Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AUTOMATIC DATA PROCESSING, INC.,
ADP MERGER CORP.
AND
PROBUSINESS SERVICES, INC.
Dated as of January 5, 2003
TABLE OF CONTENTS
PAGE
Article I THE MERGER........................................................................... 1
1.1 The Merger................................................................... 1
1.2 Effective Time; Closing...................................................... 1
1.3 Effect of the Merger......................................................... 2
1.4 Certificate of Incorporation and Bylaws...................................... 2
1.5 Directors and Officers....................................................... 2
1.6 Effect on Capital Stock...................................................... 2
1.7 Surrender of Certificates.................................................... 4
1.8 Dissenting Shares............................................................ 6
1.9 Further Action............................................................... 7
Article II REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................... 7
2.1 Organization; Standing and Power; Charter Documents; Subsidiaries............ 7
2.2 Capital Structure............................................................ 8
2.3 Authority; Non-Contravention; Necessary Consents............................. 9
2.4 SEC Filings; Financial Statements............................................ 11
2.5 Absence of Certain Changes or Events......................................... 12
2.6 Taxes........................................................................ 12
2.7 Intellectual Property........................................................ 13
2.8 Compliance; Permits.......................................................... 14
2.9 Litigation................................................................... 15
2.10 Brokers' and Finders' Fees................................................... 15
2.11 Transactions with Affiliates................................................. 15
2.12 Employee Benefit Plans....................................................... 15
2.13 Environmental Matters........................................................ 19
2.14 Contracts.................................................................... 19
2.15 Disclosure................................................................... 21
2.16 Board Approval............................................................... 21
2.17 Fairness Opinion............................................................. 21
2.18 Rights Plan.................................................................. 21
2.19 Takeover Statutes............................................................ 22
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2.20 Vote Required................................................................ 22
2.21 Real Estate.................................................................. 22
2.22 Customers.................................................................... 22
2.23 Trust Funds.................................................................. 22
2.24 Investment Policy. ......................................................... 24
Article III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............................ 25
3.1 Organization; Standing and Power; Charter Documents; Subsidiaries............ 25
3.2 Authority; Non-Contravention; Necessary Consents............................. 25
3.3 Brokers' and Finders' Fees................................................... 26
3.4 Disclosure................................................................... 26
3.5 Board Approval............................................................... 26
3.6 Available Funds.............................................................. 26
Article IV CONDUCT PRIOR TO THE EFFECTIVE TIME................................................. 27
4.1 Conduct of Business of the Company........................................... 27
Article V ADDITIONAL AGREEMENTS................................................................ 30
5.1 Proxy Statement.............................................................. 30
5.2 Meetings of Stockholders; Board Recommendation............................... 31
5.3 Acquisition Proposals........................................................ 31
5.4 Confidentiality; Access to Information....................................... 34
5.5 Public Disclosure............................................................ 34
5.6 Regulatory Filings; Reasonable Best Efforts.................................. 34
5.7 Notification of Certain Matters.............................................. 36
5.8 Third-Party Consents......................................................... 37
5.9 Company Employee Plans and Employee Benefits................................. 37
5.10 Indemnification.............................................................. 37
5.11 Section 16 Matters........................................................... 38
5.12 Merger Sub Compliance........................................................ 39
5.13 Tax Account and Non-Tax Account Reconciliation Report and Related Data....... 39
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Article VI CONDITIONS TO THE MERGER............................................................ 39
6.1 Conditions to the Obligations of Each Party to Effect the Merger............. 39
6.2 Additional Conditions to the Obligations of Parent and Merger Sub............ 40
6.3 Additional Conditions to the Obligations of the Company...................... 40
Article VII TERMINATION, AMENDMENT AND WAIVER.................................................. 41
7.1 Termination.................................................................. 41
7.2 Notice of Termination; Effect of Termination................................. 43
7.3 Fees and Expenses............................................................ 43
7.4 Amendment.................................................................... 44
7.5 Extension; Waiver............................................................ 44
Article VIII GENERAL PROVISIONS................................................................ 45
8.1 Non-Survival of Representations and Warranties............................... 45
8.2 Notices...................................................................... 45
8.3 Interpretation; Knowledge.................................................... 46
8.4 Counterparts................................................................. 47
8.5 Entire Agreement; Third-Party Beneficiaries.................................. 47
8.6 Severability................................................................. 48
8.7 Other Remedies; Specific Performance......................................... 48
8.8 Governing Law; Jurisdiction.................................................. 48
8.9 Rules of Construction........................................................ 48
8.10 Assignment................................................................... 49
8.11 Waiver of Jury Trial......................................................... 49
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of January 5, 2003, by and among Automatic Data Processing, Inc., a
Delaware corporation ("PARENT"), ADP Merger Corp., a Delaware corporation and
indirect wholly-owned subsidiary of Parent ("MERGER SUB"), and ProBusiness
Services, Inc., a Delaware corporation (the "COMPANY").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and the
Company have deemed it advisable and in the best interests of their respective
corporations and stockholders to consummate the Merger (as defined in Section
1.1), on the terms and subject to the conditions set forth in this Agreement.
B. The respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared advisable this Agreement and the transactions
contemplated hereby, including the Merger.
C. The Board of Directors of the Company has resolved to recommend to
its stockholders approval and adoption of this Agreement and approval of the
Merger.
D. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's, the Company's and Merger Sub's respective
willingness to enter into this Agreement, certain stockholders of the Company
are entering into Stockholder Support Agreements in substantially the form
attached hereto as Exhibit A (the "STOCKHOLDER AGREEMENTS").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the General Corporation Law of the State of Delaware
("DELAWARE LAW"), Merger Sub shall be merged with and into the Company (the
"MERGER"), the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation. The Company, as the
surviving corporation after the Merger, is hereinafter sometimes referred to as
the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the
"CERTIFICATE OF MERGER") (the time of such filing with the Secretary of State of
the State of Delaware (or such later time as may be agreed in writing by the
Company and Parent and specified in the Certificate of Merger) being the
"EFFECTIVE TIME") as soon as practicable on the Closing Date (as defined below).
The closing of the Merger (the "CLOSING") shall take place at the offices of
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx,
XX 00000, at a time and date to be specified by the parties, which shall be no
later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Delaware
Law.
1.4 Certificate of Incorporation and Bylaws. At the Effective Time, the
Certificate of Incorporation of the Company shall be the certificate of
incorporation of the Surviving Corporation and shall be amended and restated in
its entirety to be identical to the Certificate of Incorporation of Merger Sub,
as in effect immediately prior to the Effective Time, until thereafter amended
in accordance with Delaware Law and as provided in such Certificate of
Incorporation. At the Effective Time, the Bylaws of the Company shall be the
Bylaws of the Surviving Corporation and shall be amended and restated in their
entirety to be identical to the Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time until thereafter amended in accordance with Delaware
Law and as provided in such Bylaws.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Merger Sub, the Company or the holders of any shares of
capital stock of the Company, the following shall occur:
(a) Company Preferred Stock. In accordance with Section 4(d) of the
Certificate of Designations, Preferences and Rights of the 6.9% Senior
Convertible Preferred Stock filed with the Secretary of State of the State of
Delaware on August 1, 2000 (the "CERTIFICATE OF DESIGNATION"), subject to the
election of the holders of two-thirds (2/3) of the Company Preferred Stock (as
defined in Section 2.2(a)) issued and outstanding immediately prior to the
Effective Time (which election has been obtained concurrently with the execution
of this Agreement), each share of Company Preferred Stock (including shares of
Company Preferred Stock issued or issuable immediately prior to the Closing in
accordance with Section 3 of the Certificate of Designation) (other than shares
of Company Preferred Stock to be canceled pursuant to Section 1.6(c) and any
Dissenting Shares (as defined in Section 1.8)), will be canceled and
extinguished and automatically converted into the right to receive $26.50 in
cash (the "PREFERRED PER SHARE LIQUIDATION AMOUNT") (such amount being an amount
equal to the liquidation preference set forth in Section 4(a) of the Certificate
of Designation).
(b) Company Common Stock. Each share of the Common Stock, par value
$0.001 per share, of the Company (together with the associated Company Right (as
defined in Section
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2.2(a)) under the Company Rights Agreement (as defined in Section 2.2(a))
("COMPANY COMMON STOCK")) issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be canceled
pursuant to Section 1.6(c) and any Dissenting Shares) will be canceled and
extinguished and automatically converted into the right to receive $17 per share
(the "PER SHARE AMOUNT" and, together with the Preferred Per Share Liquidation
Amount referred to herein as the "MERGER CONSIDERATION").
(c) Cancellation of Treasury and Parent Owned Stock. Each share of
Company Common Stock or Company Preferred Stock held by the Company or Parent or
any direct or indirect wholly-owned Subsidiary of the Company or of Parent
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(d) Capital Stock of Merger Sub. Each share of common stock, par
value $0.01, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and non-assessable share of common stock, par value
$0.01 per share, of the Surviving Corporation.
(e) Conversion of Dissenting Shares. The holders of Dissenting
Shares, if any, shall be entitled to payment for such shares only to the extent
permitted by and in accordance with the provisions of Delaware Law; provided,
however, that if, in accordance with Delaware Law, any holder of Dissenting
Shares shall forfeit such right to payment of the fair cash value of such
shares, such shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Time, the right to receive the
Merger Consideration provided in Section 1.6(a) or Section 1.6(b), as
applicable.
(f) Repurchase Rights. The Board of Directors of the Company,
without any further action by Parent, shall take all actions necessary pursuant
to the terms of the Company's 2002 Employee Stock Purchase Plan and the 1997
Employee Stock Purchase Plan (collectively, the "COMPANY PURCHASE PLANS") to
shorten all Offering Periods (as defined in the Company Purchase Plans) such
that all Offering Periods then in progress terminate no later than immediately
prior to the Effective Time.
(g) Employee Stock Options. Each Company Option or Other Option
(both as defined in Section 2.2(b)) which is outstanding immediately prior to
the Effective Time, whether or not then exercisable or vested, shall by virtue
of the Merger and without any action on the part of the Parent, Merger Sub, the
Company or the holder thereof, be converted into and shall become a right to
receive an amount in cash, without interest, with respect to each share subject
thereto, equal to the excess, if any, of the Per Share Amount over the per share
exercise or purchase price of such Company Option or such Other Option (such
amount being hereinafter referred to as the "OPTION MERGER CONSIDERATION") and
each Company Option and Other Option shall be canceled at the Effective Time.
The payment of the Option Merger Consideration to the holder of a Company Option
or Other Option shall be reduced by any income or employment tax withholding
required under the Code or any provision of state, local or foreign Tax (as
defined in Section 2.6) law. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of such Company Option or Other Option. The Stock Option
Plans (as defined in Section 2.12(a)) shall terminate at the Effective Time.
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(h) Adjustments to the Merger Consideration. The Merger
Consideration shall be adjusted to reflect fully the appropriate effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Company Common Stock or Company
Preferred Stock), reorganization, recapitalization, reclassification or other
like change with respect to Company Common Stock or Company Preferred Stock
having a record date on or after the date hereof and prior to the Effective
Time.
1.7 Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall select
a bank or trust company reasonably satisfactory to the Company to act as the
exchange agent (the "EXCHANGE AGENT") in the Merger. Prior to the Effective
Time, Parent shall enter into an agreement with Exchange Agent, reasonably
satisfactory to the Company.
(b) Parent to Provide Cash. At or promptly following the Effective
Time (and in no event later than one (1) business day following the Effective
Time), Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, cash payable to the stockholders of the Company
pursuant to Section 1.6(a) or Section 1.6(b) in exchange for outstanding shares
of Company Preferred Stock and Company Common Stock, respectively. Any funds
deposited with the Exchange Agent shall hereinafter be referred to as the
"EXCHANGE FUND."
(c) Exchange Procedures. Promptly after the Effective Time (and in
no event later than three (3) business days following the Effective Time),
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) of a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock or Company Preferred Stock whose shares were converted into
the right to receive cash pursuant to Section 1.6(a) or Section 1.6(b): (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration to which the holder of such Certificate is entitled pursuant to
Section 1.6(a) or Section 1.6(b) (without limiting the effect of Section
1.7(e)). Upon surrender of Certificates for cancellation to the Exchange Agent,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificates
shall be entitled to receive promptly (and in no event later than three (3)
business days after receipt thereof) in exchange therefor the Merger
Consideration to which the holder of such certificate is entitled pursuant to
Section 1.6(a) or Section 1.6(b) (less any withholding amount with respect to
the shares of Company Common Stock or Company Preferred Stock held by such
holder as provided by Section 1.7(e)), and the Certificates so surrendered shall
forthwith be canceled. No interest shall accrue or be paid on the amounts
payable pursuant to this Article I upon surrender of the Certificates.
(d) Transfers of Ownership. If the payment of the amounts payable
pursuant to Section 1.6(a) or Section 1.6(b) is to be made to a person other
than the person in whose name the surrendered Certificate formerly evidencing
shares of Company Common Stock or Company
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Preferred Stock, as applicable, are registered, it will be a condition of
payment that the Certificates so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the Persons (as defined in
Section 8.3(d)) requesting such payment will have paid to Parent or any agent
designated by it any transfer or other Taxes (as defined in Section 2.6)
required by reason of the payment of the amount specified in Section 1.6(a) or
Section 1.6(b) to a Person other than the registered holder of the Certificates
surrendered, or established to the satisfaction of Parent or any agent
designated by it that such Tax has been paid or is not payable.
(e) Required Withholding. Each of the Exchange Agent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock or Company Preferred Stock such
amounts as may be required to be deducted or withheld therefrom under the Code
or under any provision of state, local or foreign Tax law or under any other
applicable Legal Requirement (as defined in Section 2.2(d)). To the extent such
amounts are so deducted or withheld, the amount of such consideration shall be
treated for all purposes under this Agreement as having been paid to the Person
to whom such consideration would otherwise have been paid.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Company Common Stock or Company
Preferred Stock for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(g) Investment of Exchange Fund. The Exchange Agent shall invest the
Exchange Fund as directed by Parent on a daily basis; provided that no such
investment or loss thereon shall affect the amounts payable to Company
stockholders pursuant to this Article I. Any interest and other income resulting
from such investment shall become a part of the Exchange Fund, and any amounts
in excess of the amounts payable to Company stockholders pursuant to this
Article I shall promptly be paid to Parent.
(h) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates six (6) months after
the Effective Time shall, at the request of the Surviving Corporation, be
delivered to the Surviving Corporation or otherwise on the instruction of the
Surviving Corporation, and any holders of the Certificates who have not
surrendered such Certificates in compliance with this Section 1.7 shall after
such delivery to the Surviving Corporation look only to the Surviving
Corporation (subject to abandoned property, escheat and similar laws) for
payment, as general creditors thereof, of their claim for the Merger
Consideration, without interest, to which such holders may be entitled pursuant
to Section 1.6(a) or Section 1.6(b). Any such portion of the Exchange Fund
remaining unclaimed by holders of shares of Company Common Stock or Company
Preferred Stock immediately prior to such time as such amounts would otherwise
escheat to or become property of any Governmental Entity (as defined in Section
2.3(c)) shall, to the extent permitted by law, become the property of Parent
free and clear of any claims or interest of any Person previously entitled
thereto.
