EXHIBIT 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
Among
INTERNATIONAL BUSINESS MACHINES CORPORATION
WATERFALL ACQUISITION CORP.
and
MAINSPRING, INC.
Dated as of April 19, 2001
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TABLE OF CONTENTS
ARTICLE I
The Merger
----------
SECTION 1.01. Effective Time of the Merger.............. 1
SECTION 1.02. Closing................................... 2
SECTION 1.03. Effect of the Merger...................... 2
SECTION 1.04. Certificate of Incorporation and By-laws.. 2
SECTION 1.05. Directors................................. 2
SECTION 1.06. Officers.................................. 3
ARTICLE II
Conversion of Securities
------------------------
SECTION 2.01. Conversion of Capital Stock............... 3
SECTION 2.02. Exchange of Certificates.................. 4
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Representations and Warranties of
the Company............................ 6
SECTION 3.02. Representations and Warranties of
Parent and Sub......................... 31
ARTICLE IV
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 4.01. Conduct of Business....................... 33
SECTION 4.02. No Solicitation........................... 38
ARTICLE V
Additional Agreements
---------------------
SECTION 5.01. Preparation of the Proxy Statement;
Stockholders Meeting.................... 40
SECTION 5.02. Access to Information; Confidentiality.... 41
SECTION 5.03. Reasonable Best Efforts; Notification..... 42
SECTION 5.04. Stock Options............................. 44
SECTION 5.05. Indemnification, Exculpation and
Insurance............................... 46
SECTION 5.06. Fees and Expenses......................... 47
SECTION 5.07. Employee Matters.......................... 47
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SECTION 5.08. Public Announcements...................... 48
SECTION 5.09. Closing Date Balance Sheet................ 48
ARTICLE VI
Conditions Precedent
--------------------
SECTION 6.01. Conditions to Each Party's Obligation
to Effect the Merger................... 49
SECTION 6.02. Conditions to Obligations of Parent
and Sub................................ 49
SECTION 6.03. Conditions to Obligation of the Company... 50
SECTION 6.04. Frustration of Closing Conditions......... 51
ARTICLE VII
Termination, Amendment and Waiver
---------------------------------
SECTION 7.01. Termination............................... 51
SECTION 7.02. Effect of Termination..................... 52
SECTION 7.03. Amendment................................. 53
SECTION 7.04. Extension; Waiver......................... 53
ARTICLE VIII
General Provisions
------------------
SECTION 8.01. Nonsurvival of Representations and
Warranties............................. 53
SECTION 8.02. Notices................................... 54
SECTION 8.03. Definitions............................... 54
SECTION 8.04. Interpretation............................ 55
SECTION 8.05. Counterparts.............................. 56
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries.......................... 56
SECTION 8.07. Governing Law............................. 56
SECTION 8.08. Assignment................................ 56
SECTION 8.09. Enforcement............................... 56
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AGREEMENT AND PLAN OF MERGER dated as of April 19, 2001, by
and among INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York
corporation ("Parent"), WATERFALL ACQUISITION CORP., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and
MAINSPRING, INC., a Delaware corporation (the "Company").
WHEREAS the Board of Directors of each of the Company and Sub deems it
in the best interests of their respective stockholders to consummate the merger
(the "Merger"), on the terms and subject to the conditions set forth in this
Agreement, of Sub with and into the Company in which the Company would become a
wholly owned subsidiary of Parent, and such Boards of Directors have approved
this Agreement and declared its advisability (and, in the case of the Board of
Directors of the Company, recommended that this Agreement be adopted by the
Company's stockholders);
WHEREAS, simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Parent and Sub
to enter into this Agreement, Parent and certain stockholders of the Company are
entering into a stockholders agreement (the "Stockholders Agreement") pursuant
to which, among other things, such stockholders have agreed to vote to adopt
this Agreement and to take certain other actions in furtherance of the Merger
and to grant to Parent an option to purchase their shares of Company Common
Stock (as defined in Section 2.01), in each case upon the terms and subject to
the conditions set forth therein; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
The Merger
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SECTION 1.01. Effective Time of the Merger. As soon as practicable
on or after the Closing Date (as defined
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in Section 1.02), the parties shall (i) file a certificate of merger (the
"Certificate of Merger") in such form as is required by, and executed and
acknowledged in accordance with, the relevant provisions of the General
Corporation Law of the State of Delaware (the "DGCL") and (ii) make all other
filings or recordings required under the DGCL to effect the Merger. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware or at such subsequent time
as Parent and the Company shall agree and be specified in the Certificate of
Merger (the date and time the Merger becomes effective being the "Effective
Time").
SECTION 1.02. Closing. The closing of the Merger (the "Closing")
will take place at 11:00 a.m., New York time, on a date to be specified by the
parties, which shall be not later than the second business day after
satisfaction or waiver of the conditions set forth in Article VI that by their
terms are not to be satisfied or waived at the Closing (the "Closing Date"), at
the offices of Cravath, Swaine & Xxxxx, 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, unless another time, date or place is agreed to in writing by Parent and
the Company.
SECTION 1.03. Effect of the Merger. At the Effective Time, Sub shall
be merged with and into the Company, the separate corporate existence of Sub
shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation"). The Merger shall have the effects set forth in
Section 259 of the DGCL.
SECTION 1.04. Certificate of Incorporation and By-laws. (a) The
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The By-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.05. Directors. The directors of Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
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SECTION 1.06. Officers. The officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE II
Conversion of Securities
------------------------
SECTION 2.01. Conversion of Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock, par value $0.01 per share, of the Company (the "Company
Common Stock"), or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
common stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent-Owned Stock. All shares
of Company Common Stock that are owned by the Company, as treasury stock,
Parent or Sub immediately prior to the Effective Time shall automatically
be canceled and retired and shall cease to exist and no consideration shall
be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other
than shares to be canceled in accordance with Section 2.01(b) and the
Appraisal Shares (as defined in Section 2.01(d)) shall be converted into
the right to receive $4.00 in cash, without interest (the "Merger
Consideration"). At the Effective Time all such shares shall no longer be
outstanding and shall automatically be canceled and shall cease to exist,
and each holder of a certificate that immediately prior to the Effective
Time represented any such shares (a "Certificate") shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration. The right of any holder of any share of Company Common
Stock to receive the Merger Consideration shall be subject to and reduced
by the amount of any withholding that is required under applicable tax law.
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(d) Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, shares (the "Appraisal Shares") of Company Common Stock
issued and outstanding immediately prior to the Effective Time that are
held by any holder who is entitled to demand and properly demands appraisal
of such shares pursuant to, and who complies in all respects with, the
provisions of Section 262 of the DGCL ("Section 262") shall not be
converted into the right to receive the Merger Consideration as provided in
Section 2.01(c), but instead such holder shall be entitled to payment of
the fair value of such shares in accordance with the provisions of Section
262. At the Effective Time, the Appraisal Shares shall no longer be
outstanding and shall automatically be canceled and shall cease to exist,
and each holder of Appraisal Shares shall cease to have any rights with
respect thereto, except the right to receive the fair value of such shares
in accordance with the provisions of Section 262. Notwithstanding the
foregoing, if any such holder shall fail to perfect or otherwise shall
waive, withdraw or lose the right to appraisal under Section 262 or a court
of competent jurisdiction shall determine that such holder is not entitled
to the relief provided by Section 262, then the right of such holder to be
paid the fair value of such holder's Appraisal Shares under Section 262
shall cease and such Appraisal Shares shall be deemed to have been
converted at the Effective Time into, and shall have become, the right to
receive the Merger Consideration as provided in Section 2.01(c). The
Company shall serve prompt notice to Parent of any demands for appraisal of
any shares of Company Common Stock, withdrawals of such demands and any
other instruments served pursuant to the DGCL received by the Company, and
Parent shall have the right to participate in and direct all negotiations
and proceedings with respect to such demands. The Company shall not,
without the prior written consent of Parent, make any payment with respect
to, or settle or offer to settle, any such demands, or agree to do or
commit to do any of the foregoing.
SECTION 2.02. Exchange of Certificates. (a) Paying Agent. Prior to
the Effective Time, Parent shall designate a bank or trust company reasonably
acceptable to the Company to act as agent for the payment of the Merger
Consideration upon surrender of Certificates (the "Paying Agent"), and, at the
Effective Time, Parent shall
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make available, or cause the Surviving Corporation to make available, to the
Paying Agent funds in amounts and at the times necessary for the payment of the
Merger Consideration pursuant to Section 2.01(c) upon surrender of Certificates,
it being understood that any and all interest earned on funds made available to
the Paying Agent pursuant to this Agreement shall be turned over to Parent.
(b) Exchange Procedure. As soon as practicable after the Effective
Time, the Paying Agent shall mail to each holder of record of a Certificate (i)
a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates held by such person
shall pass, only upon proper delivery of the Certificates to the Paying Agent
and shall be in a form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancelation to the Paying Agent or to such other agent or agents
as may be appointed by Parent, together with such letter of transmittal, duly
completed and validly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the amount of cash into which the shares
formerly represented by such Certificate shall have been converted pursuant to
Section 2.01(c), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of shares that is not registered in the
stock transfer books of the Company, payment may be made to a person other than
the person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. No interest shall
be paid or shall accrue on the cash payable upon surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. All cash
paid upon the surrender of a Certificate in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock formerly represented by such
Certificate. At the close of business on the day on which the Effective Time
occurs the stock transfer books of the Company shall be closed, and there shall
be no further registration of transfers on the stock
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transfer books of the Surviving Corporation of the shares that were outstanding
immediately prior to the Effective Time If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent for
transfer or any other reason, they shall be canceled and exchanged as provided
in this Article II.
(d) No Liability. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to two years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration would otherwise escheat to or became the property of any
Governmental Entity (as defined in Section 3.01(d)), any such Merger
Consideration in respect thereof shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(e) Withholding Rights. Parent, the Surviving Corporation or the
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as Parent, the Surviving Corporation or the Paying
Agent is required to deduct and withhold with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the "Code"), or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld and paid over to the appropriate taxing authority by Parent, the
Surviving Corporation or the Paying Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent, the Surviving Corporation or the Paying Agent.
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Representations and Warranties of the Company. Except
as set forth on the disclosure schedule (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to the extent
specified therein and such other representations and warranties or covenants to
the extent a matter in such section is disclosed in such a way as to make its
relevance to the information called for by such other representation
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and warranty or covenant readily apparent) delivered by the Company to Parent
prior to the execution of this Agreement (the "Company Disclosure Schedule") or,
with respect to actions and matters arising after the date of this Agreement, as
expressly contemplated by this Agreement or the Company Disclosure Schedule, the
Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the Company
and its subsidiaries (as defined in Section 8.03) (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite corporate, company or
partnership power and authority to carry on its business as now being conducted
and (iii) is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or licensing
necessary, other than where the failure to be so organized, existing, qualified
or licensed or in good standing (except in the case of clause (i) above with
respect to the Company) individually or in the aggregate could not reasonably be
expected to have a material adverse effect (as defined in Section 8.03) on the
Company. The Company has delivered to Parent complete and correct copies of its
Certificate of Incorporation and By-laws and the certificates of incorporation
and by-laws (or similar organizational documents) of each of its subsidiaries,
in each case as amended to the date of this Agreement. The Company has made
available to Parent and its representatives true and complete copies of the
minutes (or, in the case of minutes that have not yet been finalized, drafts
thereof) of all meetings of the stockholders, the Board of Directors and each
committee of the Board of Directors of the Company and each of its subsidiaries
held since January 1, 1999 (it being understood and agreed that the portions of
such minutes (or drafts thereof) that relate to any Takeover Proposal (as
defined in Section 4.02(a)) made prior to the date of this Agreement have been
redacted).
