Exhibit 99.1
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AGREEMENT AND PLAN OF MERGER
AND
REORGANIZATION
among
Clarent Corporation,
a Delaware Corporation;
Copper Acquisition Sub, Inc.,
a Delaware Corporation;
and
ACT Networks, Inc.,
a Delaware Corporation
_____________________________________
Dated as of May 1, 2000
_____________________________________
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AGREEMENT AND PLAN
OF
MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization ("Agreement") is made
and entered into as of May 1, 2000, by and among: Clarent Corporation, a
Delaware corporation ("Parent"); Copper Acquisition Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"); and ACT
Networks, Inc., a Delaware corporation (the "Company"). Certain capitalized
terms used in this Agreement are defined in Exhibit A.
Recitals
A. Parent, Merger Sub and the Company intend to effect a merger (the
"Merger") of Merger Sub with and into the Company in accordance with this
Agreement and General Corporation Law of the State of Delaware, as amended (the
"DGCL"). Upon consummation of the Merger, Merger Sub will cease to exist, and
the Company will become a wholly owned subsidiary of Parent.
B. It is intended that the Merger qualify as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"). For accounting purposes, it is intended that the Merger be treated as
a purchase.
C. The Board of Directors of the Company has (i) determined that the
Merger is consistent with and in furtherance of the long-term strategy of the
Company and fair to, and in the best interests of, the Company and its
stockholders, (ii) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) determined to recommend
that the stockholders of the Company adopt this Agreement.
D. The respective Boards of Directors of Parent and Merger Sub have
approved this Agreement and the Merger.
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, each of the
stockholders of the Company listed on Exhibit B hereto is entering into a voting
agreement substantially in the form attached hereto as Exhibit C ("Voting
Agreement").
F. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, each of the
Persons identified on Exhibit D hereto is entering into an affiliate agreement
substantially in the form attached hereto as Exhibit E ("Affiliate Agreement").
G. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, the Company
is entering into a stock option agreement substantially in the form attached
hereto as Exhibit F ("Stock Option Agreement"), pursuant to which the Company
grant to Parent the right to purchase up to 19.9%
1.
of the Company Common Stock on a primary basis prior to the Effective Time (as
defined hereunder).
Agreement
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION.
1.1 Merger of Merger Sub into the Company. Upon the terms and subject to
the conditions set forth in this Agreement and the DGCL, at the Effective Time
(as defined in Section 1.2), Merger Sub shall be merged with and into the
Company, and the separate existence of Merger Sub shall cease. The Company will
continue as the surviving corporation in the Merger (the "Surviving
Corporation").
1.2 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Godward LLP, 0000 Xxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx, at 10:00 a.m.
on a date to be designated by Parent (the "Closing Date"), which shall be no
later than the second business day after satisfaction or waiver of the
conditions set forth in Sections 6 and 7. Contemporaneously with or as promptly
as practicable after the Closing, a properly executed certificate of merger
conforming to the requirements of the DGCL shall be filed with the Secretary of
State of the State of Delaware (the date and time of such filing being the
"Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation. As of the Effective Time,
the Surviving Corporation shall be a direct wholly owned subsidiary of Parent.
1.4 Subsequent Action. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Merger Sub acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either the Company or Merger Sub, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name an on behalf of
each of such corporations or otherwise, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
1.5 Certificate of Incorporation and Bylaws; Directors and Officers.
Unless otherwise determined by Parent prior to the Effective Time:
2.
(a) the Certificate of Incorporation and Bylaws of the Surviving
Corporation shall be amended and restated as of the Effective Time to conform to
the Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws substantially in the form attached hereto as Exhibits G-1 and G-2,
respectively; and
(b) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the directors and officers of
Merger Sub immediately prior to the Effective Time, until their respective
successors are elected and qualified or duly appointed, as the case may be.
1.6 Conversion of Shares.
(a) Subject to Section 1.6(d), at the Effective Time, by virtue of
the Merger and without any further action on the part of Parent, Merger Sub, the
Company or any stockholder of the Company:
(i) any shares of Company Common Stock then held by the Company
or any subsidiary of the Company (or held in the Company's treasury) shall be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor;
(ii) any shares of Company Common Stock then held by Parent,
Merger Sub or any other subsidiary of Parent shall be canceled and shall cease
to exist, and no consideration shall be delivered in exchange therefor;
(III) except as provided in clauses "(i)" and "(ii)" above and
subject to Sections 1.6(b) and 1.6(d), each share of Company Common Stock then
outstanding shall be converted into the right to receive that fraction of a
share of Parent Common Stock equal to the Exchange Ratio. The "Exchange Ratio"
shall be 0.2546 (the "Initial Fraction"); provided, however, that:
(1) if the result of the multiplication of the Initial
Fraction by the Closing Price is greater than $18.00 per share, then the
Exchange Ratio shall be the fraction (calculated to four decimal places) having
a numerator equal to $18.00 and a denominator equal to the Closing Price; or
(2) if the result of the multiplication of the Initial
Fraction by the Closing Price is less than $14.00 per share, then the Exchange
Ratio shall be the fraction (calculated to four decimal places) having a
numerator equal to $14.00 and a denominator equal to the Closing Price.
(iv) each share of the common stock, $.001 par value per share,
of Merger Sub then outstanding shall be converted into one share of common
stock, $.001 par value per share, of the Surviving Corporation.
(b) If, between the date of this Agreement and the Effective Time,
the outstanding shares of Company Common Stock or Parent Common Stock are
changed into a different number or class of shares by reason of any stock split,
division or subdivision of shares, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction,
3.
then the Exchange Ratio shall be appropriately adjusted to reflect the economic
effects intended by Section 1.6(a).
(c) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company or under which the
Company has any rights, then the shares of Parent Common Stock issued in
exchange for such shares of Company Common Stock will also be unvested and
subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends. The Company shall take all
action that may be necessary to ensure that, from and after the Effective Time,
Parent is entitled to exercise any such repurchase option or other right set
forth in any such restricted stock purchase agreement or other agreement.
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of Company Common
Stock who would otherwise be entitled to receive a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock
issuable to such holder) shall, upon surrender of such holder's Company Stock
Certificate(s) (as defined in Section 1.8), be paid in cash the dollar amount
(rounded to the nearest whole cent), without interest, determined by multiplying
such fraction by the 4:00 p.m. (Eastern Time) closing price of a share of Parent
Common Stock as reported on Nasdaq on the Effective Date.
1.7 Stock Options. At the Effective Time, all Company Options (as defined
in Section 2.3(b)) shall be assumed by Parent in accordance with Section 5.3.
1.8 Closing of the Company's Transfer Books. At the Effective Time: (a)
all shares of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all holders of certificates representing shares of Company Common
Stock that were outstanding immediately prior to the Effective Time shall cease
to have any rights as stockholders of the Company; and (b) the stock transfer
books of the Company shall be closed at the close of business on the day during
which the Effective Time occurs. No further transfer of any such shares of
Company Common Stock shall be made on such stock transfer books after such date
and time. If, after the Effective Time, a valid certificate previously
representing any of such shares of Company Common Stock (a "Company Stock
Certificate") is presented to the Exchange Agent (as defined in Section 1.9), to
the Surviving Corporation or to Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.9.
1.9 Exchange of Certificates.
(a) On or prior to the Closing Date, Parent shall select a reputable
bank or trust company reasonably acceptable to the Company to act as exchange
agent in the Merger (the "Exchange Agent"). Promptly after the Effective Time,
Parent shall deposit with the Exchange Agent (i) certificates representing the
shares of Parent Common Stock issuable pursuant to this Section 1 and (ii) cash
sufficient to make payments in lieu of fractional shares in accordance with
4.
Section 1.6(d). The shares of Parent Common Stock and cash amounts so deposited
with the Exchange Agent, together with any dividends or distributions received
by the Exchange Agent with respect to such shares, are referred to collectively
as the "Exchange Fund."
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent will mail to the registered holders of Company Stock Certificates
(i) a letter of transmittal in customary form and containing such provisions as
Parent and the Company shall reasonably agree upon (including a provision
confirming that delivery of Company Stock Certificates shall be effected, and
risk of loss and title to Company Stock Certificates shall pass, only upon
delivery of such Company Stock Certificates to the Exchange Agent), and (ii)
instructions for use in effecting the surrender of Company Stock Certificates in
exchange for certificates representing Parent Common Stock. Subject to Section
1.6(d), upon surrender of a Company Stock Certificate to the Exchange Agent for
exchange, together with a duly executed letter of transmittal and such other
documents as are customarily required by the Exchange Agent, (A) the holder of
such Company Stock Certificate shall be entitled to receive in exchange therefor
a certificate representing the number of shares of Parent Common Stock that such
holder has the right to receive pursuant to the provisions of Section
1.6(a)(iii) together with any cash in lieu of fractional share(s) pursuant to
the provisions of Section 1.6(d), and (B) the Company Stock Certificate so
surrendered shall be canceled. Until surrendered as contemplated by this
Section 1.9(b), each Company Stock Certificate shall be deemed, from and after
the Effective Time, to represent only the right to receive shares of Parent
Common Stock (and cash in lieu of any fractional share of Parent Common Stock)
as contemplated by Section 1.6. If any Company Stock Certificate shall have
been lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the issuance of any certificate representing Parent Common Stock,
require the owner of such lost, stolen or destroyed Company Stock Certificate to
provide an appropriate affidavit and to deliver a bond (in such sum as Parent
may reasonably direct) as indemnity against any claim that may be made against
the Exchange Agent, Parent or the Surviving Corporation with respect to such
Company Stock Certificate.
(c) Notwithstanding anything to the contrary contained in this
Agreement, no shares of Parent Common Stock (or certificates therefor) shall be
issued in exchange for any Company Stock Certificate to any Person who may be an
"affiliate" (as that term is used in Rule 145 under the Securities Act) of the
Company ("Affiliate") until such Person shall have delivered to Parent and the
Company a duly executed Affiliate Agreement as contemplated by Section 6.6(a).
(d) No dividends or other distributions declared or made with respect
to Parent Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, until such holder surrenders
such Company Stock Certificate in accordance with this Section 1.9 (at which
time such holder shall be entitled, subject to the effect of applicable escheat
or similar laws, to receive all such dividends and distributions, without
interest).
(e) Any portion of the Exchange Fund that remains undistributed to
holders of Company Stock Certificates as of the date one hundred and eighty
(180) days after the date during which the Effective Time occurs shall be
delivered to Parent upon demand, and any
5.
holders of Company Stock Certificates who have not theretofore surrendered their
Company Stock Certificates in accordance with this Section 1.9 shall thereafter
look only to Parent for satisfaction of their claims for Parent Common Stock,
cash in lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock.
(f) Each of the Exchange Agent, Parent 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 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. To the extent
such amounts are so deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the Person to whom such
amounts would otherwise have been paid.
(g) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of Company Common Stock or to any other Person with
respect to any shares of Parent Common Stock (or dividends or distributions with
respect thereto), or for any cash amounts, delivered to any public official
pursuant to any applicable abandoned property, escheat or similar Legal
Requirement.
1.10 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.11 Accounting Consequences. For accounting purposes, the Merger is
intended to be treated as a purchase.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure letter that has been prepared by the
Company in accordance with the requirements of Section 9.7 and that has been
delivered by the Company to Parent on the date of this Agreement and signed by
the President of the Company (the "Company Disclosure Letter"), the Company
hereby represents and warrants to Parent and Merger Sub as follows:
2.1 Due Organization; Subsidiaries; Etc.
(a) The Company has no Subsidiaries, except for the Entities
identified in Exhibit 21.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999 or in Part 2.1(a) of the Company Disclosure
Letter; and neither the Company nor any of the other Entities identified in Part
2.1(a) of the Company Disclosure Letter owns any capital stock of, or any equity
interest of any nature in, any other Entity, other than short term investments
and memberships in trade groups. (The Company and each of its Subsidiaries are
referred to collectively in this Agreement as the "Acquired Companies.") None of
the Acquired Companies has agreed or is obligated to make, or is bound by any
Contract under which it may become obligated to make, any future investment in
or capital contribution to any other Entity.
6.
None of the Acquired Companies has, at any time, been a general partner of any
general partnership, limited partnership or other entity.
(b) Except as set forth in Part 2.1(a) of the Company Disclosure
Letter, each of the Acquired Companies is a corporation or other Entity duly
organized, validly existing and in good standing (in jurisdiction that recognize
such concept) under the laws of the jurisdiction of its organization and has all
requisite power and authority and any necessary governmental authority,
franchise, license, certificate or permit: (i) to conduct its business in the
manner in which its business is currently being conducted; (ii) to own and use
its assets in the manner in which its assets are currently owned and used; and
(iii) to perform its obligations under all Acquired Company Contracts, except
where the failure to be so organized, existing and in good standing or to have
such power and authority has not had and would not reasonably be expected to
have a Material Adverse Effect on the Acquired Companies.
(c) Each of the Acquired Companies is qualified to do business as a
foreign Entity, and is in good standing (in jurisdictions that recognize such
concept), under the laws of all jurisdictions where the nature of its business
requires such qualification, except where the failure to be so qualified has not
had and would not reasonably be expected to have a Material Adverse Effect on
the Acquired Companies.
2.2 Certificate of Incorporation and Bylaws. The Company has delivered to
Parent accurate and complete copies of the certificate of incorporation, bylaws
and other charter and organizational documents of the respective Acquired
Companies, including all amendments thereto. None of the Acquired Companies is
in violation of any of the provisions of its articles of incorporation or bylaws
or equivalent governing instruments.