(i) No Further Ownership Rights in Company Common Stock or Company
Preferred Stock.
(j)At the close of business on the day of the Effective Time, there
shall be no further
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registration of transfers on the records of the Surviving Corporation of shares
of Company Common Stock or Company Preferred Stock. From and after the Effective
Time, the holders of Company Common Stock or Company Preferred Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock or Company Preferred Stock except
as otherwise provided herein or by applicable law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent,
they shall be canceled and exchanged for the Merger Consideration, as provided
in this Article I, subject to applicable law in the case of Dissenting Shares.
All cash paid upon surrender of Certificates in accordance with the terms of
this Article I shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares previously represented by such Certificates.
(k) Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
pay in exchange for such lost, stolen or destroyed Certificates, upon the making
of an affidavit of that fact by the holder thereof, the Merger Consideration to
which the holder thereof is entitled pursuant to this Article I; provided,
however, that Parent or the Surviving Corporation may, in their discretion and
as a condition precedent to the payment thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as they may
reasonably direct as indemnity against any claim that may be made against
Parent, the Company, the Surviving Corporation or the Exchange Agent with
respect to the Certificates alleged to have been lost, stolen or destroyed.
(l) Applicability to Dissenting Shares. The provisions of this
Section 1.7 shall also apply to Dissenting Shares that lose their status as
such, except that the obligations of the Exchange Agent under this Section 1.7
shall commence only on the date of such loss of status.
1.8 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Common Stock and Company Preferred Stock for which the
holder thereof has demanded an appraisal of their value in accordance with, and
has complied in all respects with, Section 262 of Delaware Law (collectively,
the "DISSENTING SHARES") shall not be converted into or represent the right to
receive cash in accordance with Section 1.6(a) or Section 1.6(b), and the holder
or holders of such shares shall be entitled only to such rights as may be
granted to such holder or holders in Section 262 of Delaware Law.
(b) Notwithstanding the provisions of subsection (a), if any holder
of Dissenting Shares shall effectively withdraw or lose (through failure to
perfect or otherwise) such appraisal rights, then, as of the occurrence of such
event, such holder's shares shall no longer be deemed to be "Dissenting Shares"
and such shares shall automatically be converted into and represent only the
right to receive the applicable cash payment provided in Section 1.6(a) or
Section 1.6(b), without interest, upon surrender of the certificate representing
such shares in accordance with Section 1.7.
(c) The Company shall give Parent (i) prompt notice of any demands
for appraisal of any shares of Company Common Stock or Company Preferred Stock,
the withdrawals of such demands, and any other instrument served pursuant to
Delaware Law and received by the Company and (ii) the opportunity to participate
in all negotiations and proceedings with respect to demands for appraisal under
Delaware Law. The Company shall not, except with the prior written consent of
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Parent, offer to make or make any payment with respect to any demands for
appraisal of the shares Company Common Stock or Company Preferred Stock or offer
to settle or settle any such demands.
1.9 Further Action. At and after the Effective Time, the officers and
directors of Parent and the Surviving Corporation will be authorized to execute
and deliver, in the name and on behalf of Company and Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of Company and Merger Sub, any other actions and things to vest, perfect
or confirm of record or otherwise in the Surviving Corporation any and all
right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, except as
otherwise set forth in writing in appropriately corresponding sections of the
disclosure letter supplied by the Company to Parent dated as of the date hereof
(the "COMPANY DISCLOSURE LETTER"), as follows:
2.1 Organization; Standing and Power; Charter Documents; Subsidiaries.
(a) Organization; Standing and Power. The Company and each of its
Subsidiaries (as defined below) is a corporation or other organization duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as now being conducted, except where the failure of any
Subsidiary of the Company to be so organized, existing and in good standing
would not have, individually or in the aggregate, a Material Adverse Effect (as
defined in Section 8.3(c)) on the Company, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification necessary
other than in such jurisdictions where the failure to so qualify or to be in
good standing would not have, individually or in the aggregate, a Material
Adverse Effect on the Company. For purposes of this Agreement, "SUBSIDIARY,"
when used with respect to any party, shall mean any corporation or other
organization, whether incorporated or unincorporated, at least a majority of the
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
(b) Charter Documents. The Company has delivered or made available
to Parent: (i) a true and correct copy of the Certificate of Incorporation
(including any Certificate of Designations) and Bylaws of the Company, each as
amended to date (collectively, the "COMPANY CHARTER DOCUMENTS") and (ii) the
certificate of incorporation and bylaws, or like organizational documents, each
as amended to date (collectively, "SUBSIDIARY CHARTER DOCUMENTS") of each of its
Subsidiaries, and each such instrument is in full force and effect. The Company
is not in violation of any of the provisions of the Company Charter Documents
and each Subsidiary is not in violation of its respective Subsidiary Charter
Documents, except in the case of a Subsidiary, as would not be material to the
Company.
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(c) Subsidiaries. Section 2.1(c) of the Company Disclosure Letter
includes all the Subsidiaries of the Company. All the outstanding shares of
capital stock of, or other equity or ownership interests in, each such
Subsidiary have been validly issued and are fully paid and non-assessable and
are owned directly or indirectly by the Company, free and clear of all pledges,
claims, liens, charges, preemptive rights, mortgages, encumbrances, options and
security interests of any kind or nature whatsoever (collectively, "LIENS"),
including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other equity or ownership interests, except for
restrictions imposed by applicable securities laws.
2.2 Capital Structure.
(a) Capital Stock. The authorized capital stock of the Company
consists of: (i) 60,000,000 shares of Company Common Stock, par value $0.001 per
share; (ii) 5,000,000 shares of preferred stock, par value $0.001 per share,
60,000 of which have been designated as Series A Participating Preferred Stock
("SERIES A PREFERRED"), all of which will be reserved for issuance upon exercise
of preferred stock purchase rights (the "COMPANY RIGHTS") issuable pursuant to
the preferred stock rights agreement, dated as of August 8, 2001, between the
Company and Xxxxx Fargo Bank, MN N.A., as amended, (the "COMPANY RIGHTS
AGREEMENT"), none of which are issued and outstanding; and 1,800,000 of which
have been designated as 6.9% Senior Convertible Preferred Stock (the "COMPANY
PREFERRED STOCK"). At the close of business on the date hereof: (i) 28,602,857
shares of Company Common Stock were issued and outstanding (plus any shares of
Company Common Stock issued since December 31, 2002 upon the exercise of Company
Options or Other Options (as defined in Section 2.2(b)), (ii) no shares of
Company Common Stock were issued and held by the Company in its treasury, and
(iii) 1,132,075 shares of Company Preferred Stock were issued and outstanding
(plus accrued dividends payable in 203,545 shares of Company Preferred Stock in
accordance with Section 3 of the Certificate of Designation). All of the
outstanding shares of capital stock of the Company are, and all shares of
capital stock of the Company which may be issued as contemplated or permitted by
this Agreement will be, when issued, duly authorized and validly issued, fully
paid and non-assessable and not subject to any preemptive rights.
(b) Stock Options. As of the close of business on the date hereof:
(i) 6,158,804 shares of Company Common Stock are subject to issuance pursuant to
outstanding options to purchase Company Common Stock under the Company Stock
Option Plans (as defined in Section 2.12) (the "COMPANY OPTIONS") (less any such
shares issued since December 31, 2002 upon the exercise of Company Options);
(ii) 1,986,066 shares of Company Common Stock are available for future issuance
under the Company Stock Option Plans, (iii) 825,000 shares of Company Common
Stock are reserved for future issuance under the 2002 Company Employee Stock
Purchase Plan and no further shares of Company Common Stock will be issued under
the 1997 Company Employee Stock Purchase Plan, and (iv) no shares of Company
Common Stock are subject to issuance pursuant to outstanding options, rights or
warrants to purchase Company Common Stock issued pursuant to the Contracts (as
defined in Section 2.14) or instruments listed on Section 2.2(b) of the Company
Disclosure Letter (the "OTHER OPTIONS"). The Company has provided Parent
information describing option activity through December 31, 2002. All shares of
Company Common Stock subject to issuance under the Company Stock Option Plans,
the Company Purchase Plans and the Other Options, upon issuance on the terms and
conditions specified in the instruments pursuant to
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which they are issuable, would be duly authorized, validly issued, fully paid
and non-assessable and not subject to any preemptive rights. There are no
commitments or agreements of any character to which the Company is bound
obligating the Company to accelerate the vesting of any Company Option as a
result of the Merger (whether alone or upon the occurrence of any additional or
subsequent events). There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or other similar rights with respect to the
Company.
(c) Voting Debt. No bonds, debentures, notes or other indebtedness
having the right to vote on any matters on which stockholders may vote ("VOTING
DEBT") of the Company is issued or outstanding as of the date hereof.
(d) Other Securities. Except as otherwise set forth in this Section
2.2, there are no securities, options, warrants, calls, rights, commitments,
Contracts, arrangements or undertakings of any kind to which the Company or any
of its Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or redeem,
repurchase, acquire or pay for or cause to be issued, delivered or sold, or
redeemed, repurchased, acquired or paid for additional shares of capital stock,
Voting Debt, equity interests or other voting securities of the Company or any
of its Subsidiaries, or obligating the Company or any of its Subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, Contract, arrangement or undertaking. All outstanding shares
of Company Common Stock and Company Preferred Stock, all outstanding Company
Options and Other Options, and all outstanding shares of capital stock of each
Subsidiary of the Company have been issued and granted in compliance in all
material respects with (i) all applicable securities laws and all other
applicable Legal Requirements (as defined below), (ii) all requirements set
forth in applicable material Contracts and (iii) Company Charter Documents or
Subsidiary Charter Documents. There are no voting trusts or other Contracts to
which the Company or any of its Subsidiaries is a party with respect to the
voting of capital stock of the Company or any of its Subsidiaries. For purposes
of this Agreement: (x) "LEGAL REQUIREMENTS" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, order, edict, decree, rule, regulation,
ruling, judgment or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Entity; and (y) "CONTRACT" shall mean any written, oral or other
agreement, contract, subcontract, settlement agreement, lease, binding
understanding, instrument, indenture, note, option, warranty, purchase order,
license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature, as in effect as of the date hereof or
as may hereinafter be in effect.
2.3 Authority; Non-Contravention; Necessary Consents.
(a) Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has been duly authorized by
all necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement or to consummate the Merger and the other
transactions contemplated hereby (other than the approval and adoption of this
Agreement and the approval of the Merger by the Company's stockholders and the
filing of the Certificate of Merger pursuant to Delaware Law). This Agreement
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has been duly executed and delivered by the Company and, assuming due execution
and delivery by Parent and Merger Sub, constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
(b) Non-Contravention. The execution and delivery of this Agreement
by the Company does not, and performance of this Agreement by the Company will
not: (i) conflict with or violate the Company Charter Documents or any
Subsidiary Charter Documents of any Subsidiary of the Company, (ii) subject to
obtaining the approval and adoption of this Agreement and the approval of the
Merger by the Company's stockholders as contemplated in Section 5.2 and
compliance with the requirements set forth in Section 2.3(c), conflict with or
violate any material Legal Requirement applicable to the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries or any of their
respective properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the material properties or assets of the Company or
any of its Subsidiaries pursuant to, any Company Material Contract (as defined
in Section 2.14). Section 2.3(b) of the Company Disclosure Letter lists all
consents, waivers and approvals under any Company Material Contract required to
be obtained in connection with the consummation of the transactions contemplated
hereby, which, if individually or in the aggregate are not obtained, would
result in a Material Adverse Effect on the Company or the Surviving Corporation.
(c) Necessary Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with any supranational, national,
state, municipal, local or foreign government, any instrumentality, subdivision,
court, arbitral entity, administrative agency or commission or other
governmental authority or instrumentality, or any quasi-governmental or private
body exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority (a "GOVERNMENTAL ENTITY") is required to be
obtained or made by the Company in connection with the execution, performance
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for: (i) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company and/or Parent
are qualified to do business, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws and the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR ACT")
or any foreign laws regulating competition, antitrust, investment or exchange
controls, (iii) the consents listed on Section 2.3(c) of the Company Disclosure
Letter; (iv) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities or
"blue sky" laws and the securities laws of any foreign country, (v) such
consents, approvals, orders, authorizations, registration, declaration or filing
as may be required by the rules and regulations of The Nasdaq Stock Market, Inc.
and The New York Stock Exchange, Inc., and (vi) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not be material to the Company or Parent or materially adversely
affect the ability of the parties hereto to consummate the Merger within the
time frame in which the Merger would otherwise be consummated in the absence of
the need for such consent, approval, order, authorization,
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registration, declaration or filings. The consents, approvals, orders,
authorizations, registrations, declarations, waivers and filings set forth in
(i), (ii) and (v) are referred to collectively herein as the "NECESSARY
CONSENTS."
2.4 SEC Filings; Financial Statements.
(a) SEC Filings. The Company has filed all required registration
statements, prospectuses, reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated by
reference) required to be filed by it with the Securities and Exchange
Commission (the "SEC") since January 1, 2000. The Company has made available to
Parent all such registration statements, prospectuses, reports, schedules,
forms, statements and other documents in the form filed with the SEC. All such
required registration statements, prospectuses, reports, schedules, forms,
statements and other documents (including those that the Company may file
subsequent to the date hereof), as amended, are referred to herein as the
"COMPANY SEC Reports." As of their respective dates, the Company SEC Reports (i)
were prepared in accordance and complied in all material respects with the
requirements of the Securities Act of 1933, as amended (together with the rules
and regulations thereunder, the "SECURITIES ACT"), or the Securities and
Exchange Act of 1934, as amended (together with the rules and regulations
thereunder, the "EXCHANGE ACT"), as the case may be, applicable to such Company
SEC Reports and (ii) did not at the time they were filed 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, in the
light of the circumstances under which they were made, not misleading, except to
the extent corrected prior to the date hereof by a subsequently filed Company
SEC Report. None of the Company's Subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports (the "COMPANY FINANCIALS"), including each Company SEC
Report filed after the date hereof until the Closing: (i) complied as to form in
all material respects with the published rules and regulations of the SEC with
respect thereto, (ii) was prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q, 8-K or any successor form under the Exchange Act), and (iii)
fairly presented in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries as at the respective dates thereof
and the consolidated results of Company's operations and cash flows for the
periods indicated. The balance sheet of the Company contained in the Company SEC
Reports as of September 30, 2002 is hereinafter referred to as the "COMPANY
BALANCE SHEET." Except as disclosed in the Company Financials, since the date of
the Company Balance Sheet, neither the Company nor any of its Subsidiaries has
any liabilities required under GAAP to be set forth on a consolidated balance
sheet (absolute, accrued, contingent or otherwise) which, individually or in the
aggregate, would have a Material Adverse Effect on the Company, except for
liabilities incurred since the date of the Company Balance Sheet in the ordinary
course of business consistent with past practice and liabilities incurred
pursuant to this Agreement.
