid to the date on
which it is paid.
(g) The Company and Acquiror each agrees that, except as expressly
provided therein, the payments provided for in clauses (a) through (e) above, to
the extent applicable, shall
59
be the sole and exclusive remedies of the parties against each other upon a
termination of this Agreement pursuant to Section 9.1.
ARTICLE X.
GENERAL PROVISIONS
SECTION 10.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS.
(a) Except as set forth in Section 10.1(b) of this Agreement, the
representations, warranties, covenants and agreements of each party hereto shall
remain operative and in full force and effect up to the Effective Time
regardless of any investigation made by or on behalf of any other party hereto,
any Person controlling any such party or any of their officers, directors,
representatives or agents whether prior to or after the execution of this
Agreement.
(b) The representations and warranties in this Agreement will terminate
at the Effective Time; provided, however, that the covenants and agreements of
the parties that by their respective terms contemplate performance after the
Effective Time or after the termination of this Agreement pursuant to Article IX
shall survive the Effective Time or the termination, as applicable.
SECTION 10.2 NOTICES.
All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered, mailed or transmitted, and shall be effective upon receipt,
if delivered personally, mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like changes of
address) or sent by electronic transmission to the telecopier number specified
below:
(a) If to Acquiror or Merger Sub:
The Titan Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxxx, Esq., General Counsel
With a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 0000
XxXxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X.X. Xxxxxx, Esq.
60
(b) If to the Company:
Advanced Communication Systems, Inc.
00000 Xxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Chief Executive Officer
With a copy (which shall not constitute notice) to:
Venable, Baetjer, Xxxxxx & Civiletti, LLP
0000 Xxx Xxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
SECTION 10.3 CERTAIN DEFINITIONS.
For purposes of this Agreement, the term:
"Acquisition Proposal" means an inquiry, offer or proposal regarding
any of the following (other than the transactions contemplated by this
Agreement) involving the Company or its Subsidiaries: any merger,
reorganization, consolidation, share exchange, recapitalization, business
combination, liquidation, dissolution, tender offer or exchange offer or other
similar transaction involving, or, any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of ten percent (10%) or more of the assets or
equity securities of, the Company or any of its Subsidiaries, in a single
transaction or series of related transactions;
"Affiliate" of any Person means: (a) a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person; and (b) as the context
requires (including, without limitation, for purposes of Section 7.11 hereof),
any Person who is or may be an "affiliate" of such Person for purposes of Rule
145 under the Securities Act or SEC Accounting Series Release 135;
"Beneficial Owner" (including the terms "beneficial ownership" and
"beneficially own") means with respect to any shares of capital stock, a Person
who shall be deemed to be the beneficial owner or have beneficial ownership of
such shares (a) which such Person or any of its Affiliates or associates
beneficially owns, directly or indirectly, (b) which such Person or any of its
Affiliates or associates (as such term is defined in Rule 12b-2 of the Exchange
Act) has, directly or indirectly, (i) the right to acquire (whether such right
is exercisable immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii) the right to
vote pursuant to any agreement, arrangement or understanding, (c) which are
beneficially owned, directly or indirectly, by any other Persons with whom such
Person or any of its Affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding voting or disposing of any
such shares or (d) pursuant to Section 13(d) of the Exchange Act and any rules
or regulations promulgated thereunder;
61
"Business Day" means any day other than a day on which banks in the
Commonwealth of Virginia are authorized or obligated to be closed;
"Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise;
"Credit Facility" means the $60,000,000 Amended and Restated Credit
Agreement among NationsBank, N.A. and Mellon Bank, N.A., and Advanced
Communication Systems, Inc. and its subsidiaries, Integrated Systems Control,
Inc., RF Microsystems, Inc., Advanced Management Incorporated and Semcor, Inc.,
dated as of February 3, 1999 (the "Credit Agreement"), as amended, and other
"loan documents" related thereto.
"Encumbrance" means any lien, pledge, charge, security interest or
other Encumbrance of any nature;
"Intellectual Property" means all (a) patents, utility models,
invention disclosures, industrial designs, and applications for registration
thereof and all reissues, divisions, reexaminations, renewals, extensions,
provisionals, continuations, and continuations in part thereof, (b) trademarks,
service marks, trade dress, logos, trade names, domain names, web site
addresses, and corporate names and registrations and applications for
registration thereof and the goodwill associated therewith, (c) copyrights and
registrations and applications for registration thereof, (d) computer software,
data, and documentation, (e) trade secrets and confidential business information
(including formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information, (f) other proprietary rights, and (g) copies and tangible
embodiments thereof (in whatever form or medium);
"Material Adverse Effect" means, with respect to a specified Person,
any event, change, circumstance, condition, development, effect or occurrence
that individually or in the aggregate (taking into account all other such
events, changes, circumstances, conditions, developments, effects or
occurrences) has had, caused or resulted in (or with the passage of time would
be reasonably likely to have, cause, or result in) a material adverse effect on
the business, operations, earnings, assets, properties, results of operations or
condition (financial or otherwise) of such Person and its Subsidiaries, if any,
taken as a whole, except to the extent that any such event, change,
circumstance, condition, development, effect or occurrence is directly caused
by: (a) conditions generally affecting national, regional or world economics;
(b) conditions generally affecting the industry of such Person; (c) the
announcement, pendency or process of effectuating the Merger or the transactions
contemplated hereby that directly results in a delay of, reduction in or
cancellation or change in the terms of customer engagements, projects or
relationships; or (d) a change in the market price or trading volume of the
securities of such Person; which
62
conditions (in the case of clauses (a) and (b) do not affect such Person in a
disproportionate manner as compared with other Persons in such Person's
industry). For purposes of this Agreement, the parties acknowledge and agree
that (i) the industry of the Company is the government information technology
services industry, and (ii) the industry of Acquiror is the government
information technology services industry. In addition to the foregoing, the
execution or consummation after the date hereof by Acquiror of any merger,
acquisition or other similar transaction involving Acquiror and a third party
shall constitute a Material Adverse Effect with respect to Acquiror if such
merger, acquisition or similar transaction involves a third party in the same
line of business as the Company or any Company Subsidiary and could be
reasonably expected to have a materially adverse effect on the future employment
prospects of Continuing Employees (in aggregate) with the Acquiror or its
Affiliates subsequent to the Effective Time.