(b) Subsidiaries. Section 3.01(b) of the Company Disclosure Schedule
lists each subsidiary of the Company. All the outstanding shares of capital
stock or other equity or voting interests of each such subsidiary are owned by
the Company, free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever (collectively, "Liens"),
and are duly authorized, validly issued, fully paid and nonassessable. Except
for the capital stock or other equity or voting interests of its subsidiaries,
the Company does not own,
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directly or indirectly, any capital stock or other equity or voting interests in
any corporation, partnership, joint venture, association or other entity.
(c) Capital Structure. (i) The authorized capital stock of the
Company consists of 250,000,000 shares of Company Common Stock and 25,000,000
shares of preferred stock, par value $0.01 per share (the "Company Preferred
Stock"). At the close of business on April 17, 2001, (i) 19,542,107 shares of
Company Common Stock (excluding treasury shares) were issued and outstanding,
none of which were held by any subsidiary of the Company, (ii) 4,000 shares of
Company Common Stock were held by the Company in its treasury, (iii) no shares
of Company Preferred Stock were issued or outstanding or were held by the
Company in its treasury, (iv) 10,095,219 shares of Company Common Stock were
reserved and available for issuance pursuant to the Amended and Restated 1996
Omnibus Stock Plan, the 2000 Stock Option and Incentive Plan and the 2000 Non-
Employee Director Stock Option Plan (collectively, the "Company Stock Plans"),
of which 5,157,110 shares were subject to issued and outstanding options under
the Company Stock Plans and (v) 1,339,342 shares of Company Common Stock were
reserved and available for issuance pursuant to the 2000 Employee Stock Purchase
Plan (the "ESPP") of which no more than 100,000 shares of Company Common Stock
were subject to outstanding purchase rights under the ESPP. The Company has
delivered to Parent a complete and correct list, as of the close of business on
April 17, 2001, of all outstanding stock options or other rights to purchase
Company Common Stock granted under the Company Stock Plans or otherwise
(collectively, the "Stock Options"), the number of shares of Company Common
Stock subject to each such Stock Option, the grant dates and exercise prices and
vesting schedule of each such Stock Option and the names of the holders thereof.
Other than the Stock Options and rights under the ESPP, there are no outstanding
rights of any person to receive Company Common Stock under the Company Stock
Plans or otherwise, or on a deferred basis or otherwise. As of the close of
business on April 17, 2001, there were outstanding Stock Options to purchase
2,236,710 shares of Company Common Stock with exercise prices on a per share
basis lower than the Merger Consideration, and the weighted average exercise
price of such Stock Options was equal to approximately $1.65. The maximum
number of shares of Company Common Stock that could be purchased with
accumulated payroll deductions under the ESPP as of April 30, 2001 (assuming for
such purpose that the fair market value of a share of Company Common Stock on
such date is equal to the Merger Consideration) is 77,003.
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(ii) Except as set forth above, as of the close of business on April
17, 2001, no shares of capital stock or other voting securities of the
Company, or options, warrants or other rights to acquire or receive any
such stock or securities were issued, reserved for issuance or outstanding.
Since April 17, 2001, until the date of this Agreement, (x) there have been
no issuances by the Company of shares of capital stock or other voting
securities of the Company other than issuances of shares of Company Common
Stock pursuant to the exercise of Stock Options or rights under the ESPP,
in each case outstanding on such date as required by their terms as in
effect on the date of this Agreement and (y) there have been no issuances
by the Company of options, warrants or other rights to acquire shares of
capital stock or other voting securities from the Company, other than for
rights that may have arisen under the ESPP. There are no outstanding stock
appreciation rights or other rights (other than rights that may have arisen
under the ESPP) that are linked to the price of the Company Common Stock
that were not granted in tandem with a related Stock Option.
(iii) All outstanding shares of capital stock of the Company are, and
all shares that may be issued pursuant to the Company Stock Plans and the
ESPP will be, when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other
indebtedness of the Company or any of it subsidiaries, and no securities or
other instruments or obligations of the Company or any of its Subsidiaries
the value of which is in any way based upon or derived from any capital or
voting stock of the Company, having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote. Except as set forth above and
except as expressly permitted under Section 4.01(a), there are no
securities, options, warrants, calls, rights, contracts, commitments,
agreements, instruments, arrangements, understandings, obligations or
undertakings of any kind to which the Company or any of its subsidiaries is
a party, or by which the Company or any of its subsidiaries is bound,
obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of, or securities convertible
into, or exchangeable or exercisable for, shares of capital
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stock or other voting securities of, the Company or any of its subsidiaries
or obligating the Company or any of its subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
contract, commitment, agreement, instrument, arrangement, understanding,
obligation or undertaking. As of the date of this Agreement, the Original
Shares (as such term is defined in the Stockholders Agreement) represent
more than 50% of the shares of Company Common Stock outstanding. There are
not any outstanding contractual obligations of the Company or any of its
subsidiaries to (i) repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries or (ii) vote or
dispose of any shares of the capital stock of any of its subsidiaries. The
Company is not a party to any voting agreements with respect to any shares
of the capital stock or other voting securities of the Company or any of
its subsidiaries and, to the knowledge of the Company (which, for purposes
of this representation and warranty, is limited to the actual knowledge of
the chief executive officer or the chief financial officer of the Company),
as of the date of this Agreement, there are no irrevocable proxies and no
other voting agreements with respect to any shares of the capital stock or
other voting securities of the Company or any of its subsidiaries.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to execute and deliver this Agreement, to
consummate the transactions contemplated by this Agreement, subject, in the case
of the Merger, to obtaining the Stockholder Approval (as defined in Section
3.01(r)), and to comply with the provisions of this Agreement. The execution
and delivery of this Agreement by the Company, the consummation by the Company
of the transactions contemplated by this Agreement and the Stockholders
Agreement and the compliance by the Company with the provisions of this
Agreement have been duly autho rized by all necessary corporate action on the
part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement, subject, in the case of the Merger,
to obtaining the Stockholder Approval. This Agreement has been duly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery by Parent and Sub, constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms (except
insofar as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization,
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moratorium or similar laws affecting creditors' rights generally, or by
principles governing the availability of equitable remedies). The Board of
Directors of the Company, at a meeting duly called and held at which all
directors of the Company were present either in person or by telephone, duly and
unanimously adopted resolutions (i) approving and declaring advisable this
Agreement, (ii) declaring that it is in the best interests of the Company's
stockholders that the Company enter into this Agreement and consummate the
Merger on the terms and subject to the conditions set forth in this Agreement,
(iii) declaring that the consideration to be paid to the Company's stockholders
in the Merger is fair to such stockholders, (iv) directing that this Agreement
be submitted to a vote at a meeting of the Company's stockholders to be held as
promptly as practicable following the date of this Agreement, (v) recommending
that such stockholders adopt this Agreement and (vi) approving the Stockholders
Agreement and the transactions contemplated thereby, which resolutions have not
been subsequently rescinded, modified or withdrawn in any way. The execution and
delivery of this Agreement and the Stockholders Agreement and the consummation
of the transactions contemplated hereby and thereby and compliance by the
Company with the provisions of this Agreement do not and will not conflict with,
or result in any violation or breach of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of, or result in,
termination, cancelation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien in or upon any of
the properties or assets of the Company or any of its subsidiaries under, or
give rise to any increased, additional, accelerated or guaranteed rights or
entitlements under, any provision of (i) the Certificate of Incorporation or By-
laws of the Company or the certificate of incorporation or by-laws (or similar
organizational documents) of any of its subsidiaries, (ii) any loan or credit
agreement, bond, debenture, note, mortgage, indenture, lease or other contract,
commitment, agreement, instrument, arrangement, understanding, obligation,
undertaking, permit, concession, franchise or license (each, a "Contract") to
which the Company or any of its subsidiaries is a party or any of their
respective properties or assets is subject or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any (A)
statute, law, ordinance, rule or regulation or (B) judgment, order or decree, in
each case, applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, breaches, defaults, rights, losses, Liens
or entitlements that individually or in the aggregate
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could not reasonably be expected to (x) have a material adverse effect on the
Company, (y) impair in any material respect the ability of the Company to
perform its obligations under this Agreement or (z) prevent or materially
impede, interfere with, hinder or delay the consummation of any of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any domestic or
foreign governmental entity, including any Federal, state or local government or
any court, administrative agency or commission or other governmental or
regulatory authority or agency (each, a "Governmental Entity"), is required by
or with respect to the Company or any of its subsidiaries in connection with the
execution and delivery of this Agreement by the Company, the consummation by the
Company of the transactions contemplated by this Agreement or the compliance by
the Company with the provisions of this Agreement, except for (1) the filing of
a premerger notification and report form by the Company under the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act") or any
other applicable competition, merger control, antitrust or similar law, (2) the
filing with the Securities and Exchange Commission (the "SEC") of a proxy
statement relating to the adoption of this Agreement by the Company's
stockholders (as amended or supplemented from time to time, the "Proxy
Statement") and such reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as may be required in connection with this
Agreement, the Stockholders Agreement and the transactions contemplated hereby
and thereby, (3) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company or any of its subsidiaries is
qualified to do business, (4) any filings required under the rules and
regulations of The Nasdaq Stock Market Inc. and (5) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made individually or in the aggregate could
not reasonably be expected to (x) have a material adverse effect on the Company,
(y) impair in any material respect the ability of the Company to perform its
obligations under this Agreement or (z) prevent or materially impede, interfere
with, hinder or delay the consummation of any of the transactions contemplated
by this Agreement.
(e) SEC Documents. The Company has filed with the SEC, and has
heretofore made available to Parent true and complete copies of, all reports,
schedules, forms, statements and other documents required to be filed with the
SEC by the Company since July 26, 2000 (together with all
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information incorporated therein by reference, the "SEC Documents"). No
subsidiary of the Company is required to file any form, report or other document
with the SEC. As of their respective dates, each of the SEC Documents complied
in all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act") or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents at the time they were filed contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of the date of this Agreement, except to the extent that
information contained in any SEC Document filed and publicly available prior to
the date of this Agreement (a "Filed SEC Document") has been revised or
superseded by a later filed Filed SEC Document, none of the SEC Documents
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements (including the related notes) of the
Company included in the SEC Documents complied, when filed, or will comply, when
filed, in each case as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been or will be prepared in accordance with generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly presented or will present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and their consolidated results of operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
and recurring year-end audit adjustments and the absence of footnotes). Except
as set forth in the Filed SEC Documents, the Company and its subsidiaries have
no liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that individually or in the aggregate could reasonably
be expected to have a material adverse effect on the Company.
(f) Information Supplied. None of the informa tion included or
incorporated by reference in the Proxy Statement will, at the date it is first
mailed to the Company's stockholders or at the time of the Stockholders Meeting
(as defined in Section 5.01) or at the time of any
13
amendment or supplement thereof, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement. The Proxy Statement will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder.