2.3 Capitalization, Etc.
(a) The authorized capital stock of the Company consists of
40,000,000 shares of Company Common Stock, of which, as of March 31, 2000,
10,482,963 shares (which amount does not materially differ from the amount
issued and outstanding as of the date of this Agreement) have been issued and
are outstanding. The Company does not have any shares of preferred stock
authorized. As of March 31, 2000, there were 88,363 shares of Company Common
Stock available for purchase pursuant to the Company's Employee Stock Purchase
Plan. All of the outstanding shares of Company Common Stock have been duly
authorized and validly issued, and are fully paid and nonassessable. As of March
31, 2000, there were no shares of Company Common Stock held in treasury by the
Company and no shares of stock held in treasury by any of the other Acquired
Companies. Except as set forth in Part 2.3(a)(ii) of the Company Disclosure
Letter, (i) none of the outstanding shares of Company Common Stock is entitled
or subject to any preemptive right or any similar right; (ii) none of the
outstanding shares of Company Common Stock is subject to any right of first
refusal in favor of the Company; and (iii) there is no Acquired Company Contract
relating to the voting or registration of, or restricting any Person from
purchasing, selling, pledging or otherwise disposing of (or granting any option
or similar right with respect to), any shares of Company Common Stock. Upon
consummation of the Merger, (A) the shares of Parent Common Stock issued in
exchange for any shares of Company Common Stock that are subject to a Contract
pursuant to which the Company has the right to repurchase, redeem or otherwise
reacquire any shares of Company Common Stock will,
7.
without any further act of Parent, the Company or any other Person, become
subject to the restrictions, conditions and other provisions contained in such
Contract, and (B) Parent will automatically succeed to and become entitled to
exercise the Company's rights and remedies under any such Contract. Except as
set forth in Part 2.3(a)(ii) of the Company Disclosure Letter, none of the
Acquired Companies is under any obligation to repurchase, redeem or otherwise
acquire any outstanding shares of Company Common Stock.
(b) As of March 31, 2000, 2,839,491 shares (which amount does not
materially differ from the amount subject to options outstanding as of the date
of this Agreement) of Company Common Stock were subject to issuance pursuant to
outstanding options to purchase Company Common Stock. (Options to purchase
shares of Company Common Stock (whether granted by the Company pursuant to the
Company's stock option plans, assumed by the Company in connection with any
merger, acquisition or similar transaction or otherwise issued or granted) are
referred to in this Agreement as "Company Options"). Part 2.3(b) of the Company
Disclosure Letter sets forth the following information with respect to each
Company Option outstanding as of March 31, 2000: (i) the particular plan
pursuant to which such Company Option was granted; (ii) the name of the
optionee; (iii) the number of shares of Company Common Stock subject to such
Company Option; (iv) the exercise price of such Company Option; (v) the date on
which such Company Option was granted; (vi) the applicable vesting schedule and
the extent to which such Company Option is vested and exercisable as of the date
of this Agreement; and (vii) the date on which such Company Option expires. The
Company has delivered to Parent accurate and complete copies of all stock option
plans pursuant to which the Company has ever granted stock options and the form
of all stock option agreements evidencing such options. 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, except that each
outstanding Company Option held by an optionee will vest and become exercisable
for all the option shares on an accelerated basis should an Involuntary
Termination (as such term is defined in the applicable stock option agreement
for each such Company Option) of that optionee's service with the Surviving
Corporation occur within eighteen months after the Effective Time.
(c) Except as set forth in Part 2.3(c) of the Company Disclosure
Letter, there is no: (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of any of the Acquired Companies; (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares of the capital stock or other securities any
of the Acquired Companies; (iii) stockholder rights plan (or similar plan
commonly referred to as a "poison pill") or Contract under which any of the
Acquired Companies is or may become obligated to sell or otherwise issue any
shares of its capital stock or any other securities; or (iv) condition or
circumstance that would reasonably be expected to give rise to or provide a
basis for the assertion of a claim by any Person to the effect that such Person
is entitled to acquire or receive any shares of capital stock or other
securities of any of the Acquired Companies.
(d) All outstanding shares of Company Common Stock, all outstanding
Company Options and all outstanding shares of capital stock of each Subsidiary
of the Company have been issued and granted in compliance with (i) all
applicable securities laws and other applicable Legal Requirements, and (ii) all
requirements set forth in applicable Acquired
8.
Company Contracts, except where the failure to be issued or granted in
compliance therewith has not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Companies.
(e) All of the outstanding shares of capital stock of each of the
Entities identified in Exhibit 21.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1999 and in Part 2.1(a) of the Company
Disclosure Letter are validly issued, fully paid and nonassessable and are owned
beneficially and of record by the Company, free and clear of any Encumbrances.
2.4 SEC Filings; Financial Statements.
(a) The Company has delivered or made available to Parent accurate
and complete copies of all registration statements, proxy statements and other
statements, reports, schedules, forms and other documents filed by the Company
with the SEC since January 1, 1999, and all amendments thereto (collectively,
with all information incorporated by reference therein or deemed to be
incorporated by reference therein, the "Company SEC Documents"). All such
statements, reports, schedules, forms and other documents required to have been
filed by the Company with the SEC have been so filed on a timely basis. As of
the time it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing): (i) each
of the Company SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act; and (ii) none
of the Company SEC Documents contained any untrue statement of material fact or
omitted 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.
(b) The consolidated financial statements (including any related
notes and schedules) contained in the Company SEC Documents (the "Company
Financial Statements"): (i) complied as to form in all material respects with
the published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods covered (except for changes
in accounting principles disclosed in the notes to such financial statements or,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and
except that the unaudited financial statements may not contain footnotes and are
subject to normal and recurring year-end adjustments that will not, individually
or in the aggregate, be material in amount), and (iii) fairly present, in all
material respects, the consolidated financial position of the Company and its
consolidated subsidiaries as of the respective dates thereof and the
consolidated results of operations of the Company and its consolidated
subsidiaries for the periods covered thereby. All adjustments considered
necessary for a fair presentation of the financial statements have been
included. All financial statements (including all related notes and schedules)
contained in Company SEC Documents filed after the date hereof shall meet the
conditions set forth in (i), (ii) and (iii) of this Section 2.4(b).
9.
2.5 Absence of Changes. Except as set forth in Part 2.5 of the Company
Disclosure Letter, between December 31, 1999 and the date of this Agreement:
(a) there has not been any Material Adverse Effect on the Acquired
Companies;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the assets of any of the
Acquired Companies (whether or not covered by insurance) that has had or would
reasonably be expected to have a Material Adverse Effect on the Acquired
Companies;
(c) none of the Acquired Companies has (i) declared, accrued, set
aside or paid any dividend or made any other distribution in respect of any
shares of capital stock, or (ii) repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities;
(d) none of the Acquired Companies has sold, issued or granted, or
authorized the issuance or grant of (i) any capital stock or other security
(except for Company Common Stock issued upon the valid exercise of outstanding
Company Options), (ii) any option, warrant or right to acquire any capital stock
or any other security, or (iii) any instrument convertible into or exchangeable
for any capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any of the
Company's stock option plans, (ii) any provision of any Contract evidencing any
outstanding Company Option or Company Warrant, or (iii) any restricted stock
purchase agreement;
(f) there has been no amendment to the certificate of incorporation,
bylaws or other charter or organizational documents of any of the Acquired
Companies, and none of the Acquired Companies has effected or been a party to
any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(g) none of the Acquired Companies has made any capital expenditure
which, when added to all other capital expenditures made on behalf of the
Acquired Companies between December 31, 1999 and the date of this Agreement,
exceeds $500,000 in the aggregate;
(h) except in the ordinary course of business and consistent with
past practices, none of the Acquired Companies has amended or prematurely
terminated, or waived any material right or remedy under, any Material Contract
(as defined in Section 2.9);
(i) none of the Acquired Companies has (i) acquired, leased or
licensed any material right or other material asset from any other Person, (ii)
sold or otherwise disposed of, or leased or licensed, any material right or
other material asset to any other Person, or (iii) waived or relinquished any
right, except for rights or other assets acquired, leased, licensed, sold or
disposed of, or rights waived or relinquished, in the ordinary course of
business and consistent with past practices;
10.
(j) none of the Acquired Companies has written off as uncollectible,
or established any extraordinary reserve with respect to, any account receivable
or other indebtedness in excess of $25,000;
(k) none of the Acquired Companies has made any pledge of any of its
assets or otherwise permitted any of its assets to become subject to any
Encumbrance, except for pledges of made in the ordinary course of business and
consistent with past practices;
(l) none of the Acquired Companies has (i) lent in excess of $50,000
to any Person, or (ii) incurred or guaranteed any indebtedness for borrowed
money in excess of $200,000;
(m) none of the Acquired Companies has (i) established, adopted or
entered into any Plan (as defined in Section 2.16(a)), (ii) caused or permitted
any Plan to be amended in any material respect, or (iii) paid any bonus or made
any profit-sharing or similar payment to, or materially increased the amount of
the wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees;
(n) none of the Acquired Companies has changed any of its methods of
accounting or accounting practices in any material respect other than as
required by GAAP;
(o) none of the Acquired Companies has made any material Tax
election;
(p) none of the Acquired Companies has commenced or settled any
material Legal Proceeding;
(q) none of the Acquired Companies has entered into any material
transaction or taken any other material action that has had, or would reasonably
be expected to have, a Material Adverse Effect on the Acquired Companies;
(r) none of the Acquired Companies has entered into any material
transaction or taken any other material action outside the ordinary course of
business or inconsistent with past practices; and
(s) none of the Acquired Companies has agreed or committed to take
any of the actions referred to in clauses "(c)" through "(r)" above.
2.6 Leasehold; Real Property; Equipment. None of the Acquired Companies
own any real property or any interest in real property, except for the
leaseholds created under the real property leases identified in Part 2.6 of the
Company Disclosure Letter. All such real property is being leased pursuant to
lease agreements that are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default) that would result in a
Material Adverse Effect on the Acquired Companies. As of the date of this
Agreement, all material items of equipment and other material tangible assets
owned by or leased to the Acquired Companies are adequate for the uses to which
they are being put, are in good and safe condition and repair (ordinary wear and
tear excepted) and are adequate for
11.
the conduct of the business of the Acquired Companies in the manner in which
such business is currently being conducted.
2.7 Receivables; Customers.
(a) Part 2.7(a) of the Company Disclosure Letter provides an accurate
and complete breakdown and aging of all accounts receivable of the Acquired
Companies in excess of $250,000 in any individual case as of the date of the
Company Unaudited Interim Balance Sheet. All accounts receivable of the Acquired
Companies in excess of $250,000 in any individual case (including such accounts
receivable reflected on the Company Unaudited Interim Balance Sheet that have
not yet been collected and such accounts receivable that have arisen since the
date of the Company Unaudited Interim Balance Sheet and have not yet been
collected) (i) represent valid obligations of customers of the Acquired
Companies arising from bona fide transactions entered into in the ordinary
course of business, (ii) except as set forth in the Company's aging of accounts
receivable previously provided to Parent, are current and will be collected in
full when due, without any counterclaim or set off and are not subject to any
dispute or threat of nonpayment (net of the allowance for doubtful accounts set
forth on the Company Unaudited Interim Balance Sheet and an additional amount
not to exceed $1,000,000 in the aggregate) and (iii) except as set forth in Part
2.7(a)(iii) of the Company Disclosure Letter, represent revenues that have been
recognized in accordance with GAAP.
(b) As of the date of this Agreement, there are no loans or advances
in excess of $50,000 made by any of the Acquired Companies to any employee,
director, consultant or independent contract of such Acquired Company, other
than routine travel or relocation advances made to employees in the ordinary
course of business.
(c) Part 2.7(c) of the Company Disclosure Letter accurately
identifies, and provides an accurate and complete breakdown of the revenues
received from, each customer or other Person that accounted for (a) more than
$400,000 of the consolidated gross revenues of the Acquired Companies in the
fiscal year ended 1999, or (b) more than $100,000 of the consolidated gross
revenues of the Acquired Companies in the fiscal quarter ended March 31, 2000.
Since December 31, 1999, the Company has not received any notice or other
written communication, and has not received any other information, indicating
that any customer or other Person identified in Part 2.7 of the Company
Disclosure Letter will cease dealing with the Company or will otherwise reduce
the volume of business transacted by such Person with the Company materially
below historical levels. Since December 31, 1999, the Company has not received
any material customer complaints concerning its material products and/or its
services.
2.8 Proprietary Assets.
(a) Part 2.8(a)(i) of the Company Disclosure Letter sets forth, with
respect to each Acquired Company Proprietary Asset owned by the Acquired
Companies and registered with any Governmental Body or for which an application
for registration has been filed with any Governmental Body, (i) a brief
description of such Acquired Company Proprietary Asset, and (ii) the names of
the jurisdictions covered by the applicable registration or application. Part
2.8(a)(ii) of the Company Disclosure Letter identifies and provides a brief
description of all other Proprietary Assets owned by the Acquired Companies that
are material to the business of the
12.
Acquired Companies. Part 2.8(a)(iii) of the Company Disclosure Letter identifies
and provides a brief description of, and identifies any ongoing royalty or
payment obligations in excess of $100,000 with respect to, each Acquired Company
Proprietary Asset that is licensed or otherwise made available to the Acquired
Companies by any Person and is material to the business of the Acquired
Companies (except for any Proprietary Asset that is licensed to the Acquired
Companies under any third party software license generally available to the
public), and identifies the Contract under which such Acquired Company
Proprietary Asset is being licensed or otherwise made available to such Acquired
Company. The Acquired Companies have good and valid title to all of the Acquired
Company Proprietary Assets identified in Parts 2.8(a)(i) and 2.8(a)(ii) of the
Company Disclosure Letter, free and clear of all Encumbrances, except for (i)
any lien for current taxes not yet due and payable, and (ii) minor liens that
have arisen in the ordinary course of business and that do not (individually or
in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of any of the Acquired Companies.
