Exhibit 1
WORKFLOW MANAGEMENT, INC.,
WF HOLDINGS, INC.
AND
WFM ACQUISITION SUB, INC.
AGREEMENT AND PLAN OF MERGER
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DATED AS OF JANUARY 30, 2004
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TABLE OF CONTENTS
Page No.
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ARTICLE I. GENERAL...............................................................................................1
SECTION 1.1. DEFINED TERM INDEX........................................................................1
ARTICLE II. THE MERGER...........................................................................................3
SECTION 2.1. THE MERGER................................................................................3
SECTION 2.2. CONSUMMATION..............................................................................3
SECTION 2.3. EFFECTIVE TIME............................................................................4
SECTION 2.4. EFFECT OF THE MERGER......................................................................4
SECTION 2.5. SUBSEQUENT ACTIONS........................................................................4
SECTION 2.6. CERTIFICATE OF INCORPORATION; BYLAWS, DIRECTORS AND OFFICERS..............................4
SECTION 2.7. CONVERSION OF SECURITIES..................................................................5
SECTION 2.8. SURRENDER OF SHARES; STOCK TRANSFER BOOKS.................................................6
SECTION 2.9. OPTION PLANS; STOCK PURCHASE PLANS; COMPANY WARRANTS......................................8
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.............................................9
SECTION 3.1. ORGANIZATION..............................................................................9
SECTION 3.2. OWNERSHIP OF MERGER SUB...................................................................9
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT......................................................9
SECTION 3.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS................................................9
SECTION 3.5. FINANCING ARRANGEMENTS...................................................................10
SECTION 3.6. SOLVENCY.................................................................................11
SECTION 3.7. LEGAL PROCEEDINGS........................................................................11
SECTION 3.8. STATUS AS A CONTROL PERSON...............................................................11
SECTION 3.9. NO PRIOR ACTIVITIES......................................................................11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................12
SECTION 4.1. ORGANIZATION, QUALIFICATION AND CORPORATE POWER; SUBSIDIARIES............................12
SECTION 4.2. CAPITALIZATION...........................................................................12
SECTION 4.3. INVESTMENTS..............................................................................13
SECTION 4.4. SUBSIDIARIES.............................................................................13
SECTION 4.5. AUTHORITY RELATIVE TO THIS AGREEMENT.....................................................13
SECTION 4.6. NO CONFLICT, REQUIRED FILINGS AND CONSENTS...............................................14
SECTION 4.7. SEC FILINGS; FINANCIAL STATEMENTS........................................................14
SECTION 4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.....................................................15
SECTION 4.9. NO UNDISCLOSED LIABILITIES...............................................................17
SECTION 4.10. LITIGATION...............................................................................17
SECTION 4.11. EMPLOYEE BENEFIT PLANS; ERISA............................................................17
SECTION 4.12. OWNED REAL PROPERTY......................................................................21
SECTION 4.13. LEASES...................................................................................21
SECTION 4.14. INTELLECTUAL PROPERTY....................................................................21
SECTION 4.15. INSURANCE................................................................................23
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SECTION 4.16. ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS................................................23
SECTION 4.17. MATERIAL CONTRACTS.......................................................................25
SECTION 4.18. COMPLIANCE WITH LAWS/PERMITS.............................................................26
SECTION 4.19. TAXES....................................................................................26
SECTION 4.20. STATE TAKEOVER STATUTES..................................................................29
SECTION 4.21. BROKERS..................................................................................29
SECTION 4.22. OPINION OF FINANCIAL ADVISOR.............................................................29
SECTION 4.23. TITLE TO ASSETS..........................................................................29
SECTION 4.24. PRODUCT WARRANTY.........................................................................29
SECTION 4.25. EMPLOYEES................................................................................29
SECTION 4.26 NOTES AND ACCOUNTS RECEIVABLE............................................................30
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER...............................................................30
SECTION 5.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE EFFECTIVE TIME............................30
SECTION 5.2. NO SOLICITATION..........................................................................32
SECTION 5.3. TAX......................................................................................34
ARTICLE VI. ADDITIONAL AGREEMENTS...............................................................................35
SECTION 6.1. STOCKHOLDERS MEETING; PROXY STATEMENT....................................................35
SECTION 6.2. ACCESS TO INFORMATION; CONFIDENTIALITY...................................................35
SECTION 6.3. PUBLIC ANNOUNCEMENTS.....................................................................36
SECTION 6.4. APPROVALS AND CONSENTS; REASONABLE BEST EFFORTS; COOPERATION.............................37
SECTION 6.5. INDEMNIFICATION; INSURANCE...............................................................38
SECTION 6.6. EMPLOYEE BENEFIT MATTERS.................................................................39
SECTION 6.7. FINANCING................................................................................40
ARTICLE VII. CONDITIONS PRECEDENT...............................................................................41
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER..............................41
SECTION 7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY.................................................41
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB.......................................42
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER.................................................................43
SECTION 8.1. TERMINATION..............................................................................43
SECTION 8.2. EFFECT OF TERMINATION....................................................................44
ARTICLE IX. GENERAL PROVISIONS..................................................................................45
SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS...............................45
SECTION 9.2. NOTICES..................................................................................46
SECTION 9.3. EXPENSES.................................................................................47
SECTION 9.4. CERTAIN DEFINITIONS......................................................................47
SECTION 9.5. HEADINGS.................................................................................50
SECTION 9.6. SEVERABILITY.............................................................................50
SECTION 9.7. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES...........................................50
SECTION 9.8. ASSIGNMENT...............................................................................50
SECTION 9.9. GOVERNING LAW............................................................................50
SECTION 9.10. AMENDMENT................................................................................50
SECTION 9.11. WAIVER...................................................................................50
SECTION 9.12. SCHEDULE AND EXHIBITS....................................................................51
SECTION 9.13. COUNTERPARTS.............................................................................51
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 30, 2004 (this
"AGREEMENT"), by and among Workflow Management, Inc., a Delaware corporation
(the "COMPANY"), WF Holdings, Inc., a Delaware corporation ("PARENT"), and WFM
Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of
Parent ("MERGER SUB").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Sub have approved, and deemed it advisable that the respective
stockholders of the Company and Merger Sub approve and adopt, this Agreement
pursuant to which, among other things, Parent would acquire the Company by means
of a merger (the "MERGER") of Merger Sub with and into the Company on the terms
and subject to the conditions set forth in this Agreement; and
WHEREAS, the Board of Directors of the Company (the "BOARD OF
DIRECTORS") has determined that the consideration to be paid for each share of
Company Common Stock (as defined in Section 4.2(a)) upon consummation of the
Merger is fair to the holders of such shares and has recommended that the
holders of Company Common Stock approve this Agreement and the transactions
contemplated hereby;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company, Parent and Merger Sub hereby agree as follows:
ARTICLE I.
GENERAL
SECTION 1.1. DEFINED TERM INDEX.
Term Reference
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Acquisition Proposal..................................... Section 5.2
Affiliate ............................................... Section 9.4
Affiliated Group ........................................ Section 9.4
Agreement ............................................... Preamble
Alternative Financing.................................... Section 6.7
Appraisal Shares......................................... Section 2.7
Board of Directors....................................... Recitals
Certificate of Merger.................................... Section 2.3
Closing ................................................. Section 2.2
Closing Date............................................. Section 2.2
Code .................................................... Section 9.4
Company ................................................. Preamble
Company Bylaws .......................................... Section 4.6
Company Certificate ..................................... Section 4.6
Company Common Stock .................................... Section 4.2
Company Financial Statements ............................ Section 4.7
Company Material Contract ............................... Section 4.17
Company Preferred Stock ................................. Section 4.2
Company Proprietary Asset ............................... Section 4.14
Company Representatives.................................. Section 5.2
Company Stock ........................................... Section 4.2
Company Stock Options.................................... Section 2.9
Company Stockholders' Meeting ........................... Section 6.1
Company Superior Proposal................................ Section 5.2
Company Warrants......................................... Section 2.9
Confidentiality Agreement................................ Section 6.2
Control.................................................. Section 9.4
Deal Expenses............................................ Section 8.2
Delaware Act............................................. Section 2.1
Effective Time........................................... Section 2.3
Employee Stock Purchase Plan ............................ Section 2.9
Environmental Claim ..................................... Section 4.16
Environmental Law ....................................... Section 4.16
ERISA ................................................... Section 9.4
ERISA Affiliate.......................................... Section 9.4
ERISA Benefit Plans...................................... Section 4.11
Exchange Act ............................................ Section 3.4
Exchange Agent .......................................... Section 2.8
Filing Date.............................................. Section 6.4
Financing................................................ Section 3.5
Financing Letters........................................ Section 3.5
Foreign Plan............................................. Section 4.11
GAAP..................................................... Section 9.4
Governmental Entity ..................................... Section 3.4
Hazardous Substances..................................... Section 4.16
HSR Act ................................................. Section 3.4
Immediately Available Cash............................... Section 9.4
Indebtedness ............................................ Section 9.4
Indemnified Parties...................................... Section 6.5
Infringes ............................................... Section 4.14
IRS...................................................... Section 4.11
Knowledge................................................ Section 9.4
Lease.................................................... Section 4.13
Leased Real Property .................................... Section 4.13
Lenders.................................................. Section 3.5
Material Adverse Effect ................................. Section 9.4
Merger................................................... Recitals
Merger Sub............................................... Preamble
Multiemployer Plans...................................... Section 4.11
Net Debt................................................. Section 9.4
Non-ERISA Commitments.................................... Section 4.11
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Option Plan ............................................. Section 2.9
Order.................................................... Section 7.1
Ordinary Course of Business.............................. Section 9.4
Outside Date............................................. Section 8.1
Parent................................................... Preamble
Parent and Merger Sub Information ....................... Section 6.1
Pension Plans............................................ Section 4.11
Per Share Amount ........................................ Section 2.7
Person................................................... Section 9.4
Prior Pension Plans...................................... Section 4.11
Proprietary Asset ....................................... Section 9.4
Proxy Statement ......................................... Section 6.1
Required Governmental Consents........................... Section 4.6
SEC...................................................... Section 3.8
SEC Filings ............................................. Section 4.7
SEC Reports.............................................. Section 4.7
Section 262.............................................. Section 2.7
Securities Act .......................................... Section 3.4
Shares .................................................. Section 2.7
Subsidiary............................................... Section 9.4
Surviving Corporation.................................... Section 2.1
Tax ..................................................... Section 9.4
Tax Return .............................................. Section 9.4
Termination Fee ......................................... Section 8.2
Third Party.............................................. Section 5.2
United States Bank....................................... Section 2.8
Welfare Plans............................................ Section 4.11
ARTICLE II.
THE MERGER
SECTION 2.1. THE MERGER. At the Effective Time (as defined in Section
2.3), upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the General Corporation Law of the State of Delaware (the
"DELAWARE ACT"), Merger Sub shall be merged with and into the Company, the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation and shall succeed to and assume all the
rights and obligations of Merger Sub in accordance with the Delaware Act. The
Company as the surviving corporation after the Merger is sometimes referred to
herein as the "SURVIVING CORPORATION."
SECTION 2.2. CONSUMMATION. Unless this Agreement has been terminated
and the Merger shall have been abandoned pursuant to Article VIII, and subject
to the satisfaction or waiver of the conditions set forth in Article VII, the
consummation of the Merger (the "CLOSING") will take place at 12:00 p.m., New
York Time, as soon as possible, but in no event later than four business days
after satisfaction or waiver of the conditions set forth in Article VII (the
"CLOSING DATE"), at the offices of Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP,
located at 000 Xxxxxxxxx
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Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or such other place or time as Parent and the
Company may jointly designate).
SECTION 2.3. EFFECTIVE TIME. As soon as practicable after satisfaction
or, to the extent permitted hereunder, waiver of all conditions to the Merger,
the Company and Merger Sub shall file a certificate of merger (the "CERTIFICATE
OF MERGER"), with the Secretary of State of the State of Delaware and make all
other filings or recordings required by the Delaware Act in connection with the
Merger. The Merger shall become effective at such time (the "EFFECTIVE TIME") as
the Certificate of Merger is duly filed with the Delaware Secretary of State (or
at such later time as may be specified in the Certificate of Merger).
SECTION 2.4. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the Delaware
Act. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 2.5. SUBSEQUENT ACTIONS. If, at any time at or after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Merger Sub acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver and shall execute and deliver, in the name and on behalf of either the
Company or Merger Sub, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of each of such corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
SECTION 2.6. CERTIFICATE OF INCORPORATION; BYLAWS, DIRECTORS AND
OFFICERS.
(a) At the Effective Time, the certificate of incorporation of Merger
Sub as in effect immediately before the Effective Time shall be the certificate
of incorporation of the Surviving Corporation until thereafter amended as
provided by the Delaware Act and such certificate of incorporation.
(b) The Bylaws of Merger Sub as in effect immediately before the
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
amended as provided by the Delaware Act, the certificate of incorporation of the
Surviving Corporation and such bylaws.
(c) From and after the Effective Time, the directors of Merger Sub
immediately before the Effective Time will continue as the directors of the
Surviving Corporation, and except as Merger Sub may otherwise notify the Company
in writing prior to the Effective Time, the officers of the Company immediately
before the Effective Time will be the initial officers of the
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Surviving Corporation, in each case until their successors are elected or
appointed and qualified. If, at the Effective Time, a vacancy shall exist on the
board of directors or in any office of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by the Surviving Corporation's
certificate of incorporation and bylaws, and the Delaware Act.
SECTION 2.7. CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of the Company, Parent, Merger
Sub or the holder of any of the following securities:
(a) Except as provided in clauses (b) and (c) below, each share of
Company Common Stock (as defined in Section 4.2(a)) issued and outstanding
immediately before the Effective Time (such shares of Company Common Stock,
other than shares described in clauses (b) and (c) below, are hereinafter
referred to as the "SHARES") shall be converted into the right to receive $4.87
(the "PER SHARE AMOUNT") in cash payable to the holder thereof, without
interest, upon surrender of the certificate representing such Share or an
affidavit with respect thereto, in each case in accordance with Section 2.8. As
of the Effective Time, all Shares so converted shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate or certificates representing any such Shares shall
cease to have any rights with respect thereto, except to receive the aggregate
Per Share Amount applicable thereto, in accordance with Section 2.8.
(b) 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
Delaware Act ("SECTION 262") shall not be converted into the right to receive
the aggregate Per Share Amount applicable thereto as provided in Section 2.7(a)
above and in accordance with Section 2.8 below, 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 aggregate Per Share Amount
applicable thereto as provided in Section 2.7(a) above and in accordance with
Section 2.8 below. 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 Delaware Act received
by the Company, and Parent shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, 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 with respect
thereto.
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(c) Each share of Company Common Stock that is held as treasury stock
or owned by the Company or held by Parent or Merger Sub immediately before the
Effective Time shall automatically be canceled and extinguished and shall cease
to exist, and no payment shall be made with respect thereto.
(d) Each share of common stock of Merger Sub issued and outstanding
immediately before the Effective Time shall automatically be canceled and
extinguished and each shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
SECTION 2.8. SURRENDER OF SHARES; STOCK TRANSFER BOOKS.
(a) Before the Effective Time, Parent shall appoint an agent (the
"EXCHANGE AGENT") reasonably acceptable to the Company to receive the funds
necessary to make the payments contemplated by Section 2.7(a) and to make such
payments on a timely basis. The Surviving Corporation shall, on or before the
Closing Date, deposit, or cause to be deposited, in trust with the Exchange
Agent for the benefit of holders of Shares, funds in amounts sufficient for the
payments under Section 2.8(b) to which such holders shall be entitled at the
Effective Time pursuant to Section 2.7(a). Such funds shall be invested by the
Exchange Agent as directed by the Surviving Corporation, provided however that
such funds may only be invested in (i) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America with a remaining term at the time of acquisition thereof not
in excess of 90 days, (ii) money market accounts or certificates of deposit
maturing within 90 days of the acquisition thereof and issued by a bank or trust
company organized under the laws of the United States of America or a State
thereof having a combined capital surplus in excess of $500,000,000 (a "UNITED
STATES BANK"), (iii) commercial paper issued by a domestic corporation and given
a rating of no lower than A1 by Standard & Poor's Corporation and P1 by Xxxxx'x
Investors Service, Inc. with a remaining term at the time of acquisition thereof
not in excess of 90 days or (iv) demand deposits with any United States Bank.