(g) Absence of Certain Changes or Events. Since the date of the most
recent audited financial statements included in the Filed SEC Documents, the
Company and its subsidiaries have conducted their respective businesses only in
the ordinary course consistent with past practice, and there has not been (i)
any material adverse effect on the Company or any state of facts, change,
development, effect or occurrence that could reasonably be expected to result in
a material adverse effect on the Company, (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of the Company's or any of its subsidiaries'
capital stock, except for dividends by a wholly owned subsidiary of the Company
to its parent, (iii) any split, combination or reclassification of any of the
Company's or any of its subsidiaries' capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of capital stock or other securities of the
Company or any of its subsidiaries, (iv) (w) any granting by the Company or any
of its subsidiaries of any increase in compensation or fringe benefits, except
for normal increases of cash compensation prior to the date of this Agreement in
the ordinary course of business consistent with past practice, or any payment by
the Company or any of its subsidiaries of any bonus, except for bonuses made
prior to the date of this Agreement in the ordinary course of business
consistent with past practice, in each case to any current or former director,
officer, employee or consultant, (x) any granting by the Company or any of its
subsidiaries to any current or former director, officer, employee or consultant
of any increase in severance or termination pay, (y) any entry by the Company or
any of its subsidiaries into, or any amendment of, (A) any employment, deferred
compensation, severance, termination, indemnification or consulting agreement
between the Company or any of its
14
subsidiaries, on the one hand, and any current or former director, officer,
employee or consultant of the Company or any of its subsidiaries, on the other
hand or (B) any agreement between the Company or any of its subsidiaries, on the
one hand, and any current or former director, officer, employee or consultant of
the Company or any of its subsidiaries, on the other hand, the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company of the nature contemplated by
this Agreement or the Stockholders Agreement (all such agreements under this
clause (y), collectively, "Benefit Agreements"), or (z) any amendment to, or
modification of, any Stock Option, (v) any damage, destruction or loss, whether
or not covered by insurance, that individually or in the aggregate could
reasonably be expected to have a material adverse effect on the Company, (vi)
any change in financial or tax accounting methods, principles or practices by
the Company, except insofar as may have been required by a change in GAAP or
applicable law, (vii) any tax election that individually or in the aggregate
could reasonably be expected to have a material adverse effect on the Company or
any of its tax attributes or any settlement or compromise of any material income
tax liability, (viii) any revaluation by the Company of any of its material
assets or (ix) any licensing or other agreement with regard to the acquisition
or disposition of any material Intellectual Property (as defined in Section
3.01(p)) or rights thereto.
(h) Litigation. There is no suit, claim, action, investigation or
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries that individually or in the
aggregate could reasonably be expected to have a material adverse effect on the
Company, nor is there any statute, law, ordinance, rule, regulation, judgment,
order or decree, of any Governmental Entity or arbitrator outstanding against,
or, to the knowledge of the Company, investigation by any Governmental Entity
involving, the Company or any of its subsidiaries that individually or in the
aggregate could reasonably be expected to have a material adverse effect on the
Company.
(i) Contracts. None of the Company or any of its subsidiaries is a
party to or bound by, and none of their properties or assets are bound by or
subject to, any written or oral:
(i) Contract not made in the ordinary course of business entered into
prior to the date of this Agreement;
15
(ii) Contract pursuant to which the Company or any of its subsidiaries
has agreed not to compete with any person or to engage in any activity or
business, or pursuant to which any benefit is required to be given or lost
as a result of so competing or engaging;
(iii) Contract pursuant to which the Company or any of its
subsidiaries is restricted in any material respect in the development,
marketing or distribution of their respective products or services;
(iv) Contract with (i) any shareholder of the Company or any of its
subsidiaries, (ii) any affiliate of the Company or any of its subsidiaries,
(iii) any current or former director, officer, employee or consultant of
the Company or any of its subsidiaries or of any affiliate of the Company
or any of its subsidiaries (other than employment agreements referred to in
Section 3.01(k));
(v) license or franchise granted by the Company or any of its
subsidiaries pursuant to which the Company or such subsidiary has agreed to
refrain from granting license or franchise rights to any other person;
(vi) Contract under which the Company or any of its subsidiaries has
incurred any indebtedness that is currently owing or given any guarantee in
respect of indebtedness;
(vii) Contract creating or granting a Lien (including Liens upon
properties acquired under conditional sales, capital leases or other title
retention or security devices);
(viii) material Contract that requires consent of or notice to a third
party in the event of or with respect to the Merger or the transactions
contemplated by the Stockholders Agreement, including in order to avoid
termination of or loss of material benefit under any such Contract;
(ix) Contract providing for payments of royalties to third parties;
(x) Contract granting a third party any license to Intellectual
Property, other than Contracts granting licenses to end-user customers for
their internal use or solely as necessary for such customers to use the
Company's products and services;
16
(xi) Contract providing confidential treatment by the Company or any
of its subsidiaries of third party information, other than (i) non-
disclosure agreements entered into by the Company in the ordinary course of
business or (ii) confidentiality agreements entered into prior to the date
of this Agreement with respect to Takeover Proposals made prior to the date
of this Agreement;
(xii) Contract granting the other party to such Contract or a third
party "most favored nation" status that, following the Merger, would in any
way apply to Parent or any of its subsidiaries (other than the Company and
its subsidiaries and their products or services (other than any similar
products or services produced or offered by Parent or its subsidiaries
(other than the Company and its subsidiaries)));
(xiii) Contract that requires any consent (including any consent to
assignment), approval, authorization, qualification or order of any
Governmental Entity or other third party in connection with this Agreement
and the consummation of the transactions contemplated hereby; or
(xiv) Contract which (i) has aggregate future sums due from the
Company or any of its subsidiaries in excess of $50,000 and is not
terminable by the Company or such subsidiary for a cost of less than
$50,000 or (ii) is entered into prior to the date of this Agreement and is
otherwise material to the business of the Company and its subsidiaries,
taken as a whole, or as presently conducted or as proposed to be conducted.
Each Contract of the Company and its subsidiaries is in full force and effect
and is a legal, valid and binding agreement of the Company or such subsidiary
and, to the knowledge of the Company or such subsidiary, of each other party
thereto, enforceable against the Company or any of its subsidiaries, as the case
may be, and, to the knowledge of the Company, against the other party or parties
thereto, in each case, in accordance with its terms, except for such failures to
be in full force and effect or enforceable that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company. Each of the Company and its subsidiaries has performed or is
performing all material obligations required to be performed by it under its
Contracts and is not (with or without notice or lapse of time or both) in breach
or default in any material respect thereunder, and, to the knowledge of the
Company or such subsidiary, no other party to any of its Contracts is (with
17
or without notice or lapse of time or both) in breach or default in any material
respect thereunder except, in each case, for such breaches that individually or
in the aggregate could not reasonably be expected to have a material adverse
effect on the Company. Neither the Company nor any of its subsidiaries knows of
any circumstances that are reasonably likely to occur that could reasonably be
expected to materially adversely affect its ability to perform its obligations
under any material Contract.
(j) Compliance with Laws. The Company and its subsidiaries are, and
since December 31, 1998 have been, in compliance with all statutes, laws,
ordinances, rules, regulations, judgments, orders and decrees of any
Governmental Entity applicable to their businesses or operations, except for
instances of possible noncompliance that individually or in the aggregate could
not reasonably be expected to have a material adverse effect on the Company,
impair in any material respect the ability of the Company to perform its
obligations under this Agreement or prevent or materially impede, interfere
with, hinder or delay the consummation of any of the transactions contemplated
by this Agreement. None of the Company or any of its subsidiaries has received,
since December 31, 1998, a notice or other written communication alleging a
possible violation of any statute, law, ordinance, rule, regulation, judgment,
order or decree of any Governmental Entity applicable to its businesses or
operations, except for such violations that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company. The Company and its subsidiaries have in effect all Federal, state and
local, domestic and foreign, governmental consents, approvals, orders,
authorizations, certificates, filings, notices, permits, concessions,
franchises, licenses and rights (collectively "Permits") necessary for them to
own, lease or operate their properties and assets and to carry on their
businesses as now conducted and there has occurred no violation of, or default
under, any such Permit, except for the lack of Permits and for violations of, or
defaults under, Permits, which lack of Permits, violations or defaults
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company. The Merger, in and of itself, could not
reasonably be expected to cause the revocation or cancelation of any such
Permit, which revocation or cancelation could reasonably be expected to have a
material adverse effect on the Company.
(k) Absence of Changes in Benefit Plans; Employment Agreements; Labor
Relations. Except as disclosed in the Filed SEC Documents, since the date of
the most
18
recent audited financial statements included in the Filed SEC Documents, none of
the Company or any of its subsidiaries has terminated, adopted, amended or
agreed to amend in any material respect any collective bargaining agreement or
any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock appreciation, restricted
stock, stock option, phantom stock, performance, retirement, thrift, savings,
stock bonus, paid time off, perquisite, fringe benefit, vacation, severance,
disability, death benefit, hospitalization, medical or other welfare benefit or
other material plan, program, arrangement or understanding (whether or not
legally binding) maintained, contributed to or required to be maintained or
contributed to by the Company or any other person or entity that, together with
the Company, is treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code (each, a "Commonly Controlled Entity"), in each case providing
benefits to any current or former director, officer, employee or independent
contractor of the Company or any of its subsidiaries (collectively, "Benefit
Plans") or has made any material change in any actuarial or other assumption
used to calculate funding obligations with respect to any Benefit Plan that is a
Pension Plan (as defined in Section 3.01(m)), or any material change in the
manner in which contributions to any such Pension Plan are made or the basis on
which such contributions are determined. Except as disclosed in the Filed SEC
Documents, neither the Company nor any of its subsidiaries is party to any
Benefit Agreement. There are no collective bargaining or other labor union
agreements to which the Company or any of its subsidiaries is a party or by
which it is bound. Since December 31, 1998, neither the Company nor any of its
subsidiaries has encountered any labor union organizing activity, or had any
actual or threatened employee strikes, work stoppages, slowdowns or lockouts.
(l) Environmental Matters. Except to the extent that the inaccuracy
of any of the following (or the circumstances giving rise to such inaccuracy)
could not reasonably be expected to have a material adverse effect on the
Company, (i) the Company and each of its subsidiaries are in compliance with all
applicable Environmental Laws (as defined below); and (ii) there are no facts,
circumstances or conditions that are reasonably likely to give rise to any
liability of, or form the basis of a claim against, the Company or any of its
Subsidiaries in connection with any Environmental Law. As used in this
Agreement, the term "Environmental Laws" shall mean any applicable Federal,
state or local, domestic or foreign, statutes, laws, regulations, ordinances,
rules, codes, enforceable
19
requirements, agreements, orders, decrees, judgments or injunctions issued,
promulgated or entered into by any Governmental Entity relating to protection of
the environment, natural resources or human health and safety. As used in this
Agreement, the term "Hazardous Substances" shall mean any explosive or
radioactive substances or materials, any toxic or hazardous substances or
materials, including asbestos or asbestos-containing materials, polychlorinated
biphenyls, petroleum and petroleum products, and any other substances or
materials regulated under any Environmental Law.