The Acquired Companies have a valid right to use, license and otherwise exploit
all Acquired Company Proprietary Assets identified in Part 2.8(a)(iii) of the
Company Disclosure Letter, subject to the limitations and restrictions expressly
set forth in the applicable Contract pursuant to which such Proprietary Assets
are being licensed or otherwise made available to the Acquired Companies. None
of the Acquired Companies has developed jointly with any other Person any
Acquired Company Proprietary Asset that is material to the business of the
Acquired Companies with respect to which such other Person has any rights.
Except as set forth in Part 2.8(a)(iv) of the Company Disclosure Letter, there
is no Acquired Company Contract (with the exception of license agreements in the
form previously delivered by the Company to Parent) pursuant to which any Person
has any right (whether or not currently exercisable) to use, license or
otherwise exploit any Acquired Company Proprietary Asset.
(b) The Acquired Companies have taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value of
all Acquired Company Proprietary Assets (except Acquired Company Proprietary
Assets whose value would be unimpaired by disclosure). No current or former
employee, officer, director, stockholder, consultant or independent contractor
has any right, claim or interest in or with respect to any Acquired Company
Proprietary Asset.
(c) To the knowledge of the Company: (i) all patents, trademarks,
service marks and copyrights held by any of the Acquired Companies are valid,
enforceable and subsisting; (ii) none of the Acquired Company Proprietary Assets
and no Proprietary Asset that is currently being developed by any of the
Acquired Companies (either by itself or with any other Person) infringes,
misappropriates or violates any Proprietary Asset owned by any other Person;
(iii) except as set forth in Part 2.8(c)(iii) of the Company Disclosure Letter,
none of the products that are or have been designed, created, developed,
assembled, manufactured or sold by any of the Acquired Companies is infringing,
misappropriating or making any unlawful or unauthorized use of any Proprietary
Asset owned by any other Person, and none of such products has at any time
infringed, misappropriated or made any unlawful or unauthorized use of, and none
of the Acquired Companies has received any notice or written communication of
any actual or alleged infringement, misappropriation or unlawful or unauthorized
use of, any Proprietary Asset owned or used by any other Person; (iv) no other
Person is infringing, misappropriating or making any unlawful or unauthorized
use of, and no Proprietary Asset owned or used by any other Person infringes or
violates, any Acquired Company Proprietary Asset.
13.
(d) To the knowledge of the Company, each material product, system,
program or other asset designed, developed, manufactured, assembled, sold,
installed, repaired, licensed or otherwise made available by any Acquired
Company to any Person conforms with any applicable specification or user
documentation made or provided with respect thereto by or on behalf of the
Acquired Company, except (i) where the failure to conform has not had and would
not reasonably be expected to have a Material Adverse Effect on the Acquired
Companies and (ii) to the extent that any nonconformance does not result in
liabilities in excess of the reserves set forth in the Unaudited Interim Balance
Sheet or accrued after the date of the Unaudited Interim Balance Sheet in the
ordinary course of business consistent with past practices. Except as set forth
in Part 2.8(d) of the Company Disclosure Letter, there has not been any claim by
any customer or other Person alleging that any Acquired Company Proprietary
Asset (including each version thereof that has ever been licensed or otherwise
made available by the Acquired Company to any Person) does not conform in all
material respects with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of the Acquired
Company.
(e) The Acquired Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Acquired Companies to conduct their business in
the manner in which such business has been and is being conducted. None of the
Acquired Companies has (i) licensed any of the Acquired Company Proprietary
Assets to any Person on an exclusive basis, or (ii) except as set forth in Part
2.8(e)of the Company Disclosure Letter, entered into any covenant not to compete
or Contract limiting its ability to exploit fully any Acquired Company
Proprietary Assets or to transact business in any market or geographical area or
with any Person.
(f) All employees set forth in Part 2.8(f) of the Company Disclosure
Letter have executed and delivered an agreement to the Company (containing no
exceptions to or exclusions from the scope of its coverage) that is
substantially identical to the form of Employment Agreement or Employee
Agreement previously delivered to Parent by the Company. Substantially all
other current and substantially all former employees of the Company have
executed and delivered to the Company an agreement (containing no exceptions to
or exclusions from the scope of its coverage) that is substantially identical to
the form of confidential information and invention assignment agreement
previously delivered to Parent. Substantially all current and former
consultants and independent contractors to the Company have executed and
delivered to the Company an agreement (containing no exceptions to or exclusions
from the scope of its coverage) that is substantially identical to the form of
consultant confidential information and invention assignment agreement
previously delivered to Parent.
(g) Except as set forth in Part 2.8(g) of the Company Disclosure Letter,
to the knowledge of the Company, each of the Acquired Companies has taken
adequate steps to ensure that all software (and related Proprietary Assets)
owned or used by any of the Acquired Companies is Year 2000 Compliant (as
defined below). For purposes of this Agreement, an item of software (and related
Proprietary Assets) are deemed to be "Year 2000 Compliant" only if (i) the
functions, calculations, and other computing processes of such software (and
related Proprietary Assets) perform in a consistent and correct manner without
interruption regardless of the date on which such functions, calculations or
other processes are actually performed and regardless of the date input to the
applicable computer system, whether before, on, or after January 1, 2000; (ii)
such software (and related Proprietary Assets) accept and respond to year
14.
input, if any, in a manner that resolves any ambiguities as to century in a
defined, predetermined, and appropriate manner; and (iii) such software (and
related Proprietary Assets) determine leap years by the following standard: (A)
if dividing the year by 4 yields an integer, it is a leap year, except for years
ending in 00; but (B) a year ending in 00 is a leap year if dividing it by 400
yields an integer.
2.9 Contracts.
(a) Part 2.9 of the Company Disclosure Letter identifies each
Acquired Company Contract in effect as of the date of this Agreement that
constitutes a "Material Contract." For purposes of this Agreement, each of the
following shall be deemed to constitute a "Material Contract":
(i) (A) any Contract or outstanding offer relating to the
employment of, or the performance of services by, any employee (other than
Contracts that (1) provide for "at will" employment and (2) do not provide for
severance, termination or similar benefits or acceleration of stock options
other than in accordance with the terms of the Company's stock option plans and
severance plans previously provided to Parent), and (B) any Contract pursuant to
which any of the Acquired Companies is required to make any severance,
termination or similar payment to any current or former employee or director of
any of the Acquired Companies, other than in accordance with the terms of the
Company's stock option plans and severance plans previously provided to Parent;
(ii) any Contract (A) relating to the acquisition, transfer,
development, sharing or license of any Proprietary Asset (except for any
Contract pursuant to which (1) any Proprietary Asset is licensed to the Acquired
Companies under any third party software license generally available to the
public, or (2) any Proprietary Asset is licensed by any of the Acquired
Companies to any Person on a non-exclusive basis), or (B) pursuant to which any
Acquired Company Proprietary Asset has been licensed or otherwise made available
to any Person that constitutes one of the top 20 customers (based on revenues)
of the Acquired Companies during the fiscal year ended June 30, 1999 or during
the six months ended December 31, 1999;
(iii) any Contract which provides for indemnification of any
officer, director, employee or agent of any of the Acquired Companies;
(iv) any Contract imposing any restriction on the right or
ability of any Acquired Company (A) to compete in any market or geographic area
with any other Person, (B) to acquire any product or other asset or any services
from any other Person, (C) to solicit, hire or retain any Person as an employee,
consultant or independent contractor, (D) to develop, sell, supply, distribute,
offer, support or service any product or any technology or other asset to or for
any other Person, (E) to perform services for any other Person, or (F) to
transact business or deal in any other manner with any other Person;
(v) any Contract (A) relating to the acquisition, issuance,
voting, registration, sale or transfer of any securities (other than Company
Options or Company Warrants outstanding as of the date of this Agreement), (B)
providing any Person with any preemptive right, right of participation, right of
maintenance or any similar right with respect to
15.
any securities, or (C) providing the Company with any right of first refusal
with respect to, or right to repurchase or redeem, any securities;
(vi) any Contract requiring that any of the Acquired
Companies give any notice or provide any information to any Person prior to
considering or accepting any Acquisition Proposal or similar proposal, or prior
to entering into any discussions, agreement, arrangement or understanding
relating to any Acquisition Transaction or similar transaction;
(vii) any Contract incorporating or relating to any guaranty,
any warranty or any indemnity or similar obligation, except for license
agreements, maintenance agreements, distribution agreements and supply
agreements entered into in the ordinary course of business consistent with past
practices;
(viii) any Contract (other than a Contract entered into in the
ordinary course of business) (A) to which any Governmental Body is a party or
under which any Governmental Body has any rights or obligations, or (B) directly
or indirectly benefiting any Governmental Body (including any subcontract or
other Contract between any Acquired Company and any contractor or subcontractor
to any Governmental Body);
(ix) any Contract that has a stated term of more than 180
days and that may not be terminated by an Acquired Company (without penalty)
within 180 days after the delivery of a termination notice by such Acquired
Company;
(x) any Contract that contemplates or involves the payment
or delivery of cash or other consideration in an amount or having a value in
excess of $500,000 in the aggregate, and any Contract that contemplates or
involves the performance of services having a value in excess of $500,000 in the
aggregate;
(xi) any Contract or Plan (including, without limitation, any
stock option plan, stock appreciation plan or stock purchase plan), any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the execution of this Agreement or the consummation of any of
the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(xii) any joint marketing or development Contract currently in
force under which an Acquired Company has continuing material obligations to
jointly market any product, technology or service and which may not be canceled
without penalty upon notice of 90 days or less, or any material Contract
pursuant to which an Acquired Company has continuing material obligations to
jointly develop any Proprietary Asset that will not be owned, in whole or in
part, by an Acquired Company and which may not be canceled without penalty upon
notice of 180 days or less;
(xiii) any Contract currently in force to disclose or deliver
to any Person, or permit the disclosure or delivery to any escrow agent or other
Person, of the source code, or any portion or aspect of the source code, or any
proprietary information or algorithm contained in or relating to any source
code, of any Acquired Company Proprietary Asset that is material to the Acquired
Companies taken as a whole; and
16.
(xiv) any Contract (not otherwise identified in clauses "(i)"
through "(xiii)" of this sentence) that could reasonably be expected to have a
material effect on (A) the business, financial condition, capitalization,
assets, liabilities, operations, financial performance or prospects of any of
the Acquired Companies or (B) the ability of the Company to perform any of its
obligations under, or to consummate any of the transactions contemplated by,
this Agreement or the Stock Option Agreement.
(b) Each Acquired Company Contract that constitutes a Material
Contract is valid and in full force and effect, and is enforceable by an
Acquired Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies. To the knowledge of the Company, no Person has violated or
breached, or committed any default under, any Material Contract, except for
violations, breaches and defaults that have not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Companies.
(c) (i) None of the Acquired Companies has violated or breached, or
committed any default under, any Acquired Company Contract, except for
violations, breaches and defaults that have not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Companies; and, to
the knowledge of the Company, no other Person has violated or breached, or
committed any default under, any Acquired Company Contract, except for
violations, breaches and defaults that have not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Companies; (ii) to
the knowledge of the Company, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or would
reasonably be expected to, (A) result in a violation or breach of any of the
provisions of any Acquired Company Contract, (B) give any Person the right to
declare a default or exercise any remedy under any Acquired Company Contract,
(C) give any Person the right to receive or require a rebate, chargeback,
penalty or change in delivery schedule under any Acquired Company Contract, (D)
give any Person the right to accelerate the maturity or performance of any
Acquired Company Contract, or (E) give any Person the right to cancel, terminate
or modify any Acquired Company Contract, except in each such case for
violations, breaches, defaults, remedies, rebates, chargebacks, penalties,
changes in delivery schedules, cancellation rights, acceleration rights,
termination rights, modification rights and other rights that have not had and
would not reasonably be expected to have a Material Adverse Effect on the
Acquired Companies; (iii) none of the Acquired Companies or any of their
Representatives has received any notice or other communication regarding any
actual or possible violation or breach of, or default under, any Acquired
Company Contract, except in each such case for defaults, acceleration rights,
termination rights and other rights that have not had and would not reasonably
be expected to have a Material Adverse Effect on the Acquired Companies; and
(iv) each of the Acquired Companies has obtained all necessary export licenses
related to the export of its products.
(d) No Person is renegotiating, or has a right pursuant to the
terms of any Material Contract to renegotiate, any amount paid or payable to any
Acquired Company under any Material Contract or any other material term or
provision of any Material Contract, except for any Material Contract which is
being renegotiated or provides for renegotiation pursuant to its terms in each
case in the ordinary course of business.
17.
2.10 Sale of Products; Performance of Services
(a) Each product, system, program, Proprietary Asset or
other asset designed, developed, manufactured, assembled, sold, installed,
repaired, licensed or otherwise made available by any of the Acquired Companies
to any Person: (i) substantially conformed and complied in all material respects
with the terms and requirements of any applicable warranty or other Contract and
with all applicable Legal Requirements; and (ii) was free of any bug, virus,
design defect or other defect or deficiency at the time it was sold or otherwise
made available, other than any bug, virus, design defect or other defect that
(A) would not adversely affect in any material respect such product, system,
program, Proprietary Asset or other asset (or the operation or performance
thereof), or (B) could be fixed in the ordinary course of business through the
performance of ordinary maintenance activities.