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2.5 Absence of Certain Changes or Events. Since the date of the
Company Balance Sheet (a) there has not been any Material Adverse Effect on the
Company, (b) and through the date hereof, the Company and its Subsidiaries have
conducted in all material respects their respective businesses only in the
ordinary course consistent with past practice, except for the negotiation and
execution of this Agreement and (c) through the date hereof, there has not been:
(i) any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of the
Company's or any of its Subsidiaries' capital stock, or any purchase, redemption
or other acquisition by the Company or any of its Subsidiaries of any of the
Company's capital stock or any other securities of the Company or its
Subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities, except repurchases of unvested shares at cost in
connection with the termination of the Company's or any of its Subsidiary's
relationship with any Service Provider (as defined in the Company Option Plans)
pursuant to stock option or purchase agreements in effect on the date hereof or
entered into in compliance with this Agreement, or (ii) any split, combination
or reclassification of any of the Company's or any of its Subsidiaries' capital
stock.
2.6 Taxes.
(a) For the purposes of this Agreement, the term "TAX" or,
collectively, "TAXES," shall mean any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts, and any obligations with respect to such amounts arising as a
result of being a member of an affiliated, consolidated, combined or unitary
group for any period or under any agreements or arrangements with any other
Person and including any liability for taxes of a predecessor entity.
Notwithstanding the foregoing, for the purposes of this Section 2.6 and Section
4.1(b)(xii), "Tax" and "Taxes" shall not include any Tax taken into account in
determining Assumed Customer Tax Obligation (as defined in Section 2.23(a)). The
Company and each of its Subsidiaries have filed all material federal, state,
local and foreign returns, estimates, information statements and reports
relating to Taxes ("TAX RETURNS") required to be filed by any of them and all
such Tax Returns are true and correct in all material respects. The Company and
each of its Subsidiaries have timely paid, or have adequately reserved (in
accordance with GAAP) for the payment of, all Taxes required to be paid (whether
or not shown on any Tax Returns), and the most recent financial statements
contained in the Company SEC Reports reflect an adequate reserve (in accordance
with GAAP) for all Taxes payable by the Company and its Subsidiaries through the
date of such financial statements. No material deficiencies for any Taxes have
been asserted or assessed, or, to the Knowledge (as defined in Section 8.3(b))
of the Company, proposed, against the Company or any of its Subsidiaries that
are not subject to adequate reserves (in accordance with GAAP). No audit or
other examination of any Tax Return of the Company or any of its Subsidiaries is
presently in progress, nor has the Company or any of its Subsidiaries been
notified of any request for such an audit or other examination.
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(b) There are no outstanding agreements extending or waiving the
statutory period of limitations applicable to any claim for, or the period for
the collection or assessment or reassessment of, Taxes due from the Company or
any of its Subsidiaries for any taxable period and no request for any such
waiver or extension is currently pending. There are no Liens for Taxes upon the
assets or properties of the Company or any Subsidiary except for statutory Liens
for current Taxes not yet due. Neither the Company nor any of its Subsidiaries
is a party to any agreement relating to the sharing, allocation or
indemnification of Taxes, or any similar agreement, contract or arrangement,
(collectively, "TAX SHARING AGREEMENTS") or has any liability for Taxes of any
Person (other than members of the affiliated group, within the meaning of
Section 1504(a) of the Code, filing consolidated federal income tax returns of
which the Company is the common parent) under Treasury Regulation Section
1.1502-6, Treasury Regulation Section 1.1502-78 or similar provision of state,
local or foreign law, as a transferee or successor, by Contract, or otherwise.
Neither the Company nor any of its Subsidiaries has executed or entered into a
closing agreement pursuant to Section 7121 of the Code or any similar provision
of state, local or foreign law. Neither the Company nor any of its Subsidiaries
is subject to any private letter ruling of the Internal Revenue Service (the
"IRS") or comparable ruling of any other Tax authority, and there is no
currently pending private letter ruling request to the IRS or comparable ruling
request to any other Tax authority, relating to either the Company or any of its
Subsidiaries. The Company and its Subsidiaries have each withheld (or will
withhold) from their respective employees, independent contractors, creditors,
stockholders and third parties and timely paid to the appropriate Tax authority
proper and accurate amounts in all material respects for all periods ending on
or before the Closing Date in compliance with all Tax withholding and remitting
provisions of applicable laws. No claim in writing has been made by any
Governmental Entity in a jurisdiction where neither the Company nor any of its
Subsidiaries files Tax Returns that it is or may be subject to taxation by that
jurisdiction. The Company and its Subsidiaries have given or otherwise made
available to Parent true, correct and complete copies of all Tax Returns,
examination reports and statements of deficiencies for taxable periods, or
transactions consummated, for which the applicable statutory periods of
limitations have not expired. The Company and its Subsidiaries have, in all
material respects, charged their customers all sales, goods and services, and
other similar Taxes required to be charged under the laws and regulations of all
applicable taxing jurisdictions. All such Taxes have been collected and remitted
to the appropriate Tax authority in a timely manner in all material respects.
2.7 Intellectual Property.
(a) No Infringement. The products, services and operations of the
Company do not infringe or misappropriate the Intellectual Property (as defined
below) of any third party where such infringement or misappropriation,
individually or in the aggregate, would have a Material Adverse Effect on the
Company. "INTELLECTUAL PROPERTY" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, computer software
programs and all documentation relating to any of the foregoing, (iii) all
copyrights, copyrights registrations and applications therefor, and all other
rights corresponding thereto throughout the world, (iv) all industrial designs
and any registrations and applications therefor throughout the world, (v) all
mask works and any registrations and
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applications therefor throughout the world, (vi) all trade names, logos, URLs,
common law trademarks and service marks, trademark and service xxxx
registrations and applications therefor throughout the world, (vii) all
databases and data collections and all rights therein throughout the world,
(viii) all moral and economic rights of authors and inventors, however
denominated, throughout the world, and (ix) any similar or equivalent rights to
any of the foregoing anywhere in the world. "COMPANY INTELLECTUAL PROPERTY"
shall mean all Intellectual Property owned by the Company and/or used in its
products, services and operations.
(b) No Impairment. The Merger (including the assignment by operation
of law of any Contract to the Surviving Corporation) will not result in: (i)
Parent or any Subsidiary of Parent (other than the Company and its Subsidiaries,
but only to the extent existing prior to the Merger) being bound by any material
non-compete or other material restriction on the operation of any business of
Parent or its Subsidiaries, (ii) Parent or any Subsidiary of Parent (other than
the Company and its Subsidiaries, but only to the extent existing prior to the
Merger) granting any rights or licenses to any material Intellectual Property of
Parent or any Subsidiary of Parent to any third party (including a covenant not
to xxx with respect to any material Intellectual Property of Parent or any
Subsidiary of Parent), or (iii) the termination or breach of any Contract to
which the Company is a party, which termination or breach would have,
individually or in the aggregate, a Material Adverse Effect on either the
Surviving Corporation or Parent, or (iv) the termination or forfeiture of any
Company Intellectual Property.
(c) Schedule. Section 2.7(c) of the Company Disclosure Letter sets
forth, as of the date hereof, a list of all material Company Intellectual
Property described in subsection (i), (iv), (v) and (vi) of Section 2.7(a) and
all copyright registrations and applications therefor.
(d) Ownership and Maintenance. The Company owns, or possesses
licenses or other valid rights to use, all Company Intellectual Property which
is required or necessary to the conduct of the business of the Company, except
where the lack thereof, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. To the Knowledge of the Company, no
Person is infringing upon or violating any material Company Intellectual
Property. The Company has taken reasonable steps to maintain the confidentiality
of its trade secrets.
(e) Privacy. The Company does not use or collect any of the
information it collects from its web site visitors or other parties in an
unlawful manner, or in a manner that violates the Company's privacy policy or
the privacy rights of its customers. The Merger will not violate the Company's
privacy policy or the privacy rights of its customers.
2.8 Compliance; Permits.
(a) Compliance. Neither the Company nor any of its Subsidiaries is
or has been in conflict with, or in default or in violation of any Legal
Requirement applicable to the Company or any of its Subsidiaries or by which the
Company or any of its Subsidiaries or any of their respective businesses or
properties is bound, except, in each case, or in the aggregate, for conflicts,
violations and defaults that would not have a Material Adverse Effect on the
Company. No material investigation or review by any Governmental Entity is
pending or, to the Knowledge of the Company, has been threatened in a writing
delivered to the Company or any of its Subsidiaries, against the Company or any
of its Subsidiaries. There is no judgment, injunction, order or decree
-14-
binding upon the Company or any of its Subsidiaries which, individually or in
the aggregate, has or could have a Material Adverse Effect on the Company.
(b) Permits. The Company and its Subsidiaries hold, to the extent
legally required, all permits, licenses, authorizations, franchises, variances,
exemptions, orders and approvals from Governmental Entities ("PERMITS") that are
required for the operation of the business of the Company and its Subsidiaries,
as currently conducted, the failure to hold which, individually or in the
aggregate, would have a Material Adverse Effect on the Company (collectively,
"COMPANY PERMITS"). As of the date hereof, no suspension or cancellation of any
of the Company Permits is pending or, to the Knowledge of the Company,
threatened. The Company and its Subsidiaries are in compliance in all material
respects with the terms of the Company Permits.
2.9 Litigation. Except as set forth in the Company SEC Reports filed prior
to the date hereof, there are no claims, suits, actions or proceedings pending
or, to the Knowledge of the Company, threatened, nor, to the Knowledge of the
Company, any investigation pending or threatened, against the Company or any of
its Subsidiaries, any present or former officer, director or employee of the
Company or any of its Subsidiaries or any other Person for whom the Company or
any of its Subsidiaries may be liable or pursuant to which it may be obligated
to indemnify any such officer, director, employee of Person, before any
Governmental Entity that seeks to restrain, delay, alter or enjoin the
consummation of the transactions contemplated hereby, seeks an award of damages
in connection with this Agreement or any transactions contemplated hereby or
which could, either singularly or in the aggregate with all such claims, actions
or proceedings, be material to the Company. Neither the Company nor any of its
Subsidiaries is subject to any judgment, decree, injunction, rule or order of
any Governmental Entity that has had or would have, individually or in the
aggregate, a Material Adverse Effect on the Company.
2.10 Brokers' and Finders' Fees. Except for fees payable to Xxxxxxx Xxxxx
& Co. pursuant to an engagement letter dated October 3, 2002, a copy of which
has been provided to Parent, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.11 Transactions with Affiliates. Except as set forth in the Company SEC
Reports, since the date of the Company's last proxy statement filed with the
SEC, no event has occurred as of the date hereof that would be required to be
reported by the Company pursuant to Item 404 of Regulation S-K promulgated by
the SEC. Section 2.11 of the Company Disclosure Letter identifies each Person
who is an "affiliate" (as that term is used in Rule 145 promulgated under the
Securities Act) of the Company as of the date hereof.
2.12 Employee Benefit Plans.
(a) The employee compensation, severance, termination pay, deferred
compensation, stock or stock-related awards, incentive, fringe, pension,
profit-sharing, savings, retirement, employment, consulting, bonus,
change-in-control, retention, welfare, cafeteria, flexible or other benefit
plans, programs, policies, commitments, agreements or other arrangements
(whether or not set forth in a written document and including, without
limitation, all "employee benefit plans" within
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the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) under which any employee, former employee, director
or consultant of the Company, any Subsidiary of the Company or any trade or
business (whether or not incorporated) that is a member of a controlled group or
that is under common control with the Company within the meaning of Section 414
of the Code (each an "ERISA AFFILIATE") has any present or future right to
benefits, or with respect to which the Company has or may in the future have
direct or indirect liability, whether contingent or otherwise, are referred to
herein as the "PLANS." Section 2.12(a) of the Company Disclosure Letter contains
a complete and accurate list of each material Plan, including (i) all severance
and employment agreements of the Company with directors or executive officers,
(ii) all severance programs and policies of each of the Company or its
Subsidiaries, (iii) all Plans pursuant to which benefits would, in any respect,
vest or an amount would become payable by virtue of the transactions
contemplated hereby, and (iv) each stock option plan, stock purchase plan,
equity based compensation plan, equity award to any Person (whether payable in
cash, shares or otherwise) (to the extent not issued pursuant to any of the
foregoing plans) or other plan or Contract of any nature with any Person
(whether or not an employee) pursuant to which any stock, option, warrant or
other right to purchase or acquire capital stock of the Company or right to
payment based on the value of the Company capital stock has been granted or
otherwise issued (collectively, "COMPANY STOCK OPTION PLANS"). The Company has
provided or made available to Parent with respect to each Plan, a true, correct
and complete copy thereof and to the extent applicable: (i) the most recent
documents (including all amendments and trusts or other funding instruments
constituting each Plan; (ii) the three most recent annual reports (Form Series
5500 and all schedules and financial statements attached thereto), if any,
required under ERISA or the Code in connection with each Plan; (iii) all IRS
determination, opinion, notification and advisory letters relating to any Plan;
(iv) if the Plan is funded, the most recent periodic accounting of the Plan
assets; (v) the most recent summary plan description, summary of material
modifications and any other written communication (or description of any oral
communications) by the Company or any ERISA Affiliate concerning the extent of
benefits provided under a Plan; (vi) for the last three years all material
correspondence with the IRS and the Department of Labor (the "DOL"); and (vii)
any other document reasonably requested by Parent.
(b) Each Plan has been maintained and administered in material
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations (foreign or domestic), including ERISA
and the Code, that are applicable to such Plans. No suit, action, Lien or other
litigation (excluding claims for benefits incurred in the ordinary course of
Plan activities) has been brought, or to the Knowledge of the Company is
threatened, against or with respect to any such Plan, except as would not result
in material liability to the Company. There are no audits, inquiries or
proceedings pending by the IRS or the DOL with respect to any Plans. Any Plan
intended to be qualified under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code (i) has either applied for
or obtained a favorable determination, notification, advisory and/or opinion
letter, as applicable, as to its qualified status from the IRS or still has a
remaining period of time under applicable Treasury Regulations or IRS
pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination, and (ii) incorporates or has been
amended to incorporate all provisions required to comply with the Tax Reform Act
of 1986 and subsequent legislation, unless the Plan still has a remaining period
of time under applicable Treasury Regulations or IRS pronouncements in which to
conform to such legislation, and to the Knowledge of the Company, there are no
facts or
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circumstances that could reasonably be expected to cause the loss of such
qualification or the imposition of any material liability, penalty or tax under
ERISA, the Code or any other applicable laws, rules or regulations. With respect
to each Plan: (i) all reports, returns, notices and other documentation that are
required to have been filed with or furnished to the IRS and the DOL, the SEC or
any other Governmental Entity, or to the participants or beneficiaries of such
Plan have been filed or furnished on a timely basis, and (ii) no individual who
has performed services for the Company or its Subsidiaries has been improperly
excluded from participation, except in each case for violations which would not
reasonably be expected to cause material harm to the Company. All contributions
(including all employer contributions and employee salary reduction
contributions) or premium payments required to be made by the Company or its
Subsidiaries in respect of any Plan have been timely paid or accrued, except as
would not result in material liability to the Company. Neither the Company nor
any ERISA Affiliate have any liability, whether contingent or otherwise, with
respect to any plan subject to Title IV of ERISA or Section 412 of the Code
which remains unsatisfied.
(c) Neither the Company, its Subsidiaries nor, to the Knowledge of
the Company, any other "party in interest" or "disqualified person" with respect
to any Plan has engaged in a non-exempt "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code involving such Plan.