(m) ERISA Compliance. (i) Section 3.01(m)(i) of the Company
Disclosure Schedule contains a list of all Benefit Plans, including without
limitation each "employee welfare benefit plan" (as defined in Section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended "ERISA")) and
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (a
"Pension Plan"). The Company has provided or made available to Parent true,
complete and correct copies of (1) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (2) the two most recent annual
reports on Form 5500 required to be filed with the Internal Revenue Service (the
"IRS") with respect to each Benefit Plan (if any such report was required), (3)
the most recent summary plan description for each Benefit Plan for which such
summary plan description is required, (4) each trust agreement and group annuity
contract relating to any Benefit Plan and (5) the most recent IRS determination
letter for each Benefit Plan intended to be tax-qualified under Section 401(a)
of the Code. Each Benefit Plan has been administered in accordance with its
terms, except where the failure so to be administered individually or in the
aggregate could not reasonably be expected to have a material adverse effect on
the Company. The Company and its subsidiaries and all the Benefit Plans are in
compliance with all applicable provisions of ERISA, the Code, and all other
applicable laws, whether Federal, state or local, domestic or foreign, except
for instances of possible noncompliance that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company. All Pension Plans intended to be tax-qualified have been the subject of
determination letters from the IRS to the effect that such Pension Plans are
qualified and exempt from United States Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code; no such determination letter has
been revoked (or, to the knowledge of the Company, has revocation been
threatened) nor has any event occurred since the date of the most recent
determination letter or application therefor relating to any such Pension Plan
that would adversely affect the qualification of such Pension Plan or materially
increase the costs relating thereto or require security under Section 307 of
ERISA.
20
(ii) Neither the Company nor any Commonly Controlled Entity has
maintained, contributed to or been obligated to maintain or contribute to,
or has any actual or contingent liability under, any Benefit Plan that is
subject to Title IV of ERISA.
(iii) With respect to any Benefit Plan that is an employee welfare
benefit plan (each, a "Welfare Plan"), there are no understandings,
agreements or undertakings, written or oral, that would prevent any such
plan (including any such plan covering retirees or other former employees)
from being amended or terminated without material liability to the Company
or any of its subsidiaries on or at any time after the Effective Time. No
Welfare Plan provides benefits after termination of employment except where
the cost thereof is borne entirely by the former employee (or his eligible
dependents or beneficiaries) or as required by Section 4980B(f) of the
Code. The Company and its subsidiaries comply in all material respects
with the applicable requirements of Section 4980B(f) of the Code with
respect to each Benefit Plan that is a group health plan, as such term is
defined in Section 5000(b)(1) of the Code.
(iv) No current or former director, officer, employee or independent
contractor of the Company or any of its subsidiaries will be entitled to
any additional compensation or benefits or any acceleration of the time of
payment or vesting of any compensation or benefits under any Benefit Plan
or Benefit Agreement as a result of the transactions contemplated by this
Agreement or the Stockholders Agreement or any benefits under any Benefit
Plan or Benefit Agreement the value of which will be calculated on the
basis of any of the transactions contemplated by this Agreement or the
Stockholders Agreement.
(v) All reports, returns and similar documents with respect to all
Benefit Plans required to be filed with any Governmental Entity or
distributed to any Benefit Plan participant have been duly and timely filed
or distributed, except for failures to file or distribute that individually
or in the aggregate have not had and could not reasonably be expected to
have a material adverse effect on the Company. The Company has received no
notice of, and to the knowledge of the
21
Company, there are no pending investigations by any Governmental Entity
with respect to, or pending termination proceedings or other claims (except
claims for benefits payable in the normal operation of the Benefit Plans),
suits or proceedings against or involving any Benefit Plan or asserting any
rights or claims to benefits under, any Benefit Plan that could give rise
to any material liability, and, to the knowledge of the Company, there are
not any facts that individually or in the aggregate have had or could
reasonably be expected to have a material adverse effect on the Company.
(vi) All contributions, premiums and benefit payments under or in
connection with the Benefit Plans that are required to have been made by
the Company or any of its subsidiaries as of the date of this Agreement in
accordance with the terms of the Benefit Plans have been timely made or
have been reflected on the most recent consolidated balance sheet filed or
incorporated by reference into the Filed Company SEC Documents. No Pension
Plan has an "accumulated funding deficiency" (as such term is defined in
Section 302 of ERISA or Section 412 of the Code), whether or not waived.
(vii) With respect to each Benefit Plan, (A) there has not occurred
any prohibited transaction in which the Company, any of its subsidiaries or
any of their employees has engaged that could subject the Company, its
subsidiaries or any of their employees, or, to the knowledge of the
Company, a trustee, administrator or other fiduciary of any trust created
under any Benefit Plan, to the tax or penalty on prohibited transactions
imposed by Section 4975 of the Code or the sanctions imposed under Title I
of ERISA, other than such taxes, penalties or sanctions that individually
or in the aggregate could not reasonably be expected to result in a
material liability and (B) neither the Company nor, to the knowledge of the
Company, any trustee, administrator or other fiduciary of any Benefit Plan
nor any agent of any of the foregoing has engaged in any transaction or
acted in a manner that could, or failed to act so as to, subject the
Company or, to the knowledge of the Company, any trustee, administrator or
other fiduciary to any material liability for breach of fiduciary duty
under ERISA or any other applicable law. No Benefit Plan or related trust
has been terminated, nor has there been any "reportable event" (as that
term is defined in Section 4043 of ERISA) for which the 30-day reporting
requirement has not been waived with
22
respect to any Benefit Plan during the last five years, and no notice of a
reportable event will be required to be filed in connection with the
transactions contemplated hereby.
(viii) The Company and its subsidiaries do not have any material
liability or obligations, including under or on account of a Benefit Plan
or Benefit Agreement, arising out of the hiring of persons to provide
services to the Company or any of its subsidiaries and treating such
persons as consultants or independent contractors and not as employees of
the Company or its subsidiaries.
(n) Taxes. (i) Each of the Company and its subsidiaries and each
Company Affiliated Group (as defined in clause (x) below) has timely filed all
Federal, state and local, domestic and foreign, income and franchise tax returns
and reports and all other tax returns and reports required to be filed by it and
all such returns and reports are complete and correct, except for such failures
to file or to be complete and correct that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company. Each of the Company and its subsidiaries and each Company Affiliated
Group has timely paid all taxes due with respect to the taxable periods covered
by such returns and reports and all other material taxes, except where the
failures so to pay individually or in the aggregate could not reasonably be
expected to have a material adverse effect on the Company, and the most recent
financial statements contained in the Filed SEC Documents reflect an adequate
reserve for all taxes payable by the Company and its subsidiaries for all
taxable periods and portions thereof through the date of such financial
statements.
(ii) No Federal, state or local, domestic or foreign, income or
franchise tax return or report or any other material tax return or report
of the Company or any of its subsidiaries or any Company Affiliated Group
is currently under audit or examination by any taxing authority, and no
written or, to the knowledge of the Company, unwritten notice of such an
audit or examination has been received by the Company or any of its
subsidiaries, except for such audits or examinations that individually or
in the aggregate could not reasonably be expected to have a material
adverse effect on the Company. There is no deficiency, refund litigation,
proposed adjustment or matter in controversy with respect to any taxes due
and owing by the Company, any of its subsidiaries or any Company
23
Affiliated Group, other than those that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company. Each deficiency resulting from any audit or examination or any
concluded litigation relating to taxes by any taxing authority has been
timely paid, except where the failures so to pay individually or in the
aggregate could not reasonably be expected to have a material adverse
effect on the Company. No issues relating to taxes were raised by the
relevant taxing authority during any presently pending audit or
examination, and no issues relating to taxes were raised by the relevant
taxing authority in any completed audit or examination that could
reasonably be expected to recur in a later taxable period, in each case
other than those that individually or in the aggregate could not reasonably
be expected to have a material adverse effect on the Company. All
assessments for taxes due and owing by the Company, any of its subsidiaries
or any Company Affiliated Group with respect to completed and settled
audits or examinations or concluded litigation have been paid. No Federal
or state or other material local, domestic or foreign tax return or report
of the Company or any of its subsidiaries or any Company Affiliated Group
has ever been under audit or examination by any taxing authority. The
relevant statute of limitations is closed with respect to the Federal tax
returns of the Company and its subsidiaries for all years through December
31, 1995.
(iii) There is no currently effective agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any material taxes, and no power of attorney with respect to
any taxes has been executed or filed with any taxing authority.
(iv) No Liens for taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for statutory
Liens for taxes not yet due and any other Liens that individually or in the
aggregate could not reasonably be expected to have a material adverse
effect on the Company.
(v) None of the Company or any of its subsidiaries is a party to or
bound by any tax sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to taxes (including any
advance pricing agreement, closing agreement or other agreement relating to
taxes with any taxing authority).
24
(vi) None of the Company or any of its subsidiaries will be required
to include in a taxable period ending after the Effective Time taxable
income attributable to income that accrued in a prior taxable period but
was not recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract method of
accounting, the long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or comparable provisions of state or
local tax law, domestic or foreign, or for any other reason, except where
the inclusions of such income in a taxable period ending after the
Effective Time individually or in the aggregate could not reasonably be
expected to have a material adverse effect on the Company.
(vii) Section 3.01(n)(vii) of the Company Disclosure Schedule sets
forth for each employee of the Company who holds the title of vice
president or above the compensation from the Company or any of its
subsidiaries includible in such employee's gross income for each of the
1996 through the 2000 calendar years.
(viii) The Company and its subsidiaries have complied with all
applicable statutes, laws, ordinances, rules and regulations relating to
the payment and withholding of taxes (including withholding of taxes
pursuant to Sections 1441, 1442, 3121 and 3402 of the Code or similar
provisions under any Federal, state or local, domestic or foreign, laws)
and have, within the time and the manner prescribed by law, withheld from
and paid over to the proper governmental authorities all amounts required
to be so withheld and paid over under applicable laws, except where the
failures so to comply, withhold and pay over individually or in the
aggregate could not reasonably be expected to have a material adverse
effect on the Company.
(ix) Neither the Company nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355
of the Code (i) in the two years prior to the date of this Agreement or
(ii) in a distribution that could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of
the Code) in conjunction with the Merger.
25
(x) As used in this Agreement, "taxes" shall include all Federal,
state and local, domestic and foreign, income, franchise, property, sales,
excise, employment, payroll, social security, value-added, ad valorem,
transfer, withholding and other taxes, including taxes based on or measured
by gross receipts, profits, sales, use or occupation, tariffs, levies,
impositions, assessments or governmental charges of any nature whatsoever,
including any interest penalties or additions with respect thereto, and any
obligations under any agreements or arrangements with any other person with
respect to such amounts. As used in this Agreement, "Company Affiliated
Group" shall mean each affiliated, combined, consolidated or unitary group
of which the Company or any of its subsidiaries is or has been a member.
(o) Title to Properties. (i) The Company and each of its
subsidiaries has good and marketable title to, or valid leasehold interests in,
all of its material properties and assets except for such as are no longer used
or useful in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
restrictive covenants and similar encumbrances that individually or in the
aggregate could not reasonably be expected to have a material adverse effect on
the Company. All such material assets and properties, other than assets and
properties in which the Company or any of its subsidiaries has a leasehold
interest, are free and clear of all Liens, except for Liens that individually or
in the aggregate could not reasonably be expected to have a material adverse
effect on the Company.
(ii) Each of the Company and its subsidiaries has complied in all
material respects with the terms of all material leases to which it is a
party and under which it is in occupancy, and all such leases are in full
force and effect, except for such instances of noncompliance or failures to
be in full force and effect that individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the Company.
The Company and its subsidiaries enjoy peaceful and undisturbed possession
under all such material leases, except for failures to do so that
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company.
(p) Intellectual Property. (i) Section 3.01(p) of the Company
Disclosure Schedule lists all patents, patent applications, trademarks,
tradenames, service marks and
26
registered copyrights and applications therefor, if any, owned by or licensed to
the Company or any of its subsidiaries as of the date of this Agreement.