(b) All installation services, programming services, repair
services, maintenance services, support services, training services, upgrade
services and other services that have been performed by the Acquired Companies
were performed properly in all material respects and in conformity in all
material respects with the terms and requirements of all applicable warranties
and other Contracts and with all applicable Legal Requirements.
(c) Since March 31, 2000, no customer or other Person has
asserted or threatened to assert any claim against any of the Acquired Companies
under or based upon any warranty provided by or on behalf of any of the Acquired
Companies, or based upon any services performed by any of the Acquired
Companies, other than routine and ordinary claims in the ordinary course of
business consistent with past practice.
2.11 Liabilities. The Acquired Companies do not have any accrued,
contingent or other liabilities of any nature, either matured or unmatured,
except for: (a) liabilities identified as such in the "liabilities" column of or
in the notes to the Company Unaudited Interim Balance Sheet or the Company's
audited consolidated balance sheet for the year ended June 30, 1999; (b)
liabilities that have been incurred by the Acquired Companies since the date of
the Company Unaudited Interim Balance Sheet in the ordinary course of business
and consistent with past practices, or (c) liabilities which have not had and
would not reasonably be expected to have a Material Adverse Effect on the
Acquired Companies.
2.12 Compliance with Legal Requirements. Each of the Acquired Companies
has complied and is in compliance with all applicable Legal Requirements
(including with respect to the operation and administration of each of the Plans
and with respect to Environmental Laws), except where the failure to comply with
such Legal Requirements has not had and would not reasonably be expected to have
a Material Adverse Effect on the Acquired Companies. None of the Acquired
Companies has received any notice or other communication from any Governmental
Body or other Person regarding any actual or possible violation of, or failure
to comply with, any Legal Requirement, except as has not had and would not
reasonably be expected to have a Material Adverse Effect on the Acquired
Companies.
2.13 Certain Business Practices. None of the Acquired Companies, and (to
the knowledge of the Company) no director, officer, agent or employee of any of
the Acquired Companies has, on behalf of any of the Acquired Companies, (i) used
any funds for unlawful
18.
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
2.14 Governmental Authorizations.
(a) The Acquired Companies hold all Governmental Authorizations
necessary to enable the Acquired Companies to conduct their respective
businesses in the manner in which such businesses are currently being conducted,
except where the failure to hold such Governmental Authorizations has not had
and would not reasonably be expected to have a Material Adverse Effect on the
Acquired Companies. All such Governmental Authorizations are valid and in full
force and effect. Each Acquired Company is, and at all times since January 1,
1999 has been, in substantial compliance with the terms and requirements of such
Governmental Authorizations, except where the failure to be in compliance with
the terms and requirements of such Governmental Authorizations has not had and
would not reasonably be expected to have a Material Adverse Effect on the
Acquired Companies. Since January 1, 1999, none of the Acquired Companies has
received any notice or other communication from any Governmental Body regarding
(a) any actual or possible violation of or failure to comply with any term or
requirement of any material Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any material Governmental Authorization.
(b) Part 2.14(b) of the Company Disclosure Letter describes the
terms of each grant, incentive or subsidy provided or made available to or for
the benefit of any of the Acquired Companies by any U.S. or foreign Governmental
Body or otherwise. Each of the Acquired Companies is in full compliance with all
of the terms and requirements of each grant, incentive and subsidy identified or
required to be identified in Part 2.14(b) of the Company Disclosure Letter.
Neither the execution, delivery or performance of this Agreement, nor the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, will (with or without notice or lapse of time) give any Person the
right to revoke, withdraw, suspend, cancel, terminate or modify any grant,
incentive or subsidy identified or required to be identified in Part 2.14(b) of
the Company Disclosure Letter.
2.15 Tax Matters.
(a) Each of the Tax Returns required to be filed by or on behalf of
the respective Acquired Companies with any Governmental Body on or before the
Closing Date (the "Acquired Company Returns") (i) has been or will be filed on
or before the applicable due date (including any extensions of such due date),
and (ii) has been, or will be when filed, prepared in all material respects in
compliance with all applicable Legal Requirements. All amounts shown on the
Acquired Company Returns to be due on or before the Closing Date have been or
will be paid on or before the Closing Date.
19.
(b) Except as set forth in Part 2.15(b) of the Company Disclosure
Letter, the Company Financial Statements fully accrue all actual and contingent
liabilities for Taxes with respect to all periods through the dates thereof in
accordance with GAAP. Each Acquired Company will establish, in the ordinary
course of business and consistent with its past practices, reserves adequate for
the payment of all Taxes for the period from January 1, 2000 through the Closing
Date.
(c) Except as set forth in Part 2.15(c) of the Company Disclosure
Letter, no Acquired Company Return has prior to the date of this Agreement been
examined or audited by any Governmental Body. No extension or waiver of the
limitation period applicable to any of the Acquired Company Returns has been
granted (by the Company or any other Person), and no such extension or waiver
has been requested from any Acquired Company.
(d) No claim or Legal Proceeding is pending or, to the knowledge of
the Company, has been threatened against or with respect to any Acquired Company
in respect of any material Tax. Except as set forth in Part 2.15(d) of the
Company Disclosure Letter, there are no unsatisfied liabilities for material
Taxes (including liabilities for interest, additions to Tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by any Acquired Company with respect to any material
Tax (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the
Acquired Companies and with respect to which adequate reserves for payment have
been established). There are no liens for material Taxes upon any of the assets
of any of the Acquired Companies except liens for current Taxes not yet due and
payable. None of the Acquired Companies has entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code (or any comparable
provision of state or foreign Tax laws). None of the Acquired Companies has
been, and none of the Acquired Companies will be, required to include any
adjustment in taxable income for any tax period (or portion thereof) pursuant to
Section 481 of the Code or any comparable provision under state or foreign Tax
laws as a result of transactions or events occurring, or accounting methods
employed, prior to the Closing.
(e) Except for any parachute payment which may arise under Code
Section 280G in connection with the accelerated vesting of the outstanding
Company Options held by an optionee whose service with the Surviving Corporation
is terminated by reason of an Involuntary Termination (as such term is defined
in the applicable stock option agreement for each such Company Option) within
eighteen months after the Effective Time, and except as set forth in Part
2.15(e) of the Company Disclosure Letter, there is no agreement, plan,
arrangement or other Contract covering any employee or independent contractor or
former employee or independent contractor of any of the Acquired Companies that,
individually or in the aggregate with any other such Contracts, will, or would
reasonably be expected to, give rise directly or indirectly to the payment of
any amount that would not be deductible pursuant to Section 280G or Sections
162(b) through (o) of the Code (or any comparable provision of state or foreign
Tax laws). None of the Acquired Companies is, or has ever been, a party to or
bound by any tax indemnity agreement, tax-sharing agreement, tax allocation
agreement or similar Contract, and none of the Acquired Companies is or has ever
been a "distributing corporation" within the meaning of Section 355 of the Code.
20.
(f) None of the Acquired Companies have taken or agreed to take any
action that would prevent or impede the Merger from qualifying as a
reorganization under Section 368 of the Code nor have any of the Acquired
Companies omitted to take any action which omission would prevent the Merger
from qualifying as a reorganization under Section 368 of the Code.
2.16 Employee and Labor Matters; Benefit Plans.
(a) Part 2.16(a) of the Company Disclosure Letter identifies each
salary, bonus, vacation, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, termination pay, death and disability
benefits, hospitalization, medical, life or other insurance, flexible benefits,
supplemental unemployment benefits, profit-sharing, pension or retirement plan,
program or agreement and each other employee benefit plan or arrangement
(collectively, the "Plans") sponsored, maintained, contributed to or required to
be contributed to by any of the Acquired Companies as of the date of this
Agreement for the benefit of any current or former employee of any of the
Acquired Companies. Part 2.16(a) of the Company Disclosure Letter also
identifies each Legal Requirement pursuant to which any of the Acquired
Companies is required, as of the date of this Agreement, to establish any
reserve or make any contribution for the benefit of any current or former
employee located in any foreign jurisdiction.
(b) Except as set forth in Part 2.16(b) of the Company Disclosure
Letter, none of the Acquired Companies maintains, sponsors or contributes to,
and none of the Acquired Companies has at any time in the past maintained,
sponsored or contributed to, any employee pension benefit plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any similar pension benefit plan under the laws of any foreign
jurisdiction, whether or not excluded from coverage under specific Titles or
Subtitles of ERISA) for the benefit of employees or former employees of any of
the Acquired Companies (a "Pension Plan"). None of the Plans identified in Part
2.16(a) of the Company Disclosure Letter is subject to Title IV of ERISA or
Section 412 of the Code.
(c) Except as set forth in Part 2.16(c) of the Company Disclosure
Letter, as of the date of this Agreement, none of the Acquired Companies
maintains, sponsors or contributes to any: (i) employee welfare benefit plan (as
defined in Section 3(1) of ERISA or any similar welfare plan under the laws of
any foreign jurisdiction, whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of any current or former
employees or directors of any of the Acquired Companies (a "Welfare Plan"), or
(ii) self-funded medical, dental or other similar Plan. None of the Plans
identified in Part 2.16(a) of the Company Disclosure Letter is a multi-employer
plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered or made
available to Parent: (i) an accurate and complete copy of such Plan (including
all amendments thereto); (ii) except as set forth in Part 2.16(d)(ii) of the
Company Disclosure Letter, an accurate and complete copy of the annual report,
if required under ERISA, with respect to such Plan for the last two years; (iii)
an accurate and complete copy of the most recent summary plan description,
together with each Summary of Material Modifications, if required under ERISA,
with respect to such Plan, (iv) if such Plan is funded through a trust or any
third party funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments
21.
thereto) and accurate and complete copies the most recent financial statements
thereof; (v) accurate and complete copies of all Contracts relating to such
Plan, including service provider agreements, insurance contracts, minimum
premium contracts, stop-loss agreements, investment management agreements,
subscription and participation agreements and record-keeping agreements; and
(vi) except as set forth in Part 2.16(d)(vi) of the Company Disclosure Letter,
an accurate and complete copy of the most recent determination letter received
from the Internal Revenue Service with respect to such Plan (if such Plan is
intended to be qualified under Section 401(a) of the Code).
(e) None of the Acquired Companies is or has ever been required to
be treated as a single employer with any other Person under Section 4001(b)(1)
of ERISA or Section 414(b), (c), (m) or (o) of the Code. None of the Acquired
Companies has ever been a member of an "affiliated service group" within the
meaning of Section 414(m) of the Code. None of the Plans identified in the
Company Disclosure Letter is a multi-employer plan (within the meaning of
Section 3(37) of ERISA). None of the Acquired Companies has ever made a complete
or partial withdrawal from a multi-employer plan, as such term is defined in
Section 3(37) of ERISA, resulting in "withdrawal liability," as such term is
defined in Section 4201 of ERISA (without regard to subsequent reduction or
waiver of such liability under either Section 4207 or 4208 of ERISA).
(f) None of the Acquired Companies has, as of the date of this
Agreement, any plan or commitment to create any Welfare Plan or any Pension
Plan, or to modify or change any existing Welfare Plan or Pension Plan (other
than to comply with applicable law) in a manner that would affect any current or
former employee or director of any of the Acquired Companies.
(g) No Plan provides death, medical or health benefits (whether or
not insured) with respect to any current or former employee or director of any
of the Acquired Companies after any termination of service of such employee or
director (other than benefit coverage mandated by applicable law, including
coverage provided pursuant to Section 4980B of the Code).
(h) With respect to any Plan constituting a group health plan
within the meaning of Section 4980B(g)(2) of the Code, the provisions of Section
4980B of the Code ("COBRA") have been complied with in all material respects.
Part 2.16(h) of the Company Disclosure Letter describes all obligations of the
Acquired Companies as of the date of this Agreement under any of the provisions
of COBRA.
(i) Except as set forth in Part 2.16(i) of the Company Disclosure
Letter, each of the Plans intended to be qualified under Section 401(a) of the
Code has either received a favorable determination letter from the Internal
Revenue Service, and nothing has occurred that would adversely affect such
determination, or still has a remaining period of time under applicable Treasury
Regulations or Internal Revenue Service pronouncements in which to apply for
such determination letter and to make any amendments necessary to obtain a
favorable determination.
22.
(j) Except as set forth in Part 2.16(j) of the Company Disclosure
Letter, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will result in any bonus, golden parachute, severance or other
payment or obligation to any current or former employee or director of any of
the Acquired Companies (whether or not under any Plan), or materially increase
the benefits payable or provided under any Plan, or result in any acceleration
of the time of payment or vesting of any such benefits. Without limiting the
generality of the foregoing, the consummation of the Merger will not result in
the acceleration of vesting of any unvested Company Options. However, each
outstanding Company Option held by an optionee will vest and become exercisable
for all the option shares on an accelerated basis should an Involuntary
Termination (as such term is defined in the applicable stock option agreement
for each such Company Option) of that optionee's service with the Surviving
Corporation occur within eighteen months after the Effective Time.
(k) Part 2.16(k) of the Company Disclosure Letter contains a list
of all salaried employees of each of the Acquired Companies as of March 31,
2000, and correctly reflects, in all material respects, their salaries, any
other compensation payable to them (including compensation payable pursuant to
bonus, deferred compensation or commission arrangements) and their positions.
None of the Acquired Companies is a party to any collective bargaining contract
or other Contract with a labor union involving any of its employees. All of the
employees of the Acquired Companies are "at will" employees.