To the Knowledge of the Company, no fiduciary has any material liability for
breach of fiduciary duty or any other failure to act or comply with the
requirements of ERISA, the Code or any other applicable laws in connection with
the administration or investment of the assets of any Plan.
(d) Neither the Company nor any ERISA Affiliate has at any time ever
maintained, established, sponsored, participated in, contributed to, been
requested to contribute to, or had any liability, whether contingent or
otherwise, with respect to any "multiemployer plan," as such term is defined in
Section 3(37)(A) of ERISA. Neither the Company nor any ERISA Affiliate have at
any time ever maintained, established, sponsored, participated in, contributed
to, or had any liability, whether contingent or otherwise, with respect to, (i)
any multiple employer plan, or to any plan described in Section 413 of the Code,
(ii) any "multiple-employer welfare arrangement" as defined in Section 3(40) of
ERISA, (iii) a Plan subject to Section 4063 or 4064 of ERISA, or (iv) a Plan
maintained outside of the jurisdiction of the United States. None of the Plans
promises or provides retiree medical or other retiree benefits to any person
except as required by applicable law, including without limitation, coverage
required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
(e) Neither the Company nor any of its Subsidiaries is bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union. No employee of the Company or
any of its Subsidiaries is represented by any labor union or covered by any
collective bargaining agreement and, to the Knowledge of the Company, no
campaign to establish such representation is in progress. There is no pending
or, to the Knowledge of the Company, threatened labor dispute, strike or work
stoppage involving the Company or any of its Subsidiaries and any group of its
employees. The Company is in compliance in all material respects with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment and labor practices, terms and conditions of
employment and wages and hours, in each case, with respect to its current or
former employees, except in each case for
-17-
compliance violations which would not reasonably be expected to cause material
harm to the Company. The Company has not received written notice of any
investigation, charge or complaint pending before the Equal Employment
Opportunity Commission or any other Governmental Entity regarding an unlawful
unemployment practice. The Company (i) is not barred from any governmental
contract by the Office of Federal Contract Compliance Programs or comparable
state agency (the "OFCCP"), (ii) has not received a notice to show cause from
the OFCCP, and (iii) does not have an action pending with the OFCCP.
(f) Neither any payment or benefit which will or may be made by the
Company or its Subsidiaries, nor the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby (either alone or in
combination of another event) shall (i) result in the payment of any amount
which could be characterized as a "parachute payment," within the meaning of
Code Section 280G(b)(2), (ii) result in any material payment becoming due, or
materially increase the amount of any compensation due, to any current or former
employee of the Company or its Subsidiaries, (iii) materially increase any
benefits otherwise payable under any Plan, (iv) result in the acceleration of
the time of payment or vesting of any such compensation or benefits, or (v)
result in the triggering or imposition of any restrictions or limitations on the
rights of the Company or its Subsidiaries to amend or terminate any Plan.
(g) To the Knowledge of the Company, neither the Company and its
Subsidiaries nor any organization to which the Company or its Subsidiaries is a
successor or parent corporation, within the meaning of Section 4069(b) of ERISA,
has engaged in any transaction described in Sections 4069 or 4212(c) of ERISA.
(h) Neither the Company nor any of its Subsidiaries have incurred
any material liability or material obligation under the Worker Adjustment and
Retraining Notification Act or any similar state or local law which remains
unsatisfied.
(i) Neither the Company nor any of its Subsidiaries have direct or
indirect liability with respect to any misclassification of any Person as an
independent contractor rather than as an employee, or with respect to any
employee leased from another employer, except as would not result in material
harm to the Company.
(j) Neither the Company nor any of its Subsidiaries is a party to
any Contract or other arrangement which could result in the payment of material
amounts that could be non-deductible by reason of Section 162(m) of the Code.
(k) Each Plan which is a "group health plan" within the meaning of
Section 5000(b)(1) of the Code and Section 607(l) of ERISA has been administered
in material compliance with, and the Company and its Subsidiaries have otherwise
complied with, (i) the requirements of the Heath Insurance Portability and
Accountability Act of 1996 and the regulations promulgated thereunder; (ii) the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
regulations promulgated thereunder; and (iii) the Medicare Secondary Payor
Provisions of Section 1862 of the Social Security Act and the regulations
promulgated thereunder, except, in each case, for compliance violations which
would not reasonably be expected to cause material harm to the Company.
-18-
(l) No stock or other security issued by the Company or its
Subsidiaries forms or has formed a material part of the assets of any Plan.
(m) Neither the Company nor any ERISA Affiliate has a contract or
commitment, whether legally binding or not, to create any additional employee
benefit or compensation plans, policies or arrangements or, except as may be
required by applicable law, to modify any Plan.
(n) No assets of the Company or its Subsidiaries are allocated to or
held in a "rabbi trust" or other funding vehicle in respect of any Plan other
than one qualified under Section 401(a) of the Code.
(o) No "employee welfare plan" within the meaning of Section 3(1) of
ERISA ("WELFARE PLAN") disclosed in Section 2.12(a) of the Company Disclosure
Letter is a "multiple employer welfare arrangement" as defined in Section 3(40)
of ERISA or self-insured.
2.13 Environmental Matters.
(a) Hazardous Material. Except as would not, individually or in the
aggregate, result in a Material Adverse Effect on the Company, no underground
storage tanks and no amount of any substance that has been designated by any
Governmental Entity or by applicable Legal Requirement to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies, (a "HAZARDOUS MATERIAL") are present, as a result of the
actions of the Company or any of its Subsidiaries or any affiliate of the
Company, or, to the Knowledge of the Company, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Company or
any of its Subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not,
individually or in the aggregate, result in a Material Adverse Effect on the
Company: (i) neither the Company nor any of its Subsidiaries has transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of or in a manner which would result
in liability pursuant to, any Legal Requirement in effect on or before the
Closing Date and (ii) neither the Company nor any of its Subsidiaries has
disposed of, transported, sold, used, released, exposed its employees or others
to or manufactured any product containing a Hazardous Material (collectively,
"HAZARDOUS MATERIALS ACTIVITIES") in violation of or in a manner which would
result in liability pursuant to any Legal Requirement.
2.14 Contracts.
(a) Material Contracts. For purposes of this Agreement, "COMPANY
MATERIAL CONTRACT" shall mean:
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(i) any "material contracts" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) with respect to the Company and its
Subsidiaries;
(ii) any Contract containing any covenant: (A) limiting the
right of the Company or its Subsidiaries to engage in any material line of
business, make use of any material Intellectual Property or compete with any
Person in any material line of business, or (B) otherwise having an adverse
effect on the right of the Company or any of its Subsidiaries to sell,
distribute or manufacture any material products or services;
(iii) any Contract, or group of Contracts with a Person (or
group of affiliated Persons), the termination or breach of which would,
individually or in the aggregate, have a material adverse effect on any material
division or business unit or other material operating group of product or
service offerings of the Company or otherwise have a Material Adverse Effect on
the Company or any of its Subsidiaries or otherwise have a Material Adverse
Effect on the Company;
(iv) indentures, credit agreements, security agreements,
mortgages, guarantees, promissory notes and Contract relating to or evidencing
indebtedness for borrowed money of the Company or any of its Subsidiaries
(excluding any equipment leases involving aggregate annual payments of less than
$100,000 per lease);
(v) any non-competition agreement or any other agreement or
obligation which limits or purports to limit in any respect the manner in which,
or the localities in which, the business of the Company or any of its
Subsidiaries may be conducted;
(vi) any legal entity in the nature of a partnership or joint
venture, or a material strategic alliance (or any Contract substantially similar
to any of the foregoing);
(vii) any Contract which could prohibit or materially delay
the consummation of the transactions contemplated by this Agreement;
(viii) any Contract that involves, or to the Knowledge of the
Company is likely to involve, aggregate annual payments to or from the Company
or any of its Subsidiaries of $500,000 (excluding any Contract with customers of
the Company or its Subsidiaries or any Contract governing an investment made in
accordance with the Investment Policy (as defined in Section 4.1(b)(ix))); or
(ix) any material Contract with any present director or
executive officer of the Company or any of its Subsidiaries or any stockholder
who owns or controls 10% or more of the Company's voting stock.
(b) Schedule. Section 2.14(b) of the Company Disclosure Letter sets
forth a list of all Company Material Contracts to which the Company or any of
its Subsidiaries is a party or by which any of them is bound by as of the date
hereof.
(c) No Breach. All Company Material Contracts are valid and in full
force and effect except to the extent they have previously expired in accordance
with their terms or if the failure to be in full force and effect, individually
or in the aggregate, would not be material to the Company.
-20-
Neither the Company nor any of its Subsidiaries has violated any provision of,
or committed or failed to perform any act which, with or without notice, lapse
of time or both would constitute a default under the provisions of, any Company
Material Contract, except in each case for those violations and defaults which,
individually or in the aggregate, would not be material to the Company. Neither
the Company nor any of its Subsidiaries has received any written notice from any
other party to any Company Material Contract that it intends to terminate or not
renew such Company Material Contract. To the Company's Knowledge, no such other
party is in violation, breach or default of any Company Material Contract.
2.15 Disclosure. The Proxy Statement (as defined in Section 5.1) shall
not, at the date the Proxy Statement (or any amendment or supplement thereto) is
first mailed to the stockholders of the Company, at the time of the
Stockholders' Meeting (as defined in Section 5.2) and as of 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 the light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders' Meeting which
shall have become false or misleading. The Proxy Statement will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein about Parent supplied by Parent or any
of Parent's representatives for inclusion or incorporation by reference in the
Proxy Statement.
2.16 Board Approval. The Board of Directors of the Company has (i) at a
meeting duly called and held on or prior to the date hereof determined that this
Agreement and the transactions contemplated hereby are advisable and fair to,
and are in the best interest of the Company and its stockholders and declared
the Merger to be advisable, (ii) approved and adopted this Agreement and the
transactions contemplated hereby, including the Merger and the Stockholder
Agreements and the transactions contemplated thereby, which approval constitutes
approval under Section 203 of the Delaware Law such that the Merger, this
Agreement and the other transactions contemplated hereby, are not and shall not
be subject to any restriction pursuant to Section 203 of the Delaware Law, (iii)
resolved to make the Recommendation (as defined in Section 5.2(b)), subject to
the right of the Board of Directors of the Company to withhold, withdraw, amend,
change or modify the Recommendation in accordance with Section 5.3(d), and (iv)
directed that this Agreement and the Merger be submitted to the stockholders of
the Company for approval.
2.17 Fairness Opinion. The Company's Board of Directors has received an
opinion from Xxxxxxx, Xxxxx & Co., dated as of January 5, 2003, to the effect
that, as of such date, the Per Share Amount is fair from a financial point of
view to the holders of outstanding shares of Company Common Stock.
2.18 Rights Plan. The Company has taken all actions necessary to render
the Company Rights Agreement inapplicable to the execution or delivery of this
Agreement or the Stockholder Agreements, the consummation of the Merger pursuant
to this Agreement or the consummation of any other transactions contemplated
hereby and a copy of the amendment to such Company Rights Agreement effecting
such change has been provided to Parent.
-21-
2.19 Takeover Statutes. The Board of Directors of the Company has taken
all actions such that this Agreement and the transactions contemplated hereby
and the Stockholder Agreements and the transactions contemplated thereby, are
not and will not be subject to any restrictions under Section 203 of Delaware
Law. No other state takeover statute or similar statute or regulation applies to
or purports to apply to the Merger, the Stockholder Agreements or the
transactions contemplated hereby or thereby.
2.20 Vote Required. The only vote of the holders of any class or series of
capital stock of the Company necessary to approve and adopt this Agreement and
approve the Merger is the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock and Company Preferred Stock (voting
together as a single class and on an as-converted to Common Stock basis).
2.21 Real Estate.
(a) Ownership of Premises. The Company does not own any real
property.
(b) Leased Properties. Section 2.21(b) of the Company Disclosure
Letter is a true, correct and complete schedule of all leases, subleases,
licenses and other agreements (collectively, the "REAL PROPERTY LEASES") under
which the Company uses or occupies or has the right to use or occupy, now or in
the future, any real property (the land, buildings and other improvements
covered by the Real Property Leases being herein called the "LEASED REAL
PROPERTY"). The Company has heretofore delivered to Parent true, correct and
complete copies of all Real Property Leases (including all modifications,
amendments and supplements). There is no material uncured default by the Company
as tenant under any of the Real Property Leases or, to the best of the Company's
Knowledge, by the landlord thereunder. The Company holds the leasehold estate
under and interest in each Real Property Lease free and clear of all Liens,
other than for Liens for taxes not yet due and payable. None of the Leased Real
Property is subleased or sublicensed to any other person or entity.
(c) Entire Premises. All of the material land, buildings, structures
and other improvements used by the Company in the conduct of its business are
included in the Leased Real Property.
2.22 Customers. Section 2.22 of the Company Disclosure Letter sets forth a
list of (i) the top twenty-five (25) customers of the Company and its
Subsidiaries (established using the projected annualized value per customer
based on revenue for the three (3) month period ended September 30, 2002), (ii)
for each such customer, the amount of the dollar volume established using the
projected annualized value per customer based on revenue for the three (3) month
period ended September 30, 2002 and (iii) confirmation of whether a written
agreement (other than periodic purchase orders) exists between the Company or
any of its Subsidiaries and each such customer and the effective date of each
such written agreement. To the Knowledge of the Company, as of the date hereof,
no Person listed on Section 2.22 of the Company Disclosure Letter within the
last twelve months has canceled or otherwise terminated the relationship of such
Person with the Company or any of its Subsidiaries or has given written notice
that it intends to cancel or otherwise terminate the relationship of such Person
with the Company or any of its Subsidiaries.