The earnings from, and interest or income produced by, such investments shall be
payable to Parent or as Parent directs.
(b) The Surviving Corporation agrees that as soon as practicable after
the Effective Time it shall cause the Exchange Agent to distribute to holders of
record of Shares as of the Effective Time a form of letter of transmittal and
instructions for its use in effecting the surrender of the certificates
representing the Shares in exchange for the aggregate Per Share Amount relating
thereto in a customary form reasonably acceptable to Parent and the Company
prior thereto. Such letter shall specify that the delivery shall be effected,
and risk of loss and title shall pass from such holder, only upon proper
delivery of the certificates representing the Shares to the Exchange Agent for
use in the exchange. Upon receipt of a properly executed letter of transmittal
together with the requisite documentation specified in the letter of
transmittal, the Surviving Corporation shall cause the Exchange Agent to
promptly pay the holder of such certificates in exchange therefor cash in an
amount equal to the Per Share Amount multiplied by the number of Shares
represented by such certificate or certificates. Until so surrendered, each such
certificate (other than certificates representing shares of Company Common Stock
held by the Company, Parent or Merger Sub or Appraisal Shares) shall represent
solely the right to receive the aggregate Per Share Amount relating thereto.
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(c) If payment of cash in respect of canceled Shares is to be made to a
Person (as defined in Section 9.4) other than the Person in whose name a
surrendered certificate or instrument is registered, it shall be a condition to
such payment that the certificate or instrument so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the Person
requesting such payment shall have paid any transfer and other taxes required by
reason of such payment in a name other than that of the registered holder of the
certificate or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation or the Exchange Agent that such tax
either has been paid or is not payable, all of which shall be specified in the
letter of transmittal.
(d) If any certificate or certificates representing Shares shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such certificate or certificates to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by such
Person of a bond in such reasonable amount as the Surviving Corporation may
require as indemnity against any claim that may be made against it with respect
to such certificate or certificates, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed certificate or certificates the Per Share
Amount multiplied by the number of Shares represented by such certificate or
certificates payable pursuant to this Agreement.
(e) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall not be any further registration of transfers of
any shares of capital stock thereafter on the records of the Company. If, after
the Effective Time, certificates for Shares are presented to the Surviving
Corporation, they shall be canceled and exchanged for cash as provided in
Section 2.7(a). No interest shall accrue or be paid on any cash payable upon the
surrender of a certificate or certificates which immediately before the
Effective Time represented outstanding Shares.
(f) Promptly following the date which is six months after the Effective
Time, the Parent may cause the Exchange Agent to deliver to the Parent all cash,
certificates and other documents in its possession relating to the transactions
contemplated hereby, and any holder of a certificate or certificates
representing Shares who has not theretofore complied with this Section 2.8 shall
thereafter look only to the Surviving Corporation for payment of the Per Share
Amount multiplied by the number of Shares represented by such certificate or
certificates, subject to any applicable abandoned property, escheat or similar
law, all without interest. Any amounts remaining unclaimed by holders of Shares
18 months after the Effective Time (or such earlier date, immediately prior to
such time when amounts would otherwise escheat to or become property of any
governmental authority) shall become, to the extent permitted by applicable law,
the property of Parent, free and clear of any claims or interest of any Persons
previously entitled thereto.
(g) None of the Parent, the Company, the Surviving Corporation or the
Exchange Agent, or any employee, officer, director, agent or Affiliate (as
defined in Section 9.4) thereof, shall be liable to any Person in respect of
cash delivered by the Exchange Agent to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) All cash paid upon the surrender for exchange of a certificate or
certificates representing Shares in accordance with the terms of this Article II
shall be deemed to have been
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paid in full satisfaction of all rights pertaining to the Shares exchanged for
cash theretofore represented by such certificate or certificates.
(i) The Per Share Amount paid to each holder of Shares in the Merger
shall be reduced by and paid net of any applicable withholding taxes or, as set
forth in Section 2.8(c), stock transfer taxes payable by such holder.
(j) The Surviving Corporation shall pay all charges and expenses,
including those of the Exchange Agent, in connection with the exchange of cash
for Shares.
(k) Any portion of the Per Share Amount deposited with the Exchange
Agent to pay for Shares for which appraisal rights have been perfected in
accordance with Section 2.7(b) shall be returned to the Parent, upon demand.
SECTION 2.9. OPTION PLANS; STOCK PURCHASE PLANS; COMPANY WARRANTS.
(a) Subject to Section 2.9(b) below, at the Effective Time (and the
Board of Directors or any committee administering the Option Plan (as defined
below) shall, prior to the Effective Time, take all actions necessary so that),
all outstanding options to purchase shares of Company Common Stock (the "COMPANY
STOCK OPTIONS") heretofore granted under the Company's 1998 Stock Incentive Plan
(the "OPTION PLAN") shall become fully vested and exercisable (whether or not
currently exercisable) and shall be canceled in exchange for the right to
receive a cash payment by the Surviving Corporation at the Effective Time of an
amount equal to (i) the excess, if any, of (x) the Per Share Amount over (y) the
applicable exercise price per share of Common Stock subject to such Company
Stock Options, multiplied by (ii) the number of shares of Common Stock for which
such Company Stock Options shall not theretofore have been exercised.
(b) The Surviving Corporation shall be entitled to deduct and withhold
from the amounts otherwise payable pursuant to this Section 2.9 to any holder of
Company Stock Options such amounts as the Surviving Corporation is required to
deduct and withhold with respect to the making of such payment under the Code
(as defined in Section 9.4), or any provision of state, local or foreign tax
law. To the extent that amounts are so deducted and withheld by the Surviving
Corporation, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Company Stock Options in
respect of which such deduction and withholding was made by the Surviving
Corporation.
(c) The rights of participants in the Workflow Management, Inc. 1999
Employee Stock Purchase Plan (the "EMPLOYEE STOCK PURCHASE PLAN"), with respect
to any offering period then underway under such plan, shall be determined by
shortening the offering period so that the last day of such offering period
occurs before, and as close as reasonably practicable to, March 31, 2004 and by
making such other pro-rata adjustments as may be necessary to reflect the
shortened offering period by otherwise treating such shortened offering period
as a fully effective and completed offering period for all purposes under such
plan. The Company shall take all actions (including, if appropriate, amending
the terms of such plan) that are necessary or appropriate to give effect to the
transactions contemplated by this Section 2.9(c).
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(d) At the Effective Time (and the Board of Directors shall take all
actions necessary so that) all outstanding warrants to purchase Company Common
Stock that will not otherwise terminate pursuant to their terms as a result of
the Closing of the Merger ("COMPANY WARRANTS") shall be canceled in exchange for
the right to receive a cash payment by the Surviving Corporation at the
Effective Time of an amount equal to (i) the excess, if any, of (x) the Per
Share Amount over (y) the applicable exercise price per share of Common Stock
subject to such warrants, multiplied by (ii) the number of shares of Common
Stock for which such warrants shall not theretofore have been exercised.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, hereby represent and
warrant to the Company:
SECTION 3.1. ORGANIZATION. Each of Parent and Merger Sub is a
corporation, and each is duly formed or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has the
requisite corporate power and authority to carry on its business as it is now
being conducted.
SECTION 3.2. OWNERSHIP OF PARENT AND MERGER SUB. The authorized capital
stock of Merger Sub consists of 200 shares of common stock. All of the issued
and outstanding shares of Merger Sub are owned by Parent. As of the date hereof,
the authorized capital stock of Parent consists of 200 shares of common stock.
As of the date hereof, all of the issued and outstanding shares of Parent are
owned as set forth on Schedule 3.2.
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has all necessary corporate power and authority to enter into this
Agreement and to carry out its respective obligations hereunder. The execution
and delivery of this Agreement by each of Parent and Merger Sub and the
consummation by each of Parent and Merger Sub of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of each of Parent and Merger Sub, respectively. This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of Parent and Merger Sub, enforceable against
each in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
SECTION 3.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all required filings and authorizations specified in
Section 3.4(b) are made or obtained, the execution and delivery of this
Agreement by each of Parent and Merger Sub does not, and the performance of this
Agreement and the transactions contemplated hereby by each of Parent and Merger
Sub will not, (i) conflict with or violate any law, statute, regulation, court
order, judgment, decree or other restriction of any government, governmental
agency or court applicable to Parent or Merger Sub or by which any of their
respective properties
9
or assets is bound or affected, (ii) violate or conflict with the certificate of
incorporation or bylaws, or other organizational documents of Parent or Merger
Sub, or (iii) result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination or cancellation of, or result in the creation
of a lien or encumbrance on any of the property or assets of any of Parent or
Merger Sub pursuant to, any contract, instrument, permit, license or franchise
to which any of Parent or Merger Sub is a party or by which any of Parent or
Merger Sub or any of their respective property or assets is bound or affected,
except where the failure to obtain such waiver, consent, approval or
authorization is not, individually or in the aggregate, reasonably likely to
prevent or delay the consummation of the transactions contemplated by this
Agreement.
(b) Except for (i) applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "EXCHANGE ACT"), and the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "SECURITIES ACT"), (ii)
the requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), and the requirements of any relevant foreign antitrust
authority, and (iii) the filing and recordation of appropriate merger documents
as required by the Delaware Act, neither Parent nor Merger Sub is required to
submit any notice, report or other filing with any Federal, state, local or
foreign government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"GOVERNMENTAL ENTITY"), in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. No waiver, consent, approval or authorization of any
Governmental Entity is required to be obtained or made by either Parent or
Merger Sub in connection with its respective execution, delivery or performance
of this Agreement, except as aforesaid.
SECTION 3.5. FINANCING ARRANGEMENTS. Parent has received and executed
commitment letters (the "FINANCING LETTERS") dated as of January 30, 2004 from
Xxxxxxxx Xxxx Xxxx, Xxxxxxx Dominion Investments, Inc. and Perseus, L.L.C. (the
"LENDERS"). A true, complete and fully-executed copy of each Financing Letter
has been furnished to the Company. Each of the Financing Letters is in full
force and effect and has not been amended or modified in any respect, all
commitment fees required to be paid thereunder have been paid in full or will be
duly paid in full when due, and no event has occurred which (with or without
notice, lapse of time or both) would constitute a default thereunder on the part
of Parent, Merger Sub or, to the knowledge of Parent, the Lenders, as the case
may be. Except as set forth in the Financing Letters, the Lenders have not
advised Parent, Merger Sub or any of their respective Affiliates of any facts
which cause them to believe the financings contemplated by the Financing Letters
will not be consummated substantially in accordance with the terms thereof.
Assuming the satisfaction of the conditions contained in Sections 7.3(a) and
(b), the aggregate proceeds of the financings contemplated by the Financing
Letters, when taken together with the cash to be made available to Parent at the
Closing, and the available cash of Merger Sub, the Company and its Subsidiaries,
are sufficient to pay the aggregate Per Share Amount for the Shares pursuant to
Article II, to pay all amounts required to be paid to holders of Company Stock
Options and Company Warrants hereunder, to refinance the Indebtedness of the
Company and its Subsidiaries that may become due as a result of the transactions
contemplated by this Agreement (assuming the accuracy of the condition contained
in Section 7.3(g) hereof), to pay all related fees and
10
expenses and to provide working capital and funding for general corporate needs
of Parent, the Surviving Corporation and their respective Subsidiaries (such
financing, the "FINANCING").
SECTION 3.6. SOLVENCY. Each of Parent and Merger Sub at the Effective
Time will be able to pay its debts generally as they become due and will be
solvent and will not be, nor will the Surviving Corporation be, as of the
Effective Time, rendered insolvent as a result of the transactions contemplated
hereby, including the Merger and the Financing. Neither Parent nor Merger Sub is
in breach or default of any obligation owed to any creditor for borrowed money
or any other creditor who may have a lien or other encumbrance on any of its
rights and assets. Neither Parent nor Merger Sub has, either voluntarily or
involuntarily, (i) admitted in writing that it is or may become unable to pay
its debts generally as they become due, (ii) filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of an
insolvency act, (iii) made an assignment for the benefit of its creditors, (iv)
consented to the appointment of a receiver for itself or for the whole or any
substantial part of its property, (v) had a petition in bankruptcy filed against
it, (vi) been adjudged as bankrupt or filed a petition or answer seeking
reorganization or arrangement under the federal bankruptcy laws or any law or
statute of the United States of America or any other jurisdiction, or (vii)
incurred or reasonably should have believed it would incur, debts that are or
will be beyond its ability to pay as such debts mature. Parent, Merger Sub, and
as of the Effective Time, to the knowledge of Parent, the Surviving Corporation,
on a consolidated basis, are not engaged, nor currently contemplate being
engaged, in a business or transaction for which any property remaining with them
would be insufficient to continue to operate their businesses or to pay their
debts generally as they come due.
SECTION 3.7. LEGAL PROCEEDINGS.
(a) There are no claims, actions, suits, proceedings or investigations
pending (or, to the knowledge of Parent, threatened) against Parent or Merger
Sub that would materially and adversely affect Parent's or Merger Sub's ability
to consummate any of the transactions contemplated by this Agreement.
(b) There is no order, writ, injunction or judgment to which Parent or
Merger Sub is subject that would materially and adversely affect Parent's or
Merger Sub's ability to consummate any of the transactions contemplated by this
Agreement.
(c) To Parent's knowledge, as of the date of this Agreement, no
investigation or review by any Governmental Entity with respect to Parent,
Merger Sub or any other Affiliate of Parent is pending or threatened with
respect to the transactions contemplated by this Agreement.
SECTION 3.8. STATUS AS A CONTROL PERSON. Neither Parent nor Merger Sub,
together with their respective Affiliates, beneficially owns (as that term is
defined by the rules of the U.S. Securities and Exchange Commission (the "SEC")
under either Section 13(d) or 16 of the Exchange Act) 10% or more of the shares
of any class of equity or convertible securities of the Company.
SECTION 3.9. NO PRIOR ACTIVITIES. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby
(including any Financing), Merger Sub has
11
not incurred any obligations or liabilities, and has not engaged in any business
or activities of any type or kind whatsoever or entered into any agreements or
arrangements with any Person or entity.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
except as set forth in a disclosure schedule delivered to Parent on the date of
this Agreement, as follows:
SECTION 4.1. ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The
Company is duly organized and validly existing under the laws of the
jurisdiction of its formation and has the requisite corporate power and
authority to carry on its business as it is now being conducted. The Company is
qualified to transact business and is in good standing in each jurisdiction in
which the properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified or in good standing would not have a Material Adverse Effect (as
defined in Section 9.4). The Company has made available to Parent correct and
complete copies of the Company Certificate (as defined in Section 4.6) and the
Company Bylaws (as defined in Section 4.6). Schedule 4.1 sets forth the dates of
all meetings of the Board of Directors held since January 1, 2002. The Company
is not in default under or in violation of any provision of the Company
Certificate or Company Bylaws.
SECTION 4.2. CAPITALIZATION
(a) The authorized capital stock of the Company consists of 1,000,000
shares of Preferred Stock, $0.001 par value per share (the "COMPANY PREFERRED
STOCK"), and 150,000,000 shares of common stock, $0.001 par value per share (the
"COMPANY COMMON STOCK" and, together with the Company Preferred Stock, the
"COMPANY STOCK"). As of the date hereof, 13,458,698 shares of Company Common
Stock are issued and outstanding, all of which shares of Company Common Stock
are validly issued and are fully paid, non-assessable and free of preemptive
rights. As of the date hereof, no shares of Company Preferred Stock are issued
and outstanding.