(l) Each of the Acquired Companies has good labor relations, and,
to the knowledge of the Company, (i) the consummation of the Merger or any of
the other transactions contemplated by this Agreement will not have a material
adverse effect on the labor relations of any of the Acquired Companies, and (ii)
none of the employees of the Acquired Companies intends to terminate his or her
employment with the Acquired Company with which such employee is employed.
2.17 Environmental Matters. None of the Acquired Companies has received
any notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, Employee or otherwise, that alleges that any
of the Acquired Companies is not in compliance with any Environmental Law. To
the knowledge of the Company, (a) all property that is leased to, controlled by
or used by any of the Acquired Companies, and all surface water, groundwater and
soil associated with or adjacent to such property, is free of any material
environmental contamination of any nature, (b) none of the property leased to,
controlled by or used by any of the Acquired Companies contains any underground
storage tanks, asbestos, equipment using PCBs, underground injection xxxxx, and
(c) none of the property leased to, controlled by or used by any of the Acquired
Companies contains any septic tanks in which process wastewater or any Materials
of Environmental Concern have been disposed of. No Acquired Company has ever
sent or transported, or arranged to send or transport, any Materials of
Environmental Concern to a site that, pursuant to any applicable Environmental
Law, (i) has been placed on the "National Priorities List" of hazardous waste
sites or any similar state list, (ii) is otherwise designated or identified as a
potential site for remediation, cleanup, closure or other environmental remedial
activity, or (iii) is subject to a Legal Requirement to take "removal" or
"remedial" action as detailed in any applicable Environmental Law or to make
payment for the cost of cleaning up any site.
23.
2.18 Insurance. Part 2.18 of the Company Disclosure Letter accurately
identifies all material insurance policies and all material self insurance
programs and arrangements relating to the business, assets and operations of the
Acquired Companies. Each of such insurance policies is in full force and effect.
Since January 1, 1999, none of the Acquired Companies has received any notice or
other communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or rejection
of any material claim under any insurance policy, or (c) material adjustment in
the amount of the premiums payable with respect to any insurance policy.
2.19 Transactions with Affiliates. Except as set forth in the Company
SEC Documents filed prior to the date of this Agreement and except for events
similar in nature to those disclosed in the last proxy statement filed by the
Company with the SEC, since the date of the Company's last proxy statement filed
with the SEC, no event has occurred that would be required to be reported by the
Company pursuant to Item 404 of Regulation S-K promulgated by the SEC. Exhibit D
identifies each Person who is (or who may be deemed to be) an Affiliate of the
Company as of the date of this Agreement.
2.20 Legal Proceedings; Orders.
(a) There is no pending Legal Proceeding, and (to the knowledge of
the Company) no Person has threatened to commence any Legal Proceeding: (i) that
involves any of the Acquired Companies or any of the assets owned or used by any
of the Acquired Companies, including, without limitation, any Acquired Company
Proprietary Asset; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the
knowledge of the Company, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that would reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding.
To the knowledge of the Company, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that would reasonably be expected to,
cause or provide a basis for a director, officer or other Representative of any
of the Acquired Companies to seek indemnification from, or commence a Legal
Proceeding against or involving, any of the Acquired Companies.
(b) There is no material order, writ, injunction, judgment or
decree to which any of the Acquired Companies, or any of the assets owned or
used by any of the Acquired Companies, is subject. To the knowledge of the
Company, no officer or other employee of any of the Acquired Companies is
subject to any order, writ, injunction, judgment or decree that prohibits such
officer or other employee from engaging in or continuing any conduct, activity
or practice relating to the business of any of the Acquired Companies.
2.21 Authority; Inapplicability of Anti-takeover Statutes; Binding Nature
of Agreement. The Company has the requisite power and authority to enter into
and to perform its obligations under this Agreement and under the Stock Option
Agreement. The Board of Directors of the Company (at a meeting duly called and
held) has (a) unanimously determined that the Merger is advisable and fair and
in the best interests of the Company and its stockholders, (b) unanimously
authorized and approved the execution, delivery and performance of this
Agreement and the Stock Option Agreement by the Company and unanimously approved
24.
the Merger, (c) unanimously recommended the approval of this Agreement by the
holders of Company Common Stock and directed that this Agreement and the Merger
be submitted for consideration by the Company's stockholders at the Company
Stockholders' Meeting (as defined in Section 4.4(a)), and (d) to the extent
necessary, adopted a resolution having the effect of causing the Company not to
be subject to any state takeover law or similar Legal Requirement that might
otherwise apply to the Merger or any of the other transactions contemplated by
this Agreement. Assuming the due authorization, execution and delivery by each
of Parent and Merger Sub, this Agreement and the Stock Option Agreement
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies. Prior to the execution of those certain Voting
Agreements of even date herewith and prior to the execution of the Stock Option
Agreement, the Board of Directors of the Company approved said Voting Agreements
and said Stock Option Agreement and the transactions contemplated thereby. No
state takeover statute or similar Legal Requirement applies or purports to apply
to the Merger, this Agreement or any of the transactions contemplated hereby.
2.22 Inapplicability of Section 2115 of California Corporations Code. The
Acquired Companies are not subject to Section 2115 of the California
Corporations Code.
2.23 Vote Required. The affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding on the record date for the
Company Stockholder Meeting (the "Required Company Stockholder Approval") is the
only vote of the holders of any class or series of the Company's capital stock
necessary to adopt this Agreement, the Merger and the other transactions
contemplated by this Agreement.
2.24 Non-Contravention; Consents. Neither (i) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement by the Company, nor (ii) the consummation of the Merger or any of the
other transactions contemplated by this Agreement by the Company, will directly
or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any
of the provisions of the certificate of incorporation, bylaws or other charter
or organizational documents of any of the Acquired Companies, or (ii) any
resolution adopted by the stockholders, the board of directors or any committee
of the board of directors of any of the Acquired Companies;
(b) contravene, conflict with or result in a violation of any Legal
Requirement or any order, writ, injunction, judgment or decree to which any of
the Acquired Companies, or any of the assets owned or used by any of the
Acquired Companies, is subject;
(c) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by any of the Acquired Companies or that otherwise relates to the
business of any of the Acquired Companies or to any of the assets owned or used
by any of the Acquired Companies;
25.
(d) except as set forth in Part 2.24(d) of the Company Disclosure
Letter, contravene, conflict with or result in a violation or breach of, or
result in a default under, any provision of any Material Contract, or give any
Person the right to (i) declare a default or exercise any remedy under any such
Material Contract, (ii) a rebate, chargeback, penalty or change in delivery
schedule under any such Material Contract, (iii) accelerate the maturity or
performance of any such Material Contract, or (iv) cancel, terminate or modify
any term of such Material Contract; or
(e) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by any of the Acquired Companies (except
for minor liens that will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair the
operations of any of the Acquired Companies).
Except as may be required by the Securities Act, the Exchange Act, state
securities or "blue sky" laws, the DGCL, the HSR Act and any foreign antitrust
law or regulation, none of the Acquired Companies was, is or will be required to
make any filing with or give any notice to, or to obtain any Consent from, any
Person in connection with (x) the execution, delivery or performance of this
Agreement, the Stock Option Agreement or any of the other agreements referred to
in this Agreement, or (y) the consummation by the Company of the Merger or any
of the other transactions contemplated by this Agreement or the Stock Option
Agreement.
2.25 Fairness Opinion. The Company's Board of Directors has received the
opinion of Xxxx Xxxxxxxx Xxxxxxx, financial advisor to the Company, as of the
date of this Agreement, to the effect that the consideration to be received by
the stockholders of the Company in the Merger is fair to the stockholders of the
Company from a financial point of view. The Company will furnish an accurate
and complete copy of the written opinion of Xxxx Xxxxxxxx Xxxxxxx to the effect
referred to in the preceding sentence to Parent as soon as practicable following
the execution of this Agreement.
2.26 Financial Advisor. Except for Xxxx Xxxxxxxx Xxxxxxx, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
any of the Acquired Companies. The Company has furnished to Parent accurate and
complete copies of all agreements under which any such fees, commissions or
other amounts have been paid to or may become payable and all indemnification
and other agreements related to the engagement of Xxxx Xxxxxxxx Xxxxxxx.
26.
2.27 Disclosure. None of the information supplied or to be supplied by or
on behalf of the Company for inclusion or incorporation by reference in the Form
S-4 Registration Statement will, at the time the Form S-4 Registration Statement
is filed with the SEC or at the time it becomes effective under the Securities
Act, 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. None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in the Proxy
Statement/Prospectus will, at the time the Proxy Statement/Prospectus is mailed
to the stockholders of the Company or at the time of the Company Stockholders'
Meeting (or any adjournment or postponement thereof), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. The Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Exchange Act.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Except set forth in the disclosure letter delivered to the Company on the
date of this Agreement and signed by an executive officer of Parent (the "Parent
Disclosure Letter"), Parent and Merger Sub, jointly and severally, represent and
warrant to the Company as follows:
3.1 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 State of Delaware. Each of Parent and Merger Sub has all corporate power
and authority to own its properties and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent and Merger Sub.
3.2 Capitalization, Etc.
(a) The authorized capital stock of Parent consists of: (i)
200,000,000 shares of Parent Common Stock, $.001 par value per share, of which,
as of March 31, 2000, approximately 32,370,142 shares (which amount does not
materially differ from the amount issued and outstanding as of the date of this
Agreement) have been issued and were outstanding; and (ii) 5,000,000 shares of
preferred stock, $.001 par value per share, of which no shares are outstanding
as of the date of this Agreement. As of March 31, 2000, there were 600,000
shares of Parent Common Stock available for purchase pursuant to Parent's
Employee Stock Purchase Plan. All of the outstanding shares of Parent Common
Stock have been duly authorized and validly issued, and are fully paid and
nonassessable. As of the date of this Agreement, there are no shares of Parent
Common Stock held in treasury by Parent.
(b) As of March 31, 2000, approximately 8,261,506 shares (which
amount does not materially differ from the amount subject to options outstanding
as of the date of this Agreement) of Parent Common Stock were subject to
issuance pursuant to outstanding options to purchase Parent Common Stock
("Parent Options"). As of March 31, 2000, 3,000 shares of
27.
Parent Common Stock were subject to issuance pursuant to outstanding warrants to
purchase Parent Common Stock ("Parent Warrants").
(c) As of the date of this Agreement, except as set forth in Section
3.2(b) or as set forth in Part 3.2(c) of the Parent Disclosure Letter, there is
no: (i) outstanding subscription, option, call, warrant or right (whether or not
currently exercisable) to acquire any shares of the capital stock or other
securities of Parent; (ii) outstanding security, instrument or obligation that
is or may become convertible into or exchangeable for any shares of the capital
stock or other securities of Parent; (iii) stockholder rights plan (or similar
plan commonly referred to as a "poison pill") or Contract under which Parent is
or may become obligated to sell or otherwise issue any shares of its capital
stock or any other securities; or (iv) condition or circumstance that would
reasonably be expected to give rise to or provide a basis for the assertion of a
claim by any Person to the effect that such Person is entitled to acquire or
receive any shares of capital stock or other securities of Parent.
(d) All outstanding shares of Parent Common Stock, all outstanding
Parent Options, all outstanding Parent Warrants and all outstanding shares of
capital stock of each Subsidiary of Parent have been issued and granted in
compliance with (i) all applicable securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in applicable Contracts,
except where the failure to be issued or granted in compliance therewith has not
had and would not reasonably be expected to have a Material Adverse Effect on
Parent.
3.3 SEC Filings; Financial Statements.
(a) Parent has delivered or made available to the Company accurate
and complete copies (excluding copies of exhibits) of each report, registration
statement and definitive proxy statement filed by Parent with the SEC since
January 1, 1999 (collectively, with all information incorporate by reference
therein or deemed to be incorporated by reference therein, the "Parent SEC
Documents"). All statements, reports, schedules, forms and other documents
required to have been filed by Parent with the SEC have been so filed on a
timely basis. As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Parent SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act ; and (ii) none of the Parent SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the Parent
SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered (except as may be indicated in the notes to such financial
statements and, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC, and except that unaudited financial statements may not contain
footnotes and are subject to normal and recurring year-end audit adjustments
which will not, individually or in the aggregate, be material in amount); and
(iii) fairly present, in all material respects, the consolidated financial
position of Parent and its consolidated subsidiaries as of the respective
28.
dates thereof and the consolidated results of operations of Parent and its
consolidated subsidiaries for the periods covered thereby. All adjustments
considered necessary for a fair presentation of the financial statements have
been included. All financial statements (including all related notes and
schedules) contained in Parent SEC Documents filed after the date hereof shall
meet the conditions set forth in (i), (ii) and (iii) of this Section 3.3(b).
3.4 Disclosure. None of the information supplied or to be supplied by or
on behalf of Parent and Merger Sub for inclusion or incorporation by reference
in the Form S-4 Registration Statement will, at the time the Form S-4
Registration Statement is filed with the SEC or at the time it becomes effective
under the Securities Act, 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 not misleading. None of the information
supplied or to be supplied by or on behalf of Parent and Merger Sub for
inclusion or incorporation by reference in the Proxy Statement/Prospectus will,
at the time the Proxy Statement/Prospectus is mailed to the stockholders of the
Company or at the time of the Company Stockholders' Meeting (or any adjournment
or postponement thereof), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. The Form S-4 Registration Statement will
comply as to form in all material respects with the provisions of the Securities
Act.