Attached to Section 3.01(p) of the Company Disclosure Schedule are true and
correct copies of all standard forms of license agreements relating to
Intellectual Property (as defined below in clause (iii)) of the Company or any
of its subsidiaries as of the date of this Agreement, and the Company has
provided to Parent true and correct copies of all license agreements relating to
Intellectual Property to which the Company or any of its subsidiaries is a party
that deviate from such standard forms in any material respect.
(ii) Except to the extent that the inaccuracy of any of the following
(or the circumstances giving rise to such inaccuracy) could not reasonably
be expected to have a material adverse effect on the Company:
(A) the Company and each of its subsidiaries owns, or is licensed
or otherwise has the right to use (in each case, free and clear of any
Liens), all Intellectual Property used in or necessary to carry on its
business as now being conducted;
(B) none of the Company or any of its subsidiaries is infringing
on or otherwise violating the rights of any person with regard to any
Intellectual Property owned by, licensed to or otherwise used by the
Company or any of its subsidiaries (provided, however, that with
respect to the foregoing as it relates to infringement by the Company
of validly issued patents of third parties, such representation is
limited to the knowledge of the Company);
(C) there is no suit, claim, action, investigation or proceeding
pending or, to the knowledge of the Company, threatened with respect
to, and the Company has not been notified of, any possible
infringement by the Company or any of its subsidiaries on or other
violation of the rights of any person with regard to any Intellectual
Property owned by, licensed to or otherwise used by the Company or any
of its subsidiaries;
(D) to the knowledge of the Company, no person is infringing on
or otherwise violating any right of the Company or any of its
subsidiaries with respect to any Intellectual Property owned by,
licensed to and/or otherwise used by the Company or any of its
subsidiaries;
27
(E) to the knowledge of the Company, none of the former or
current members of management or key personnel of the Company or any
of its subsidiaries, including all former and current employees,
agents, consultants and contractors who have contributed to or
participated in the conception and development of the Intellectual
Property of the Company or any of its subsidiaries, have a valid claim
against the Company or any of its subsidiaries in connection with the
involvement of such persons in the conception and development of any
such Intellectual Property, and no such claim has been asserted or
threatened;
(F) the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict
with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to any right,
license or encumbrance relating to, Intellectual Property owned by the
Company or any of its subsidiaries or with respect to which the
Company or any of its subsidiaries now has or has had any agreement
with any third party, or any right of termination, cancelation or
acceleration of any material Intellectual Property right or obligation
set forth in any agreement to which the Company or any of its
subsidiaries is a party, or the loss or encumbrance of any
Intellectual Property or benefit related thereto, or result in the
creation of any Lien in or upon any Intellectual Property or right,
other than under certain contracts and agreements, the material ones
of which are set forth on Section 3.01(p) of the Company Disclosure
Schedule, that provide for their termination upon a change of control
of the Company;
(G) except in the ordinary course of business consistent with
past practice, no licenses or rights have been granted to distribute
the source code of, or to use the source code to create Derivative
Works (as defined below) of, any product currently marketed by,
commercially available from or under development by the Company or any
of its subsidiaries for which the Company possesses the source code;
and
28
(H) the Company and each of its subsidiaries has taken
commercially reasonable and necessary steps to protect their
Intellectual Property and their rights thereunder, and to the
knowledge of the Company no such rights to Intellectual Property have
been lost or are in jeopardy of being lost through failure to act by
the Company or any of its subsidiaries.
As used in this Agreement, "Derivative Work" shall mean a work
that is based upon one or more preexisting works, such as a revision,
enhancement, modification, abridgement, condensation, expansion or any
other form in which such preexisting works may be recast, transformed
or adapted, and which, if prepared without authorization of the owner
of the copyright in such preexisting work, would constitute a
copyright infringement. As used in this Agreement, a Derivative Work
shall also include any compilation that incorporates such a
preexisting work as well as translation from one human language to
another and from one type of code to another.
(iii) As used in this Agreement, "Intellectual Property" shall mean
trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction
to register, the foregoing, including any extension, modification or
renewal of any such registration or application; inventions, discoveries
and ideas, whether patented, patentable or not in any jurisdiction;
computer programs and software (including source code, object code and
data), know-how and any other technology; trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works, whether copyrighted,
copyrightable or not in any jurisdiction; registration or applications for
registration of copyrights in any jurisdiction, and any renewals or
extensions thereof; any similar intellectual property or proprietary rights
similar to any of the foregoing; licenses, immunities, covenants not to xxx
and the like relating to any of the foregoing; and any claims or causes of
action arising out of or related to any infringement, misuse or
misappropriation of any of the foregoing.
29
(q) State Takeover Statutes. The approval of the Merger and the
Stockholders Agreement and the transactions contemplated thereby by the Board of
Directors of the Company referred to in Section 3.01(d) constitutes approval of
the Merger and the Stockholders Agreement and the transactions contemplated
thereby for purposes of Section 203 of the DGCL and represents the only action
necessary to ensure that Section 203 of the DGCL does not and will not apply to
the execution and delivery of this Agreement or the Stockholders Agreement or
the consummation of the Merger or the other transactions contemplated hereby or
thereby. No other state takeover or similar statute or regulation is applicable
to this Agreement, the Merger or the other transactions contemplated by this
Agreement.
(r) Voting Requirements. The affirmative vote at the Stockholders
Meeting or any adjournment or postponement thereof of the holders of a majority
of the outstanding shares of Company Common Stock in favor of adopting this
Agreement (the "Stockholder Approval") is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve or adopt
this Agreement, the Stockholders Agreement or the consummation of the
transactions contemplated hereby and thereby.
(s) Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than Xxxxxx Xxxxxxx & Co.
Incorporated, the fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission, or the reimbursement of expenses, in connection with the
transactions contemplated by this Agreement or the Stockholders Agreement based
upon arrangements made by or on behalf of the Company. The Company has delivered
to Parent true and complete copies of all agreements under which any such fees
or expenses are payable and all indemnification and other agreements related to
the engagement of the persons to whom such fees are payable. The fees and
expenses of any accountant, broker, financial advisor, consultant, legal counsel
or other person retained by the Company in connection with this Agreement or the
transactions contemplated hereby incurred or to be incurred by the Company in
connection with this Agreement and the transactions contemplated by this
Agreement will not exceed the fees and expenses set forth and identified by
category of advisor in Section 3.01(s) of the Company Disclosure Schedule.
(t) Opinion of Financial Advisor. The Company has received the
written opinion of Xxxxxx Xxxxxxx & Co. Incorporated, in customary form to the
effect that, as of
30
the date of this Agreement, the consideration to be received in the Merger by
the Company's stockholders is fair to the Company's stockholders from a
financial point of view, a copy of which opinion has been delivered to Parent.
SECTION 3.02. Representations and Warranties of Parent and Sub.
Parent and Sub represent and warrant to the Company as follows:
(a) Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has all requisite corporate
power and authority to carry on its business as now being conducted.
(b) Authority; Noncontravention. Parent and Sub have the requisite
corporate power and authority to execute and deliver this Agreement, to
consummate the transactions contemplated by this Agreement and to comply
with the provisions of this Agreement. The execution and delivery of this
Agreement by Parent and Sub, the consummation by Parent and Sub of the
transactions contemplated by this Agreement and the compliance by Parent
and Sub with the provisions of this Agreement have been duly authorized by
all necessary corporate action on the part of Parent and Sub and no other
corporate proceedings on the part of Parent or Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated by
this Agreement. This Agreement has been duly executed and delivered by
Parent and Sub, as applicable, and, assuming the due authorization,
execution and delivery by the Company, constitutes a valid and binding
obligation of Parent and Sub, as applicable, enforceable against Parent and
Sub, as applicable, in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable
remedies). The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement and
compliance by Parent and Sub with the provisions of this Agreement do not
and will not conflict with, or result in any violation or breach of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of, or result in, termination, cancelation or acceleration
of any obligation or to loss of a material benefit under, or result in the
creation of any Lien in or upon any of
31
the properties or assets of Parent or Sub under, or give rise to any
increased, additional, accelerated or guaranteed rights or entitlements
under, any provision of (i) the Certificate of Incorporation or By-laws of
Parent or Sub, (ii) any Contract to which Parent or Sub is party or any of
their respective properties or assets is subject or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any (A) statute, law, ordinance, rule or regulation or (B)
judgment, order or decree, in each case, applicable to Parent or Sub or any
of their respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, breaches, defaults,
rights, losses, Liens or entitlements that individually or in the aggregate
could not reasonably be expected to impair in any material respect the
ability of each of Parent and Sub to perform its obligations under this
Agreement or prevent or materially impede, interfere with, hinder or delay
the consummation of any of the transactions contemplated by this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Parent or Sub in connection with the execution and delivery of
this Agreement by Parent and Sub, the consummation by Parent and Sub of the
transactions contemplated by this Agreement or the compliance by Parent or
Sub with the provisions of this Agreement, except for (1) the filing of a
premerger notification and report form under the HSR Act or any other
applicable competition, merger control, antitrust or similar law, (2) the
filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities
of other states in which the Company or any of its subsidiaries is
qualified to do business and (3) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to be obtained or made individually or in the aggregate could not
reasonably be expected to impair in any material respect the ability of
each of Parent and Sub to perform its obligations under this Agreement or
prevent or materially impede, interfere with, hinder or delay the
consummation of any of the transactions contemplated by this Agreement.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the Proxy Statement will (except to the
32
extent revised or superseded by amendments or supplements contemplated
hereby), at the date the Proxy Statement is first mailed to the Company's
stockholders or at the time of Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
(d) Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement, and has
engaged in no business other than in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 4.01. Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Effective
Time, except as expressly set forth in Section 4.01(a) of the Company Disclosure
Schedule, as consented to in writing by Parent or as specifically contemplated
by this Agreement, the Company shall, and shall cause its subsidiaries to, carry
on their respective businesses in the ordinary course consistent with past
practice and use their reasonable best efforts to comply with all applicable
laws, rules and regulations and, to the extent consistent therewith, use their
reasonable best efforts to preserve their assets and technology and preserve
their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them. Without limiting
the generality of the foregoing, during the period from the date of this
Agreement to the Effective Time, except as expressly set forth in Section
4.01(a) of the Company Disclosure Schedule, as consented to in writing by Parent
or as specifically contemplated by this Agreement, the Company shall not, and
shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of
its capital stock except for dividends by a direct or indirect wholly owned
subsidiary of the Company to its parent, (y) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution
33
for shares of its capital stock or (z) purchase, redeem or otherwise
acquire any shares of capital stock or any other securities of the Company
or its subsidiaries or any options, warrants, calls or rights to acquire
any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or exchangeable for, or any options, warrants, calls or
rights to acquire, any such shares, voting securities or convertible
securities (other than (A) the issuance of shares of Company Common Stock
upon the exercise of Stock Options or rights under the ESPP outstanding on
the date of this Agreement and in accordance with their present terms and
(B) the granting of rights that may arise under the ESPP, as the ESPP is in
effect on the date of this Agreement);