(b) As of the date hereof, (i) 4,392,894 shares of Company Common Stock
are authorized for issuance under the Option Plan, of which Company Stock
Options to purchase 3,012,268 shares of Company Common Stock are currently
outstanding, and (ii) 2,400,000 shares of Company Common Stock are authorized
for issuance pursuant to outstanding Company Warrants of which warrants to
purchase 2,400,000 shares of Company Common Stock are outstanding.
(c) Except as set forth in Schedule 4.2, as of the date hereof, there
are no outstanding Company Stock Options, Company Warrants, subscriptions,
options, contracts, rights or warrants, including any right of conversion or
exchange under any outstanding security, instrument or other agreement,
obligating the Company or any Subsidiary (as defined in Section 9.4) of the
Company to issue additional shares of Company Stock or any debt instrument.
There are no outstanding share appreciation rights or similar rights of the
Company or any of its
12
Subsidiaries. There are no voting trusts, irrevocable proxies or other
agreements or understandings to which the Company or any Subsidiary of the
Company is a party or is bound with respect to the voting of any shares of
Company Stock.
SECTION 4.3. INVESTMENTS. Except for the capital stock or other
ownership interests of its Subsidiaries, the Company does not own or have the
right to acquire, directly or indirectly, any shares of outstanding capital
stock or securities convertible into or exchangeable for capital stock of any
other corporation or any equity or other participating interest in the revenues
or profits of any Person.
SECTION 4.4. SUBSIDIARIES. Schedule 4.4 sets forth for each direct or
indirect Subsidiary of the Company: (i) its name and jurisdiction of
organization, (ii) each jurisdiction in which it is qualified to do business,
(iii) the number of authorized shares of capital stock or units of limited
liability company membership interests of each class authorized to be issued,
(iv) the number of issued and outstanding shares of capital stock or units of
limited liability company membership interests of each class, the names of the
holders thereof, and the number of shares or units held by each such holder, and
(v) the number of shares of its capital stock held in treasury. Each Subsidiary
is duly organized and validly existing under the laws of its jurisdiction of
organization and has the requisite power and authority to own, lease and operate
its assets and properties and to carry on its business as it is now being
conducted. Each Subsidiary of the Company is qualified to transact business and
is in good standing in each jurisdiction in which the properties owned or leased
by it or the nature of the business conducted by it makes such qualification
necessary, except as set forth in Schedule 4.4 or where the failure to be so
qualified or in good standing would not have a Material Adverse Effect. All of
the outstanding capital stock or units of limited liability company membership
interests of each Subsidiary of the Company are validly issued, and where such
Subsidiary is a corporation, fully paid and non-assessable and are owned
directly by the Company or a Subsidiary of the Company free and clear of any
liens, taxes, claims and demands except as set forth on Schedule 4.4. Except as
set forth on Schedule 4.4, there are no subscriptions, options, warrants, voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements to which the Company or any of its Subsidiaries is a party relating
to the issuance, sale, voting or transfer of any capital stock or units of
limited liability company membership interests of any Subsidiary of the Company,
including any right of conversion or exchange under any outstanding security,
instrument or agreement. The Company has made available to Parent correct and
complete copies of (a) the certificate or articles of incorporation,
organization or formation and (b) the bylaws or operating agreement of each
Subsidiary (as amended to date).
SECTION 4.5. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
necessary corporate power and corporate authority to enter into this Agreement
and, subject to obtaining any necessary stockholder approval for the Merger, to
carry out its obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to the approval of this Agreement by the
Company's stockholders in accordance with the Delaware Act. This Agreement has
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Merger Sub and Parent, constitutes a
legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to (i) laws of general
13
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
SECTION 4.6. NO CONFLICT, REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Schedule 4.6 and assuming that all Required
Governmental Consents (as defined below) are obtained, the execution and
delivery of this Agreement by the Company does not, and the performance of this
Agreement and the transactions contemplated hereby by the Company will not, (i)
conflict with or violate any law, statute, regulation, court order, judgment,
decree or other restriction of any government, governmental agency or court
applicable to the Company or any of its Subsidiaries or by which its or any of
their respective properties or assets is bound or affected, (ii) violate or
conflict with any provision of the certificate of incorporation of the Company
as amended (the "COMPANY CERTIFICATE"), or the bylaws of the Company, as amended
(the "COMPANY BYLAWS"), or any charter, bylaws or operating agreement of any
Subsidiary of the Company, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or result in any, or give rise to any rights of termination,
cancellation or acceleration of any obligations or any loss of any material
benefit under, or result in the creation of a lien or encumbrance on any of the
properties or assets (whether owned or leased) of the Company or any of its
Subsidiaries pursuant to, or require any notice under, any Company Material
Contract (as defined in Section 4.17). The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not violate or conflict with any of the provisions of any of the Option
Plan or Company Warrants.
(b) Except for (i) applicable requirements, if any, of the Exchange Act
and the Securities Act, (ii) the requirements of the HSR Act and the
requirements of any relevant foreign antitrust or foreign investment authority,
(iii) the filing and recordation of appropriate merger documents as required by
the Delaware Act, (iv) the filing and recordation of appropriate documents with
the relevant authorities of other states or jurisdictions in which the Company
or any of its Subsidiaries is qualified to do business, (v) applicable
requirements of the Nasdaq National Market, and (vi) compliance with any
applicable state securities or blue sky laws or state takeover laws (the filings
and authorizations referred to in clauses (i) through (vi) being referred to
collectively as the "REQUIRED GOVERNMENTAL CONSENTS"), neither the Company nor
any of its Subsidiaries is required to submit any notice, report or other filing
with any Governmental Entity in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. Except for the Required Governmental Consents, no waiver,
consent, approval or authorization of any Governmental Entity is required to be
obtained or made by the Company or any of its Subsidiaries in connection with
its execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby.
SECTION 4.7. SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports, statements, schedules,
and other documents with the SEC required to be filed by it pursuant to the
Securities Act and Exchange Act (collectively, the "SEC FILINGS"). The Company
has made available to Parent true and complete copies of (1) its Annual Reports
on Forms 10-K and 10K/A for the fiscal years ended April 30,
14
2001, 2002 and 2003, as filed with the SEC, (ii) its proxy statements relating
to all of the meetings of stockholders (whether annual or special) of the
Company since May 1, 2001, as filed with the SEC, and (iii) all other reports,
statements and registration statements and amendments thereto (including,
without limitation, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K) filed by the Company with the SEC since May 1, 2001 (collectively, the "SEC
REPORTS"). The SEC Filings (i) at the time filed or if amended or superseded by
a later filing, as of the date of the last such amendment or filing, complied as
to form in all material respects with the requirements of the Securities Act, or
the Exchange Act, as the case may be, and (ii) did not at the time they were
declared effective or filed, as the case may be, or if amended or superseded by
a later filing, as of the date of the last such amendment or such filing,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
(b) The audited and unaudited consolidated financial statements of the
Company and its Subsidiaries contained in the SEC Reports (collectively, the
"COMPANY FINANCIAL STATEMENTS") were prepared in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
therein or in the notes thereto), and the requirements of Regulation S-X
promulgated under the Exchange Act, fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as at the
respective dates thereof and the consolidated results of operations, cash flows
and changes in financial position of the Company and its Subsidiaries for the
periods indicated, and are consistent in all material respects with the internal
financial statements of the Company to the extent required by GAAP, except that
the unaudited interim financial statements are subject to normal and recurring
year-end adjustments and any other adjustments described therein or permitted by
the Exchange Act (including without limitation Regulation S-X thereunder), none
of which adjustments individually or in the aggregate are material. The internal
financial statements of the Company and its Subsidiaries have been, and are
being maintained in accordance with GAAP to the extent applicable and reflect
only actual transactions.
SECTION 4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as expressly
permitted by this Agreement, or as set forth in Schedule 4.8, since May 1, 2003:
(i) there has not occurred a Material Adverse Effect and (ii) there has not been
any change by the Company in its significant accounting principles or practices
except as required by GAAP or applicable law or SEC requirements. Without
limiting the generality of the foregoing, since April 30, 2003:
(a) none of the Company or its Subsidiaries has sold, leased,
transferred, or assigned any of its assets, tangible or intangible, other than
for a fair consideration in the Ordinary Course of Business;
(b) none of the Company or its Subsidiaries has entered into any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) outside the Ordinary Course of Business;
(c) no party (including the Company and any of its Subsidiaries) has
accelerated, terminated, modified, or cancelled any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and licenses) to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound which acceleration, termination, modification or
15
cancellation involved payments exceeding $100,000, other than any terminations,
cancellations or modifications to any agreement with a salesperson or customer
service representative of the Company or any Subsidiary of the Company who had
annual compensation for the fiscal year ended April 30, 2003 of $250,000 or
less;
(d) no liens have been placed upon any of the assets, tangible or
intangible, of the Company or any of its Subsidiaries other than pursuant to the
Company's existing senior credit facility and other liens permitted under the
terms of such facility;
(e) none of the Company or its Subsidiaries has made any capital
expenditure (or series of related capital expenditures) outside the Ordinary
Course of Business other than (i) as set forth in the Company's capital budget
for 2004, a copy of which is attached hereto as part of Schedule 5.1 and (ii)
such other items as do not exceed $250,000 in the aggregate;
(f) none of the Company or its Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities or assets of,
any other Person (or series of related capital investments, loans, and
acquisitions) either involving more than $100,000 in the aggregate or outside
the Ordinary Course of Business (excluding loans or advances in respect of
commissions to any salesperson or customer service representative of the Company
or any Subsidiary of the Company made in the Ordinary Course of Business);
(g) none of the Company or its Subsidiaries has issued any note, bond,
or other debt security or created, incurred, assumed, or guaranteed any
Indebtedness involving more than $50,000, in any one case, or $250,000 in the
aggregate other than (a) borrowings under the Company's existing senior credit
facility or (b) refinancings of existing obligations reflected in the Company
Financial Statements or Schedule 4.8;
(h) none of the Company or its Subsidiaries has delayed or postponed
the payment of accounts payable and other liabilities outside the Ordinary
Course of Business;
(i) none of the Company or its Subsidiaries has cancelled, compromised,
waived, or released any right or claim (or series of related rights and claims)
either involving more than $500,000 or outside the Ordinary Course of Business;
(j) the Company has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(k) none of the Company or its Subsidiaries has made any loan to, or
entered into any other transaction with, any of its directors or officers,
including, without limitation, the grant of any severance or termination pay,
other than pursuant to any existing plan, policy, agreement or arrangement, and
none of the Company or its Subsidiaries has made any loan to, or entered into
any other transaction with, any of its employees outside the Ordinary Course of
Business;
(l) none of the Company or its Subsidiaries has experienced any damage,
destruction, or loss to its property exceeding $250,000 and not covered by
insurance or exceeding $250,000 (excluding deductibles) and covered by
insurance;
16
(m) none of the Company or its Subsidiaries has granted any increase in
the base compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
(n) none of the Company or its Subsidiaries has entered into any
collective bargaining agreement, written or oral, or modified the terms of any
existing such agreement;
(o) none of the Company or its Subsidiaries has adopted, amended,
modified, or terminated any ERISA Benefit Plans or Non-ERISA Commitment (as
defined in Section 4.11) outside the Ordinary Course of Business;
(p) none of the Company or its Subsidiaries has made any change in
employment terms for any of its directors, officers or employees outside the
Ordinary Course of Business;
(q) none of the Company or its Subsidiaries has made or pledged to make
any charitable or other capital contribution to any individual charity in excess
of $100,000;
(r) none of the Company or its Subsidiaries has discharged a liability
or lien outside the Ordinary Course of Business;
(s) none of the Company or its Subsidiaries has transferred, assigned
or granted any license or sublicense of any rights of any Company Proprietary
Asset other than in the Ordinary Course of Business; and
(t) none of the Company and its Subsidiaries has committed in writing
to any of the foregoing.
SECTION 4.9. NO UNDISCLOSED LIABILITIES. Neither the Company nor any of
its Subsidiaries has any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), except
(i) for liabilities incurred in the Ordinary Course of Business which, either
individually or in the aggregate, have not had and could not be reasonably
expected to have a Material Adverse Effect and (ii) as and to the extent set
forth on the consolidated balance sheet of the Company and its Subsidiaries
contained in the Company's SEC Filing for the quarter ended October 31, 2003 (or
described in the footnotes accompanying the financial statements that contain
such balance sheet) or disclosed on Schedule 4.9.
SECTION 4.10. LITIGATION. Except as set forth in Schedule 4.10, (i)
there are no claims, actions, suits, proceedings or investigations pending or,
to the knowledge of the Company, threatened in writing against or involving the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any Governmental Entity or arbitrator.
None of the claims, actions, suits, proceedings or investigations listed on
Schedule 4.10, if adversely determined, could reasonably be expected to have a
Material Adverse Effect. Except as set forth on Schedule 4.10, neither the
Company nor any of its Subsidiaries nor any of their respective properties is
subject to any order, judgment, injunction or decree.
SECTION 4.11. EMPLOYEE BENEFIT PLANS; ERISA.
17
(a) Set forth in Schedule 4.11(a) is a true and complete list of each
"employee pension benefit plan" (as such term is defined in Section 3(2) of
ERISA (as defined in Section 9.4)) maintained by the Company or an ERISA
Affiliate (as defined in Section 9.4), or with respect to which the Company or
an ERISA Affiliate is or will be required to make any payment, or which provides
or will provide benefits to present or prior employees of Company or an ERISA
Affiliate due to such employment (the "PENSION PLANS"). Set forth in Schedule
4.11(a) is a true and complete list of each "employee welfare benefit plan" (as
such term is defined in Section 3(1) of ERISA) maintained by the Company, or
with respect to which the Company is or will be required to make any payment, or
which provides or will provide benefits to present or prior employees of the
Company due to such employment (the "WELFARE PLANS") (the Pension Plans and
Welfare Plans being the "ERISA BENEFIT PLANS"). In addition, set forth in
Schedule 4.11(a) is a true and complete list of each other "employee pension
benefit plan" (as such term is defined in Section 3(2) of ERISA) that is or has
ever been subject to Section 302 of ERISA and (i) maintained by the Company or
an ERISA Affiliate at any time during the six-year period prior to the Effective
Time, or (ii) with respect to which Company or an ERISA Affiliate was required
to make any payment at any time during such period (the "PRIOR PENSION PLANS").
(b) Other than those listed in Schedule 4.11(a), set forth in Schedule
4.11(b) is a true and complete list of each retirement, savings, profit sharing,
deferred compensation, severance, stock ownership, stock purchase, stock option,
hospitalization or other medical, disability, life or other insurance, or other
welfare or fringe benefit plan or policy to which Company or any of its
Subsidiaries is a party or with respect to which it is or will be required to
make any payment (the "NON-ERISA COMMITMENTS").
The Company has made available to Parent correct and complete copies of
(i) all written Non-ERISA Commitments and (ii) all insurance and annuity
policies and contracts and other documents relevant to any Non-ERISA Commitment.
Except as disclosed in Schedule 4.11(a) or Schedule 4.11(b), none of the ERISA
Benefit Plans or the Non-ERISA Commitments is subject to the law of any
jurisdiction outside of the United States of America.