3.5 Authority; Binding Nature of Agreement. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement have been duly authorized by all
necessary action on the part of Parent and Merger Sub and their respective
boards of directors. This Agreement constitutes the legal, valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.6 Non-Contravention; Consents. Neither (i) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement by Parent, nor (ii) the consummation of the Merger or any of the other
transactions contemplated by this Agreement by Parent, will directly or
indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the certificate of incorporation, bylaws or other charter or
organizational documents of Parent or Merger Sub, or (ii) any resolution adopted
by the stockholders, the board of directors or any committee of the board of
directors of any of Parent or Merger Sub;
(b) contravene, conflict with or result in a violation of any Legal
Requirement or any order, writ, injunction, judgment or decree to which Parent
or Merger Sub, or any of the assets owned or used by Parent or Merger Sub, is
subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel,
29.
terminate or modify, any Governmental Authorization that is held by Parent or
that otherwise relates to the business of Parent or to any of the assets owned
or used by Parent;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any material Contract to which
Parent is a party, or give any Person the right to (i) declare a default or
exercise any remedy under any such material Contract, (ii) a rebate, chargeback,
penalty or change in delivery schedule under any such material Contract, (iii)
accelerate the maturity or performance of any such material Contract, or (iv)
cancel, terminate or modify any term of such material Contract; or
(e) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by Parent (except for minor liens that
will not, in any case or in the aggregate, materially detract from the value of
the assets subject thereto or materially impair the operations of Parent).
Except as may be required by the Securities Act, the Exchange Act, state
securities or "blue sky" laws, the DGCL, the HSR Act, any foreign antitrust law
or regulation and the NASD Bylaws (as they relate to the Form S-4 Registration
Statement and the Proxy Statement/Prospectus), neither Parent nor Merger Sub
was, is or will be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement, the Stock Option Agreement or any of
the other agreements referred to in this Agreement, or (y) the consummation by
Parent or Merger Sub of the Merger or any of the other transactions contemplated
by this Agreement or the Stock Option Agreement.
3.7 Absence of Changes. Between March 31, 2000 and the date of this
Agreement, there has not been any Material Adverse Effect on Parent.
3.8 Financial Advisor. Except for Xxxxxx Xxxxxx Partners, LLC, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
3.9 Valid Issuance. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be duly
authorized, validly issued, fully paid and nonassessable and not issued in
violation of any preemptive rights.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY.
4.1 Access and Investigation.
(a) During the period from the date of this Agreement through the
Effective Time (the "Pre-Closing Period"), the Company shall, and shall cause
the respective Representatives of the Acquired Companies to: (i) provide Parent
and Parent's Representatives with reasonable access at all reasonable times to
the Acquired Companies' Representatives, personnel and assets and to all
existing books, records, Tax Returns, work papers and other documents and
information relating to the Acquired Companies; and (ii) provide Parent and
Parent's Representatives with such copies of the existing books, records, Tax
Returns, work papers and other documents and information relating to the
Acquired Companies, and with such
30.
additional financial, operating and other data and information regarding the
Acquired Companies, as Parent may reasonably request.
(b) Without limiting the generality of the foregoing, during the
Pre-Closing Period, the Company shall promptly provide Parent with copies of:
(i) all material operating and financial reports prepared by
the Company and its Subsidiaries and delivered to the Company's senior
management, including (A) copies of the unaudited monthly consolidated balance
sheets of the Acquired Companies and the related unaudited monthly consolidated
statements of operations, statements of stockholders' equity and statements of
cash flows and (B) copies of any sales forecasts, marketing plans, development
plans, discount reports, write-off reports, hiring reports and capital
expenditure reports delivered to the Company's senior management;
(ii) any written materials or communications sent by or on
behalf of the Company to its stockholders;
(iii) any material notice, document or other communication sent
by or on behalf of any of the Acquired Companies to any party to any Acquired
Company Contract or sent to any of the Acquired Companies by any party to any
Acquired Company Contract (other than any communication that relates solely to
routine commercial transactions between the applicable Acquired Company and the
other party to any such Acquired Company Contract and that is of the type sent
in the ordinary course of business and consistent with past practices);
(iv) any notice, report or other document filed with or sent
to any Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement; and
(v) to the extent permitted by law, rule or regulation, any
material notice, report or other document received by any of the Acquired
Companies from any Governmental Body.
4.2 Operation of the Company's Business.
(a) During the Pre-Closing Period: (i) the Company shall ensure that
each of the Acquired Companies conducts its business and operations (A) in the
ordinary course and in accordance with past practices and (B) in compliance with
all applicable Legal Requirements and the requirements of all Material
Contracts; (ii) the Company shall use commercially reasonable efforts to ensure
that each of the Acquired Companies preserves intact its current business
organization, keeps available the services of its current officers and employees
and maintains its relations and goodwill with all suppliers, customers,
landlords, creditors, licensors, licensees, employees and other Persons having
business relationships with the respective Acquired Companies; (iii) the Company
shall keep in full force all insurance policies referred to in Section 2.18
other than those insurance policies that expire at the end of their stated term
(which shall be replaced with similar insurance policies); (iv) the Company
shall provide all notices, assurances and support required by any Acquired
Company Contract relating to any Acquired Company Proprietary Asset in order to
ensure that no condition under such Acquired Company Contract occurs that would
reasonably be expected to result in, or would reasonably be
31.
expected to increase the likelihood of, (A) any transfer or disclosure by any
Acquired Company of any Acquired Company Proprietary Asset, or (B) a release
from any escrow of any Acquired Company Proprietary Asset that has been
deposited or is required to be deposited in escrow under the terms of such
Acquired Company Contract; (v) the Company shall promptly notify Parent of (A)
any notice or other communication from any Person alleging that the Consent of
such Person is or may be required in connection with the transactions
contemplated by this Agreement, and (B) any Legal Proceeding commenced or
threatened against, relating to or involving or otherwise affecting any of the
Acquired Companies that relates to the consummation of the transactions
contemplated by this Agreement; and (vi) the Company shall (to the extent
reasonably requested by Parent) cause its officers and the officers of its
Subsidiaries to report regularly to Parent concerning the status of the
Company's business.
(b) During the Pre-Closing, unless otherwise contemplated by this
Agreement, the Company shall not (without the prior written consent of Parent,
which consent shall not be unreasonably withheld or delayed), and shall not
permit any of the other Acquired Companies to:
(i) declare, accrue, set aside or pay any dividend or make
any other distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other securities;
(ii) sell, issue, grant or authorize the issuance or grant of
(A) any capital stock or other security, (B) any option, call, warrant or right
to acquire any capital stock or other security, or (C) any instrument
convertible into or exchangeable for any capital stock or other security (except
that (1) the Company may issue shares of Company Common Stock upon the valid
exercise of Company Options outstanding as of the date of this Agreement, (2)
the Company may, in the ordinary course of business and consistent with past
practices, grant Company Options (having an exercise price equal to the fair
market value of the Company Common Stock covered by such options determined as
of the time of the grant of such options) to employees of the Company under its
Plans to purchase no more than a total of 100,000 shares of Company Common
Stock, and (3) if an employee's employment with the Acquired Companies is
terminated and such employee surrenders to the Company unvested Company Options,
then, subject to the limitations set forth in clause "(xii)" of this Section
4.2(a), such unvested Company Options may be re-granted by the Company to any
Person who is hired to replace such terminated employee);
(iii) amend or waive any of its rights under, or accelerate the
vesting under, any provision of any of the Company's stock option plans, any
provision of any agreement evidencing any outstanding stock option or any
restricted stock purchase agreement, or otherwise modify any of the terms of any
outstanding option, warrant or other security or any related Contract;
(iv) amend or permit the adoption of any amendment to its
certificate of incorporation or bylaws or other charter or organizational
documents, or effect or become a party to any merger, consolidation, share
exchange, business combination, recapitalization, reclassification of shares,
stock split, reverse stock split, consolidation of shares or similar
transaction;
32.
(v) form any subsidiary or acquire any equity interest or
other interest in any other Entity, other than interests in short term
investments in the ordinary course of business consistent with past practices;
(vi) make any capital expenditure (except that the Acquired
Companies may make capital expenditures that, when added to all other capital
expenditures made on behalf of the Acquired Companies during the Pre-Closing
Period, do not exceed $500,000 in the aggregate);
(vii) enter into or become bound by, or permit any of the
assets owned or used by it to become bound by, any Material Contract, or amend
or terminate, or waive or exercise any material right or remedy under, any
Material Contract, other than in each case in the ordinary course of business
consistent with past practices;
(viii) acquire, lease or license any right or other asset from
any other Person or sell or otherwise dispose of, or lease or license, any right
or other asset to any other Person (except in each case for assets acquired,
leased, licensed, sold or disposed of by an Acquired Company in the ordinary
course of business and consistent with past practices), or, other than in the
ordinary course of business consistent with past practices, waive or relinquish
any right;
(ix) incur any indebtedness for borrowed money (other than (A)
in connection with the financing of ordinary trade receivables; (B) pursuant to
existing credit facilities; (C) in connection with leasing activities in the
ordinary course of business; or (D) for tax planning purposes in the ordinary
course of business) or guarantee any indebtedness of any person for borrowed
money, or issue or sell any debt securities or warrants or right to acquire debt
securities of any of the Acquired Companies or guarantee any debt securities of
others.
(x) establish, adopt or amend any employee benefit plan, pay
any bonus or make any profit-sharing or similar payment to, or increase the
amount of the wages, salary, commissions, fringe benefits or other compensation
or remuneration payable to, any of its directors, officers or employees (except
that the Company (A) may make routine, reasonable salary increases in connection
with the Company's customary employee review process, (B) may pay customary
bonuses consistent with past practices payable in accordance with existing bonus
plans and (C) may make such amendments required by changes made to applicable
law);
(xi) grant any severance or termination pay to any officer or
employee except payments in amounts consistent with policies and past practices
or pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing or made available to Parent, or
adopt any new severance plan;
(xii) hire any employee at the level of vice president or above
or with an annual base salary in excess of $120,000, or promote any employee to
the position of officer except in order to fill a position vacated after the
date of this Agreement;
(xiii) change the status, title or responsibilities, including
without limitation, termination or promotion, of any officer of the Company or
promote any employee to an officer position in the Company;
33.
(xiv) transfer or license to any Person or otherwise extend
the term of any agreement with respect to, amend or modify in any material
respect any rights (including without limitation distribution rights) to the
Acquired Company Proprietary Assets, or enter into assignments of future patent
rights, other than non-exclusive licenses and distribution rights in the
ordinary course of business and consistent with past practices;
(xv) sell, lease, license, encumber or otherwise dispose of
any properties or assets which are material, individually or in the aggregate,
to the business of the Acquired Companies, except in the ordinary course of
business consistent with past practice or lend funds to any third party (other
than intra-company loans and travel advances in the ordinary course of
business);
(xvi) change any of its pricing policies, product return
policies, product maintenance polices, service policies, product modification or
upgrade policies, personnel policies or other business policies in any material
respect;
(xvii) change in any material respect its accounting policies,
methods or procedures except as required by GAAP;
(xviii) make any Tax election;
(xix) commence or settle any material Legal Proceeding;
(xx) take any action which it believes when taken would,
individually or in the aggregate, reasonably be expected to adversely affect or
delay in any material respect the ability of any of the Parties to obtain any
approval of any Governmental Body required to consummate the transactions
contemplated hereby;
(xxi) take any action to cause the share of Company Common
Stock to cease to be quoted on any of the stock exchanges on which such shares
are now quoted;
(xii) take any action which it believes when taken would cause
its representations and warranties contained herein to become inaccurate in any
material respect;
(xxiii) enter into any material transaction or take any other
material action outside the ordinary course of business or inconsistent with
past practices;
(xxiv) enter into any agreement requiring the consent or
approval of any third party with respect to the Merger; or
(xxv) agree or commit to take any of the actions described in
clauses "(i)" through "(xxiv)" of this Section 4.2(b).
(C) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of: (i) the discovery by the Company of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by the Company in this Agreement; (ii) any
event, condition, fact or circumstance that occurs, arises or exists after the
date of this
34.
Agreement and that would cause or constitute a material inaccuracy in any
representation or warranty made by the Company in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any event, condition, fact or
circumstance hereafter arising which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in the
Company Disclosure Letter; (iv) any material breach of any covenant or
obligation of the Company; and (v) any event, condition, fact or circumstance
that would make the timely satisfaction of any of the conditions set forth in
Section 6 or Section 7 impossible or unlikely or that has had or would
reasonably be expected to have a Material Adverse Effect on the Acquired
Companies. Without limiting the generality of the foregoing, the Company shall
promptly advise Parent in writing of any material Legal Proceeding or material
claim threatened, commenced or asserted against or with respect to any of the
Acquired Companies. No notification given to Parent pursuant to this Section
4.2(c) shall limit or otherwise affect any of the representations, warranties,
covenants or obligations of the Company contained in this Agreement.