(iii) amend its certificates of incorporation or by-laws (or similar
organizational documents);
(iv) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by purchasing
all of or a substantial equity interest in, or by any other manner, any
business or any corporation, partnership, limited liability company, joint
venture, association or other entity or division thereof or (y) any assets
other than inventory, components, raw materials or other immaterial assets
in the ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets (including
any shares of capital stock, voting securities or other rights, instruments
or securities), except sales of inventory or used equipment and licenses of
Intellectual Property to end-user customers for their internal use or
solely as necessary for such customers to use the Company's products and
services, in each case in the ordinary course of business consistent with
past practice;
(vi) (x) repurchase, prepay or incur any indebtedness or guarantee any
indebtedness of another person or issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
the Company or any of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain
any
34
financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing or (y) make
any loans, advances or capital contributions to, or investments in, any
other person, other than the Company or any direct or indirect wholly owned
subsidiary of the Company;
(vii) make any new capital expenditure or expenditures, or incur any
obligations or liabilities in connection therewith, which, individually is
in excess of $25,000 or, in the aggregate, are in excess of $100,000;
(viii) (x) pay, discharge, settle or satisfy any claims (including
claims of stockholders), liabilities or obligations (whether absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business
consistent with past practice or as required by their terms as in effect on
the date of this Agreement, of claims, liabilities or obligations reflected
or reserved against in the most recent audited financial statements (or the
notes thereto) of the Company included in the Filed SEC Documents (for
amounts not in excess of such reserves) or incurred since the date of such
financial statements in the ordinary course of business consistent with
past practice, (y) waive, release, grant or transfer any right of material
value or (z) waive any material benefits of, or agree to modify in any
adverse respect, or fail to enforce, any confidentiality, standstill or
similar agreement to which the Company or any of its subsidiaries is a
party;
(ix) modify, amend or terminate any material Contract to which the
Company or such subsidiary is a party, including any arrangements involving
material Intellectual Property, or waive, release or assign any material
rights or claims thereunder in a manner that is materially adverse to the
Company with respect to the particular Contract in question;
(x) enter into any Contract material to the Company and its
subsidiaries, taken as a whole, not otherwise prohibited by any other
provision of this Agreement, including any arrangements involving material
Intellectual Property, except for contracts relating to the sale of
products or services by the Company entered into in the ordinary course of
business consistent with past practice (it being understood and agreed that
no Contract (I) pursuant to which the
35
Company agrees (A) to accept information of any person on a confidential or
trade secret basis without a "residuals" clause in substantially the form
of Parent's standard form of "residuals" clause (which has previously been
provided by Parent to the Company), (B) not to compete with any person or
not to engage in any activities that would substantially limit the
Company's ability to compete or engage in competitive activities, (C) not
to solicit or attempt to hire, or to hire, any individual or (II) that has
a term greater than six months, shall be permitted under this exception);
(xi) except as required to comply with applicable law or any Contract,
Benefit Plan or Benefit Agreement existing on the date of this Agreement,
(A) increase in any manner the compensation or fringe benefits of, or pay
any bonus to, any current or former director, officer, employee or
consultant of the Company or any of its subsidiaries, (B) pay to any
current or former director, officer, employee or consultant of the Company
or any of its subsidiaries any benefit not provided for under any Contract,
Benefit Plan or Benefit Agreement other than the payment of cash
compensation in the ordinary course of business consistent with past
practice, (C) grant any awards under any Benefit Plan (including the grant
of stock options, stock appreciation rights, stock based or stock related
awards, performance units or restricted stock or the removal of existing
restrictions in any Contract, Benefit Plan or Benefit Agreement or awards
made thereunder), (D) take any action to fund or in any other way secure
the payment of compensation or benefits under any Contract, Benefit Plan or
Benefit Agreement or (E) take any action to accelerate the vesting or
payment of any compensation or benefit under any Contract, Benefit Plan or
Benefit Agreement;
(xii) form any subsidiary of the Company;
(xiii) enter into any Contract if consummation of the transactions
contemplated hereby or compliance by the Company with the provisions of
this Agreement will violate or conflict with, or result in any violation or
breach of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of, or result in, termination, cancelation
or acceleration of any obligation or to loss of a material benefit under,
or result in the creation of any Lien in or upon any of the properties or
assets of the Company or Parent or any of their respective subsidiaries
under, or give rise to any increased, additional, accelerated or guaranteed
rights or entitlements under, any provision of such Contract;
36
(xiv) enter into any Contract containing any restriction on the
ability of the Company or any of its subsidiaries to assign its rights,
interests or obligations thereunder, unless such restriction expressly
excludes any assignment to Parent or any of its subsidiaries in connection
with or following the consummation of the Merger and the other transactions
contemplated by this Agreement;
(xv) take any action (or omit to take any action) if such action (or
omission) would or could reasonably be expected to result in (A) any
representation and warranty of the Company set forth in this Agreement that
is qualified as to materiality becoming untrue, (B) any such representation
and warranty that is not so qualified becoming untrue in any material
respect or (C) any condition to the Merger set forth in Article VI not
being satisfied; or
(xvi) authorize any of, or commit, resolve or agree to take any of,
the foregoing actions.
(b) Certain Tax Matters. During the period from the date of this
Agreement to the Effective Time, (i) the Company and each of its subsidiaries
shall timely file all Federal, state and local, domestic and foreign, income and
franchise tax returns and reports and all other material tax returns and reports
("Post-Signing Returns") required to be filed by each such entity (after taking
into account any extensions) and all Post-Signing Returns shall be complete and
correct; (ii) the Company and each of its subsidiaries will timely pay all taxes
shown as due on such Post-Signing Returns that are so filed; (iii) the Company
will accrue a reserve in its books and records and financial statements in
accordance with past practice for all taxes payable by the Company or any of its
subsidiaries for which no Post-Signing Return is due prior to the Effective
Time; (iv) the Company and each of its subsidiaries will promptly notify Parent
of any suit, claim, action, investigation, proceeding or audit (collectively,
"Actions") pending against or with respect to the Company or any of its
subsidiaries in respect of any tax where there is a reasonable possibility of a
determination or decision that could reasonably be expected to have a material
adverse effect on the Company's or any of its subsidiaries' tax liabilities or
tax attributes and will not settle or compromise any such Action without
Parent's consent; and (v) none of the Company or any of its subsidiaries will
make or change any material tax election without Parent's consent, which consent
shall not be unreasonably withheld.
37
(c) Advice of Changes; Filings. The Company and each of its
subsidiaries shall (i) confer on a regular and frequent basis with Parent to
report on operational matters and other matters requested by Parent and (ii)
promptly advise Parent orally and in writing of any change or event that could
reasonably be expected to have a material adverse effect on the Company. The
Company and Parent shall each promptly provide the other copies of all filings
made by such party with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby, other than the portions of
such filings that include confidential information not directly related to the
transactions contemplated by this Agreement.
(d) Other Actions. Neither the Company nor its Board of Directors
shall take any action that would, or that could reasonably be expected to,
prevent or materially impede, interfere with, hinder or delay the consummation
of any of the transactions contemplated by this Agreement or the Stockholders
Agreement (including pursuant to the option to purchase Subject Shares granted
under Section 3 thereof) or deprive Parent of any material right or benefit to
which it is entitled under the Stockholders Agreement. The covenants and
agreements of the Company relating to the Stockholders Agreement contained in
this Section 4.01(d) shall survive termination of this Agreement.
SECTION 4.02. No Solicitation. (a) The Company shall not, nor shall
it permit any of its subsidiaries to, or authorize any director, officer or
employee of the Company or any of its subsidiaries or any investment banker,
attorney, accountant or other advisor or representative of the Company or any of
its subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage,
or take any other action knowingly to facilitate, any Takeover Proposal (as
defined below) or any inquiries or the making of any proposal that constitutes
or could reasonably be expected to lead to a Takeover Proposal or (ii) enter
into, continue or otherwise participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or
otherwise cooperate in any way with, any Takeover Proposal; provided, however,
that the Company may, if the Board of Directors of the Company determines in
good faith that the failure to do so would be reasonably likely to result in a
breach of its fiduciary duties under applicable law and subject to compliance
with Section 4.02(c), participate in discussions regarding such Takeover
38
Proposal and furnish information with respect to the Company and its
subsidiaries to the person making such Takeover Proposal (and its
representatives) pursuant to a customary confidentiality agreement. Without
limiting the foregoing, it is understood that any violation in any material
respect of the restrictions set forth in the preceding sentence by any director,
officer or employee of the Company or any of its subsidiaries or any investment
banker, attorney, accountant or other advisor or representative of the Company
or any of its subsidiaries shall be deemed to be a breach of this Section
4.02(a) by the Company.
The term "Takeover Proposal" means any inquiry, proposal or offer from
any person relating to, or that is reasonably likely to lead to, any direct or
indirect acquisition, in one transaction or a series of transactions, including
any merger, consolidation, tender offer, exchange offer, stock acquisition,
asset acquisition, binding share exchange, business combination,
recapitalization, liquidation, dissolution, joint venture or similar
transaction, of (A) assets or businesses that constitute or represent 15% or
more of the total revenue, operating income, EBITDA or assets of the Company and
its subsidiaries, taken as a whole, or (B) 15% or more of the outstanding shares
of Company Common Stock or capital stock of, or other equity or voting interests
in, any of the Company's subsidiaries directly or indirectly holding,
individually or taken together, the assets or businesses referred to in clause
(A) above, in each case other than the transactions contemplated by this
Agreement or the Stockholders Agreement.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw (or modify in a manner adverse to Parent or Sub) or
propose publicly to withdraw (or modify in a manner adverse to Parent or Sub)
the recommendation or declaration of advisability by such Board of Directors or
any such committee of this Agreement or the Merger, or resolve or agree to take
any such action, unless the Board of Directors or a committee thereof determines
in good faith, after consulting with legal counsel, that the failure to take
such action would be reasonably likely to result in a breach of its fiduciary
duties under applicable law, (ii) adopt or approve, or propose publicly to adopt
or approve, any Takeover Proposal, or resolve or agree to take any such action
or (iii) cause or permit the Company to enter into any letter of intent,
memorandum of understanding, agreement in principle, acquisition agreement,
merger agreement, option agreement, joint venture agreement, partnership
agreement or other agreement constituting or related to, or which is intended to
or is reasonably likely to lead to, any Takeover Proposal (other than a
confidentiality agreement referred to in Section 4.02(a)) or resolve or agree to
take any such action.
39
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.02, the Company promptly shall advise
Parent in writing of any request for information that the Company reasonably
believes could lead to or contemplates a Takeover Proposal or of any Takeover
Proposal, or any inquiry the Company reasonably believes could lead to any
Takeover Proposal, the terms and conditions of such request, Takeover Proposal
or inquiry (including any subsequent material amendment or modification to such
terms and conditions) and the identity of the person making any such request,
Takeover Proposal or inquiry. The Company shall keep Parent informed in all
material respects of the status and details (including material amendments or
proposed amendments) of any such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 4.02 or elsewhere in this
Agreement shall prohibit the Company from (i) taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or (ii) making any disclosure to the Company's stockholders if, in
the good faith judgment of the Board of Directors of the Company, after
consultation with outside counsel, failure so to disclose would be inconsistent
with applicable law; provided, however, that in no event shall the Company or
its Board of Directors or any committee thereof take, agree or resolve to take
any action prohibited by Section 4.02(b).