2.23 Trust Funds
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(a) Trust Tax Funds. All Trust Tax Funds amounts have been held in
segregated tax accounts maintained by the Company or its Subsidiaries on behalf
of their customers (the "TAX ACCOUNTS"). Such amounts are not commingled with
funds of the Company and its Subsidiaries and no amounts have been paid out of
such Tax Accounts other than (i) payments to the applicable Tax authorities of
such Taxes on behalf of such customers, (ii) payments returning any such amounts
(or any portion of such amounts) to such customers, (iii) the interest income
earned on investments which is subsequently transferred to the Company's
corporate cash account or (iv) fees mistakenly wired by customers to the Tax
Accounts which are transferred to the Company's corporate cash account. To the
Knowledge of the Company, the Company and its Subsidiaries have paid in a timely
manner to the applicable Tax authorities all amounts that are required to be
paid to such authorities on behalf of their customers in respect of all taxable
periods then ended, except in the event that any failure to pay such amount to
such authorities was (i) caused solely by the refusal or inability of the
customer to pay such amount to the Company and its Subsidiaries, (ii) caused
solely by the failure of the customer to provide accurate data to the Company
and its Subsidiaries or (iii) in the ordinary course of business. To the
Knowledge of the Company, the Company and its Subsidiaries have timely filed
with the applicable Tax authorities all Tax Returns that are required to be
filed in connection with the Trust Tax Funds held in the Tax Accounts, except in
the event that any failure to timely file such Tax Returns with such authorities
was (i) caused solely by the failure of the customer to provide in a timely
manner the information necessary to make such filings or (ii) in the ordinary
course of business. The aggregate Assumed Customer Tax Obligations are equal to
the sum of (i) the aggregate amount of Trust Tax Funds held in the Tax Accounts
plus (ii) the relevant portion of Tax Account Receivables (as defined in Section
5.13), if any, with the exception of the realized loss in value of a financial
instrument described in Section 2.23 of the Company Disclosure Letter of which
corporate funds will ultimately be transferred into the Tax Account to remedy
the differential. "TRUST TAX FUNDS" shall mean, with respect to any date, all
federal and state payroll, social security, Medicare, unemployment and other
trust Taxes held in Tax Accounts that were (i) withheld by the Company or its
Subsidiaries from the payroll of employees of, or otherwise collected from, the
Company's or its Subsidiaries' customers in connection with the payroll
processing and tax filing services of the Company and its Subsidiaries prior to
such date and (ii) not yet remitted to the applicable Tax authorities as of such
date. "ASSUMED CUSTOMER TAX OBLIGATIONS" shall mean with respect to any date,
obligations of the Company and/or its Subsidiaries as of such date (i) to remit
to the Tax authorities on behalf of the Company's or its Subsidiaries' customers
after such date all federal and state payroll, social security, Medicare,
unemployment and other trust Taxes that are required to be paid and (ii) to
refund to the Company's or its Subsidiaries' customers after such date any Trust
Tax Funds over-impounded from such customers by the Company and/or its
Subsidiaries, in each case, in connection with the payroll processing and tax
filing services performed by the Company and/or its Subsidiaries prior to such
date; provided that, for purposes hereof, the Company and/or its Subsidiaries
shall only be regarded as having such an obligation if, and to the extent that,
a customer has paid, or Trust Tax Funds have been over-impounded by, the Company
and/or its Subsidiaries in respect thereof prior to such date. To the Company's
Knowledge, set forth on Section 2.23 of the Company Disclosure Letter is a true
and correct list as of December 20, 2002 of penalties and interest relating to
assessments with respect to payroll Tax Returns filed on behalf of the clients
of the Company or its Subsidiaries which, at the time the Company received
notice of such assessments, were deemed individually to represent potential
exposure to the Company and Subsidiaries, or their clients, in excess of
$250,000.
(b) Trust Non-Tax Funds. All Trust Non-Tax Funds amounts have been
held in segregated non-tax accounts maintained by the Company or its
Subsidiaries on behalf of their customers (the "NON-TAX ACCOUNTS"). Such amounts
are not commingled with funds of the Company or its Subsidiaries and no amounts
have been paid out of such accounts other than (i) payments to the applicable
regulatory authorities of such withheld amounts on behalf of such
-23-
customers or to authorized recipients or (ii) payments returning any such
amounts (or any portion of such amounts) to such customers. To the Knowledge of
the Company, the Company and its Subsidiaries have paid in a timely manner to
the applicable regulatory authorities (or authorized recipients) all amounts
that are required to be paid to such authorities (or authorized recipients) on
behalf of customers in respect of all payroll periods then ended, except in the
event that any failure to pay such amount to such authorities (or authorized
recipients) was (i) caused solely by the refusal or inability of the customer to
pay such amount to the Company and its Subsidiaries, (ii) caused solely by the
failure of the customer to provide accurate data to the Company and its
Subsidiaries or (iii) in the ordinary course of business. To the Knowledge of
the Company, the Company and its Subsidiaries have timely filed with the
applicable regulatory authorities or authorized recipients all filings, if any,
that are required to be filed in connection with the Trust Non-Tax Funds held in
the Non-Tax Accounts, except in the event that any failure to timely file such
filings with such authorities was (i) caused solely by the failure of the
customer to provide in a timely manner the information necessary to make such
filings or (ii) in the ordinary course of business. The aggregate Assumed
Customer Non-Tax Obligations are equal to the sum of (i) the aggregate amount of
Trust Non-Tax Funds held in the Non-Tax Accounts plus (ii) the relevant portion
of Trust Account Receivables, if any. "TRUST NON-TAX FUNDS" shall mean, with
respect to any date, (a) all customers' employees' net pay (in connection with
direct deposit services or check services) and (b) all workers' compensation or
other insurance premiums or contributions (whether on behalf of the employer or
employee) to 401(k) or other similar investment plans that were withheld by the
Company or its Subsidiaries from the payroll of employees of, or otherwise
collected from, the Company's or its Subsidiaries' customers in connection with
the payroll processing services of the Company and its Subsidiaries prior to
such date, which in each case, were not yet remitted to the applicable
regulatory authorities or other authorized recipients as of such date and are
held in Non-Tax Accounts. "ASSUMED CUSTOMER NON-TAX OBLIGATIONS" shall mean with
respect to any date, obligations of the Company and/or its Subsidiaries as of
such date (i) to remit to the applicable regulatory authorities or other
authorized recipients on behalf of the Company's or its Subsidiaries' customers
after such date all workers' compensation or other insurance premiums or
contributions (whether on behalf of employer or employee) to 401(k) or other
similar investment plans or customers' employees' net pay (in connection with
direct deposit services or check services) that are required to be paid and (ii)
to refund to the Company's or its Subsidiaries' customers after such date any
Trust Non-Tax Funds over-impounded from such customers by the Company and/or its
Subsidiaries, in each case, in connection with the payroll processing services
performed by the Company and/or its Subsidiaries prior to such date; provided
that, for purposes hereof, the Company and/or its Subsidiaries shall only be
regarded as having such an obligation if, and to the extent that, a customer has
paid, or Trust Non-Tax Funds have been over-impounded by, the Company and/or its
Subsidiaries in respect thereof prior to such date.
2.24 Investment Policy. The Company is, in all material respects, in
compliance with the terms of the Investment Policy.
-24-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, except as
otherwise set forth in writing in appropriately corresponding sections of the
disclosure letter supplied by Parent and Merger Sub to the Company dated as of
the date hereof (the "PARENT DISCLOSURE LETTER"), as follows:
3.1 Organization; Standing and Power; Charter Documents; Subsidiaries.
(a) Organization; Standing and Power. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing would not have a
Material Adverse Effect on Parent.
(b) Charter Documents. Parent has delivered or made available to the
Company (i) a true and correct copy of the Certificate of Incorporation
(including any Certificate of Designations) and Bylaws of Parent, each as
amended to date (collectively, the "PARENT CHARTER DOCUMENTS"). and of the
Certificate of Incorporation and Bylaws of Merger Sub (collectively, the "MERGER
SUB CHARTER DOCUMENTS"). Such Parent Charter Documents and Merger Sub Charter
Documents are in full force and effect. Parent is not in violation of any of the
provisions of the Parent Charter Documents and Merger Sub is not in violation of
any of the provisions of the Merger Sub Charter Documents.
(c) Merger Sub. All the outstanding shares of capital stock of, or
other equity interests in Merger Sub have been validly issued and are fully paid
and non-assessable and are owned directly or indirectly by Parent, free and
clear of all Liens, including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests, except for
restrictions imposed by applicable securities laws.
3.2 Authority; Non-Contravention; Necessary Consents.
(a) Authority. Each of Parent and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby has been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby, subject only, with respect to
the Merger, to the filing of the Certificate of Merger pursuant to Delaware Law.
This Agreement has been duly executed and delivered by Parent and Merger Sub
and, assuming due execution and delivery by the Company, constitutes the valid
and binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms.
-25-
(b) Non-Contravention. The execution and delivery of this Agreement
by Parent and Merger Sub does not, and performance of this Agreement by Parent
will not: (i) conflict with or violate the Parent Charter Documents or the
Merger Sub Charter Documents, (ii) subject to compliance with the requirements
set forth in Section 3.2(c), conflict with or violate any material Legal
Requirement applicable to Parent or Merger Sub or by which Parent or Merger Sub
or any of their respective properties is bound or affected, or (iii) result in
any material breach of or constitute a material default (or an event that with
notice or lapse of time or both would become a material default) under, or
impair Parent's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a material Lien on any of the
material properties or assets of Parent or Merger Sub pursuant to, any material
Contract to which Parent or Merger Sub is a party or by which Parent or Merger
Sub or any of their respective properties are bound or affected, in each case,
except as would not individually or in the aggregate, have a material adverse
effect on the ability of Parent or Merger Sub to consummate the transactions
contemplated hereby.
(c) Necessary Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with any Governmental Entity is
required to be obtained or made by Parent in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the Necessary Consents and (ii) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not be material to Parent, Merger Sub or the Company or materially
adversely affect the ability of the parties hereto to consummate the
transactions contemplated hereby within the time frame in which such
transactions would otherwise be consummated in the absence of the need for such
consent, approval, order, authorization, registration, declaration or filings.
3.3 Brokers' and Finders' Fees. Except for fees payable to Xxxxxx Brothers
pursuant to an engagement letter entered into by Parent, Parent has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
3.4 Disclosure. None of the information supplied or to be supplied by or
on behalf of Parent or Merger Sub for inclusion or incorporation by reference in
the Proxy Statement, will, at the time the Proxy Statement is first mailed to
the stockholders of the Company, at the time of the Stockholders' Meeting or as
of 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 the light of the circumstances under which
they are made, not misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Stockholders' Meeting which shall have become false or misleading.
3.5 Board Approval. The Board of Directors of Parent has, by resolutions
duly adopted by at a meeting of the Parent's Directors duly called and held and
not subsequently rescinded or modified in any way (the "PARENT BOARD APPROVAL")
has duly approved this Agreement.
3.6 Available Funds.
3.7 Parent has or has available to it, and will make available to Merger
Sub, all funds necessary to satisfy all of Parent's and Merger Sub's obligations
under this Agreement.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company.
(a) Ordinary Course. During the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, the Company shall, and shall cause each of its
Subsidiaries to, (except (i) as permitted by the terms of this Agreement, (ii)
as disclosed in Section 4.1 of the Company Disclosure Letter, or (iii) to the
extent that Parent shall otherwise consent in writing (which consent shall not
be unreasonably delayed), carry on the business of the Company and its
Subsidiaries, including but not limited to its Investment Policy in all material
respects, in the ordinary course, consistent with past practice, and shall use
their commercially reasonable efforts to preserve intact their business,
organization and relationships with third parties and to keep available the
services of their officers and employees.
(b) Required Consent. In addition, without limiting the generality
of Section 4.1(a), except as permitted by the terms of this Agreement, and
except as provided in Section 4.1 of the Company Disclosure Letter, without the
prior written consent of Parent (which consent shall not be unreasonably
delayed), during the period from the date hereof and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, the Company shall not do any of the following, and shall not
permit its Subsidiaries to do any of the following:
(i) Enter into any new line of business material to it and its
Subsidiaries taken as a whole;
(ii) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock, other than, the declaration
and payment in additional shares of Company Preferred Stock of quarterly
dividends payable to the holders of Company Preferred Stock in accordance with
Section 3 of the Certificate of Designation;
(iii) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of its capital stock or the capital stock of its
Subsidiaries, except repurchases of unvested shares at cost in connection with
the termination of the Company's or any of its Subsidiary's relationship with
any Service Provider (as defined in the Company Option Plans) pursuant to stock
option or purchase agreements in effect on the date hereof or entered into in
compliance with this Agreement;
(iv) Issue, deliver, sell, authorize, pledge or otherwise
encumber any shares of capital stock, Voting Debt or any securities convertible
into shares of capital stock or Voting Debt, or subscriptions, rights, warrants
or options to acquire any shares of capital stock or Voting Debt or any
securities convertible into shares of capital stock or Voting Debt, or enter
into other agreements or commitments of any character obligating it to issue any
such securities or rights, other than: (A) issuances of Company Common Stock
upon the exercise of Company Options existing on the date hereof in accordance
with their present terms or granted pursuant to clause (D) hereof, (B) issuance
of shares of Company Common Stock to participants in the Company Purchase Plans
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pursuant to the terms thereof under currently existing agreements, (C) issuances
of Company Common Stock upon the exercise of other options, warrants or other
rights of the Company outstanding on the date hereof in accordance with their
present terms (including cashless exercises), and (D) grants of stock options to
acquire Company Common Stock granted on or after February 14, 2003 under the
Company Stock Option Plans in the ordinary course of business in connection with
annual compensation reviews, promotions or new hires provided that not more than
75,000 shares of Company Common Stock (net of cancellations) shall be issued
pursuant to this clause (D) in each three month period commencing on February
14, 2003;
(v) Cause, permit or propose any amendments to the Company
Charter Documents or any of the Subsidiary Charter Documents of its
Subsidiaries;
(vi) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a portion of the assets of, or
by any other manner, any business or any Person or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its business;
(vii) Enter into any joint ventures, strategic partnerships or
alliances that are material to any of its divisions or business units;
(viii) Except as previously disclosed in the Company SEC
Reports prior to the date hereof, sell, lease, license, mortgage or otherwise
encumber or dispose of any properties or assets which are material, individually
or in the aggregate, to its business, except in the ordinary course of business
consistent with past practice;
(ix) Make any loans, advances or capital contributions to, or
investments in, any other Person, other than: (A) loans or investments by it or
a Subsidiary of it to or in it or any wholly-owned Subsidiary of it, (B)
employee loans or advances made in the ordinary course of business consistent
with past practice and not to exceed $250,000 in the aggregate, (C) investments
by it or a Subsidiary of it in any other Person (i) in the ordinary course of
business consistent with past practice and not to exceed $500,000 in the
aggregate (provided that none of such transactions referred to in this clause
(C)(i) presents a material risk of delaying the Merger or making it more
difficult to obtain any Necessary Consent) or (ii) pursuant to the terms of and
in accordance with the Company's Investment Policy. For the purposes of this
Agreement, "INVESTMENT POLICY" shall mean the investment policy of the Company
adopted by the Board of Directors of the Company on July 31, 2002 set forth in
Section 4.1(b)(ix) of the Company Disclosure Letter;
(x) Except as required by GAAP or the SEC as concurred in by
its independent auditors, make any material change in its methods or principles
of accounting since the date of the Company Balance Sheet;
(xi) Make or change any material Tax election or adopt or
change a Tax accounting method;
(xii) Settle, pay, discharge or satisfy any material claim
(including any Tax claim), action, suit, investigation, audit or proceeding
involving money damages, except (A) in the ordinary course of business (B) to
the extent subject to reserves existing as of the date hereof in
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accordance with GAAP, (C) amounts outside the ordinary course of business not to
exceed $500,000 in the aggregate or (D) engaging in any such activities on
behalf of customers of the Company or its Subsidiaries that result in payments
only by such customers, and, except as permitted by subsections (A), (B) or (C),
do not result in any payment obligation or other liability of the Company or any
of its Subsidiaries;
(xiii) Except as required by Legal Requirements, this
Agreement or Contracts currently binding on the Company or its Subsidiaries,
adopt or amend any Plan, Company Purchase Plans, Company Stock Option Plan or
Other Options, or enter into any new, or amend any existing employment,
severance, consulting, salary continuation or other similar Contract or
collective bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business with employees who are
terminable "at will"), pay any special bonus or special remuneration (cash,
equity or otherwise) to any director or employee, or increase the salaries or
wage rates or fringe benefits (including rights to severance or indemnification)
of its directors, officers, employees or consultants except (x) payment of
bonuses or increases in salaries or wage rates or fringe benefits to non-officer
employees in the ordinary course of business consistent with past practice or
(y) payments made to Company employees pursuant to Company retention plans in
amounts not to exceed the amounts set forth in Section 4.1 of the Company
Disclosure Letter;
(xiv) Enter into any Contract the effect of which would be to
grant to a third party any actual or potential right of license to any material
Intellectual Property owned by Parent or any of its Subsidiaries;
(xv) Incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any of
its Subsidiaries, guarantee any debt securities of another Person, enter into
any "keep well" or other Contract to maintain any financial statement condition
of another Person or enter into any arrangement having the economic effect of
any of the foregoing, except for borrowings under its line of credit for working
capital purposes and the endorsement of checks in the normal course of business
consistent with past practice or make any loans, advances or capital
contributions to, or investments in, any other Person, other than to the Company
or any direct or indirect wholly owned Subsidiary of the Company and other than
travel and entertainment advances to employees in the ordinary course of
business consistent with past practice;
(xvi) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(xvii) Engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
the Company's or its Subsidiaries' affiliates, including, without limitation,
any transactions, agreements, arrangements or understandings with any affiliate
or other Person covered under Item 404 of SEC Regulation S-K that would be
required to be disclosed under such Item 404;
(xviii) Do or permit any licensee or sublicensee thereof to do
any act or knowingly omit to do any act whereby any Company Intellectual
Property may become invalidated, abandoned or dedicated to the public domain;
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(xix) Make any commitment or enter into, or amend, modify, or
terminate, or waive any rights under any Company Material Contract; or
(xx) Agree in writing or otherwise to take any of the actions
described in (i) through (xix) above.