(c) Except as set forth on Schedule 4.11(c), the Company has made
available to Parent with respect to each ERISA Benefit Plan, Non-ERISA
Commitment and with respect to each Prior Pension Plan, other than any ERISA
Benefit Plan or Prior Pension Plan which is a "multiemployer plan" (as such term
is defined in Section 3(37) of ERISA), correct and complete copies, where
applicable, of (i) all plan documents and amendments thereto, trust agreements
and amendments thereto and insurance and annuity contracts and policies, (ii)
the current summary plan description, (iii) the Annual Reports (Form 5500
series) and accompanying schedules, as filed, for the most recently completed
three plan years for which such reports have been filed, (iv) the financial
statements completed in accordance with GAAP for the most recently completed
three plan years for which such statements have been prepared, (v) the actuarial
reports for the three most recently completed plan years, if applicable, and
(vi) the most recent determination letter issued by the United States Internal
Revenue Service ("IRS") and the application submitted with respect to such
letter if such application was required to be filed. With respect to each
Pension Plan that is a "multiemployer plan" (the "MULTIEMPLOYER PLANS"), (A) the
Company has delivered to Parent correct and complete copies of all plan
documents and amendments thereto and trust agreements and amendments thereto,
the items described in clauses (ii), (iii) and (v) of the second preceding
sentence but with respect to the reports
18
described in such clauses (iii) and (v) only such reports for the most recent
year, and all correspondence and other information in the Company or any ERISA
Affiliate's possession, if any, relating to any anticipated increases in
contribution rates with respect to such plan, and (B) also set forth in Schedule
4.11(c) is a true and complete list of the amounts which each of the Company and
each ERISA Affiliate has paid to such plan through December 31, 2003 with
respect to each of the calendar years 2001 through 2003. The Company has
delivered to Parent with respect to each of the Multiemployer Plans and with
respect to each of the Prior Pension Plans which is a "multiemployer plan" (the
"PRIOR MULTIEMPLOYER PLANS") correct and complete copies of all correspondence
and other information in Company's or any ERISA Affiliate's possession, if any,
relating to the amount for which Company or any ERISA Affiliate is or could be
liable under Title IV of ERISA for a total or partial withdrawal as of any date
or for any other reason.
(d) Each Pension Plan that is intended to qualify under Section 401(a)
of the Code has been determined to be so qualified by the IRS, and no
circumstance has occurred or exists which might cause such plan to cease being
so qualified, other than as set forth in Schedule 4.11(e).
(e) There is no pending or, to the knowledge of the Company, threatened
claim in respect of any of the ERISA Benefit Plans or Non-ERISA Commitments
other than claims for benefits in the ordinary course of business. Except as set
forth in Schedule 4.11(e), each of the ERISA Benefit Plans and Non-ERISA
Commitments other than any Multiemployer Plans and Foreign Plans (as defined in
Section 4.11(l)) (i) has been administered substantially in accordance with its
terms and (ii) complies in form, and has been administered substantially in
accordance, with the requirements of ERISA and, where applicable, the Code and
any applicable law. The Company and each ERISA Affiliate has complied in all
material respects with the health care continuation requirements of Part 6 of
Title I of ERISA. The Company has no obligation under any ERISA Benefit Plans or
otherwise to provide health or other welfare benefits to any prior employees or
any other person, except as required by Part 6 of Title I of ERISA, other than
as set forth in Schedule 4.11(e). The consummation of the transaction
contemplated by this Agreement will not result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of payment of any
compensation or benefits payable to or in respect of any participant.
(f) To the knowledge of the Company, no proceeding has been initiated
to terminate any Multiemployer Plan, and there has been no "reportable event"
(as such term is defined in Section 4043(b) of ERISA) with respect to any such
plan. No Multiemployer Plan is in reorganization as described in Section 4241 of
ERISA or insolvent as described in Section 4245 of ERISA. Except as described in
Schedule 4.11(f), neither the Company nor any ERISA Affiliate has failed to make
a required or disputed contribution to any Multiemployer Plan or any Prior
Multiemployer Plan. Except as described in Schedule 4.11(f), (i) neither the
Company nor any ERISA Affiliate has incurred any liability on account of a
"partial withdrawal" or a "complete withdrawal" (within the meaning of Sections
4205 and 4203, respectively, of ERISA) from any multiemployer plan (as such term
is defined in Section 3(37) of ERISA), (ii) no such liability has been asserted,
(iii) there are no events or circumstances which could result in any such
partial or complete withdrawal, and (iv) neither the Company nor any ERISA
Affiliate is bound by a contract or agreement or has any obligation or liability
described in Section 4204 of ERISA. To the knowledge of the Company, each
Multiemployer Plan (A) complies in form, and has been
19
administered substantially in accordance, with the requirements of ERISA and,
where applicable, the Code, and (B) is qualified under Section 401(a) of the
Code as amended to the date hereof.
(g) Except as to Multiemployer Plans (as to which this representation
and warranty is made only to the knowledge of the Company), neither the Company
nor, to the knowledge of Company, any other "disqualified person" (within the
meaning of Section 4975 of the Code) or "party in interest" (within the meaning
of Section 3(14) of ERISA) has taken any action with respect to any ERISA
Benefit Plan which could subject any such plan (or its related trust) or the
Company or any officer, director or employee of any of the foregoing to the
penalty or tax under Section 502(i) or Section 502(l) of ERISA or Section 4975
of the Code.
(h) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the ERISA Benefit Plans and Non-ERISA Commitments (including workers
compensation) or by law (without regard to any waivers granted under Section 412
of the Code), to any funds or trusts established thereunder or in connection
therewith have been made by the due date thereof (including any valid
extension), and all contributions for any period ending on or before the
Effective Time which are not yet due will have been paid or sufficient accruals
for such contributions and other payments, to the extent required by GAAP have
been duly and fully provided for on the most recent consolidated balance sheet
of the Company included in the filed SEC Filings.
(i) No liability under any ERISA Benefit Plan or Non-ERISA Commitment
has been funded nor has any such obligation been satisfied with the purchase of
a contract from an insurance company that is not rated AA by Standard & Poor's
Corporation and the equivalent by each other nationally recognized rating
agency.
(j) No stock or other security issued by the Company or any ERISA
Affiliate forms or has formed a material part of the assets of any ERISA Benefit
Plan.
(k) Except as set forth or described in the Schedules under this
Section 4.11, neither the Company or any ERISA Affiliate has maintained,
sponsored or contributed to, or been required to contribute to, any United
States defined benefit plan (as defined in Section 414(j) of the Code) or any
plan subject to Title IV of ERISA at any time during the past six (6) years.
(l) Except as set forth on Schedule 4.11(l), with respect to each
Non-ERISA Commitment established or maintained outside of the United States of
America primarily for the benefit of employees of the Company or any ERISA
Affiliate residing outside the United States of America (a "FOREIGN PLAN"): (i)
all employer and employee contributions to each Foreign Plan required by
applicable law or by the terms of such Foreign Plan have been made, or, if
applicable, accrued, in accordance with normal accounting practices; (ii) the
fair market value of the assets of each funded Foreign Plan, the liability of
each insurer for any Foreign Plan funded through insurance or the book reserve
established for any Foreign Plan, together with any accrued contributions, is
sufficient to procure or provide for the accrued benefit obligations with
respect to all current and former participants in such plan according to the
actuarial assumptions and valuations most recently used to determine employer
contributions to such Foreign Plan, and no transaction contemplated by this
Agreement shall cause such assets or insurance obligations to be less than such
benefit obligations; and (iii) each Foreign Plan required to be
20
registered has been registered and has been maintained in all material respects
in good standing with applicable regulatory authorities.
SECTION 4.12. OWNED REAL PROPERTY. Neither the Company nor any of its
Subsidiaries owns any real property.
SECTION 4.13. LEASES.
(a) Schedule 4.13 sets forth a list of all leases, subleases and
occupancy agreements, together with all amendments, extensions, renewals,
guaranties, assignments and supplements thereto, with respect to all real
properties in which the Company or any of its Subsidiaries has a leasehold
interest, whether as lessor or lessee (each, a "LEASE" and collectively, the
"LEASES"; the property covered by Leases under which the Company or such
Subsidiary is a lessee is referred to herein as the "LEASED REAL PROPERTY"),
including the date and name of the parties to such Leases and all assignors and
assignees thereof.
(b) With respect to each of the Leases, except as set forth in Schedule
4.13: (i) such Lease is legal, valid, binding, enforceable and in full force and
effect; (ii) the transactions contemplated by this Agreement do not require the
consent of any other party to such lease, will not result in a breach of or
default under such lease, or otherwise cause such lease to cease to be legal,
valid, binding, enforceable and in full force and effect on identical terms
immediately following the Closing; (iii) neither the Company nor any of its
Subsidiaries is, and, to the knowledge of the Company, no other party to any
Lease is, in breach or default under such Lease, and, to the Company's
knowledge, no event has occurred or circumstance exists which, with the delivery
of notice, the passage of time or both, would constitute such a breach or
default, or permit the termination, modification or acceleration of rent under
such Lease; (iv) the other party to such Lease is not an Affiliate of the
Company or any of its Subsidiaries; (v) neither the Company nor any of its
Subsidiaries has subleased, licensed or otherwise granted any Person the right
to use or occupy such Leased Real Property or any portion thereof except in the
Ordinary Course of Business; and (vi) except for any security interest granted
pursuant to the Company's existing senior credit facility or other security
interests permitted under the terms of such facility, neither the Company nor
any of its Subsidiaries has collaterally assigned or granted any other security
interest in such Lease or any interest therein.
SECTION 4.14. INTELLECTUAL PROPERTY.
(a) Schedule 4.14(a)(i) sets forth, with respect to each Proprietary
Asset owned by the Company and its Subsidiaries (a "COMPANY PROPRIETARY ASSET")
and registered with any Governmental Entity or for which an application has been
filed with any Governmental Entity: (i) a brief description of such Proprietary
Asset consisting of (A) the name and/or design of each xxxx, registration number
(or serial number) and date registered (filed) for such xxxx, (B) the title of
each patent, patent number (or serial number) and date issued (filed) for such
patent, (C) the title of each copyright work, date registered and registration
number; and (ii) the jurisdictions covered by the applicable registration or
application. Schedule 4.14(a)(ii) identifies and provides a brief description of
all common law marks, domain names and unregistered copyrights owned by the
Company and its Subsidiaries that are material to the business of the Company
and its Subsidiaries. Schedule 4.14(a)(iii) identifies and provides a brief
description of contracts
21
containing any ongoing royalty or payment obligations with respect to, each
Proprietary Asset that is licensed to the Company and its Subsidiaries by any
Person (other than employees of the Company or any Subsidiary) and is material
to the business of the Company and its Subsidiaries (except for any Proprietary
Asset that is licensed to the Company and its Subsidiaries under any third party
software license generally available to the public). The Company and its
Subsidiaries have good and marketable title to all of the Proprietary Assets
identified in Schedule 4.14(a)(i) and, to the knowledge of the Company, in and
to all other Company Proprietary Assets, free and clear of all encumbrances,
except for (A) as set forth in Schedule 4.14(b), and (B) minor liens that have
arisen in the Ordinary Course of Business and that do not (individually or in
the aggregate) materially detract from the value of the asset subject thereto or
materially impair the operations of the Company or its Subsidiaries. Except as
identified in Schedule 4.14(b), the Company and its Subsidiaries have a valid
right to use and license in connection with the business of the Company and its
Subsidiaries as currently conducted all Company Proprietary Assets. Except as
set forth in Schedule 4.14(a)(iv), none of the Company or its Subsidiaries has
developed jointly with any other Person (other than employees of the Company or
any Subsidiary of the Company) any Proprietary Asset that is material to the
business of the Company and its Subsidiaries with respect to which such other
Person has ownership rights.
(b) Except as set forth in Schedule 4.14(a)(iv), to the knowledge of
the Company, no current or former employee, officer, director, stockholder,
consultant or independent contractor has any right, claim or interest in or with
respect to any Company Proprietary Assets.
(c) To the knowledge of the Company: (i) all patents, trademarks,
service marks and copyrights owned by the Company and its Subsidiaries are
valid, enforceable and subsisting; (ii) none of the Company Proprietary Assets
and no Proprietary Asset that is currently being developed by any of the Company
or its Subsidiaries (either by itself or with any other Person) infringes or
misappropriates or makes unauthorized use of ("INFRINGES") any Proprietary
Assets owned by any other Person, (iii) none of the products that have been
designed, created, developed, assembled, manufactured or sold by any of the
Company or its Subsidiaries is Infringing any Proprietary Assets owned by any
other Person in any respect, and, except as set forth in Schedule 4.14(c), none
of the Company or its Subsidiaries has received any written notice or other
written communication of any actual, alleged, or potential Infringement of any
Proprietary Asset owned by any other Person; and (iv) to the knowledge of the
Company no other Person is Infringing, and no Proprietary Assets owned by any
other Person Infringes, any Company Proprietary Asset.
(d) The Company Proprietary Assets constitute all the Proprietary
Assets owned by or licensed to the Company and its Subsidiaries necessary to
enable the Company and its Subsidiaries to conduct their businesses in the
manner in which such businesses are now being conducted. Except as set forth in
Schedule 4.14(d), none of the Company or its Subsidiaries has (i) licensed any
of the Company Proprietary Assets to any Person on an exclusive basis, or (ii)
entered into any other contract limiting its ability to exploit any Company
Proprietary Assets.
(e) Except as set forth on Schedule 4.14(e), to the knowledge of the
Company, (i) no current executive officer of the Company or its Subsidiaries is
competing against, or soliciting customers or employees from, the Company or its
Subsidiaries, or wrongfully using Company Proprietary Assets, and (ii) no former
executive officer of the Company or its Subsidiaries is
22
wrongfully competing against, or soliciting customers or employees from, the
Company or its Subsidiaries, or using Company Proprietary Assets.
SECTION 4.15. INSURANCE. (a) Schedule 4.15 sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) of the Company or any of its Subsidiaries in effect as of
the date hereof:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
(b) With regard to each insurance policy carried by the Company and its
Subsidiaries or covering their business, assets and properties: (A) the policy
is legal, valid, binding, enforceable, and in full force and effect; (B) neither
the Company, nor any of its Subsidiaries, nor, to the Company's knowledge any
other party to the policy, is in breach or default (including with respect to
the payment of premiums or the giving of notices), and to the Company's
knowledge, no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (C) no party to the policy has repudiated
any provision thereof. To the Company's knowledge, each of the Company and its
Subsidiaries has been covered during the past five years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period.
SECTION 4.16. ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(a) Each of the Company, its Subsidiaries, predecessors and Affiliates
has complied in all material respects with all applicable Environmental Laws,
and, except as set forth on Schedule 4.16, there are no past or current
Environmental Claims pending or threatened against the Company or any of its
Subsidiaries, predecessors or Affiliates and there are no facts or circumstances
that could reasonably be expected to form the basis for any Environmental Claim
against the Company or any of its Subsidiaries, predecessors or Affiliates.
(b) Neither the Company nor any of its Subsidiaries, predecessors or
Affiliates has caused or allowed the generation, treatment, storage or disposal
of Hazardous Substances on any real property, including without limitation, the
Leased Real Property, any real property formerly leased or owned by the Company
or any of its Subsidiaries, predecessors or Affiliates or any
23
other location except (i) in accordance with applicable Environmental Laws and
(ii) as set forth on Schedule 4.16.
(c) Neither the Company nor any of its Subsidiaries, predecessors or
Affiliates has caused or allowed the (i) release of Hazardous Substances into
the environment except where the release of such Hazardous Substances was in
accordance with applicable Environmental Laws or (ii) as set forth on Schedule
4.16.
(d) There have been no environmental investigations, studies, tests,
reviews or other analyses conducted by, on behalf of, or that are in the
possession of the Company or any of its Subsidiaries, or, to the knowledge of
the Company, in the possession of any of its predecessors, with respect to the
Leased Real Property or any property formerly leased or owned by the Company or
any of its Subsidiaries, predecessors or Affiliates that have not been made
available to Parent, Merger Sub or any of their representatives prior to the
execution of this Agreement.
(e) All environmental permits and other material permits for all
activities relating to the operation of the Business necessary at any time prior
to the date of this Agreement and prior to the Closing Date have been obtained
and were and are in full force and effect. Each of the Company and its
Subsidiaries, predecessors and Affiliates has complied and is in compliance in
all material respects with all environmental permits with respect to the
operation of the business of the Company and its Subsidiaries and there are no
known reasons why the business of the Company and its Subsidiaries currently
operating on the Leased Real Property cannot lawfully continue.