ARTICLE V
Additional Agreements
---------------------
SECTION 5.01. Preparation of the Proxy Statement; Stockholders
Meeting. (a) As promptly as practicable following the date of this Agreement,
the Company shall prepare and file with the SEC the Proxy Statement and the
Company shall use its reasonable best efforts to respond as promptly as
practicable to any comments of the SEC with respect thereto and to cause the
Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable following the date of this Agreement. The Company shall promptly
notify Parent upon the receipt of any comments from the SEC or its staff or any
request from the SEC or its staff for amendments or supplements to the Proxy
40
Statement and shall provide Parent with copies of all correspondence between the
Company and its representatives, on the one hand, and the SEC and its staff, on
the other hand. Notwithstanding anything to the contrary stated above, prior to
filing or mailing the Proxy Statement (or any amendment or supplement thereto)
or responding to any comments of the SEC with respect thereto, the Company shall
(i) provide Parent an opportunity to review, comment on and approve such
document or response, (ii) include in such document or response all comments
reasonably proposed by Parent and (iii) not file or mail such document or
respond to the SEC prior to receiving Parent's approval, which approval shall
not be unreasonably withheld or delayed.
(b) The Company shall, as promptly as practicable following the date
of this Agreement, establish a record date (which will be as promptly as
practicable following the date of this Agreement) for, duly call, give notice
of, convene and hold a meeting of its stockholders (the "Stockholders Meeting")
for the purpose of obtaining the Stockholder Approval, regardless of whether the
Board of Directors of the Company determines at any time that this Agreement is
no longer advisable and recommends that the stockholders of the Company reject
it. The Company shall cause the Stockholders Meeting to be held as promptly as
practicable after the date of this Agreement. Subject to Section 4.02(b)(i),
the Company shall, through its Board of Directors, recommend to its stockholders
that they adopt this Agreement, and shall include such recommendation in the
Proxy Statement. Without limiting the generality of the foregoing, the Company
agrees that its obligations pursuant to this Section 5.01(b) shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company or any other person of any Takeover Proposal.
SECTION 5.02. Access to Information; Confiden tiality. The Company
shall, and shall cause each of its subsidiaries to, afford to Parent, and to
Parent's officers, employees, investment bankers, attorneys, accountants and
other advisors and representatives, reasonable access during normal business
hours during the period prior to the Effective Time or the termination of this
Agreement to all their respective properties, books, contracts, commitments,
directors, officers, attorneys, accountants, auditors (and, to the extent within
the Company's control, former auditors), other advisors and representatives and
records and, during such period, the Company shall, and shall cause each of its
subsidiaries to, make available to Parent (a) a copy of each report, schedule,
form, statement and other document filed or received by it during such period
pursuant
41
to the requirements of Federal, state or local, domestic or foreign, laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request (including the work papers of
PricewaterhouseCoopers LLP). Except as required by law, Parent will hold, and
will direct its officers, employees, investment bankers, attorneys, accountants
and other advisors and representatives to hold, any and all information received
from the Company, directly or indirectly, in confidence in accordance with the
Confidentiality Agreement.
SECTION 5.03. Reasonable Best Efforts; Notification. (a) Upon the
terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use its reasonable best efforts to take, or cause to be taken,
all actions, that are necessary, proper or advisable to consummate and make
effective the Merger and the other transactions contemplated by this Agreement
and the Stockholders Agreement, including using its reasonable best efforts to
accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions precedent set forth in Article VI to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any), (iii) the taking
of all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by an Governmental Entity and (iv) the obtaining of
all necessary consents, approvals or waivers from third parties. In connection
with and without limiting the foregoing, the Company and its Board of Directors
shall, if any state takeover statute or similar statute or regulation is or
becomes applicable to this Agreement, the Stockholders Agreement, the Merger or
any of the other transactions contemplated hereby or thereby, use their
reasonable best efforts to ensure that the Merger and the other transactions
contemplated hereby or thereby may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on this Agreement, the Stockholders Agreement, the
Merger and the other transactions contemplated hereby or thereby.
Notwithstanding the foregoing or any other provision of this Agreement to the
contrary, in no event shall any party hereto be obligated to (A) agree to, or
proffer to, divest or hold separate, or enter into any licensing or similar
arrangement with respect to, any assets (whether tangible or intangible) or any
portion of any business of Parent, the Company or any of their respective
subsidiaries or (B)
42
litigate any suit, claim, action, investigation or proceeding, whether judicial
or administrative, (1) challenging or seeking to restrain or prohibit the
consummation of the Merger; (2) seeking to prohibit or limit in any material
respect the ownership or operation by the Company, Parent or any of their
respective affiliates of a material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries,
taken as a whole, or to require any such person to dispose of or hold separate
any material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, as a result of the Merger; or (3) seeking to prohibit Parent or any of
its affiliates from effectively controlling in any material respect a
substantial portion of the business or operations of the Company or its
subsidiaries. The Company and Parent will provide such assistance, information
and cooperation to each other as is reasonably required to obtain any such
nonactions, waivers, consents, approvals, orders and authorizations and, in
connection therewith, will notify the other person promptly following the
receipt of any comments from any Governmental Entity for amendments, supplements
or additional information in respect of any registration, declaration or filing
with such Governmental Entity and will supply the other person with copies of
all correspondence between such person or any of its representatives, on the one
hand, and any Governmental Entity, on the other hand.
(b) The Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate such that the condition set forth in Section 6.02(a) would
not be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(c) Parent shall give prompt notice to the Company of any
representation or warranty made by it or Sub contained in this Agreement
becoming untrue or inaccurate such that the condition set forth in Section
6.03(a) would not be satisfied; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
(d) Without limiting the generality of the foregoing, the Company
shall give Parent the opportunity to participate in the defense of any
litigation against the Company and/or its directors relating to the transactions
contemplated by this Agreement at the sole expense of Parent.
43
SECTION 5.04. Stock Options. (a) As soon as practicable following
the date of this Agreement, the Board of Directors of the Company (or, if
appropriate, any committee administering the Company Stock Plans) shall adopt
such resolutions or take such other actions (if any) as may be required to
effect the following:
(i) adjust the terms of all outstanding Stock Options (other than Non-
Employee Options (as defined below)), whether vested or unvested, as
necessary to provide that, at the Effective Time, each such Stock Option
outstanding immediately prior to the Effective Time shall be converted into
an option to acquire, on the same terms and conditions as were applicable
under such Stock Option, the number of shares of Parent common stock, par
value $0.20 per share ("Parent Common Stock") (rounded down to the nearest
whole share), determined by multiplying the number of shares of Company
Common Stock subject to such Stock Option by a fraction (the "Option
Exchange Ratio"), the numerator of which is the Merger Consideration and
the denominator of which is the average closing price of Parent Common
Stock on the New York Stock Exchange Composite Transactions Tape on the ten
trading days immediately preceding the date on which the Effective Time
occurs, at an exercise price per share of Parent Common Stock equal to (A)
the per share exercise price for the shares of Company Common Stock
otherwise purchasable pursuant to such Stock Option divided by (B) the
Option Exchange Ratio (each, as so adjusted, an "Adjusted Option"),
provided that such exercise price shall be rounded up to the nearest whole
cent;
(ii) adjust the terms of all outstanding Stock Options held by
individuals other than current or former employees of the Company ("Non-
Employee Options"), whether vested or unvested, as necessary to provide
that at the Effective Time, each Non-Employee Option outstanding
immediately prior to the Effective Time shall be canceled and converted
into the right to receive an amount of cash equal to the excess, if any, of
(A) the product of (1) the number of shares of Company Common Stock subject
to such Non-Employee Option and (2) the Merger Consideration, over (B) the
product of (1) the number of shares of Company Common Stock subject to such
Non-Employee Option and (2) the per share exercise price of such Non-
Employee Option; and
44
(iii) make such other changes to the Company Stock Plans as Parent
and the Company may agree are appropriate to give effect to the Merger.
(b) The adjustments provided herein with respect to any Stock Options
that are "incentive stock options" as defined in Section 422 of the Code shall
be and are intended to be effected in a manner which is consistent with Section
424(a) of the Code.
(c) At the Effective Time, by virtue of the Merger and without the
need of any further corporate action, Parent shall assume the Company Stock
Plans, with the result that all obligations of the Company under the Company
Stock Plans, including with respect to Stock Options outstanding at the
Effective Time, shall be obligations of Parent following the Effective Time.
(d) As soon as practicable after the Effective Time, Parent shall
prepare and file with the SEC a registration statement on Form S-8 (or another
appropriate form) registering a number of shares of Parent Common Stock equal to
the number of shares subject to the Adjusted Options. Such registration
statement shall be kept effective (and the current status of the prospectus or
prospectuses required thereby shall be maintained) as long as any Adjusted
Options may remain outstanding.
(e) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Stock Options (other than Non-Employee Options)
appropriate notices setting forth such holders' rights pursuant to the
respective Company Stock Plans and the agreements evidencing the grants of such
Stock Options and that such Stock Options and agreements shall be assumed by
Parent and shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 5.04 after giving effect to the
Merger).
(f) A holder of an Adjusted Option may exercise such Adjusted Option
in whole or in part in accordance with its terms by delivering a properly
executed notice of exercise to Parent, together with the consideration therefor
and the Federal withholding tax information, if any, required in accordance with
the related Company Stock Plan.
(g) Except as otherwise contemplated by this Section 5.04 and except
to the extent required under the respective terms of the Stock Options or
Company Stock Plans, all restrictions or limitations on transfer and vesting
with respect to Stock Options awarded under the
45
Company Stock Plans or any other plan, program or arrangement of the Company, to
the extent that such restrictions or limitations shall not have already lapsed,
shall remain in full force and effect with respect to such options after giving
effect to the Merger and the assumption by Parent as set forth above.
SECTION 5.05. Indemnification, Exculpation and Insurance. (a)
Parent and Sub agree that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
(and rights for advancement of expenses) now existing in favor of the current or
former directors or officers of the Company and its subsidiaries as provided in
their respective certificates of incorporation or by-laws (or comparable
organizational documents) and any indemnification or other agreements of the
Company as in effect on the date of this Agreement shall be assumed by the
Surviving Corporation in the Merger, without further action, at the Effective
Time and shall survive the Merger and shall continue in full force and effect in
accordance with their terms, and Parent shall ensure that the Surviving
Corporation complies with and honors the foregoing obligations.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all its properties
and assets to any person, or if Parent otherwise dissolves the Surviving
Corporation, then, and in each such case, Parent shall cause proper provision to
be made so that the successors and assigns of the Surviving Corporation assume
the obligations set forth in this Section 5.05.
(c) For six years after the Effective Time, Parent shall maintain in
effect the Company's current directors' and officers' liability insurance
covering each person currently covered by the Company's directors' and officers'
liability insurance policy for acts or omissions occurring prior to the
Effective Time on terms with respect to such coverage and amounts no less
favorable than those of such policy in effect on the date of this Agreement;
provided that Parent may substitute therefor policies of a reputable insurance
company the material terms of which, including coverage and amount, are no less
favorable to such directors and officers than the insurance coverage otherwise
required under this Section 5.05(c); provided, however, that in no event shall
Parent be required to pay aggregate premiums for insurance under this Section
5.05(c) in excess
46
of 200% of the amount of the aggregate premiums paid by the Company in 2001 on
an annualized basis for such purpose (which 2001 annualized premiums are hereby
represented and warranted by the Company to be $333,580) (the "Maximum
Premium"), provided that Parent shall nevertheless be obligated to provide such
coverage as may be obtained for such 200% amount. If the existing or substituted
directors' and officers' liability insurance expires or is terminated or
canceled during such six-year period, Parent will obtain as much directors' and
officers' liability insurance as can be obtained for the remainder of such
period for an annualized premium not in excess of the Maximum Premium.