(c) Taxes. During the period from the date of this Agreement to the
Effective Time, the Company and its Subsidiaries shall:
(i) prepare, in the ordinary course of business and consistent
with past practice (except as otherwise required by law), and timely file all
Tax Returns required to be filed by it (or them) on or before the Closing Date
("POST SIGNING RETURNS");
(ii) deliver to Parent drafts of the Company's fiscal year
ended June 30, 2002 Tax Return prior to the date (including extensions) on which
such Tax Return is required to be filed; and
(iii) promptly notify Parent of any material federal, state,
local or foreign income or franchise and any other suit, claim, action,
investigation, proceeding or audit pending against or with respect to the
Company or any of its Subsidiaries in respect of any Tax matter, including
(without limitation) Tax liabilities and refund claims.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement. Promptly after execution and delivery of this
Agreement, the Company shall prepare and shall file with the SEC as soon as is
practicable a preliminary Proxy Statement, together with a form of proxy, with
respect to the Stockholders' Meeting at which the stockholders of the Company
will be asked to vote upon and approve this Agreement and the Merger and shall
use reasonable efforts to have the Proxy Statement and form of proxy cleared by
the SEC as promptly as practicable, and promptly thereafter shall mail the
definitive Proxy Statement and form of proxy to stockholders of the Company. The
term "PROXY STATEMENT" shall mean such proxy or information statement and all
amendments or supplements thereto, if any, similarly filed and mailed. Parent
will provide the Company with any information that may be required in order to
effectuate the preparation and filing of the Proxy Statement pursuant to this
Section 5.1. The Company will provide Parent and its counsel with a reasonable
opportunity to review the Proxy Statement prior to its filing. The Company will
respond to, and provide Parent and its counsel with a reasonable opportunity to
participate in the response of the Company to, any comments from the SEC and
will notify Parent promptly upon the receipt of any comments from the SEC in
connection with the filing of, or amendments or supplements to, the Proxy
Statement. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement, the Company or Parent, as the
case may be, will promptly inform the other of such occurrence and cooperate in
filing with the SEC and/or mailing to stockholders of the Company such amendment
or supplement. Each of Parent and the Company shall cooperate and the Company
shall provide Parent (and its counsel) with a reasonable opportunity to review
and comment on the Proxy Statement and on any amendment or supplement to the
Proxy Statement prior to filing such with the SEC, and will
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provide Parent with a copy of all such filings made with the SEC. The
information provided and to be provided by Parent, Merger Sub and the Company,
respectively, for use in Proxy Statement shall, on the date the Proxy Statement
is first mailed to the Company's stockholders, on the date of the Stockholders'
Meeting and as of the Effective Time, not contain an untrue statement of a
material fact or omit to state any material fact necessary in order to make such
information, in light of the circumstances under which it was provided, not
misleading, and the Company, Parent and Merger Sub each agree to correct any
information provided by it for use in the Proxy Statement which shall have
become false or misleading in any material respect. The Proxy Statement shall
comply as to form in all material respects with all applicable requirements of
federal securities laws.
5.2 Meetings of Stockholders; Board Recommendation.
(a) Meeting of Stockholders. Promptly after the execution of this
Agreement, the Company will take all action necessary in accordance with
Delaware Law and its Certificate of Incorporation and Bylaws to call, hold and
convene a meeting of its stockholders to consider the adoption and approval of
this Agreement and approval of the Merger (the "STOCKHOLDERS' MEETING") as soon
as practicable after the date hereof. Subject to Section 5.3(d), the Company
will use reasonable efforts to solicit from its stockholders proxies in favor of
the adoption and approval of this Agreement and the approval of the Merger, and
will take all other action necessary or advisable to secure the vote or consent
of its stockholders required by Delaware Law to obtain such approval.
Notwithstanding anything to the contrary contained in this Agreement, the
Company may adjourn or postpone its Stockholders' Meeting to the extent
necessary to ensure that any necessary supplement or amendment to the Proxy
Statement is provided to its stockholders in advance of a vote on the Merger and
this Agreement or, if as of the time for which the Stockholders' Meeting is
originally scheduled (as set forth in the Proxy Statement) there are
insufficient shares of Company Common Stock or Company Preferred Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of such Stockholders' Meeting.
(b) Board Recommendation. Except to the extent expressly permitted
by Section 5.3(d): (i) the Board of Directors of the Company shall recommend
that its stockholders vote in favor of the adoption and approval of this
Agreement and approval of the Merger (the "RECOMMENDATION"), at the
Stockholders' Meetings, (ii) the Proxy Statement shall include a statement to
the effect that the Board of Directors of the Company has recommended that the
Company's stockholders vote in favor of adoption and approval of this Agreement
and approval of the Merger at the Stockholders' Meeting, and (iii) neither the
Board of Directors of the Company nor any committee thereof shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or modify in a manner
adverse to Parent, the Recommendation.
5.3 Acquisition Proposals.
(a) No Solicitation. The Company agrees that neither it nor any of
its Subsidiaries nor any of their respective officers, directors, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries), and any party to a Stockholder
Agreement shall, and that the Company shall use reasonable efforts to cause its
and its Subsidiaries' other employees and affiliates not to (and shall not
authorize any of them to) directly or indirectly: (i) solicit, initiate,
encourage, knowingly facilitate or induce any inquiry with respect to,
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or the making, submission or announcement of, any Acquisition Proposal (as
defined in Section 5.3(f)) with respect to itself, (ii) participate or engage in
any discussions or negotiations regarding, or furnish to any Person any
nonpublic information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes or may reasonably
be expected to lead to, any Acquisition Proposal with respect to itself, (iii)
approve, endorse or recommend any Acquisition Proposal with respect to itself
(except to the extent specifically permitted pursuant to Section 5.3(d)), or
(iv) enter into any letter of intent or similar document or any Contract or
commitment contemplating or otherwise relating to any Acquisition Proposal or
transaction contemplated thereby with respect to itself. The Company and its
Subsidiaries and any of their respective officers, directors, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries), and any party to a Stockholder
Agreement will immediately cease, and the Company shall use reasonable efforts
to cause its and its Subsidiaries' other employees and affiliates to cease, any
and all existing activities, discussions or negotiations with any third parties
(other than Parent, Merger Sub and their representatives) conducted heretofore
with respect to any Acquisition Proposal with respect to itself.
(b) Notification of Unsolicited Acquisition Proposals. As promptly
as practicable and in any event within one (1) business day after receipt of any
Acquisition Proposal or any request for nonpublic information or inquiry which
the Company reasonably believes would lead to an Acquisition Proposal the
Company shall provide Parent with oral and written notice of the material terms
and conditions of such Acquisition Proposal, request or inquiry, and the
identity of the Person or group making any such Acquisition Proposal, request or
inquiry. The Company shall, upon receipt of an Acquisition Proposal, request or
inquiry, provide Parent as promptly as practicable oral and written notice
setting forth the terms of any material amendments or proposed material
amendments of any such Acquisition Proposal, request or inquiry.
(c) Superior Offers. Notwithstanding anything to the contrary
contained in Section 5.3(a), in the event that, prior to the adoption and
approval of this Agreement and the Merger by the required vote of the
stockholders of the Company, the Company receives an unsolicited, bona fide
written Acquisition Proposal with respect to itself from a third party that its
Board of Directors has in good faith concluded (after consultation with its
outside legal counsel and its financial advisor), is, or is reasonably likely to
result in, a Superior Offer (as defined in Section 5.3(f)) and the Company has
complied in full with all its obligations under Section 5.3(a) in connection
with such Acquisition Proposal, it may then take the following actions:
(i) Furnish nonpublic information to the third party making
such Acquisition Proposal, provided that (A) (1) concurrently with furnishing
any such nonpublic information to such party, it gives Parent written notice of
its intention to furnish nonpublic information and (2) it receives from the
third party an executed confidentiality agreement in substantially the form of
the Confidentiality Agreement (as defined in Section 5.4) prior to taking any
action under clause (1) above and (B) contemporaneously with furnishing any such
nonpublic information to such third party, it furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously so furnished);
(ii) Engage in negotiations with the third party with respect
to the Acquisition Proposal, provided that concurrently with entering into
negotiations with such third
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party, it gives Parent oral and written notice of the its intention to enter
into negotiations with such third party; and
(iii) Approve or recommend, or propose to approve or
recommend, any Superior Offer and enter into any agreement with respect thereto;
provided, in each such case, that the Company has terminated this Agreement
pursuant to Section 7.1(g).
Nothing in this Section 5.3(c) shall relieve the Company from its
obligation to comply with Section 5.3(b).
(d) Changes of Recommendation. The Board of Directors of the Company
may not withhold, withdraw, amend or modify the Recommendation (any of the
foregoing actions, whether by a Board of Directors or a committee thereof, a
"CHANGE OF RECOMMENDATION"), unless, prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of the
Company, the Board of Directors has concluded in good faith, after consultation
with its outside legal counsel, that such Change of Recommendation is required
by its fiduciary obligations to its stockholders under Delaware Law.
(e) Compliance with Tender Offer Rules. Nothing contained in this
Agreement shall prohibit either party or its respective Board of Directors from
taking and disclosing to its stockholders a position contemplated by Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act.
(f) Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "ACQUISITION PROPOSAL," with respect to a party, shall
mean any offer or proposal or public announcement of a proposal or plan,
relating to any transaction or series of related transactions involving: (A) any
purchase from such party or acquisition by any Person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a fifteen percent (15%) interest in the total
outstanding voting securities of such party or any of its Subsidiaries, directly
or indirectly, or any tender offer or exchange offer that if consummated would
result in any Person or group beneficially owning fifteen percent (15%) or more
of the total outstanding voting securities of such party or any of its
Subsidiaries, directly or indirectly, or any merger, consolidation, business
combination or similar transaction involving such party or any of its
Subsidiaries, (B) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than fifteen percent (15%) of the
assets of such party (including its Subsidiaries taken as a whole), directly or
indirectly, or (C) any liquidation or dissolution of such party; and
(ii) "SUPERIOR OFFER," with respect to a party, shall mean an
unsolicited, bona fide written offer made by a third party to acquire, directly
or indirectly, pursuant to a tender offer, exchange offer, merger, consolidation
or other business combination, all or substantially all of the assets of such
party or a majority of the total outstanding voting securities of such party and
as a result of which the stockholders of such party immediately preceding such
transaction would hold less than fifty percent (50%) of the equity interests in
the surviving or resulting entity of such transaction or any direct or indirect
parent or subsidiary thereof, on terms that the Board of Directors
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of such party has in good faith concluded (after consultation with its outside
legal counsel and its financial adviser) (i) to be more favorable from a
financial point of view, to such party's stockholders (in their capacities as
stockholders) than the terms provided pursuant to this Agreement, (ii) the
conditions to the consummation of which are reasonably capable of being
satisfied and (iii) financing for which, to the extent required, is then
committed or in the good faith judgment of the Board of Directors of the Company
(after consultation with its independent financial advisors) reasonably
available.
5.4 Confidentiality; Access to Information.
(a) Confidentiality. The parties acknowledge that the Company and
Parent have previously executed a Non-Disclosure Agreement dated November 1,
2002 (the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms and Parent will
hold, and will cause its directors, officers, employees, agents and advisors
(including attorneys, accountants, consultants, bankers and financial advisors)
to hold, any Evaluation Material (as defined in the Confidentiality Agreement)
confidential in accordance with the terms of the Confidentiality Agreement.
(b) Access to Information. The Company will afford Parent and
Parent's accountants, counsel and other representatives reasonable access during
normal business hours to its properties, books, records and personnel during the
period prior to the Effective Time to obtain all information concerning its
business, including the status of product development efforts, properties,
results of operations and personnel, as Parent or its representatives may
reasonably request, and, during such period, upon request by Parent, the Company
shall, and shall cause each of its Subsidiaries to, furnish promptly to Parent a
copy of any report, schedule, registration statement and other document filed by
it during such period pursuant to the requirements of federal or state
securities laws; provided, however, that the Company may restrict the foregoing
access to the extent that any law, treaty, rule or regulation of any
Governmental Entity applicable to the Company requires the Company or its
Subsidiaries to restrict or prohibit access to any such properties or
information.
5.5 Public Disclosure. Neither the Company, Parent nor any of their
respective affiliates shall issue or cause the publication of any press release
or other public announcement with respect to the this Agreement or the other
transactions contemplated hereby without the prior written consent of the other
party, except as may be required by law or by any listing agreement with, or the
policies of, a national securities exchange in which circumstance reasonable
efforts to consult with the other party will still be required to the extent
practicable.
5.6 Regulatory Filings; Reasonable Best Efforts.
(a) Regulatory Filings. Each of Parent, Merger Sub and the Company
shall coordinate and cooperate with one another and shall each use reasonable
best efforts to comply with, and shall each refrain from taking any action that
would impede compliance with, all Legal Requirements, and as promptly as
practicable after the date hereof, each of Parent, Merger Sub and the Company
shall make all filings, notices, petitions, statements, registrations,
submissions of information, application or submission of other documents
required by any Governmental Entity in connection with the Merger and the other
transactions contemplated hereby, including, without
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limitation: (i) Notification and Report Forms with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") as required by the HSR Act, (ii) any other filing
necessary to obtain any Necessary Consent, (iii) filings under any other
comparable pre-merger notification forms required by the merger notification or
control laws of any applicable jurisdiction, as agreed by the parties hereto,
and (iv) any filings required under the Securities Act, the Exchange Act, any
applicable state or securities or "blue sky" laws and the securities laws of any
foreign country, or any other Legal Requirement relating to the Merger. Each of
Parent, Merger Sub and the Company shall comply as promptly as practicable with
any request for additional information, documents or other materials received by
such party hereto or any of its Subsidiaries or affiliates from any Governmental
Entity. Each of Parent and the Company will cause all documents that it is
responsible for filing with any Governmental Entity under this Section 5.6(a) to
comply in all material respects with all applicable Legal Requirements.