(f) except as set forth on Schedule 4.16, none of the Company, its
Subsidiaries, or any of their respective predecessors or Affiliates, has either
expressly or by operation of law, assumed or undertaken any liability, including
without limitation, any obligation for corrective or remedial action, of any
Person relating to Environmental Laws or Hazardous Substances.
(g) As used in this Agreement, the following terms have the meanings
set forth below:
(i) "ENVIRONMENTAL CLAIM" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices, violations or
proceedings, whether civil or criminal, related to any applicable
Environmental Law or any environmental permit brought, issued or
asserted by a governmental or regulatory authority or by a third party
for compliance, damages, penalties, removal, response, remedial action
or other action resulting from a release of a Hazardous Substance at,
to or from any real property currently or formerly owned, leased or
operated by the Company or any of its Subsidiaries, predecessors or
Affiliates or any real property to which any Hazardous Substances or
materials containing Hazardous Substances were sent for handling,
storage, treatment or disposal.
(ii) "ENVIRONMENTAL LAW" means any United States or Canadian
federal, provincial, state and local law, statute, ordinance and any
related rules and regulations, and any judicial or administrative
interpretation thereof, including any judicial or
24
administrative order, consent decree or judgment, relating to the use,
handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Substances, including without limitation the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sections
6901 et seq., the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, 42 U.S.C. Sections 9601 et seq., and the
Clean Water Act, as amended, 33 U.S.C. Sections 1251 et seq.
(iii) "HAZARDOUS SUBSTANCES" means (a) petroleum and petroleum
products, by-products or breakdown products, radioactive materials, and
polychlorinated biphenyls, and (b) any other chemicals, materials or
substances regulated as toxic or hazardous or as a pollutant,
contaminant or waste under any applicable Environmental Law.
SECTION 4.17. MATERIAL CONTRACTS. Schedule 4.17 lists the following
written contracts and other written agreements to which the Company or any of
its Subsidiaries is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $350,000 per annum;
(b) any agreement (or group of related agreements) for the purchase or
sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services (i) which cannot be
terminated without penalty upon 90 days or less prior written notice and (ii)
which involve annual payments in excess of $350,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any Indebtedness in excess of
$250,000;
(e) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing annual base compensation in
excess of $150,000, other than agreements with a salesperson or customer service
representative of the Company or any Subsidiary of the Company entered into in
the Ordinary Course of Business;
(f) any agreement under which it has advanced or loaned in excess of
$50,000 that is outstanding as of the date of this Agreement, to any of its
directors, officers, and employees (other than loans or advances against
commissions to salespersons or customer service representatives of the Company
or any Subsidiary of the Company in the Ordinary Course of Business) or in
connection with an acquisition by the Company or any of its Subsidiaries;
(g) any agreement under which it has granted any Person any
registration rights (including, without limitation, demand and piggyback
registration rights);
(h) any agreement under which the Company or any of its Subsidiaries
has advanced or loaned any other Person amounts in the aggregate exceeding
$100,000 (other than loans or advances against commissions to salespersons or
customer service representatives of the Company or a Subsidiary of the Company
in the Ordinary Course of Business);
25
(i) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any Indebtedness in excess of $250,000
or under which it has imposed a lien on any of its assets, tangible or
intangible (other than liens permitted under the Company's existing senior
credit facility); or
(j) any other agreement (or group of related agreements) the
performance of which involves consideration from and after the date of this
Agreement in excess of $500,000.
Each contract, arrangement, commitment or understanding of the type described in
this Section 4.17, whether or not set forth in Schedule 4.17 is referred to as a
"COMPANY MATERIAL CONTRACT." The Company has made available to Parent a correct
and complete copy of each Company Material Contract (as amended to date). With
respect to each such agreement: (A) the agreement is legal, valid, binding, in
full force and effect and enforceable in accordance with its terms, except as to
the effect, if any, of (i) applicable bankruptcy or other similar laws affecting
the rights of creditors generally, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies; (B) neither the
Company, nor to the knowledge of the Company any other party, is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (C) neither the Company, nor to the
knowledge of the Company any other party, has repudiated any provision of the
agreement.
SECTION 4.18. COMPLIANCE WITH LAWS/PERMITS.
(a) Except as set forth in Schedule 4.18, neither the Company nor any
of its Subsidiaries is in violation of any applicable provisions of any laws
applicable thereto, except for any violations which would not individually or in
the aggregate have a Material Adverse Effect.
(b) Except as set forth in Schedule 4.18, the Company and its
Subsidiaries have all permits, licenses, approvals and other authorizations from
applicable Governmental Entities required in connection with the operation of
their respective businesses, except those the absence of which would not
individually or in the aggregate have a Material Adverse Effect.
SECTION 4.19. TAXES.
(a) Except as set forth on Schedule 4.19, the Company and each of its
Subsidiaries has timely filed, or caused to be timely filed, all Tax Returns
required to be filed by it, and has paid, collected or withheld, or caused to be
paid, collected or withheld, in all material respects, all Taxes required to be
paid, collected or withheld, other than such Taxes for which all of the
following are true: (1) adequate reserves have been established for such Taxes
in the Company Financial Statements; (2) such Taxes are being contested in good
faith; and (3) such Taxes are set forth on Schedule 4.19. There are no claims or
assessments pending against the Company or any of its Subsidiaries for any
alleged material deficiency in any Tax, and the Company has not been notified in
writing of any proposed material Tax claims or assessments against the Company
or any of its Subsidiaries (other than, in each case, claims or assessments for
which adequate reserves in the Company Financial Statements have been
established or which are being contested in good faith). Except as set forth on
Schedule 4.19, neither the Company nor any of its Subsidiaries has any waivers
or extensions of any applicable statute of limitations to
26
assess any amount of Taxes. There are no outstanding requests by the Company or
any of its Subsidiaries for any extension of time within which to file any
material Tax Return or within which to pay any amounts of Taxes shown to be due
on any return. There are no liens or security interests on any of the assets of
any of the Company and its Subsidiaries that arose as a result of the failure to
pay Taxes, other than liens for current Taxes not yet due and payable and liens
for Taxes that are being contested in good faith. Each of the Company and its
Subsidiaries has in all material respects withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
No director or officer (or employee responsible for Tax matters) of any of the
Company and its Subsidiaries expects any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax liability of any of the Company and its Subsidiaries
either (A) claimed or raised by any authority in writing or (B) as to which any
of the directors and officers (and employees responsible for Tax matters) of the
Company and its Subsidiaries has knowledge based upon personal contact with any
agent of such authority.
(b) Schedule 4.19 indicates those Tax Returns that are currently the
subject of audit. The Company has made available to Parent correct and complete
copies of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Company and its
Subsidiaries since January 1, 1999. Except as set forth on Schedule 4.19, no
power of attorney currently in force has been granted by any of the Company and
its Subsidiaries with respect to any Tax matter.
(c) None of the Company or its Subsidiaries has filed a consent under
Code Section 341(f) concerning collapsible corporations. None of the Company or
its Subsidiaries is required to include in income any adjustment pursuant to
Code Section 481(a) by reason of a change in accounting method or has an
application pending with the IRS or any other tax authority requesting
permission for any change in accounting method. None of the Company or its
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Section 162(m) or 280G.
None of the Company or its Subsidiaries has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). None of the
Company or its Subsidiaries is subject to any accumulated earnings tax or
personal holding companies tax. Each of the Company and its Subsidiaries has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662 and complied with the disclosure required under the
tax shelter reporting provisions in Code Section 6011. Except as set forth on
Schedule 4.19, none of the Company or its Subsidiaries is currently a party to
any Tax allocation or Tax sharing agreement pursuant to which any of them has an
obligation to make a payment under such an agreement. None of the Company or its
Subsidiaries has any liability for the Taxes of any person (other than any of
the Company and its Subsidiaries) under Treas. Reg. ss. 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(d) Schedule 4.19 sets forth the following information with respect to
each of the Company and its Subsidiaries as of the most recent practicable date
(as well as on an estimated
27
pro forma basis as of the Closing giving effect to the consummation of the
transactions contemplated hereby): (A) the amount of any excess loss account of
the stockholder(s) of each Subsidiary in its stock; (B) to the Company's
knowledge, the amount of any deferred gain or loss allocable to the Company or
its Subsidiaries arising out of any deferred intercompany transaction; (C) all
material elections and consents relating to Tax and agreements with any taxing
authorities which are still in effect; and (D) all closing agreements and Tax
rulings requested or received from any taxing authority.
(e) The unpaid Taxes of the Company and its Subsidiaries (A) did not,
as of the most recent fiscal month end, exceed the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the balance
sheet included in the Company Financial Statements as of October 31, 2003
(rather than in any notes thereto) and (B) to the Company's knowledge, do not
exceed that reserve as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns.
(f) None of the Company or its Subsidiaries (A) has participated in an
international boycott as defined in Code Section 999; (B) except as set forth on
Schedule 4.19, has been the distributing corporation or controlled corporation
with respect to a transaction described in Code Section 355 since the effective
date of Code Section 355(e); (C) as a result of a "Closing Agreement" (as
described in Code Section 7121) will be required to include an item of income or
exclude an item of deduction in a taxable period or portion thereof after
Closing; (D) has a material item of income or gain reported for financial
accounting purposes in a pre-closing period or otherwise attributable to a
pre-closing period which is required to be included in taxable income for a
post-closing period or (E) has an overall foreign loss described in Code Section
904(f).
(g) None of the assets of the Company or its Subsidiaries is (A) tax
exempt use property under Code Section 168(h); (B) tax-exempt bond financed
property under Code Section 168(g); (C) limited use property under Revenue
Procedure 76-30, or (D) treated as owned by any other person under Code Section
168. None of the Company or it Subsidiaries is a party (other than as an
investor) to any industrial development bond.
(h) None of the Company or its Subsidiaries owns shares of any passive
foreign investment companies as described in Code Section 1297, or foreign
investment companies as described in Code Section 1246. None of the Subsidiaries
of the Company which are organized outside the United States (A) have material
loss carryovers; (B) have any United States real property interests as described
in Code Section 897, or (C) generate material amounts of Subpart F income as
described in Code Section 952. None of the Subsidiaries of the Company which are
organized outside the United States are contiguous country corporations
described in Code Section 1504(d).
(i) None of the Company or its Subsidiaries has made an election under
US law with respect to its status or classification for US tax purposes. None of
the Subsidiaries of the Company which are organized outside the United States
are engaged in the conduct of a trade or business in the United States. None of
the Company or its Subsidiaries has a branch, office or fixed place of business
or permanent establishment outside its country of incorporation (other
28
than Puerto Rico). The Company and its Subsidiaries have made their transfer
pricing determinations for U.S. federal income tax purposes using appropriate
methods in accordance with applicable tax laws and have kept reasonably accurate
tax records supporting such determinations.
SECTION 4.20. STATE TAKEOVER STATUTES. No "fair price," "moratorium,"
"control share acquisition," "interested stockholder" or other similar
anti-takeover statute or regulation enacted under any state law applicable to
the Company is applicable to the Merger.
SECTION 4.21. BROKERS. No broker, finder, investment banker or other
Person (other than Xxxxxxxxx & Company, Inc. ("Jefferies")) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Company. SCHEDULE 4.21 includes the letter agreement between
the Company and Jefferies with respect to the amount of all unpaid fees and
expenses owed by the Company and its Subsidiaries to Jefferies with respect to
the transactions contemplated by this Agreement or otherwise. Such agreement
shall not be amended or modified in any respect.
SECTION 4.22. OPINION OF FINANCIAL ADVISOR. Jefferies & Company, Inc.
has rendered to the Board a written opinion, dated as of the date of this
Agreement, to the effect that, subject to the assumptions and limitations set
forth therein, the Per Share Amount to be received by the stockholders of the
Company, is fair to such holders from a financial point of view.
SECTION 4.23. TITLE TO ASSETS. Except as set forth on Schedule 4.23,
the Company and its Subsidiaries have good and marketable title to, or a valid
leasehold interest in, the properties and assets used by them, located on their
premises, or shown on the balance sheet included in the Company Financial
Statements as of October 31, 2003, or acquired after the date thereof, free and
clear of all liens, except for properties and assets disposed of in the Ordinary
Course of Business since such date.
SECTION 4.24. PRODUCT WARRANTY. Except as set forth on Schedule 4.24,
each product manufactured, sold, leased, or delivered by the Company or any of
its Subsidiaries has been in conformity with all applicable contractual
commitments and all express and implied warranties, and none of the Company and
its Subsidiaries has any liability (and there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any liability) for
replacement or repair thereof or other damages in connection therewith, subject
only to the reserve for product warranty claims set forth on the face of the
balance sheet included in the Company Financial Statements as of October 31,
2003 (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Company and its Subsidiaries.
SECTION 4.25. EMPLOYEES.
(a) Except as set forth in Schedule 4.25, the Company and each of its
Subsidiaries has complied in all material respects with all applicable laws,
rules and regulations which relate to prices, wages, hours, discrimination in
employment and collective bargaining and is not liable
29
for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing. Except as set forth in Schedule 4.25, (i) neither the
Company nor any of its Subsidiaries is a party to any collective bargaining
agreement, (ii) the Company and each of its Subsidiaries has complied in all
material respects with all collective bargaining agreements listed in Schedule
4.25, and (iii) neither the Company or any of its Subsidiaries is a party to,
and it is not affected by or threatened with, any dispute or controversy with a
union or with respect to unionization or collective bargaining involving its
employees.
(b) Any individual who performs services for the Company or its
Subsidiaries (other than through a contract with an organization other than such
individual) and who is not treated as an employee of the Company or a Subsidiary
of the Company for federal income tax purposes by the Company is not an employee
for such purposes.
(c) The Company is in compliance with the requirements of the Workers
Adjustment and Retraining Notification Act and has no liabilities pursuant to
such act.
(d) Other than as set forth on Schedule 4.25, to the knowledge of the
Company, no executive, key employee, or group of employees has any plans to
terminate employment with any of the Company or its Subsidiaries.
SECTION 4.26. NOTES AND ACCOUNTS RECEIVABLE. Except as set forth in
Schedule 4.26, to the Company's knowledge, all notes and accounts receivable of
the Company and its Subsidiaries are reflected properly on their books and
records, are valid receivables subject to no setoffs or counterclaims, are
current and collectible, subject only to the reserve for bad debts set forth on
the face of the consolidated balance sheet of the Company and its Subsidiaries
contained in the Company's SEC Filing for the quarter ended October 31, 2003 as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company and its Subsidiaries.