(d) The provisions of this Section 5.05 (i) are intended to be for
the benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.06. Fees and Expenses. All fees and expenses incurred in
connection with this Agreement, the Stockholder Agreement, the Merger and the
other transactions contemplated hereby and thereby shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
SECTION 5.07. Employee Matters. (a) Following the Effective Time,
the Surviving Corporation shall honor, or cause to be honored, all obligations
of the Company and its subsidiaries under Benefit Agreements and Benefit Plans
in accordance with the terms thereof. Nothing herein shall be construed to
prohibit the Surviving Corporation from amending or terminating such Benefit
Agreements and Benefit Plans in accordance with the terms thereof and with
applicable law or from terminating the employment of any employee of the Company
or its subsidiaries at any time following the Effective Time.
(b) The Company shall amend the ESPP on the date of this Agreement to
provide that (i) participants may not increase their payroll deductions or
purchase elections from those in effect on the date of this Agreement, (ii) no
offering periods shall be commenced after the date of this Agreement, (iii) each
participant's outstanding right to purchase shares of Company Common Stock under
the ESPP shall terminate immediately prior to the Effective Time in exchange for
a cash payment in an amount equal to the excess, if any, of (A) the product of
(1) the number of shares of Company Common Stock that could have been
47
purchased with such participant's accumulated payroll deductions immediately
prior to the Effective Time (the "Applicable ESPP Shares") at the applicable
option price determined in accordance with the terms of the ESPP (the
"Applicable ESPP Price") and (2) the Merger Consideration, over (B) the product
of the number of Applicable ESPP Shares and the Applicable ESPP Price and (iv)
the ESPP shall terminate at the Effective Time.
SECTION 5.08. Public Announcements. Parent and Sub, on the one hand,
and the Company, on the other hand, will, to the extent reasonably practicable,
consult with each other before issuing, and give each other a reasonable
opportunity to review and comment upon, any press release or other public
statements with respect to this Agreement, the Stockholders Agreement, the
Merger and the other transactions contemplated hereby and thereby, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or national securities quotation system. The parties agree that the
initial press releases to be issued by Parent and the Company with respect to
the transactions contemplated by this Agreement and the Stockholders Agreement
shall be in a form agreed to by the parties.
SECTION 5.09. Closing Date Balance Sheet. The Company shall prepare
and deliver to Parent prior to Closing (i) an unaudited consolidated balance
sheet of the Company as of the last business day of the most recently completed
full month ending immediately preceding the Closing Date (or, if the Closing
Date is before the 15th day of the month, as of the last business day of the
month immediately preceding the most recently completed full month ending
immediately preceding the Closing Date), which balance sheet shall be prepared
in accordance with GAAP (except as permitted by Form 10-Q of the SEC) and on a
basis consistent with the unaudited balance sheets of the Company included in
the SEC Documents and shall fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the date thereof, and (ii) the Company's best estimate (using actual data
through at least the end of the third business day immediately preceding the
Closing Date) of closing account information for all line items that would
appear on a consolidated balance sheet of the Company other than deferred
revenue and line items relating to stockholders' equity (deficit) as of the
business day immediately preceding the Closing Date. The Company shall provide
to Parent any information and back-up materials (including bank account
information) reasonably requested by Parent with respect thereto.
48
ARTICLE VI
Conditions Precedent
--------------------
SECTION 6.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The Stockholder Approval shall have been
obtained.
(b) Antitrust. Any waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) No Injunctions or Legal Restraints. No temporary restraining
order, preliminary or permanent injunction or other order or decree issued
by any court of competent jurisdiction or other legal restraint or
prohibition (collectively, "Legal Restraints") which has the effect of
preventing the consummation of the Merger shall be in effect.
SECTION 6.02. Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein that are qualified as to
materiality shall be true and correct, and the representations and
warranties of the Company contained herein that are not so qualified shall
be true and correct in all material respects, in each case as of the date
of this Agreement and as of the Closing Date with the same effect as though
made as of the Closing Date except that the accuracy of representations and
warranties that by their terms speak as of a specified date will be
determined as of such date. Parent shall have received a certificate
signed on behalf of the Company by the chief executive officer and chief
financial officer of the Company to such effect.
49
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to
such effect.
(c) No Litigation. There shall not be pending any suit, action or
proceeding brought by any Governmental Entity or any other third party (in
the case of any such other third party, excluding suits, actions and
proceedings based on state law fiduciary duty claims) (i) challenging or
seeking to restrain or prohibit the consummation of the Merger; or (ii)
seeking to prohibit or limit in any material respect the ownership or
operation by the Company, Parent or any of their respective affiliates of a
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, or to require any such person to dispose of or hold separate any
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, as a result of the Merger; or (iii) seeking to impose material
limitations on the ability of Parent or any of its affiliates to acquire or
hold, or exercise full rights of ownership of, any shares of Company Common
Stock, including the right to vote the Company Common Stock on all matters
properly presented to the stockholders of the Company; or (iv) seeking to
prohibit Parent or any of its affiliates from effectively controlling in
any material respect a substantial portion of the business or operations of
the Company or its subsidiaries.
(d) Legal Restraint. No Legal Restraint that could reasonably be
expected to result, directly or indirectly, in any of the effects referred
to in clauses (i) through (iv) of paragraph (c) of this Section 6.02 shall
be in effect.
SECTION 6.03. Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
50
(a) Representations and Warranties. The representations and
warranties of Parent and Sub contained herein that are qualified as to
materiality shall be true and correct, and the representations and
warranties of Parent contained herein that are not so qualified shall be
true and correct in all material respects, in each case as of the date of
this Agreement and as of the Closing Date with the same effect as though
made as of the Closing Date except that the accuracy of representations and
warranties that by their terms speak as of a specified date will be
determined as of such date. The Company shall have received a certificate
signed on behalf of Parent by an authorized signatory of Parent to such
effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date,
and the Company shall have received a certificate signed on behalf of
Parent by an authorized signatory of Parent to such effect.
SECTION 6.04. Frustration of Closing Conditions. None of the Company,
Parent or Sub may rely on the failure of any condition set forth in Section
6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable best efforts to consummate the
Merger and the other transactions contem plated by this Agreement and the
Stockholders Agreement, as required by and subject to Section 5.03.
ARTICLE VII
Termination, Amendment and Waiver
---------------------------------
SECTION 7.01. Termination. This Agreement may be terminated, and the
Merger contemplated hereby may be abandoned, at any time prior to the Effective
Time, whether before or after the Stockholder Approval has been obtained:
(a) by mutual written consent of Parent, Sub and the Company;
51
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by September 1,
2001 for any reason; provided, however, that the right to terminate
this Agreement under this Section 7.01(b)(i) shall not be available to
any party whose action or failure to act has been a principal cause of
or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a breach of this
Agreement;
(ii) if any Legal Restraint having the effect set forth in
Section 6.01(c) shall be in effect and shall have become final and
nonappealable; or
(iii) if the Stockholder Approval shall not have been obtained at
the Stockholders Meeting duly convened therefor or at any adjournment
or postponement thereof or by written consent;
(c) by Parent (i) if the Company shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
(A) would give rise to the failure of a condition set forth in Section
6.02(a) or 6.02(b), and (B) has not been or is incapable of being cured by
the Company within 30 calendar days after its receipt of written notice
thereof from Parent; or (ii) if any Legal Restraint having any of the
effects referred to in clauses (i) through (iv) of Section 6.02(c) shall be
in effect and shall have become final and nonappealable; or
(d) by the Company, if Parent shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
(i) would give rise to the failure of a condition set forth in Section
6.03(a) or 6.03(b), and (ii) has not been or is incapable of being cured by
Parent within 30 calendar days after its receipt of written notice thereof
from the Company.
SECTION 7.02. Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 3.01(s),
52
4.01(d) the last sentence of Section 5.02, Section 5.06, this Section 7.02 and
Article VIII and except to the extent that such termination results from a
wilful breach by a party of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
SECTION 7.03. Amendment. This Agreement may be amended by the
parties hereto at any time, whether before or after the Stockholder Approval has
been obtained; provided, however, that after the Stockholder Approval has been
obtained, there shall be made no amendment that by law requires further approval
by stockholders of the parties without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 7.04. Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein; provided, however, that after the Stockholder Approval has
been obtained, there shall be made no waiver that by law requires further
approval by stockholders of the parties without the further approval of such
stockholders. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure or delay by any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights nor shall any single or partial exercise by any party to
this Agreement of any of its rights under this Agreement preclude any other or
further exercise of such rights or any other rights under this Agreement.
ARTICLE VIII
General Provisions
------------------
SECTION 8.01. Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
53
SECTION 8.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
if to Parent or Sub, to:
International Business Machines Corporation
Xxx Xxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
with copies to:
International Business Machines Corporation
Xxx Xxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
and
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
if to the Company, to:
Mainspring, Inc.
Xxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: President and
Chief Executive Officer
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxx, Esq.
Xxxxx Xxxxxx, Esq.
54
SECTION 8.03. Definitions. As used in this Agreement:
(a) an "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first person;
(b) as it relates to the Company, "knowledge" means, with respect to
any matter in question, that any officer of the Company has actual
knowledge of such matter;
(c) "material adverse effect" on or with respect to the Company means
any state of facts, change, development, effect or occurrence that is, or
could reasonably be expected to be, materially adverse to the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its subsidiaries, taken as a whole, other than any state of
facts, change, development, effect or occurrence principally attributable
to (i) the economy in general or the strategic consulting market in general
and not specifically relating to the Company or any of its subsidiaries,
(ii) any litigation against the Company arising out of the transactions
contemplated by this Agreement or (iii) (x) any cancelation or modification
of client engagements or (y) any decline or delay in demand for the
products and services offered by the Company, in each of cases (x) and (y)
resulting from the announcement or existence of this Agreement;
(d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(e) a "subsidiary" of any person means another person of which more
than 50% of any class of capital stock, voting securities or other equity
interests are owned or controlled, directly or indirectly, by such first
person.
SECTION 8.04. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When ever the words "include", "includes" or
"including" are used
55
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. The term "or" is not
exclusive. The word "extent" in the phrase "to the extent" shall mean the degree
to which a subject or other thing extends, and such phrase shall not mean simply
"if". The definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms. Any agreement or instrument defined
or referred to herein or in any agreement or instrument that is referred to
herein means such agreement or instrument as from time to time amended, modified
or supplemented. References to a person are also to its permitted successors and
assigns.
SECTION 8.05. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (a) constitutes the entire agreement, and supersedes all prior
agreements and under standings, both written and oral, among the parties with
respect to the subject matter of this Agreement and (b) except for the
provisions of Section 5.05, is not intended to confer upon any person other than
the parties hereto any rights or remedies.
SECTION 8.07. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 8.08. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by, the parties and their
respective successors and assigns.
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SECTION 8.09. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in any Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any court of the United States located in the State of
Delaware or of any Delaware state court in the event any dispute arises out of
this Agreement or the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or the transactions contemplated by
this Agreement in any court other than a court of the United States located in
the State of Delaware or a Delaware state court.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
INTERNATIONAL BUSINESS
MACHINES CORPORATION,
by /s/ Xxxxx X. Xxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President,
Corporate Development
WATERFALL ACQUISITION CORP.,
by /s/ Xxxxx X. Xxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
MAINSPRING, INC.,
by /s/ Xxxx X. Xxxxxxxx
-------------------------
Name: Xxxx X. Xxxxxxxx
Title: President & CEO
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