(b) Exchange of Information. Parent, Merger Sub and the Company each
shall promptly supply the other with any information which may be required in
order to effectuate any filings or application pursuant to Section 5.6(a).
Except where prohibited by applicable Legal Requirements, and subject to the
Confidentiality Agreement, each of the Company and Parent shall consult with
outside counsel to the other prior to taking a position with respect to any such
filing, shall permit outside counsel to the other to review and discuss in
advance, and consider in good faith the views of the other in connection with
any analyses, appearances, presentations, memoranda, briefs, white papers,
arguments, opinions and proposals before making or submitting any of the
foregoing to any Governmental Entity by or on behalf of any party hereto in
connection with any investigations or proceedings in connection with this
Agreement, the Merger or the other transactions contemplated hereby (including
under any antitrust or fair trade Legal Requirement), coordinate with outside
counsel to the other in preparing and exchanging such information and promptly
provide outside counsel to the other with copies of all filings, presentations
or submissions (and a summary of any oral presentations) made by such party to
any Governmental Entity in connection with this Agreement, the Merger or the
other transactions contemplated hereby, provided that with respect to any such
filing, presentation or submission, each of Parent and the Company need not
supply outside counsel to the other with copies (or in case of oral
presentations, a summary) to the extent that any law, treaty, rule or regulation
of any Governmental Entity applicable to such party requires such party or its
Subsidiaries to restrict or prohibit access to any such properties or
information.
(c) Notification. Each of Parent, Merger Sub and the Company will
notify the other promptly upon the receipt of: (i) any comments from any
officials of any Governmental Entity in connection with any filings made
pursuant hereto and (ii) any request by any officials of any Governmental Entity
for amendments or supplements to any filings made pursuant to, or information
provided to comply in all material respects with, any Legal Requirements.
Whenever any event occurs that is required to be set forth in an amendment or
supplement to any filing made pursuant to Section 5.6(a), Parent, Merger Sub or
the Company, as the case may be, will promptly inform the other of such
occurrence and cooperate in filing with the applicable Governmental Entity such
amendment or supplement.
(d) Reasonable Best Efforts. Subject to the express provisions of
Section 5.2 and Section 5.3 hereof and upon the terms and subject to the
conditions set forth herein, each of the
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parties agrees to use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including using reasonable best efforts to
accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions precedent set forth in Article VI to be satisfied, (ii) the
obtaining of all necessary actions or non-actions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all necessary consents, approvals or waivers from third parties, including all
Necessary Consents, (iv) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, and (v) the execution or
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, the Company and its Board of
Directors shall, if any takeover statute or similar Legal Requirement is or
becomes applicable to this Agreement or any of the transactions contemplated by
this Agreement, use reasonable best efforts to ensure that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such Legal Requirement on this Agreement and the transactions contemplated
hereby.
(e) Limitation on Divestiture. Notwithstanding anything in this
Agreement to the contrary, nothing contained in this Agreement shall be deemed
to require Parent or the Company or any Subsidiary or affiliate thereof to take
or agree to take any Action of Material Divestiture (as defined below) which
would be reasonably likely to materially adversely impact the benefits expected
to be derived by Parent and its Subsidiaries (on a combined basis with the
Company and its Subsidiaries) as a result of the transactions contemplated
hereby or would be reasonably likely to materially adversely affect Parent and
its Subsidiaries (on a combined basis with the Company and its Subsidiaries)
following the Merger. For purposes of this Agreement, an "ACTION OF MATERIAL
DIVESTITURE" shall mean executing or carrying out agreements or submitting to
Legal Requirements providing for a material license, material sale or other
material disposition of any assets or categories of assets that are material to
the combined business of Parent's employer services business and the Company or
the holding separate of Company capital stock or imposing or seeking to impose
any material limitation on the ability of Parent, the Company or any of their
respective Subsidiaries to own such assets or to acquire, hold or exercise full
rights of ownership of the Company's business or on the ability of Parent to
conduct the combined business of Parent's employer services business and the
Company.
5.7 Notification of Certain Matters. The Company shall give prompt notice
to Parent and Parent shall give prompt notice to the Company, of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate or any failure of the Company, Parent or Merger Sub, as the
case may be, to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, such that, (A) in
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the case of the Company, the conditions set forth in Section 6.2(a) or Section
6.2(b) would not be satisfied or (B) in the case of Parent or Merger Sub, the
conditions set forth in Section 6.3(a) or Section 6.3(b) would not be satisfied;
provided, however, that the delivery of any notice pursuant to this Section 5.7
shall not limit or otherwise affect the remedies available hereunder to any of
the parties sending or receiving such notice.
5.8 Third-Party Consents. As soon as practicable following the date
hereof, Parent and the Company will each use reasonable efforts to obtain (i)
all Necessary Consents and (ii) all consents, waivers and approvals under any
Company Material Contract as may be required to be obtained in connection with
the Merger.
5.9 Company Employee Plans and Employee Benefits.
(a) For the twelve (12) month period following the Effective Time,
Parent will provide to employees of the Company or any Subsidiary of the Company
who are employed by Parent or any Subsidiary of Parent after the Effective Time
(the "CONTINUING EMPLOYEES") compensation (excluding bonuses, commissions, stock
options, restricted stock, other forms of equity compensation and benefits) that
is comparable to the compensation (excluding bonuses, commissions, stock
options, restricted stock, other forms of equity compensation and benefits)
provided to the Continuing Employees prior to the execution of this Agreement.
For the twelve (12) month period following the Effective Time, Parent will
maintain a severance pay practice for the benefit of each Continuing Employee
that is no less favorable than the severance pay practice provided by the
Company as of the date of this Agreement. On and after the Effective Time,
Parent and/or any Subsidiary of Parent shall provide to the Continuing Employees
participation in benefit plans offered to similarly situated employees of Parent
that are no less favorable than the Plans (the "PARENT PLANS"). Parent shall
take all necessary actions to provide that Continuing Employees will receive
full credit for years of service with the Company and any of its Subsidiaries
under the Parent Plans to the extent taken into account for such purposes under
the Plans prior to the Effective Time (other than with respect to benefit
accrual under tax qualified plans)). Parent and/or any Subsidiary of Parent
shall give credit under those of its Parent Plans that are welfare benefit plans
for all amounts credited toward deductibles and out-of-pocket maximums, and time
accrued against applicable waiting periods, by Continuing Employees (including
their eligible dependents), in respect of the calendar year in which the
Effective Time occurs. Parent and/or any Subsidiary of Parent shall waive all
requirements for evidence of insurability and pre-existing conditions otherwise
applicable to the Continuing Employees under the Parent Plans in which such
Continuing Employees become eligible to participate on or following the
Effective Time.
(b) Parent agrees that at the Effective Time, Company Employees may
participate in the employee stock purchase plan sponsored by Parent (the "PARENT
ESPP"), subject to the terms and conditions of the Parent ESPP, and that service
with the Company shall be treated as service with Parent for determining
eligibility of the Continuing Employees under the Parent ESPP.
5.10 Indemnification.
(a) Indemnity. From and after the Effective Time, Parent will, and
will cause the Surviving Corporation to, fulfill and honor in all respects the
obligations of the Company pursuant to any indemnification and exculpation
provisions in favor of the current or former directors or officers of the
Company (the "INDEMNIFIED PARTIES") under the Certificate of Incorporation or
Bylaws of the Company and any agreement between an Indemnified Party and the
Company or a Subsidiary of the
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Company as in effect as of the date hereof that is listed in Section 5.10(a) of
the Company Disclosure Letter. The Certificate of Incorporation and Bylaws of
the Surviving Corporation will contain provisions with respect to exculpation
and indemnification that are at least as favorable to the Indemnified Parties as
those contained in the Certificate of Incorporation and Bylaws of the Company as
in effect on the date hereof, which provisions will not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
any time prior to the Effective Time were directors, officers, employees or
agents of the Company, unless such modification is required by law.
(b) Insurance. For a period of six (6) years after the Effective
Time, Parent will cause the Surviving Corporation to maintain in effect the
current policies of directors' and officers' liability insurance maintained by
the Company covering those persons (but only those persons) who are currently
covered by such policies; provided, however, that in no event will the Surviving
Corporation be required to pay an annual premium on such insurance policy that
is greater than 200% of the annual premium currently payable by the Company for
such coverage and provided, further, that notwithstanding the foregoing, in the
event such coverage is no longer available (or is only available for an amount
in excess of 200% of the annual premium currently paid by the Company for such
coverage) Parent shall nevertheless be obligated to provide such coverage as may
be obtained for such 200% amount. Parent may, however, satisfy its obligations
under the first sentence of this Section 5.10(b) by purchasing a "tail" policy
under the Company's existing directors' and officers' insurance policy which (i)
has an effective term of six (6) years from the Effective Time, (ii) covers
those persons (but only those persons) who are currently covered by the
Company's directors' and officers' insurance policy in effect as of the date
hereof, and (iii) contains terms and conditions (including, coverage amounts)
which are no less advantageous that those contained in the terms and conditions
of the Company directors' and officers' insurance policies in effect as of the
date hereof. The Company shall take all actions necessary or advisable under its
existing directors' and officers' insurance policy to permit Parent to satisfy
its obligations hereunder, including but not limited to triggering any "tail"
policy.
(c) Third-Party Beneficiaries. This Section 5.10 is intended to be
for the benefit of, and shall be enforceable by the Indemnified Parties and
their heirs and personal representatives and shall be binding on Parent and the
Surviving Corporation and its successors and assigns. In the event Parent or the
Surviving Corporation or its successor or assign (i) consolidates with or merges
into any other Person and shall not be the continuing or surviving corporation
or entity in such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any Person, then, and in each case, proper
provision shall be made so that the successor and assign of Parent or the
Surviving Corporation, as the case may be, honor the obligations set forth with
respect to Parent or the Surviving Corporation, as the case may be, in this
Section 5.10.
5.11 Section 16 Matters. Prior to the Effective Time, Parent and the
Company shall take all such steps as may be required (to the extent permitted
under applicable law) to cause any dispositions of Company Common Stock
(including derivative securities with respect to Company Common Stock) or
acquisitions of Parent Common Stock (including derivative securities with
respect to Parent Common Stock) resulting from the transactions contemplated by
Article I of this Agreement by each individual who is subject to the reporting
requirements of Section 16(a) of the
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Exchange Act with respect to the Company to be exempt under Rule 16b-3
promulgated under the Exchange Act.
5.12 Merger Sub Compliance. Parent shall cause Merger Sub to comply with
all of Merger Sub's obligations under or relating to this Agreement. Merger Sub
shall not engage in any business which is not in connection with the Merger or
other transactions contemplated hereby.
5.13 Tax Account and Non-Tax Account Reconciliation Report and Related
Data. The Company has delivered to Parent, in a form reasonably acceptable to
Parent, (A) (i) a Tax Account Reconciliation Report as of December 31, 2002 and
(ii) a statement of the Assumed Customer Tax Obligations, Tax Trust Funds, Tax
Account Receivables (shown in aggregate, as well as by aging category, e.g., 30
to 90 days, 91 to 180, 181 to 360, and one year or older) and the Tax Fund
Investment Portfolio (showing market value adjustments) balances, each as of
December 31, 2002, for each customer of the Company or its Subsidiaries and (B)
a Non-Tax Bank Account Reconciliation Report as of December 31, 2002. "TAX
ACCOUNT RECONCILIATION REPORT" shall mean a reconciliation report comparing the
aggregate amounts of the Tax Trust Funds and Tax Account Receivables to the
Assumed Customer Tax Obligations for each customer. "NON-TAX BANK ACCOUNT
RECONCILIATION REPORT" shall mean a report demonstrating the reconciliation of
the cash disbursement ledger to the bank account for only the COBRA account, the
flexible spending account (FSA), the health and welfare account (H&W) and the
ProCheck business account. "TAX ACCOUNT RECEIVABLES" shall mean, with respect to
any date, any amounts owed to the Company or its Subsidiaries by its customers
as of such date relating to previously assumed and fulfilled Assumed Customer
Tax Obligations, including, but not limited to, (i) rejected Collection Items in
Transit, (ii) items payable to the Company or its Subsidiaries by its customers
for reimbursement of overdeposits by Tax authorities (for which the customer has
received earlier credit or upon which it has relinquished any claim) or (iii)
any other amounts owed to the Company or its Subsidiaries by customers for the
past funding of bona fide Assumed Customer Tax Obligations. A "COLLECTION ITEM
IN TRANSIT" shall mean a pre-approved electronic impound from a customer's bank
account that was processed via an automated clearing house network or reverse
wire transfer initiated through the Company's or its Subsidiaries' banks but
that is not yet settled. "TAX FUND INVESTMENT PORTFOLIO" shall mean that portion
of the Tax Trust Funds invested in bonds, securities, mutual funds, and other
non-cash financial instruments.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to the Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been approved
and adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law, by the stockholders of the Company.
(b) No Order. No Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any Legal Requirement
(whether temporary, preliminary or
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permanent) which (i) is in effect and (ii) has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger; provided, however,
that prior to invoking this condition, the party so invoking this condition
shall have complied with its obligations under Section 5.6.
(c) HSR Act. All waiting periods (and any extension thereof) under
the HSR Act relating to the transactions contemplated hereby will have expired
or terminated early.
(d) Necessary Consents. All Necessary Consents required to execute,
deliver and perform this Agreement and to consummate the Merger shall have been
obtained or made.
6.2 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Article II of the Agreement (A) that are
qualified by the phrase "Material Adverse Effect" shall each be true and correct
in all respects and (B) that are not so qualified shall be true and correct in
all respects, in the case of (A) and (B) as of the date of this Agreement and as
of the Effective Time with the same force and effect as if made as of such date,
except (i) with respect to (B) any such representations and warranties in each
case, or in the aggregate with other representations and warranties that are not
qualified by the phrase "Material Adverse Effect", as does not constitute a
Material Adverse Effect on the Company; (ii) for changes contemplated by this
Agreement; and (iii) for those representations and warranties which address
matters only as of a particular date (which representations shall have been true
and correct (subject, if applicable, to the Material Adverse Effect on the
Company limitation set forth in the preceding clause (i)) as of such particular
date) (it being understood that, for purposes of determining the accuracy of the
representations and warranties described in (B), all materiality qualifications
and other qualifications based on the word "material" contained in such
representations and warranties shall be disregarded) Parent shall have received
a certificate to such effect signed on behalf of the Company by an authorized
senior executive officer of the Company.
(b) Agreements and Covenants. The Company has performed or complied
in all material respects with the covenants, obligations and agreements required
by this Agreement to be performed or complied with by it at or prior to the
Closing Date. Parent and Merger Sub shall have received a certificate with
respect to the foregoing signed on behalf of the Company by an authorized senior
executive officer of the Company.
(c) Litigation Matters. There shall not have been any suit or
proceeding by any Governmental Entity against Parent, the Company, Merger Sub or
any of their respective Subsidiaries, that would result in Parent being required
to take any action described in Section 5.6(e).