ARTICLE V.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE EFFECTIVE
TIME. Except as otherwise contemplated by this Agreement, required by law,
disclosed in Schedule 5.1 or consented to by Parent in writing (which consent
shall not be unreasonably withheld or delayed), during the period from the date
of this Agreement to the Effective Time, (i) the Company and each of its
Subsidiaries shall conduct their respective businesses in the Ordinary Course of
Business and (ii) without limiting the generality of the foregoing, neither the
Company nor any of its Subsidiaries will:
(a) amend their respective articles or certificates of incorporation or
bylaws (or comparable governing instruments) in any respect;
(b) authorize for issuance, issue, grant, sell, pledge or dispose of
any shares of, or any options, warrants, commitments, subscriptions or rights of
any kind to acquire or sell any shares of, the capital stock or other securities
of the Company or any of its Subsidiaries including, but not limited to, any
securities convertible into or exchangeable for shares of stock of any class of
30
the Company or any of its Subsidiaries, except for (i) the issuance of Shares
upon the exercise of Company Stock Options or Company Warrants to purchase
common stock outstanding on the date of this Agreement in accordance with their
present terms, (ii) the issuance of Shares pursuant to the Employee Stock
Purchase Plan for the offering period ending no later than March 31, 2004 and
(ii) the issuance of Shares to members of the Board of Directors of the Company
in lieu of cash directors' fees consistent with past practices;
(c) split, combine or reclassify any shares of its capital stock or
declare, pay or set aside any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
other than dividends or distributions to the Company or a Subsidiary of the
Company, or directly or indirectly redeem, purchase or otherwise acquire or
offer to acquire any shares of its capital stock or other securities;
(d) (i) create, incur or assume any Indebtedness in excess of $100,000
in the aggregate, except refinancings of existing obligations, without
increasing the amount of Indebtedness represented by such obligations, on terms
that are no less favorable to the Company or its Subsidiaries than the existing
terms; (ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, indirectly, contingently or otherwise) for the obligations of
any Person; (iii) make any capital expenditures or make any loans, advances or
capital contributions to, or investments in, any other Person (other than (v)
loans or advances in respect of commissions to any salesperson or customer
service representative of the Company or its Subsidiaries, (w) to the Company or
a Subsidiary of the Company in the Ordinary Course of Business, (x) customary
travel, relocation or business advances to employees, (y) such as are included
in the Company's capital budget for 2004, a copy of which is attached to
Schedule 5.1 and (z) such other items as do not exceed $100,000 in the
aggregate); (iv) voluntarily incur any liability or obligation (absolute,
accrued, contingent or otherwise) material to the Company and its Subsidiaries
taken as a whole; (v) enter into any other agreement (or group of related
agreements) the performance of which involves consideration from and after the
date of this Agreement in excess of $100,000 (except as permitted under Section
5.1(e)) or (vi) sell, transfer, mortgage, pledge or otherwise dispose of, or
encumber, or agree to sell, transfer, mortgage, pledge or otherwise dispose of
or encumber, any assets or properties, real, personal or mixed, material to the
Company and its Subsidiaries taken as a whole other than to secure debt
outstanding as of the date of this Agreement or permitted under subpart (i) of
this clause (d) or as set forth on Schedule 5.1;
(e) other than pursuant to the terms of agreements in effect on the
date of this Agreement, (i) enter into, establish, amend or terminate any
retention, change of control or collective bargaining agreement or arrangement;
(ii) increase in any manner the compensation of any of its officers or
employees, or enter into, establish, amend or terminate any employment or
consulting agreement with any of its employees, in each case other than changes
in the Ordinary Course of Business with respect to salespeople or customer
service representatives of the Company or its Subsidiaries, or other employees
of the Company and its Subsidiaries who do not have a title of vice president or
higher; (iii) hire or terminate any employee of the Company or any of its
Subsidiaries with a title of vice president or higher; or (iv) enter into,
establish, amend or terminate any profit sharing, pension, retirement, health or
other welfare plans, or any other benefit plan, policy, agreement, trust, fund
or arrangement, other than: (w) amendments to, or terminations of, group health
and other welfare plans in the Ordinary Course of Business, (x) as
31
required by the IRS or Department of Labor (whether through a closing agreement,
compliance statement or otherwise), (y) amendments to the Company's 401(k) plan
in the Ordinary Course of Business (other than any changes in vesting schedules
or increases in the employer matching contributions under such plan), and (z)
amendments to, or mergers of, the retirement plans of the Company's Subsidiaries
listed on Schedule 4.11(e) in the Ordinary Course of Business as set forth on
Schedule 5.1;
(f) settle or compromise any material pending or threatened suit,
action or claim (including, without limitation, any claims in excess of $100,000
of the Company or its Subsidiaries as creditor in any bankruptcy proceeding) on
terms other than those set forth on Schedule 5.1;
(g) adopt any stockholder rights or similar plans;
(h) adopt any plan of liquidation or dissolution; or
(i) agree in writing or otherwise to take any of the actions described
in Sections 5.1 (a) through (h) above.
SECTION 5.2. NO SOLICITATION.
(a) Except as otherwise provided in Section 6.7 below, upon execution
of this Agreement, the Company shall, and shall direct the Company
Representatives (as defined in Section 5.2 (b)) to, immediately cease any
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal (as defined in Section 5.2 (c)).
(b) Except as permitted by this Section 5.2, and subject to Section 6.7
below, the Company shall not, and it shall direct its Subsidiaries and the
officers, directors, employees, investment bankers, attorneys, accountants,
consultants or other agents, advisors or representatives of the Company and its
Subsidiaries (collectively, the "COMPANY REPRESENTATIVES") not to, directly or
indirectly, (i) solicit, initiate, knowingly encourage, or take any other action
to knowingly facilitate any inquiries regarding or the submission of, any
Acquisition Proposal, (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any information or data with respect to, or
take any other action to knowingly facilitate the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
or (iii) amend or grant any waiver or release under any standstill or similar
agreement with respect to any class of equity securities of the Company or any
of its Subsidiaries. Notwithstanding the foregoing, if, at any time prior to the
Effective Time, the Board of Directors determines in good faith that the failure
to do so could create a reasonable possibility of a breach of its fiduciary
duties to the Company's stockholders under applicable law, the Company may, in
response to an Acquisition Proposal, and subject to compliance with Section
5.2(d), (x) furnish information with respect to the Company to any Person
pursuant to a customary confidentiality agreement (as determined by the Board
after consultation with its outside counsel) and (y) participate in negotiations
regarding such Acquisition Proposal.
(c) As used in this Agreement, the following terms have the meanings
set forth below:
32
(i) "ACQUISITION PROPOSAL" means any inquiry, proposal or
offer, whether in writing or otherwise, pursuant to which a Third Party
acquires or would acquire, directly or indirectly, beneficial ownership
(as defined under Rule 13d-3 of the Exchange Act) of 25% or more of the
assets of the Company and its Subsidiaries (taken as a whole) or 25% or
more of any class of equity securities or of the voting power of the
Company pursuant to a merger, consolidation or other business
combination, sale of shares of capital stock, sale of assets, tender
offer, exchange offer or similar transaction with respect to the
Company, including any single or multi-step transaction or series of
related transactions, which is structured to permit such Third Party to
acquire beneficial ownership of 25% or more of the assets of the
Company and its Subsidiaries (taken as a whole), or 25% or more of the
equity interests in the Company.
(ii) "THIRD PARTY" means any Person or group other than
Parent, Merger Sub or any of their respective Affiliates.
(d) Except as permitted by this Section 5.2, and subject to Section 6.7
below, the Board of Directors shall not (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent or Merger Sub, the
approval or recommendation by the Board of Directors of this Agreement or the
transactions contemplated hereby, including the Merger, or (ii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition
Proposal. Notwithstanding the foregoing or any other provision contained in this
Agreement, in the event that prior to the Effective Time the Board of Directors
determines in good faith that the failure to do so could create a reasonable
possibility of a breach of its fiduciary duties to the Company's stockholders
under applicable law, the Board of Directors may (subject to this and the
following sentences) (x) withdraw or modify its approval or recommendation of
this Agreement or the Merger or (y) approve or recommend a Company Superior
Proposal (as hereinafter defined), but in each of the cases set forth in these
clauses (x) or (y), only at a time that is at least 48 hours following delivery
to Parent of a written notice advising Parent that the Board of Directors has
received a Company Superior Proposal, specifying the material terms and
conditions of such Company Superior Proposal and identifying the Person making
such Company Superior Proposal. For purposes of this Agreement, a "COMPANY
SUPERIOR PROPOSAL" means any Acquisition Proposal on terms which the Board of
Directors determines in its good faith judgment (after consultation with their
advisors) to be more favorable to the Company's stockholders than the Merger
(taking into account any factors relating to such proposed transaction deemed
relevant by the Board of Directors, including, without limitation, the financing
thereof, any break-up fees, expense reimbursements and all other conditions
thereto).
(e) In addition to the obligations of the Company set forth in
paragraphs (a), (b) and (d) of this Section 5.2, the Company shall no later than
24 hours after the receipt thereof advise Parent orally and in writing of any
Acquisition Proposal, or of any request for information relating to the Company
or any of its Subsidiaries or for access to the business, properties, assets,
books or records of the Company or any of its stockholders by any Third Party
that to the knowledge of the Company is seeking to make, or has made, an
Acquisition Proposal. The Company shall keep Parent informed in all material
respects, on a prompt basis, of the status and material terms, conditions and
other details of any such Acquisition Proposal, indication or request.
33
(f) Nothing contained in this Section 5.2 or any other provision hereof
shall prohibit the Company or the Board of Directors from (i) taking and
disclosing to the Company's stockholders a position contemplated by Rule 14e-2
promulgated under the Exchange Act or (ii) making such disclosure to the
Company's stockholders as, in the good faith judgment of the Board of Directors,
after consultation with outside counsel, is required under applicable law.
SECTION 5.3. TAX.
(a) Until the earlier of (i) the Closing Date, or (ii) the termination
of this Agreement, the Company and its Subsidiaries shall prepare and file on or
before the due date thereof all Tax Returns required to be filed by any of the
Company and its Subsidiaries (except for any Tax Return for which an extension
has been granted as permitted hereunder) on or before the Closing Date, and
shall pay all Taxes (including estimated Taxes) due on such Tax Return (or due
with respect to Tax Returns for which an extension has been granted as permitted
hereunder) or which are otherwise required to be paid at any time prior to or
during such period. Such Tax Returns shall be prepared in accordance with the
most recent Tax practices as to elections and accounting methods except for new
elections that may be made therein that were not previously available, subject
to Parent's consent (not to be unreasonably withheld or delayed).
(b) Until the earlier of (i) the Closing Date, or (ii) the termination
of this Agreement, to the extent any of the Company and its Subsidiaries has
knowledge of the commencement or scheduling of any Tax audit, the assessment of
any Tax, the issuance of any notice of Tax due or any xxxx for collection of any
Tax due or the commencement or scheduling of any other administrative or
judicial proceeding with respect to the determination, assessment or collection
of any Tax of the Company or its Subsidiaries, the Company shall provide prompt
notice to Parent of such matter, setting forth information (to the extent known)
describing any asserted Tax liability in reasonable detail and including copies
of any notice or other documentation received from the applicable Tax authority
with respect to such matter.
(c) Until the earlier of (i) the Closing Date, or (ii) the termination
of this Agreement, none of the Company or its Subsidiaries shall take any of the
following actions without the Parent's consent: (i) make, revoke or amend any
Tax election; (ii) execute any waiver of restrictions on assessment or
collection of any Tax; or (iii) enter into or amend any agreement or settlement
with any Tax authority.
(d) All tax-sharing agreements or similar arrangements with respect to
or involving the Company or its Subsidiaries pursuant to which any of them has a
current obligation to make a payment under such an agreement shall be terminated
prior to the Closing Date, and, after the Closing Date, none of the Company or
its Subsidiaries shall be bound thereby or have any liability thereunder for
amounts due in respect of such agreements and arrangements.
(e) The Company and its Subsidiaries shall retain copies of all Tax
Returns, schedules, workpapers, records and other documents in its possession
relating to Tax matters for periods or portions thereof before the Closing Date
until 60 days after the expiration of the applicable statute of limitations with
respect to such Tax matters.
34
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1. STOCKHOLDERS' MEETING; PROXY STATEMENT.
(a) In accordance with the Company Certificate and Company Bylaws, the
Company shall call and hold a meeting of its stockholders as promptly as
practicable for the purpose of voting upon the approval of the Merger, and the
Company shall use its reasonable best efforts to hold such stockholder meeting
as promptly as practicable after the date on which the Proxy Statement (as
defined below) is cleared by the SEC. Subject to Section 5.2(d), the Board of
Directors shall recommend approval and adoption of this Agreement and the Merger
by the Company's stockholders. As promptly as practicable after the date of this
Agreement, the Company shall prepare and file with the SEC, and shall use all
commercially reasonable efforts to have cleared by the SEC, and promptly
thereafter shall mail to stockholders, a proxy statement (the "PROXY STATEMENT")
in connection with the meeting of the Company's stockholders to consider the
Merger (the "COMPANY STOCKHOLDERS' MEETING"). The Company, Parent and Merger Sub
each will promptly and timely cooperate and provide all information relating to
its respective businesses or operations necessary for inclusion in the Proxy
Statement to satisfy all requirements of applicable state and federal securities
laws. The Company and Parent (with respect to Parent and Merger Sub) each shall
be solely responsible for any statement, information or omission in the Proxy
Statement relating to it (and Merger Sub with respect to Parent) or its
Affiliates based upon written information furnished by it (or Merger Sub with
respect to Parent) for inclusion in the Proxy Statement.
(b) The Company agrees that the Proxy Statement will not, at the time
the Proxy Statement (or any amendment or supplement thereto) is filed with the
SEC or first sent to stockholders, at the time of the Company Stockholders'
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation,
warranty or covenant is hereby made, or will be made, by the Company with
respect to Parent and Merger Sub Information (as defined in Section 6.1(c)).
(c) Each of Parent and Merger Sub agrees that none of the information
supplied in writing by Parent or Merger Sub, or any of their respective
officers, directors, representatives, agents or employees (the "PARENT AND
MERGER SUB INFORMATION"), for inclusion in the Proxy Statement, or in any
amendments thereof or supplements thereto, at the time the Proxy Statement (or
any amendment or supplement thereto) is filed with the SEC or first sent to
stockholders, at the time of the Company Stockholders' Meeting or at the
Effective Time, will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 6.2. ACCESS TO INFORMATION; CONFIDENTIALITY. The Company shall,
and shall use its commercially reasonable efforts to cause its Subsidiaries to,
afford to Parent and its
35
accountants, counsel, financial advisors and other representatives reasonable
access during normal business hours and upon reasonable notice throughout the
period prior to the Effective Time to their respective employees, properties,
books, contracts, commitments and records and, during such period, shall furnish
such information concerning its businesses, properties and personnel as Parent
shall reasonably request; PROVIDED, HOWEVER, such access shall not unreasonably
disrupt the Company's or its Subsidiaries' respective operations and must be
conducted in accordance with the reasonable procedures established by the
Company. All nonpublic information provided to, or obtained by, Parent in
connection with the transactions contemplated hereby shall be "Evaluation
Material" for purposes of the 2003 Confidentiality Agreement, by and between the
Company and Parent (the "CONFIDENTIALITY AGREEMENT"), the terms of which shall
survive the termination of this Agreement and continue in full force and effect.
Nothing in this Agreement or the Confidentiality Agreement shall in any way
limit any party's ability to consult any tax advisor (including a tax advisor
independent from all other entities involved in the Transaction) regarding the
Tax Treatment or Tax Structure of the Merger. For purposes of this provision,
"TAX TREATMENT" is strictly limited to the purported or claimed U.S. federal
income tax treatment of the Merger contemplated by this Agreement and "TAX
STRUCTURE" is strictly limited to any fact that may be relevant to understanding
the purported or claimed U.S. federal income tax treatment of the Merger, and
neither term includes information relating to the identity of any party to the
Merger or any of such party's representatives, the existence and status of
negotiations between the parties, or financial, business, legal or other
information regarding a party (or any of its representatives), to the extent not
related to the Tax Treatment or Tax Structure of the Merger. These provisions
are meant to be interpreted so as to prevent the Merger from being treated as
offered under "conditions of confidentiality" within the meaning of the Code and
the Treasury Regulations promulgated thereunder. Notwithstanding the foregoing,
the Company shall not be required to provide any information which it reasonably
believes it may not provide to Parent by reason of applicable law, rules or
regulations, which constitutes information protected by attorney/client
privilege, or which the Company or any of its Subsidiaries is required to keep
confidential by reason of contract, agreement or other obligation to third
parties; PROVIDED, HOWEVER, that the Company shall deliver to Parent a list of
such properties, books, contracts, commitments and records that were requested
by Parent but withheld because of such impediments to disclosure.