4.3 No Solicitation.
(a) From the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to Section 8, the
Company shall not directly or indirectly, and shall not authorize or permit any
Subsidiary of the Company or any Representative of any of the Acquired Companies
directly or indirectly to, (i) solicit, initiate, encourage or induce the
making, submission or announcement of any Acquisition Proposal or take any
action that would, individually or in the aggregate, reasonably be expected to
lead to an Acquisition Proposal, (ii) furnish any information regarding any of
the Acquired Companies to any Person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that could lead to
an Acquisition Proposal, (iii) engage in discussions with any Person with
respect to any Acquisition Proposal, (iv) approve, endorse or recommend any
Acquisition Proposal or (v) enter into any letter of intent or similar document
or any Contract contemplating or otherwise relating to any Acquisition
Transaction; provided, however, that nothing herein shall prohibit the Company's
Board of Directors from complying with Rules 14d-9 or 14e-2 under the Exchange
Act; and provided, further, that prior to the Required Company Stockholder
Approval, this Section 4.3(a) shall not prohibit the Company from furnishing
nonpublic information regarding the Acquired Companies to, or entering into
discussions with, any Person in response to an Acquisition Proposal that is
submitted to the Company by such Person (and not withdrawn) if (1) neither the
Company nor any Representative of any of the Acquired Companies shall have
violated in any material respect any of the restrictions set forth in this
Section 4.3, (2) the Board of Directors of the Company concludes in good faith
(based upon a written opinion of an independent financial advisor of nationally
recognized reputation) that such Acquisition Proposal constitutes, or would
reasonably be expected to lead to, a Superior Offer, (3) the Board of Directors
of the Company concludes in good faith after having taken into account the
advice of its outside legal counsel, that such action is required in order for
the Board of Directors of the Company to comply with its fiduciary obligations
to the Company's stockholders under applicable law, (4) at least 24 hours prior
to furnishing any such nonpublic information to, or entering into discussions
with, such Person, the Company gives Parent written notice of the identity of
such Person and of the Company's intention to furnish
35.
nonpublic information to, or enter into discussions with, such Person, and the
Company receives from such Person an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such Person by or on behalf of the
Company, and (5) prior to furnishing any such nonpublic information to such
Person, the Company furnishes such nonpublic information to Parent (to the
extent such nonpublic information has not been previously furnished by the
Company to Parent). Without limiting the generality of the foregoing (x) the
Company acknowledges and agrees that any violation of any of the restrictions
set forth in the preceding sentence by any Representative of any of the Acquired
Companies, whether or not such Representative is purporting to act on behalf of
any of the Acquired Companies, shall be deemed to constitute a breach of this
Section 4.3 by the Company, and (y) Parent acknowledges and agrees that the
taking of any action permitted by and in accordance with this Section 4.3(a)
shall not constitute a breach of this Agreement.
(b) The Company shall promptly (and in no event later than 24 hours
after receipt of any Acquisition Proposal, any inquiry or indication of interest
that could reasonably be expected to lead to an Acquisition Proposal or any
request for nonpublic information) advise Parent orally and in writing of any
Acquisition Proposal, any inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal or any request for
nonpublic information relating to any of the Acquired Companies (including the
identity of the Person making or submitting such Acquisition Proposal, inquiry,
indication of interest or request, and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period. The Company shall keep
Parent fully informed with respect to the status of any such Acquisition
Proposal, inquiry, indication of interest or request and any modification or
proposed modification thereto.
(c) The Company shall immediately cease and cause to be terminated
any existing discussions with any Person that relate to any Acquisition
Proposal.
(d) The Company agrees not to release or permit the release of any
Person from, or to waive or permit the waiver of any provision of, any
confidentiality, "standstill" or similar agreement to which any of the Acquired
Companies is a party, and will use its best efforts to enforce or cause to be
enforced each such agreement at the request of Parent. The Company also will
promptly request each Person that has executed, within 12 months prior to the
date of this Agreement, a confidentiality agreement in connection with its
consideration of a possible Acquisition Transaction or equity investment to
return all confidential information heretofore furnished to such Person by or on
behalf of any of the Acquired Companies.
4.4 Company Stockholders' Meeting.
(a) The Company shall take all action necessary under all applicable
Legal Requirements to call, give notice of and hold a meeting of the holders of
Company Common Stock to vote on the adoption of this Agreement (the "Company
Stockholders' Meeting"). The Company may adjourn or postpone the Company
Stockholders' Meeting to the extent that (i) such adjournment or postponement is
necessary to ensure that any necessary supplement or amendment to the Proxy
Statement/Prospectus is provided to the Company's stockholders in advance of the
applicable vote, (ii) additional time is reasonably required to solicit proxies
or (iii)
36.
as of the time for which the Company Stockholders' Meeting is originally
scheduled there are insufficient shares represented (either in person or by
proxy) necessary to constitute a quorum necessary to conduct the business to be
conducted at the Company Stockholders' Meeting. The Company Stockholders'
Meeting shall be held (on a date selected by the Company in consultation with
Parent) as promptly as practicable after the Form S-4 Registration Statement is
declared effective under the Securities Act. The Company shall ensure that all
proxies solicited in connection with the Company Stockholders' Meeting are
solicited in compliance with all applicable Legal Requirements.
(b) Subject to Section 4.4(c): (i) the Proxy Statement/Prospectus
shall include a statement to the effect that the Board of Directors of the
Company recommends that the Company's stockholders vote to adopt this Agreement
at the Company Stockholders' Meeting (the recommendation of the Company's Board
of Directors that the Company's stockholders vote to adopt this Agreement being
referred to as the "Company Board Recommendation"); and (ii) the Company Board
Recommendation shall not be withdrawn or modified in a manner adverse to Parent,
and no resolution by the Board of Directors of the Company or any committee
thereof to withdraw or modify the Company Board Recommendation in a manner
adverse to Parent shall be adopted or proposed.
(c) Notwithstanding anything to the contrary contained in Section
4.4(b), at any time prior to the Required Company Stockholder Approval, the
Company Board Recommendation may be withdrawn or modified in a manner adverse to
Parent if: (i) an unsolicited, bona fide written offer for an Acquisition
Transaction involving the acquisition (whether by way of merger, consolidation,
share exchange, business combination, issuance of securities, acquisition of
securities, tender offer, exchange offer or other similar transaction) of more
than 50% of the outstanding voting securities of the Company or the 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 50% of the business or assets of the Company is made to the Company
and is not withdrawn; (ii) the Company provides Parent with at least two
business days prior notice of any meeting of the Company's Board of Directors at
which such Board of Directors will consider and determine whether such offer for
such an Acquisition Transaction is a Superior Offer; (iii) the Company's Board
of Directors determines in good faith (based upon a written opinion of an
independent financial advisor of nationally recognized reputation) that such
offer for such an Acquisition Transaction constitutes a Superior Offer; (iv) the
Company's Board of Directors determines in good faith, after having taken into
account the advice of the Company's outside legal counsel, that, in light of
such Superior Offer, the withdrawal or modification of the Company Board
Recommendation is required in order for the Company's Board of Directors to
comply with its fiduciary obligations to the Company's stockholders under
applicable law; (v) the Company Board Recommendation is not withdrawn or
modified in a manner adverse to Parent at any time within two business days
after Parent receives written notice from the Company confirming that the
Company's Board of Directors has determined that such offer for such an
Acquisition Transaction is a Superior Offer; and (vi) neither the Company nor
any of its Representatives shall have violated in any material respect any of
the restrictions set forth in Section 4.3.
(d) The Company's obligation to call, give notice of and hold the
Company Stockholders' Meeting in accordance with Section 4.4(a) shall not be
limited or otherwise
37.
affected by the commencement, disclosure, announcement or submission of any
Superior Offer or other Acquisition Proposal, or by any withdrawal or
modification of the Company Board Recommendation.
4.5 Letter of the Company's Accountants. The Company shall use
commercially reasonable efforts to cause to be delivered to Parent a letter of
Ernst & Young LLP, dated no more than two business days before the date on which
the Form S-4 Registration Statement becomes effective, that is customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4 Registration
Statement.
4.6 Affiliates. Not less than thirty days prior to the Effective Time,
the Company shall identify all Affiliates and shall use commercially reasonable
efforts to cause each Affiliate, other than those Persons listed in Exhibit D,
to enter into an Affiliate Agreement prior to the Effective Time.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES.
5.1 Registration Statement; Proxy Statement/Prospectus.
(a) As promptly as practicable after the date of this Agreement,
Parent and the Company shall prepare and cause to be filed with the SEC the
Proxy Statement/Prospectus and Parent shall prepare and cause to be filed with
the SEC the Form S-4 Registration Statement, in which the Proxy
Statement/Prospectus will be included as a prospectus. Each of Parent and the
Company shall use commercially reasonable efforts to cause the Form S-4
Registration Statement and the Proxy Statement/Prospectus to comply with the
rules and regulations promulgated by the SEC, to respond promptly to any
comments of the SEC or its staff and to have the Form S-4 Registration Statement
declared effective under the Securities Act as promptly as practicable after it
is filed with the SEC. The Company will use commercially reasonable efforts to
cause the Proxy Statement/Prospectus to be mailed to the Company's stockholders
as promptly as practicable after the Form S-4 Registration Statement is declared
effective under the Securities Act. The Company shall promptly furnish to Parent
all information concerning the Acquired Companies and the Company's stockholders
that may be required or reasonably requested in connection with any action
contemplated by this Section 5.1. If any event relating to any of the Acquired
Companies occurs, or if the Company becomes aware of any information, that
should be disclosed in an amendment or supplement to the Form S-4 Registration
Statement or the Proxy Statement/Prospectus, then the Company shall promptly
inform Parent thereof and the Company and Parent shall cooperate in filing such
amendment or supplement with the SEC and, if appropriate, in mailing such
amendment or supplement to the stockholders of the Company.
(b) Prior to the Effective Time, Parent shall use commercially
reasonable efforts to obtain all regulatory approvals needed to ensure that the
Parent Common Stock to be issued in the Merger will be registered or qualified
under the securities law of every jurisdiction of the United States in which any
registered holder of Company Common Stock has an address of record on the record
date for determining the stockholders entitled to notice of and to vote at the
Company Stockholders' Meeting; provided, however, that Parent shall not be
required (i) to
38.
qualify to do business as a foreign corporation in any jurisdiction in which it
is not now qualified or (ii) to file a general consent to service of process in
any jurisdiction.
(c) If, between the date of this Agreement and the Closing, the
trading price of the Parent Common Stock declines and, as a result of such
decline, Parent is required to issue additional shares of Parent Common Stock
such that the approval of the stockholders of Parent with respect to the
issuance of the shares of Parent Common Stock in the Merger is required by
applicable Nasdaq rules, Parent shall use commercially reasonable efforts to
obtain such stockholder approval, and the parties hereto shall act in good faith
to negotiate an appropriate amendment to this Agreement (which would include,
among other provisions, provisions permitting either party to refuse to
consummate the Merger if such Parent stockholder approval is not obtained) to
reflect that such a vote is required.
5.2 Regulatory Approvals. Each party shall use commercially reasonable
efforts to file, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed by such party with any
Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. Without limiting the
generality of the foregoing, the Company and Parent shall, promptly after the
date of this Agreement, prepare and file the notifications required under the
HSR Act and any applicable foreign antitrust laws or regulations in connection
with the Merger. The Company and Parent shall respond as promptly as practicable
to (i) any inquiries or requests received from the Federal Trade Commission or
the Department of Justice for additional information or documentation and (ii)
any inquiries or requests received from any state attorney general, foreign
antitrust authority or other Governmental Body in connection with antitrust or
related matters. Each of the Company and Parent shall (1) give the other party
prompt notice of the commencement or threat of commencement of any Legal
Proceeding by or before any Governmental Body with respect to the Merger or any
of the other transactions contemplated by this Agreement, (2) keep the other
party informed as to the status of any such Legal Proceeding or threat, and (3)
promptly inform the other party of any communication to or from the Federal
Trade Commission, the Department of Justice or any other Governmental Body
regarding the Merger. Except as may be prohibited by any Governmental Body or by
any Legal Requirement, the Company and Parent will consult and cooperate with
one another, and will consider in good faith the views of one another, in
connection with any analysis, appearance, presentation, memorandum, brief,
argument, opinion or proposal made or submitted in connection with any Legal
Proceeding under or relating to the HSR Act or any other foreign, federal or
state antitrust or fair trade law. In addition, except as may be prohibited by
any Governmental Body or by any Legal Requirement, in connection with any Legal
Proceeding under or relating to the HSR Act or any other foreign, federal or
state antitrust or fair trade law or any other similar Legal Proceeding, each of
the Company and Parent will permit authorized Representatives of the other party
to be present at each meeting or conference relating to any such Legal
Proceeding and to have access to and be consulted in connection with any
document, opinion or proposal made or submitted to any Governmental Body in
connection with any such Legal Proceeding. At the request of Parent, the Company
shall agree to divest, sell, dispose of, hold separate or otherwise take or
commit to take any action that limits its freedom of action with respect to its
or its Subsidiaries' ability to retain, any of the businesses, product lines or
assets of the Company or any of its Subsidiaries, provided that any such action
is conditioned upon the consummation of the Merger.
39.
5.3 Stock Options.
(a) Subject to Section 5.3(b), at the Effective Time, all rights with
respect to Company Common Stock under each Company Option then outstanding shall
be converted into and become rights with respect to Parent Common Stock, and
Parent shall assume each such Company Option (an "Assumed Option") in accordance
with the requirements of Section 424(a) of the Code (as in effect as of the date
of this Agreement) and the terms of the stock option plan under which it was
issued and the stock option agreement by which it is evidenced. From and after
the Effective Time, (i) each Assumed Option may be exercised solely for shares
of Parent Common Stock, (ii) the number of shares of Parent Common Stock subject
to each such Assumed Option shall be equal to the number of shares of Company
Common Stock subject to the Company Option immediately prior to the Effective
Time multiplied by the Exchange Ratio, rounding down to the nearest whole share,
(iii) the per share exercise price under each Assumed Option shall be adjusted
by dividing the per share exercise price under such Company Option by the
Exchange Ratio and rounding up to the nearest cent and (iv) any restriction on
the exercise of any such Company Option shall continue in full force and effect
and the term, exercisability, vesting schedule and other provisions of such
Company Option shall otherwise remain unchanged; provided, however, that each
Assumed Option shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, stock dividend, reverse
stock split, reclassification, recapitalization or other similar transaction
subsequent to the Effective Time. It is the intention of the parties that each
Assumed Option shall qualify, immediately after the Effective Time, as incentive
stock options under Section 422 of the Code to the same extent those options
qualified as such incentive stock options immediately prior to the Effective
Time. Within 20 business days after the Effective Time, Parent shall issue to
each person who, immediately after the Effective Time, was a holder of an
Assumed Option a document in form and substance reasonably satisfactory to the
Company evidencing the foregoing assumption of such Company Option by Parent.