6.3 Additional Conditions to the Obligations of the Company. The
obligation of the Company to consummate and effect the Merger shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
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(a) Representations and Warranties. The representations and
warranties of Parent contained in Article III hereof (A) that are qualified by
the phrase "Material Adverse Effect" shall each be true and correct in all
respects and (B) that are not so qualified shall be true and correct in all
respects, in the case of (A) and (B) as of the date of this Agreement and as of
the Effective Time with the same force and effect as if made as of such date,
except (i) with respect to (B) any such representations and warranties in each
case, or in the aggregate with other representations and warranties that are not
qualified by the phrase "Material Adverse Effect", as does not constitute a
Material Adverse Effect on Parent; (ii) for changes contemplated by this
Agreement; and (iii) for those representations and warranties which address
matters only as of a particular date (which representations shall have been true
and correct (subject, if applicable, to the Material Adverse Effect on Parent
limitation set forth in the preceding clause (i)) as of such particular date)
(it being understood that, for purposes of determining the accuracy of the
representations and warranties described in (B), all materiality qualifications
and other qualifications based on the word "material" contained in such
representations and warranties shall be disregarded). The Company shall have
received a certificate with respect to the foregoing signed on behalf of Parent,
with respect to the representations and warranties of Parent, by an authorized
senior executive officer of Parent and a certificate with respect to the
foregoing signed on behalf of Merger Sub, with respect to the representations
and warranties of Merger Sub, by an authorized officer of Merger Sub.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with the covenants, obligations
and agreements required by this Agreement to be performed or complied with by
them at or prior to the Closing Date. The Company shall have received a
certificate with respect to the foregoing signed on behalf of Parent, with
respect to the covenants of Parent, by an authorized senior executive officer of
Parent and a certificate with respect to the foregoing signed on behalf of
Merger Sub, with respect to the covenants of Merger Sub, by an authorized
officer of Merger Sub.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, and except as provided below, whether before or
after the requisite approval of the stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either Parent or the Company, if the Merger shall not have
been consummated on or before May 31, 2003 (which date shall be extended to
September 30, 2003, in the event that all waiting periods (and any extension
thereof) under the HSR Act relating to the Merger shall not have expired or been
terminated on or prior to May 31, 2003) (the "END DATE"); provided, however,
that the right to terminate this Agreement pursuant to this Section 7.1(b) shall
not be available to any party whose action or failure to act has been the
principal cause of or resulted in the failure of the
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Merger to occur on or before the End Date, and such action or failure to act
constitutes a material breach of this Agreement;
(c) (i) by either the Company or Parent if any court of competent
jurisdiction or other Government Entity shall have issued an order, decree, or
ruling enjoining or otherwise prohibiting the transaction contemplated by this
Agreement and such order, decree or ruling shall have become final and
non-appealable (unless such order, decree, or ruling has been withdrawn,
reversed, or otherwise made inapplicable); or (ii) by the Company if any
litigation or proceeding is pending before any court of competent jurisdiction
or has been threatened to be instituted by any Person or governmental body,
which in the good faith judgment of the Board of Directors of the Company is
reasonably likely to result in an order, decree, or ruling enjoining,
prohibiting, seeking substantial damages in respect of, or impairing the
benefits of the transactions contemplated by this Agreement;
(d) by Parent (at any time prior to the adoption and approval of
this Agreement and the Merger by the required vote of the stockholders of the
Company) if a Triggering Event (as defined below in this Section 7.1) with
respect to the Company shall have occurred;
(e) by the Company by written notice to Parent, upon a breach of any
representation, warranty, covenant or agreement on the part of Parent or Merger
Sub set forth in this Agreement, or if any representation or warranty of Parent
or Merger Sub shall have become untrue or inaccurate, which untruths,
inaccuracies or breach would give rise to the failure of a condition set forth
in Section 6.3(a) or 6.3(b); provided that if such untruth or inaccuracy in
Parent's or Merger Sub's representations and warranties or breach by Parent or
Merger Sub is curable by Parent or Merger Sub prior to the End Date through the
exercise of reasonable efforts, then the Company may not terminate this
Agreement under this Section 7.1(e) prior to such End Date, provided that Parent
continues to exercise reasonable efforts to cure such untruthfulness, inaccuracy
or breach through the End Date (it being understood that the Company may not
terminate this Agreement pursuant to this paragraph (e) if it shall have
materially breached this Agreement or if such untruthfulness, inaccuracy or
breach by Parent or Merger Sub is cured prior to the End Date);
(f) by Parent by written notice to the Company, upon a breach of any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, or if any representation or warranty of the Company
shall have become untrue or inaccurate, which untruths, inaccuracies or breach
would give rise to the failure of a condition set forth in Section 6.2(a) or
6.2(b) provided that if such untruth or inaccuracy in the Company's
representations and warranties or breach by the Company is curable by the
Company prior to the End Date through the exercise of reasonable efforts, then
Parent may not terminate this Agreement under this Section 7.1(f) prior to the
End Date, provided that the Company continues to exercise reasonable efforts to
cure such untruthfulness, inaccuracy or breach through the End Date (it being
understood that Parent may not terminate this Agreement pursuant to this
paragraph (f) if it shall have materially breached this Agreement or if such
untruthfulness, inaccuracy or breach by the Company is cured prior to the End
Date);
(g) by the Company, if the Company receives a Superior Offer;
provided that, (i) the Company shall have notified Parent in writing prior to
terminating this Agreement pursuant to this
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Section 7.1(g) that the Company has received a Superior Offer and intends to
terminate this Agreement pursuant to this Section 7.1(g), attaching the most
current version of such Superior Offer to such notice, (ii) the Company shall
have afforded Parent the reasonable opportunity to make a revised offer
(including by negotiating the terms of such offer with Parent) and Parent shall
not have made, within three (3) business days after receipt of the Company's
written notice of its intention to terminate this Agreement pursuant to this
Section 7.1(g), an offer that the Board of Directors of the Company determines
in good faith to be more favorable to the Company's stockholders than such
Superior Offer and (iii) the Company shall simultaneously with its termination
hereunder make all payments required by Section 7.3(b); and
(h) by either the Company or Parent if the required approval of the
stockholders of the Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
the Company stockholders duly convened therefore or at any adjournment thereof;
provided, however, that the right to terminate this Agreement under this Section
7.1(h) shall not be available to the Company where the failure to obtain the
Company stockholder approval shall have been caused by the action or failure to
act of the Company and such action or failure to act constitutes a material
breach by the Company of this Agreement.
For the purposes of this Agreement, a "TRIGGERING EVENT," with respect to
the Company, shall be deemed to have occurred if: (i) its Board of Directors or
any committee thereof shall for any reason have withdrawn or shall have amended
or modified in a manner adverse to Parent the Recommendation, (ii) it shall have
failed to include the Recommendation in the Proxy Statement, (iii) its Board of
Directors or any committee thereof shall have approved or recommended any
Acquisition Proposal, or (iv) a tender or exchange offer relating to its
securities shall have been commenced by a Person unaffiliated with the Company
and it shall not have sent to its securityholders pursuant to Rule 14e-2
promulgated under the Securities Act, within ten (10) business days after such
tender or exchange offer is first published, sent or given, a statement
disclosing that the Board of Directors of the Company recommends rejection of
such tender or exchange offer.
7.2 Notice of Termination; Effect of Termination. Except as otherwise set
forth in Section 7.1(g), any termination of this Agreement under Section 7.1
above will be effective immediately upon the delivery of a valid written notice
of the terminating party to the other party hereto. In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, except (i) as set forth in Section 5.4(a),
this Section 7.2, Section 7.3 and Article VIII, each of which shall survive the
termination of this Agreement and (ii) nothing herein shall relieve any party
from liability for any willful breach of this Agreement. No termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated.
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(b) Payments.
(i) Payment by the Company. In the event that this Agreement
is terminated by Parent or the Company, as applicable, pursuant to Section
7.1(d) or (g) the Company shall promptly, but (except as set forth in Section
7.1(g)) in no event later than two (2) business days after the date of such
termination, pay Parent a fee equal to $25 million in immediately available
funds.
(ii) Payment by Parent. In the event that this Agreement is
terminated by Parent or the Company (A) pursuant to Section 7.1(c) primarily as
a result of issues relating to the antitrust or competition laws of any
applicable jurisdiction or (B) pursuant to Section 7.1(b) in the event the
applicable waiting period under the HSR Act not having expired or terminated
then, in any such event, Parent shall promptly, but in no event later than two
(2) business days after the date of such termination, pay the Company a fee
equal to $25 million in immediately available funds.
(iii) Interest and Costs; Other Remedies. Each of Parent and
the Company acknowledges that the agreements contained in this Section 7.3(b)
are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, Parent and the Company would not enter into this
Agreement; accordingly, if the Company or Parent fails to pay in a timely manner
the amounts due pursuant to Section 7.3(b)(i) or Section 7.3(b)(ii),
respectively, and, in order to obtain such payment, Parent or the Company, as
applicable, makes a claim that results in a judgment against the Company (in the
case of non-payment under Section 7.3(b)(i)) or Parent (in the case of
non-payment under Section 7.3(b)(ii)) for the amounts set forth in Section
7.3(b)(i) or Section 7.3(b)(ii), respectively, the Company (in the case of
non-payment under Section 7.3(b)(i)) or Parent (in the case of non-payment under
Section 7.3(b)(ii)) shall pay to the other party its reasonable costs and
expenses (including reasonable attorneys' fees and expenses) in connection with
such suit, together with interest on the amounts set forth in Section 7.3(b)(i)
or Section 7.3(b)(ii), as applicable, at the prime rate of Citibank, N.A. in
effect on the date such payment was required to be made. Payment of the fees
described in this Section 7.3(b) shall not be in lieu of damages incurred in the
event of breach of this Agreement.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company, provided, after
any such approval, no amendment shall be made which by law or in accordance with
the rules of any relevant stock exchange requires further approval by such
stockholders without such further stockholder approval. This Agreement may not
be amended except by execution of an instrument in writing signed on behalf of
each of Parent, Merger Sub and the Company.
7.5 Extension; Waiver. At any time prior to the Effective Time either
party hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the
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part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. Delay in
exercising any right under this Agreement shall not constitute a waiver of such
right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of the Company, Parent and Merger Sub contained in this
Agreement, or any instrument delivered pursuant to this Agreement, shall
terminate at the Effective Time, and only the covenants or agreements that by
their terms survive the Effective Time and this Article VIII shall survive the
Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if delivered
personally, (ii) on the date of confirmation of receipt (or, the first business
day following such receipt if the date is not a business day) of transmission by
telecopy or telefacsimile, or (iii) on the date of confirmation of receipt (or,
the first business day following such receipt if the date is not a business day)
if delivered by a nationally recognized courier service. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice:
(a) if to Parent or Merger Sub, to:
Automatic Data Processing, Inc.
Xxx XXX Xxxxxxxxx
Xxxxxxxx, XX 00000-0000
Attention: President, Employer Services Group
Facsimile: (000) 000-0000
with a copy to:
Automatic Data Processing, Inc.
Xxx XXX Xxxxxxxxx
Xxxxxxxx, XX 00000-0000
Attention: General Counsel
Facsimile: (000) 000-0000
with copies to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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(b) if to the Company, to:
ProBusiness Services, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: President and Chief Executive Officer
Attention: General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
and to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
Xxx Xxxxxx
Xxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
8.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a section of this Agreement unless otherwise indicated. For purposes of this
Agreement, the words "INCLUDE," "INCLUDES" and "INCLUDING," when used herein,
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "THE BUSINESS OF" an entity,
such reference shall be deemed to include the business of all such entity and
its Subsidiaries, taken as a whole.
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(b) For purposes of this Agreement, the term "KNOWLEDGE" means, with
respect to a party hereto, with respect to any matter in question, that any of
the Chief Executive Officer, Chief Financial Officer, General Counsel, Chief
Information Officer or Executive Vice President for Operations, has actual
knowledge of such matter.
(c) For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT," when used in connection with an entity, means any change, event,
violation, inaccuracy, circumstance or effect (any such item, an "EFFECT") that
is materially adverse to the business, properties, assets, financial condition
or results of operations of such entity taken as a whole with its Subsidiaries
(or, if such entity is the Company, the Company taken as a whole with its
Subsidiaries or Parent taken as a whole with its Subsidiaries); provided,
however, that, in no event shall any of the following be deemed to constitute,
nor shall any of the following be taken into account in determining whether
there has been or will be, a Material Adverse Effect on any entity: (A) any
Effect resulting from compliance with the terms and conditions of this
Agreement, (B) any Effect resulting from the announcement or pendency of the
Merger (including, without limitation, any (x) actions by clients or
competitors, (y) loss of personnel or clients, or (z) the delay or cancellation
of orders for services and products), (C) any change in such entity's stock
price or trading volume, (D) any failure by such entity to meet revenue or
earnings projections, (E) any Effect that results from changes affecting any of
the industries in which such entity operates generally or the United States
economy generally, (F) any Effect that results from changes affecting general
worldwide economic or capital market conditions, (G) in the case of the Company
only, any Effect that results from investments in any other Person made in
accordance with the Company's Investment Policy, (H) any Effect that results
from changes in laws after the date hereof, or (I) any Effect resulting from an
outbreak or escalation of hostilities involving the United States, the
declaration by the United States of a national emergency or war, or the
occurrence of any acts of terrorism.
(d) For purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third-Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Letter
and the Parent Disclosure Letter (i) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and
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effect until the Closing and shall survive any termination of this Agreement and
(ii) are not intended to confer upon any other Person any rights or remedies
hereunder, except as specifically provided, following the Effective Time, in
Section 5.10.
8.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
Persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic, business and
other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance.
(a) Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
(b) Specific Performance. It is accordingly agreed that the parties
shall be entitled to seek an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.8 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof. Each party hereby (a) irrevocably and unconditionally submits to
the exclusive jurisdiction of the Delaware Court of Chancery, with respect to
all actions and proceedings arising out of or relating to this Agreement and the
transaction contemplated hereby, (b) agrees that all claims with respect to any
such action or proceeding shall be heard and determined in such courts and
agrees not to commence an action or proceeding relating to this Agreement or the
transactions contemplated hereby except in such courts, (c) irrevocably and
unconditionally waives any objection to the laying of venue of any action or
proceeding arising out of this Agreement or the transactions contemplated hereby
and irrevocably and unconditionally waives the defense of an inconvenient forum,
(d) consents to service of process upon him, her or it by mailing or delivering
such service to the address set forth in Section 8.2 hereof, and (e) agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
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8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties; provided, however, that Parent or Merger Sub can assign
any of their respective rights and obligations to any direct or indirect
wholly-owned Subsidiary of Parent, but no such assignment shall relieve Parent
or Merger Sub, as the case may be, of its obligations hereunder. Any purported
assignment in violation of this Section 8.10 shall be void. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
8.11 Waiver of Jury Trial. EACH OF PARENT, MERGER SUB AND THE COMPANY
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, MERGER SUB OR THE COMPANY
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
*****
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
PROBUSINESS SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President & Chief Executive Officer
ADP MERGER CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
AUTOMATIC DATA PROCESSING, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman & Chief Executive Officer
****AGREEMENT AND PLAN OF MERGER****