SECTION 6.3. PUBLIC ANNOUNCEMENTS. The parties shall issue a joint
initial press release announcing the execution of this Agreement as may be
mutually agreed. Thereafter, the parties will consult with one another prior to
issuing any press release or otherwise making any public communications in
connection with the Merger or the other transactions contemplated by this
Agreement and will provide each other with a meaningful opportunity to review
and comment upon, any such press releases or other public communications, and
prior to making any filings with any third party and/or any Governmental Entity
with respect to the Merger or the other transactions contemplated by this
Agreement, the parties will consult with one another prior to making such
filings and will provide each other with a meaningful opportunity (to the extent
practicable in light of disclosure requirements imposed by applicable law) to
review and comment upon, such filings.
36
SECTION 6.4. APPROVALS AND CONSENTS; REASONABLE BEST EFFORTS;
COOPERATION.
(a) From the date hereof until the Effective Time, each of the Company,
Parent and Merger Sub shall (i) promptly apply for, diligently pursue through to
completion, and use their respective reasonable best efforts to obtain prior to
the Effective Time all consents, approvals, authorizations and clearances of
Governmental Entities and third parties required of it to consummate the Merger,
(ii) provide such information and communications to Governmental Entities as
such Persons may reasonably request, and (iii) assist and cooperate with the
other parties hereto to obtain all permits and clearances of Governmental
Entities that are reasonably necessary, and to prepare any document or other
information reasonably required of it by any such Persons to consummate the
Merger.
(b) In addition to the other obligations set forth in this Agreement,
including, without limitation, this Section 6.4 and Section 6.7, from and after
the date hereof until the Effective Time, each of the Company, Parent and Merger
Sub shall use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws, regulations or otherwise to consummate and make
effective as expeditiously as practicable, the Merger and the other transactions
contemplated by this Agreement, including without limitation, (i) filing as soon
as practicable after the date hereof (the "FILING DATE") a Notification and
Report Form under the HSR Act with the United States Federal Trade Commission
and the Antitrust Division of the United States Department of Justice (and
filing as soon as practicable any form or report required by any other
Governmental Entity relating to antitrust, competition, or trade regulation
matters, including without limitation, any relevant foreign antitrust
authority), (ii) promptly applying for, diligently pursuing through to
completion, and using reasonable best efforts to obtain prior to the Effective
Time all consents, approvals, authorizations, permits and clearances of
Governmental Entities and third parties required of it to consummate the Merger,
(iii) providing such information and communications to Governmental Entities as
they may reasonably request, (iv) effecting all necessary registrations, filings
and submissions and using reasonable best efforts to have lifted any injunction,
order or decree of a court or other Governmental Entity of competent
jurisdiction or other legal bar to consummation of the Merger or otherwise
restraining or prohibiting the consummation thereof (and, in such case,
proceeding with the consummation of the Merger as expeditiously as practicable),
including through all possible appeals, unless waived by the Company and Parent,
(v) assisting and cooperating with each other to obtain all permits and
clearances of Governmental Entities that are necessary, and preparing any
document or other information reasonably required of it to consummate the
Merger, and (vi) executing and delivering any additional certificates,
agreements, instruments, reports, schedules, statements, consents, documents and
information necessary to consummate the Merger, and fully carrying out the
purposes of, this Agreement. Each of the Company, Parent and Merger Sub agrees
that, except as otherwise expressly contemplated by this Agreement, they will
not take any action that would reasonably be expected to materially adversely
affect or materially delay the Effective Time or the ability of any of the
parties to satisfy any of the conditions to the Effective Time or to consummate
the Merger.
(c) In furtherance of and without limitation of the foregoing, each of
the Company, Parent and Merger Sub shall (i) respond as promptly as practicable
to any reasonable inquiries or requests received from any Governmental Entity
for additional information or documentation;
37
(ii) promptly notify the other parties hereto of any written communication to
that party or its Affiliates from any Governmental Entity and, subject to
applicable law, permit the other parties to review in advance any proposed
written communication to any of the foregoing (and consider in good faith the
views of the other parties in connection therewith); and (iii) furnish the other
parties with copies of all material correspondence, filings, and communications
(and memoranda setting forth the substance thereof) between them and their
Affiliates and their respective representatives on the one hand, and any
Governmental Entity of their respective staffs on the other hand, with respect
to this Agreement and the Merger; all with a view towards the prompt completion
of the Merger and the transactions contemplated by this Agreement.
(d) Each of Parent and Merger Sub shall pursue all of their legal
alternatives with respect to the HSR Act, any relevant foreign antitrust
authority or any effort to have lifted any injunction, order or decree of a
court or other Governmental Entity of competent jurisdiction or other legal bar
to consummation of the Merger. In furtherance and not in limitation of the
foregoing sentence, each of Parent and Merger Sub shall take any and all
reasonable steps necessary to respond to and satisfy any concerns raised by any
Governmental Entity in any administrative, judicial or legislative action or
proceeding. Parent and the Company shall each pay one half of any filing fees
required to be paid in connection with the HSR Act and any relevant foreign
antitrust authority.
(e) The Company shall use its reasonable best efforts to obtain the
resignations of each of the officers and directors of the Subsidiaries of the
Company, which resignations shall be effective as of the Effective Time.
SECTION 6.5. INDEMNIFICATION; INSURANCE.
(a) It is understood and agreed that, subject to the limitations on
indemnification contained in the Delaware Act, the Company Certificate and other
applicable law, the Company shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and after the Effective Time, the Surviving Corporation shall
for a period of six years following the Effective Time, to the fullest extent
permitted under applicable law, indemnify and hold harmless, each director and
officer of the Company or any Subsidiary (and, without limiting the generality
of the foregoing, as members of any committee of the Board of Directors) on the
date hereof or at the Effective Time (collectively, the "INDEMNIFIED PARTIES")
from and against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to any of the transactions
contemplated hereby, including without limitation liabilities arising under the
Securities Act or the Exchange Act in connection with the Merger, and in the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) the Company or the Surviving
Corporation shall pay the reasonable fees and expenses of not more than one (1)
counsel selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company or the Surviving Corporation, promptly as statements
therefor are received, and (ii) the Company and the Surviving Corporation will
cooperate in the defense of any such matter; PROVIDED, HOWEVER, that neither the
Company nor the Surviving Corporation shall be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld or delayed).
38
Notwithstanding anything to the contrary contained herein, Parent shall be
entitled to assume the defense of any such matter and upon such assumption
Parent shall not be liable to any Indemnified Party in connection with the
defense thereof. Any Indemnified Party wishing to claim indemnification under
this Section 6.5 shall promptly notify Parent upon learning of any claim,
action, suit, proceeding or investigation, provided that the failure to so
notify shall not affect the obligations of Parent under this Section 6.5 except
to the extent that Parent is prejudiced by any failure of an Indemnified Party
to so notify Parent.
(b) For a period of six years following the Effective Time, the
Surviving Corporation shall maintain or obtain officers' and directors'
liability insurance covering the Indemnified Parties who currently or at the
Effective Time are covered by the Company's officers and directors liability
insurance policies on terms not less favorable than those in effect on the date
hereof in terms of coverage and amounts; PROVIDED, HOWEVER, that if the
aggregate annual premiums for such insurance at any time during such period
exceed 150% of the premium paid by the Company for such insurance as of the date
of this Agreement, then the Surviving Corporation shall provide the maximum
coverage that will then be available at an annual premium equal to 150% of such
per annum rate as of the date of this Agreement. This Section 6.5 shall survive
consummation of the Merger. Notwithstanding Section 9.7, this Section 6.5 is
intended to be for the benefit of and to grant third-party rights to the
Indemnified Parties whether or not they are parties to this Agreement, and each
of the Indemnified Parties shall be entitled to enforce the covenants contained
herein.
(c) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
Person, then and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation shall assume the obligations
set forth in this Section 6.5.
(d) Following the Effective Time, Parent and Surviving Corporation
jointly and severally agree to pay all expenses, including reasonable attorney
fees, that may be incurred by the Indemnified Parties in enforcing the indemnity
and other obligations provided for in this Section 6.5 provided that it is
ultimately determined that such Indemnified Party is entitled to be indemnified
hereunder. Such fees shall be paid by the Parent or Surviving Corporation in
advance of the final disposition of such action, suit or proceeding at the
request of the Indemnified Party within twenty days after the receipt by Parent
or Surviving Corporation of a statement or statements from the Indemnified Party
requesting such advance or advances from time to time. Such statement or
statements shall reasonably evidence the expenses and costs incurred by him in
connection therewith and shall include or be accompanied by an undertaking by or
on behalf of the Indemnified Party that he is entitled to receive indemnity
pursuant to this Article VI and to repay such amount if it is ultimately
determined that Indemnified Party is not entitled to be indemnified against such
expenses and costs by the Parent or Surviving Corporation as provided by this
Agreement.
SECTION 6.6. EMPLOYEE BENEFIT MATTERS. Until the first anniversary of
the Effective Time, Parent shall cause the Surviving Corporation to provide the
employees of the Surviving
39
Corporation and their dependents with an employee benefit program providing
benefits that are substantially equivalent to the benefits provided to such
persons immediately prior to the Effective Time under the applicable terms of
the ERISA Benefit Plans or Non-ERISA Commitments. Subject to the foregoing,
Parent may permit the Surviving Corporation to amend or terminate any of the
ERISA Benefit Plans or Non-ERISA Commitments after the Effective Time, subject
to their terms and applicable law. To the extent that any ERISA Benefit Plans or
Non-ERISA Commitments are amended or terminated after the Effective Time so as
to reduce the benefits that are then being provided with respect to participants
thereunder, the Parent shall cause the Surviving Corporation to permit each
individual who is then a participant or beneficiary in such terminated or
amended ERISA Benefit Plans or Non-ERISA Commitments to participate in a
comparable employee benefit plan maintained by the Surviving Corporation in
accordance with the eligibility criteria thereof, provided that: (a) such
participants shall receive full credit for all years of service with the Company
for all purposes for which such service is recognized under such plan,
including, but not limited to, recognition of service for eligibility and
vesting and level of benefits, (b) such participants shall participate in such
plan on terms that are no less favorable than those offered to similarly
situated employees of the Surviving Corporation, and (c) such participants shall
participate under any welfare-type benefit plan without any waiting periods,
evidence of insurability or application of any pre-existing condition
restrictions (except to the extent any such limitation has not been satisfied
under any applicable ERISA Benefit Plans or Non-ERISA Commitments in which the
participant then participates or is otherwise eligible to participate), and
shall receive appropriate credit for purposes of satisfying any applicable
deductibles, co-payments or out-of-pocket limits.
SECTION 6.7. FINANCING.
(a) Parent, Merger Sub and their respective Affiliates shall use their
reasonable best efforts to cause the Lenders or other entities to fund the
financing provided for in the Financing Letters. In the event that at any time
funds are not or have not been made available (or, to the knowledge of Parent,
are not reasonably likely to be made available) pursuant to the Financing
Letters so as to enable Parent to proceed with the Merger in a timely manner,
each of Parent and Merger Sub shall (i) use its reasonable best efforts to
obtain alternative funding in an amount at least equal to the amount to be
provided pursuant to the Financing Letters on terms and conditions substantially
comparable to those provided in the Financing Letters, or otherwise on terms
acceptable to each of Parent and Merger Sub in its sole discretion ("ALTERNATIVE
FINANCING") and (ii) shall continue to use its reasonable best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
(b) Following the date hereof, any amendment, modification, termination
or cancellation of the Financing, or any information which becomes known to
Parent, Merger Sub or any of their respective Affiliates which makes it
reasonably unlikely that the Financing will be obtained substantially on the
terms set forth in the Financing Letters, shall be promptly disclosed to the
Board of Directors. Upon the expiration of ten (10) business days following
receipt by the Board of Directors of any such notice, and until such time as
Parent and Merger Sub shall provide the Board of Directors with written
documentation which, in the reasonable discretion of the Board of Directors,
adequately demonstrates the availability of Alternative Financing to
40
Parent and Merger Sub, the restrictions against the Company contained in Section
5.2(a), (b) and (d) above shall no longer apply or be deemed to have any legal
force or effect.
SECTION 6.8. ADVICE OF CHANGES. The Company shall promptly advise
Parent of any change or event having a Material Adverse Effect on it or which it
believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained herein.
From time to time prior to the Effective Time, the Company will promptly
supplement or amend the Schedules delivered in connection with the execution of
this Agreement to reflect any matter which, if existing, occurring or known at
the date of this Agreement, would have been required to be set forth or
described in such Schedules or which is necessary to correct any information in
such Schedules which has been rendered inaccurate thereby. No supplement or
amendment to such Schedules shall have any effect for the purpose of determining
satisfaction of the condition set forth in Section 7.3(a) or Section 7.3(b)
hereof.
ARTICLE VII.
CONDITIONS PRECEDENT
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Effective Time of the following
conditions:
(a) This Agreement shall have been approved by the requisite vote of
the stockholders of the Company, as required by the Delaware Act and the Company
Certificate.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and the requirements of
any relevant foreign antitrust authority shall have been satisfied. Other than
the filing of the Certificate of Merger provided for in Section 2.3, all other
Required Governmental Consents and any other consents, approvals or
authorizations of Governmental Entities required to be made or obtained prior to
the Effective Time by the Company or Parent or any of their respective
Subsidiaries in connection with the execution and delivery of this Agreement,
and the consummation of the Merger and the other transactions contemplated by
this Agreement, shall have been made or obtained.
(c) No court or Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and restrains,
enjoins or otherwise prohibits consummation of the Merger (collectively, an
"ORDER") and no Governmental Entity shall have instituted any proceeding which
continues to be pending seeking any such Order.
SECTION 7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations
of the Company to effect the Merger shall be further subject to the satisfaction
on or prior to the Effective Time of the following additional conditions
precedent any of which can be waived by, and in the sole discretion of, the
Company:
41
(a) Parent and Merger Sub shall have performed in all material respects
and complied in all material respects with all agreements and conditions
contained in this Agreement that are required to be performed or complied with
by them prior to or at the Closing.
(b) The representations and warranties of Parent and Merger Sub
contained in Article III of this Agreement shall be true and correct in all
respects as of the Closing with the same effect as though such representations
and warranties were made on and as of the Closing, except (x) for changes
permitted by this Agreement, (y) any such representation and warranty which is
itself qualified as to materiality shall not be deemed so qualified for purposes
of this condition and any representation and warranty that addresses matters
only as of a certain date shall be true and correct as of that certain date, and
(z) for any inaccuracy that has not caused, individually or in the aggregate, a
material adverse effect on the ability of Parent or Merger Sub to perform their
respective obligations under this Agreement.
(c) The Company shall have received a certificate dated the Closing
Date and signed by the Chairman, President or an Executive Vice-President of
each of Parent and Merger Sub, certifying that the conditions specified in this
Section 7.2 have been satisfied.
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of each of Parent and Merger Sub to effect the Merger shall be
further subject to the satisfaction on or prior to the Effective Time of the
following additional conditions precedent any of which can be waived by, and in
the sole discretion of, Parent or Merger Sub:
(a) The Company shall have performed in all material respects and
complied in all material respects with all agreements and conditions contained
in this Agreement that are required to be performed or complied with by it prior
to or at the Closing.
(b) Each of the Company's representations and warranties contained in
Article IV of this Agreement shall be true and correct in all respects as of the
Closing with the same effect as though such representations and warranties were
made on and as of the Closing, except for changes permitted by this Agreement
and except where the failure of such representation and warranty to be true and
correct in all respects does not have and could not be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect; provided that
any such representation and warranty which is itself qualified as to Material
Adverse Effect shall not be deemed so qualified for purposes of this condition
and any representation and warranty that addresses matters only as of a certain
date shall be true and correct as of that certain date.
(c) The Parent and Merger Sub shall have received the proceeds of the
Financing contemplated by the Financing Letters (or Alternative Financing in
accordance with Section 6.7).
(d) The aggregate number of Appraisal Shares shall not exceed 7% of the
outstanding Company Common Stock at the Effective Time.