"Person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in Section
13(d) of the Exchange Act);
"Reasonable Best Efforts" means, as to a party hereto, an undertaking
by such party to perform or satisfy an obligation or duty or otherwise act in a
manner reasonably calculated to obtain the intended result by action or
expenditure not substantially disproportionate or unduly burdensome in the
circumstances;
"Subsidiary" of any Person means any corporation, partnership, joint
venture or other legal entity of which such Person (either alone or through or
together with any other Subsidiary of such Person) (a) owns, directly or
indirectly, fifty percent (50%) or more of the capital stock, partnership
interests or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other governing body of
such corporation, partnership, joint venture or other legal entity; or (b)
possesses, directly or indirectly, control over the direction of management or
policies of such corporation, partnership, joint venture or other legal entity
(whether through ownership of voting securities, by agreement or otherwise);
"Superior Proposal" means a bona fide Acquisition Proposal made by any
Person that the Board of Directors of the Company determines in its good faith
judgment (taking into account the advice of a financial advisor of nationally
recognized reputation) will result in a transaction pursuant to which greater
aggregate financial consideration will be paid to the Company's stockholders
than pursuant to this Agreement and the transactions contemplated by this
Agreement and for which financing, to the extent required, is then committed;
provided that the Board of Directors of the Company has determined in good
faith, taking into account the advice of outside counsel, that it is reasonably
likely to be required to recommend such proposal to the Company's stockholders
to comply with its fiduciary duties to stockholders under applicable law .
SECTION 10.4 HEADINGS.
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.
63
SECTION 10.5 SEVERABILITY.
If any term or other provision of this Agreement is deemed invalid,
illegal or incapable of being enforced pursuant to any rule of law or public
policy or other Order by a court of competent jurisdiction or otherwise, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.6 ENTIRE AGREEMENT.
This Agreement (together with the Exhibits, the disclosure schedules of
the parties and the other documents specified herein and delivered pursuant
hereto) and the Confidentiality Agreement constitute the entire agreement of the
parties with respect to the subject matter contained herein and therein and
supersede all prior agreements and undertakings, both written and oral, between
the parties, or any of them, with respect to the subject matter hereof and,
except as otherwise expressly provided herein, are not intended to confer upon
any other Person any rights or remedies hereunder.
SECTION 10.7 SPECIFIC PERFORMANCE.
The transactions contemplated by this Agreement are unique.
Accordingly, the parties acknowledge and agree that, in addition to all other
remedies to which they may be entitled, each shall be entitled to a decree of
specific performance.
SECTION 10.8 ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties hereto. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and permitted assigns.
SECTION 10.9 THIRD PARTY BENEFICIARIES.
Subject to Section 10.8, this Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement except for the Indemnified Parties under Section 7.6.
SECTION 10.10. GOVERNING LAW.
This Agreement will be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts between residents of that
State and executed in and to
64
be performed entirely within that State. Each party hereby irrevocably submits
to the exclusive jurisdiction of the courts in the State of Delaware in any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action, suit or proceeding shall be brought only in such courts
(and waives any objection based on forum non conveniens or any other objection
to venue therein); provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this Section 10.10 and shall not be deemed
to be a general submission to the jurisdiction of such courts or in the State of
Delaware other than for such purposes.
SECTION 10.11. COUNTERPARTS.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed and delivered shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement.
SECTION 10.12 WAIVER OF JURY TRIAL.
EACH OF ACQUIROR, THE COMPANY AND MERGER SUB HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF ACQUIROR, THE COMPANY OR MERGER SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Merger to be executed and delivered as of the date first written above.
THE TITAN CORPORATION
By: /s/ Xxxx X. Xxx
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Name: Xxxx X. Xxx
Title: Chairman and Chief Executive Officer
ADVANCED COMMUNICATION SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
Title: Chief Executive Officer
A T ACQUISITION CORP.
By: /s/ Xxxx X. Xxx
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Name: Xxxx X. Xxx
Title: Chairman and Chief Executive Officer
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