(e) Since the date hereof, there shall not have occurred any Material
Adverse Effect.
(f) At the Closing, the Company shall have delivered signed letters of
resignation from each director of the Company pursuant to which each such
director resigns from his
42
position as a director of the Company and makes such resignation effective at or
prior to the Effective Time.
(g) On the Closing Date, no more than $154,400,000 of Net Debt shall be
outstanding.
(h) The consent, approval or waiver of each person (other than the
Required Governmental Consents) whose consent or approval shall be required in
order to permit the succession by the Surviving Corporation pursuant to the
Merger to any obligation, right or interest of the Company or any Subsidiary of
the Company under any lease, license or other agreement or instrument shall have
been obtained, except where the failure to obtain such consent, approval or
waiver would not materially adversely affect the economic or business benefits
of the transactions contemplated by this Agreement to Parent as to render
inadvisable the consummation of the Merger.
(i) Parent shall have received a certificate dated the Closing Date and
signed by the Chairman, President or a Vice-President of the Company, certifying
that the conditions specified in this Section 7.3 have been satisfied and
received a calculation, in reasonable specificity, as to the determination of
Net Debt.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of the Merger by the stockholders of the Company:
(a) By the mutual written consent of the Company and each of Parent and
Merger Sub.
(b) By any of Parent, Merger Sub or the Company if any Governmental
Entity shall have issued an order, decree or ruling or taken any other action
(which order, decree or ruling or other action each party hereto shall use its
reasonable best efforts to have lifted, vacated or reversed, including through
all possible appeals), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable.
(c) By any of Parent, Merger Sub or the Company (provided that if the
terminating party is the Company, the Company shall not be in material breach of
its obligations under Section 6.1), if the condition set forth in Section 7.1(a)
is not satisfied because the stockholders of the Company fail to approve the
Merger upon the taking of a vote at the Company Stockholders' Meeting or any
adjournment thereof.
(d) By any of Parent, Merger Sub or the Company, if the Merger shall
not have been consummated by April 30, 2004 (the "OUTSIDE DATE") for any reason;
provided, however, that the right to terminate this Agreement under this Section
8.1(d) shall not be available to any party
43
whose action or failure to act, in either case in violation of the provisions of
this Agreement, has been a principal cause of or resulted in the failure of the
Merger to occur on or before such date.
(e) By the Company, if (i) any of the representations and warranties of
Parent and Merger Sub contained in this Agreement shall fail to be true and
correct such that the condition set forth in Section 7.2(b) with respect to
representations and warranties would not be satisfied, or (ii) Parent or Merger
Sub shall have breached or failed to comply with any of their respective
obligations under this Agreement such that the condition set forth in Section
7.2(a) with respect to agreements and conditions would not be satisfied (in
either case other than as a result of a material breach by the Company of any of
its obligations under this Agreement) and such failure or breach with respect to
any such representation, warranty or obligation cannot be cured or, if curable,
shall continue unremedied for a period of forty-five days after Parent has
received written notice from the Company of the occurrence of such failure or
breach (provided that in no event shall such forty-five day period extend beyond
the fifth business day preceding the Outside Date).
(f) By Parent or Merger Sub, if (i) any of the representations and
warranties of the Company contained in this Agreement shall fail to be true and
correct such that the condition set forth in Section 7.3(b) with respect to
representations and warranties would not be satisfied or (ii) the Company shall
have breached or failed to comply with any of its obligations under this
Agreement such that the condition set forth in Section 7.3(a) with respect to
agreements and conditions would not be satisfied (in either case other than as a
result of a material breach by Parent or Merger Sub of any of their respective
obligations under this Agreement) and such failure or breach with respect to any
such representation, warranty or obligation cannot be cured or, if curable,
shall continue unremedied for a period of forty-five days after the Company has
received written notice from Parent of the occurrence of such failure or breach
(provided that in no event shall such forty-five day period extend beyond the
fifth business day preceding the Outside Date).
(g) By the Company if the Board of Directors, after complying with
Section 5.2(d), or by Parent if the Board of Directors, (i) fails to recommend
or withdraws its approval or recommendation of this Agreement or the Merger,
(ii) approves or recommends a Company Superior Proposal, or (iii) authorizes the
Company to enter into an agreement with respect to any Company Superior
Proposal.
SECTION 8.2. EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by any of the
Company, Parent or Merger Sub as provided in Section 8.1, this Agreement shall
forthwith become null and void and have no further force or effect, without any
liability or obligation on the part of the Company, Parent or Merger Sub, other
than the second sentence of Section 6.2, and those provisions of this Agreement
that expressly survive termination hereof and except that nothing herein shall
relieve (i) any party from liability, at law or in equity, for their failure to
satisfy the conditions set forth in Sections 7.2(a), 7.2(b), 7.3(a) or 7.3(b),
as the case may be, or (ii) the Company of its obligations or liability under
Sections 8.2(b), 8.2(c) and 8.2(d).
44
(b) If (i) the Company, Parent or Merger Sub terminates this Agreement
pursuant to Section 8.1(g), (ii) the Company, Parent or Merger Sub terminates
this Agreement pursuant to Section 8.1(c) and, prior to the Company
Stockholders' Meeting being held, there shall have been made an Acquisition
Proposal pursuant to which the Company's stockholders would receive cash,
securities or other consideration having an aggregate value, when taken together
with the value of any securities of the Company or its Subsidiaries otherwise
held by such stockholders after such event, in excess of $4.87 per share of
Company Common Stock, which Acquisition Proposal is consummated within 12 months
of termination of this Agreement, or (iii) (x) if Parent or Merger Sub
terminates this Agreement pursuant to Section 8.1(d) or Section 8.1(f), (y) the
Company is in breach of any of the covenants contained in the first and third
sentences of Section 6.1(a) hereof, and (z) Parent is not in breach of the
covenant contained in the penultimate sentence of Section 6.1(a), the Company
shall pay, or cause to be paid to Parent, upon termination (or upon consummation
of the Acquisition Proposal in the case of clause (ii) above), an amount equal
to $5,000,000 (the "TERMINATION FEE") plus the documented reasonable
out-of-pocket expenses incurred by Parent and Merger Sub in connection with the
transactions contemplated under this Agreement, the investigation by Parent and
Merger Sub of the Company, and the negotiation and drafting this Agreement
(including without limitation, legal, accounting, commitment, consulting and
other fees), not to exceed $1,800,000 (collectively, "DEAL EXPENSES").
Notwithstanding the foregoing, in no event will the Company be required to pay
the Termination Fee on more than one occasion.
(c) If (i) Parent, Merger Sub or the Company terminates this Agreement
pursuant to Section 8.1(c) and Section 8.2(b)(ii) is not applicable, (ii) the
Company, Parent or Merger Sub terminates this Agreement pursuant to Section
8.1(d) and no party is then in material breach under this Agreement, (iii)
Parent or Merger Sub terminates this Agreement pursuant to 8.1(f) and Section
8.2(b)(iii) is not applicable, or (iv) Parent, Merger Sub or the Company
terminates this Agreement pursuant to Section 8.1(b), then, in any such event,
the Company shall pay to Parent, upon termination, the Deal Expenses.
(d) The Company acknowledges that the agreements contained in this
Section 8.2 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, Parent and Merger Sub would not
enter into this Agreement. Accordingly, if the Company fails promptly to pay any
amount due to Parent pursuant to this Section 8.2, it shall also pay any costs
and expenses incurred by Parent or Merger Sub in connection with a legal action
to collect the Termination Fee and/or Deal Expenses, as the case may be.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or the termination of this Agreement
pursuant to Section 8.1, as the case may be, except as provided in Section
8.2(a) and except that the agreements set forth in Article II and Sections 6.5,
6.6 and 8.2(b), 8.2(c) and 8.2(d) shall survive the Effective Time indefinitely.
45
SECTION 9.2. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made (i) as of the date and time delivered or sent by facsimile if
delivered personally or by facsimile, with confirmation, and (ii) on the third
business day after deposit in the U.S. mail, if mailed by registered or
certified mail (postage prepaid, return receipt requested), in each case to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice, except that notices of changes of address
shall be effective upon receipt):
if to Parent or Merger Sub: WF Holdings, Inc.
c/o The Renaissance Group, LLC
000 Xxxxxx Xxxxx Xxxxxxx
Xxxx X0 - 411
Xxxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Perseus, L.L.C.
000 Xxxxxxx Xxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxx, III
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Perseus, L.L.C.
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
with a copy to: Xxxx Xxxxx LLP
0000 Xxxxxxxxxxx Xxxxxx,
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
46
Xxxxxxxx Xxxxx Singer &
Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Xxxxxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Company: Workflow Management, Inc.
000 Xxxxx Xxxx Xxx
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (561-659-7793)
Attn: Xxxxxx X. Xxxxxxx
Chairman of the Board
with a copy to: Xxxxxxx & Xxxxxxx, P.C.
000 Xxxx Xxxx Xxxxxx Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: T. Xxxxxxx Xxxxxx, Xx., Esq.
SECTION 9.3. EXPENSES. Except as otherwise expressly provided herein,
all fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs and expenses.
SECTION 9.4. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATE" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person;
(b) "AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504 (or any similar group defined under a similar provision of
state, local or foreign law).
(c) "CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
(d) "CONTROL" (including the terms "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise.
47
(e) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations promulgated thereunder.
(f) "ERISA AFFILIATE" means (i) any corporation which, at the Effective
Time, is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Company; (ii) any partnership,
trade or business (whether or not incorporated) which, on the Effective Time is
under common control (within meaning of Section 414(c) of the Code) with the
Company; and (iii) any entity which, at the Effective Time, is a member of the
same affiliated service group (within the meaning of Section 414(m) of the Code)
as either the Company, any corporation described in clause (i) of this
definition or any partnership, trade or business described in clause (ii) of
this definition.
(g) "GAAP" means generally accepted accounting principles in effect
within the United States, consistently applied.
(h) "GAAP CASH" means cash recorded on the Company's consolidated
balance sheet in accordance with GAAP.
(i) "IMMEDIATELY AVAILABLE CASH" means that portion, if any, of GAAP
Cash that is immediately available and accessible to the Company and its
Subsidiaries for the satisfaction of their respective liabilities and
obligations, without any restriction whatsoever. The calculation of Immediately
Available Cash shall take into account all Taxes associated with the
repatriation of cash from the Company's Subsidiaries located or operating in
Canada.
(j) "INDEBTEDNESS" means, for any Person, without duplication, (1) all
indebtedness or other obligations of such Person for borrowed money or for
purchase money indebtedness, (2) any other indebtedness of such Person which is
evidenced by a note, mortgage, bond, indenture or similar instrument, (3) all
obligations under leases that are or should be, in accordance with GAAP,
recorded as capital leases in respect of which such Person is liable as lessee,
(4) all obligations owed pursuant to any interest rate hedging arrangement, (5)
all guarantied indebtedness, (6) obligations under contracts or instruments that
may arise as a result of change of control or otherwise as a result of the
transactions contemplated by this Agreement, (7) contingent liabilities, and (8)
all other indebtedness secured by any lien on any property or asset owned or
held by such Person.
(k) "KNOWLEDGE" means, with respect to a particular Person, the actual
knowledge of each of such Person's directors and the actual knowledge, after
reasonable inquiry, of each such Person's executive officers, including, without
limitation, the president and chief financial officer of such Person. For
purposes of this section 9.4(k), the term Person shall include any Subsidiaries
of such Person.
(l) "MATERIAL ADVERSE EFFECT" means any change, event or effect that is
materially adverse to the business or financial condition of the Company and its
Subsidiaries, taken as a whole, except for any such change, event or effect
constituting, resulting from or arising out of (i) changes, events or
developments in or affecting the industry in which the Company and its
Subsidiaries operate in general which do not have a materially disproportionate
effect on the Company and its Subsidiaries, taken as a whole, or (ii) any loss
of employees, labor dispute,
48
employee strikes, slowdowns, job actions or work stoppages or labor union
activities occurring after execution of this Agreement by all parties hereto or
resulting from the announcement of this Agreement and the transactions
contemplated hereby.
(m) "NET DEBT" means an amount equal to the sum of the outstanding
indebtedness of the Company and its Subsidiaries under their existing senior
credit facility (excluding outstanding letters of credit up to $3,650,000),
capital lease obligations, notes payable on deferred earnouts and any other
obligations or liabilities that will accelerate as a result of the Merger
(excluding such obligations and liabilities arising out of the agreements set
forth on Schedule 9.4(m)), less Immediately Available Cash; provided, however,
that following the calculation of Net Debt, and as of the close of business on
the second business day immediately preceding the Closing Date, GAAP Cash shall
exceed by at least $1 million Immediately Available Cash applied to satisfy the
condition set forth in Section 7.3(g).
(n) "ORDINARY COURSE OF BUSINESS" means, with respect to a particular
Person, the ordinary course of business of such Person, consistent with its past
custom and practices (including with respect to frequency and amount).
(o) "PERSON" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
entity.
(p) "PROPRIETARY ASSET" means any: patent, patent application
(including continuations, divisionals, continuations-in-part, renewals and
reissues), trademark (whether registered or unregistered), trademark
application, trade name (including internet domain names), fictitious business
name, service xxxx (whether registered or unregistered), service xxxx
application, copyright (whether registered or unregistered), copyright
application, mask work, mask work application or registration, trade secret,
including any of the foregoing rights in know-how, process, method, customer
list, franchise, system, computer program (source code and object code),
algorithm, invention, design, blueprint, engineering drawing, moral right, right
of publicity or privacy relating to the use of names, likenesses, voices,
signatures and biographical data of real persons, or other intellectual property
right.
(q) "SUBSIDIARY" means, with respect to any Person, any corporation or
other legal entity of which such Person (either alone or through or together
with any other Subsidiary) (i) owns, directly or indirectly, more than 50% of
the stock or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other governing body of
such corporation or other legal entity, (ii) in the case of a limited liability
company or a partnership, serves as managing member or general partner, as the
case may be, or owns a majority of the equity interests or (iii) otherwise has
the ability to elect a majority of the directors, trustees or managing members
thereof.
(r) "TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
49
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
(s) "TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
SECTION 9.5. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.6. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are fulfilled
to the maximum extent possible.
SECTION 9.7. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the Schedules hereto) and the Confidentiality Agreement
constitute the entire agreement and supersede any and all other prior agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement is not intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder,
except as otherwise provided in Sections 2.8, 2.9 and 6.5.
SECTION 9.8. ASSIGNMENT. This Agreement shall not be assigned by the
parties hereto whether by operation of law or otherwise.
SECTION 9.9. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed entirely within that State without
regard to principles of conflicts of laws therein.
SECTION 9.10. AMENDMENT. This Agreement maybe amended by the parties
hereto by action taken by each of Parent, Merger Sub and the Company at any time
before the Effective Time but not thereafter; PROVIDED, HOWEVER, that, after
approval of the Merger by the stockholders of the Company, no amendment may be
made which would reduce the amount or change the type of consideration into
which each Share will be converted upon consummation of the Merger. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 9.11. WAIVER. At any time before the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other parties hereto contained herein or
in any document delivered pursuant hereto and (c) waive compliance by the other
parties hereto with any of their agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only as against such party and only if set forth in an instrument in
writing signed by such party. The
50
failure of any party hereto to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 9.12. ACKNOWLEDGMENT OF RECEIPT OF CERTAIN FEES. Parent
acknowledges the receipt of $175,000 which, if Deal Expenses are due and owing
under Section 8.2, shall be credited against such amounts.
SECTION 9.13. SCHEDULE AND EXHIBITS. All Schedules and Exhibits
referred to herein are intended to be and hereby are specifically made a part of
this Agreement.
SECTION 9.14. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which when executed shall be deemed to be an original
but all of which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
WORKFLOW MANAGEMENT, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman of the Board
WF HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title:
WFM ACQUISITION SUB, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title:
52