(b) Notwithstanding anything to the contrary contained in this
Section 5.3, in lieu of assuming outstanding Company Options in accordance with
Section 5.3(a), Parent may, at its election, cause such outstanding Company
Options to be replaced by issuing substantially equivalent replacement stock
options in substitution therefor, which replacement stock options will include
equivalent terms relating to acceleration, vesting and the effect of a change in
control. Nothing in this Section 5.3(b) shall be construed to eliminate any
vested right of a holder of any Company Option.
(c) As of the Effective Time, the Company's Employee Stock Purchase
Plan shall be terminated. The rights of participants in the Employee Stock
Purchase Plan with respect to any offering period then underway under the
Employee Stock Purchase Plan shall be determined by treating the last business
day prior to the Effective Time as the last day of such offering period and by
making such other pro-rata adjustments as may be necessary to reflect the
shortened offering period but otherwise treating such shortened offering period
as a fully effective and completed offering period for all purposes under the
Employee Stock Purchase Plan. Prior to the Effective Time, the Company shall
take commercially reasonable actions (including, if appropriate, amending the
terms of the Employee Stock Purchase Plan) that are necessary to give effect to
the transactions contemplated by this Section 5.3(c).
40.
(d) Parent agrees that all employees of the Acquired Companies who
continue employment with Parent, the Surviving Corporation or any Subsidiary of
the Surviving Corporation after the Effective Time ("Continuing Employees")
shall be eligible to continue to participate in the Surviving Corporation's
health and welfare benefit plans and 401(k) profit-sharing plan; provided,
however, that (i) nothing in this Section 5.3(d) or elsewhere in this Agreement
shall limit the right of Parent or the Surviving Corporation to amend or
terminate any such health or welfare benefit plan or 401(k) profit-sharing plan
at any time, and (ii) if Parent or the Surviving Corporation terminates any such
health or welfare benefit plan or 401(k) profit-sharing plan, then (upon
expiration of any appropriate transition period and subject to the other
provisions of Parent's health or welfare benefit plans or 401(k) profit-sharing
plan), the Continuing Employees shall be eligible to participate in Parent's
health and welfare benefit plans and 401(k) profit-sharing plan, to
substantially the same extent as similarly situated employees of Parent. To the
extent permitted by law and the terms of Parent's health and welfare benefit
plans and 401(k) profit-sharing plan, Parent will provide each Continuing
Employee with full credit for service as an employee of the Acquired Companies
prior to the Effective Time for purposes of eligibility, vesting and
determination of the level of benefits under any such health or welfare benefit
plan or 401(k) profit-sharing plan of Parent. Nothing in this Section 5.3(d) or
elsewhere in this Agreement shall be construed to create a right in any employee
to employment with Parent, the Surviving Corporation or any other Subsidiary of
Parent and the employment of each Continuing Employee shall be "at will"
employment.
(e) The Company agrees to take (or cause to be taken) all actions
necessary or appropriate to terminate, effective immediately prior to the
Effective Time, any employee benefit plan sponsored by any of the Acquired
Companies (or in which any of the Acquired Companies participate) that contains
a cash or deferred arrangement intended to qualify under Section 401(k) of the
Code.
5.4 Form S-8. Parent agrees to file a registration statement on Form S-8
for the shares of Parent Common Stock issuable with respect to Assumed Options
as soon as reasonably practical (and in any event within 15 days) after the
Effective Time.
5.5 Indemnification of Officers and Directors.
(a) For a period of six years after the Effective Time, Parent and
the Surviving Corporation shall (i) indemnify and hold harmless (and, subject to
customary undertakings, provide advancement of expenses to) the directors and
officers of the Company and those Persons serving, at the request of the
Company, as an officer or director of another Person, for acts and omissions
occurring prior to the Effective Time, as provided in the Company's Bylaws (as
in effect as of the date of this Agreement) and as provided in any
indemnification agreements between the Company and said Persons (as in effect as
of the date of this Agreement), and (ii) include and cause to be maintained in
effect in the certificate of incorporation and bylaws of the Surviving
Corporation (or any successor thereto) provisions regarding limitation of
liability of directors, indemnification of officers and directors and
advancement of expenses which are no less advantageous to the Persons referred
to in clause "(i)" of this Section 5.5(a) than the provisions existing as of the
date of this Agreement.
41.
(b) From the Effective Time until the sixth anniversary of the
Effective Time, Parent shall, or shall cause the Surviving Corporation to,
maintain or cause to be maintained in effect, for the benefit of the current
directors and officers of the Company with respect to acts or omissions
occurring at or prior to the Effective Time, the current policies of directors'
and officers' liability insurance maintained by the Company as of the date of
this Agreement (the "Existing Policy"); provided, however, that Parent or the
Surviving Corporation may substitute for the Existing Policy a policy or
policies with coverage of at least the same amounts and containing terms and
conditions which are no less favorable to the insured in the aggregate than the
terms and conditions of the Existing Policy; provided, further, that (i) in no
event shall Parent or the Surviving Corporation be required to expend an amount
in excess of 150% of the amount of the last annual premium paid by the Company
prior to the date of this Agreement for the Existing Policy, and (ii) if the
annual premiums of such insurance coverage exceed the maximum amount referred to
in clause "(i)" of this Section 5.5(b), the Surviving Corporation shall be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such maximum.
5.6 Reorganization. Each of the Company and Parent agrees not to take any
action either prior to or after the Effective Time that could reasonably be
expected to cause the Merger to fail to qualify as a reorganization under
Section 368 of the Code.
5.7 Additional Agreements.
(a) Subject to Section 5.7(b), Parent and the Company shall use
commercially reasonable efforts to take, or cause to be taken, all actions
necessary to consummate the Merger and make effective the other transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, but subject to Section 5.7(b), each party to this Agreement (i) shall
make all filings (if any) and give all notices (if any) required to be made and
given by such party in connection with the Merger and the other transactions
contemplated by this Agreement, (ii) shall use commercially reasonable efforts
to obtain each Consent (if any) required to be obtained (pursuant to any
applicable Legal Requirement or Contract, or otherwise) by such party in
connection with the Merger or any of the other transactions contemplated by this
Agreement, and (iii) shall use commercially reasonable efforts to lift any
restraint, injunction or other legal bar to the Merger. The Company shall
promptly deliver to Parent a copy of each such filing made, each such notice
given and each such Consent obtained by the Company during the Pre-Closing
Period.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement: (i) to
dispose of or transfer or cause any of its Subsidiaries to dispose of or
transfer any assets, or to commit to cause any of the Acquired Companies to
dispose of any assets; (ii) to discontinue or cause any of its Subsidiaries to
discontinue offering any product or service, or to commit to cause any of the
Acquired Companies to discontinue offering any product or service; (iii) to
license or otherwise make available, or cause any of its Subsidiaries to license
or otherwise make available, to any Person, any technology, software or other
Acquired Company Proprietary Asset, or to commit to cause any of the Acquired
Companies to license or otherwise make available to any Person any technology,
software or other Proprietary Asset; (iv) to hold separate or cause any of its
Subsidiaries to hold separate any assets or operations (either before or after
the Closing Date), or
42.
to commit to cause any of the Acquired Companies to hold separate any assets or
operations; (v) to make or cause any of its Subsidiaries to make any commitment
(to any Governmental Body or otherwise) regarding its future operations or the
future operations of any of the Acquired Companies; or (vi) to contest any Legal
Proceeding relating to the Merger if Parent determines in good faith, based upon
advice of outside counsel, that contesting such Legal Proceeding is not
reasonably likely to be successful or is likely to result in material costs to
Parent.
5.8 Confidentiality. The parties acknowledge that the Company and Parent
have previously executed a Mutual Non-Disclosure Agreement, dated as of March
22, 2000 (the "Confidentiality Agreement"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms.
5.9 Disclosure. Unless otherwise required by applicable law or by
obligations pursuant to any listing agreement with or rules of any securities
exchange, Parent and the Company shall consult with each other before issuing
any other press release or otherwise making any public statement with respect to
the Merger or any of the other transactions contemplated by this Agreement.
5.10 Tax Matters.
(a) At or prior to the filing of the Form S-4 Registration Statement,
Parent and Merger Sub and the Company shall execute and deliver to Xxxxxx
Godward LLP and to Xxxxxxx Phleger & Xxxxxxxx LLP tax representation letters
substantially in the forms attached as Exhibit H-1 and H-2, as applicable;
(b) Parent, Merger Sub and the Company shall each confirm to Xxxxxx
Godward LLP and to Xxxxxxx Xxxxxxx & Xxxxxxxx LLP the accuracy and completeness
as of the Effective Time of the tax representation letters delivered pursuant to
Section 5.10(a);
(c) Parent, Merger Sub and the Company shall use commercially
reasonable efforts to cause the Merger to qualify as a reorganization under
Section 368(a)(1) of the Code; and
(d) Following delivery of the tax representation letters pursuant to
Section 5.10(a), each of Parent and the Company shall use its commercially
reasonable efforts to cause Xxxxxx Godward LLP and Xxxxxxx Xxxxxxx & Xxxxxxxx
LLP, respectively, to deliver promptly to it a legal opinion satisfying the
requirements of Item 601 of Regulation S-K promulgated under the Securities Act.
In rendering such opinions, each of such counsel shall be entitled to rely on
the tax representation letters delivered pursuant to Section 5.10(a).
5.11 Nasdaq Listing. Parent shall use commercially reasonable efforts to
have the shares of Parent Common Stock issuable to the stockholders of the
Company pursuant to the Agreement and such other shares required to be reserved
for issuance in connection with the Merger authorized for listing on Nasdaq,
subject to official notice of issuance, prior to the Effective Time.
5.12 Access to Information. During the Pre-Closing Period, Parent shall,
and shall cause its Representatives, to: (a) provide the Company and its
Representatives with reasonable
43.
access at all reasonable times to Parent's Representatives, personnel and assets
and to all existing books, records, Tax Returns, work papers and other documents
and information relating to Parent and its Subsidiaries; and (b) provide the
Company and its Representatives with such copies of the existing books, records,
Tax Returns, work papers and other documents and information relating to Parent
and its Subsidiaries, and with such additional financial, operating and other
data and information regarding Parent and its Subsidiaries, as the Company may
reasonably request. Without limiting the generality of the foregoing, during the
Pre-Closing Period, Parent shall promptly provide the Company with copies of any
notice, report or other document filed with or sent to any Governmental Body in
connection with the Merger or any of the other transactions contemplated by this
Agreement.
5.13 Advice of Changes. During the Pre-Closing Period, Parent shall
promptly notify the Company in writing of: (a) the discovery by Parent of any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes a material inaccuracy
in any representation or warranty made by Parent in this Agreement; (b) any
event, condition, fact or circumstance that occurs, arises or exists after the
date of this Agreement and that would cause or constitute a material inaccuracy
in any representation or warranty made by Parent in this Agreement if (i) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (ii)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (c) any event, condition, fact or
circumstance hereafter arising which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in the
Parent Disclosure Letter; (d) any material breach of any covenant or obligation
of Parent; and (e) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 7
impossible or unlikely or that has had or would reasonably be expected to have a
Material Adverse Effect on Parent. Without limiting the generality of the
foregoing, Parent shall promptly advise the Company in writing of any material
Legal Proceeding or material claim threatened, commenced or asserted against or
with respect to Parent. No notification given to the Company pursuant to this
Section 5.13 shall limit or otherwise affect any of the representations,
warranties, covenants or obligations of Parent contained in this Agreement.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 Accuracy of Representations.
The representations and warranties of the Company contained in this
Agreement shall be accurate in all respects as of the Closing Date as if made on
and as of the Closing Date (except to the extent that such representations and
warranties speak as of another date, in which case such representations and
warranties shall be true and correct as of such other date), except that any
inaccuracies in such representations and warranties will be disregarded if the
circumstances giving rise to all such inaccuracies (considered collectively) do
not constitute, and would not
44.
reasonably be expected to have, a Material Adverse Effect on the Acquired
Companies; provided, however, that, for purposes of determining the accuracy of
such representations and warranties, (i) all "Material Adverse Effect"
qualifications and other materiality qualifications contained in such
representations and warranties shall be disregarded and (ii) any update of or
modification to the Company Disclosure Letter made or purported to have been
made after the date of this Agreement shall be disregarded.
6.2 Performance of Covenants. Each covenant or obligation that the Company
is required to comply with or to perform at or prior to the Closing shall have
been complied with and performed in all material respects.
6.3 Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued, and no proceeding for
that purpose shall have been initiated or be threatened, by the SEC with respect
to the Form S-4 Registration Statement.
6.4 Stockholder Approval. The Required Company Stockholder Approval shall
have been obtained.
6.5 Consents. All Consents identified in Part 6.5 of the Company
Disclosure Letter shall have been obtained and shall be in full force and
effect, and all other Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement shall have been
obtained and shall be in full force and effect, except where the failure to
obtain such Consents has not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Companies. All material authorizations,
consents, orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any Governmental Body required to be
obtained in connection with the Merger and the other transactions contemplated
by this Agreement shall have been obtained or made or shall have expired and
shall be in full force and effect.
6.6 Agreements and Documents. Parent and Merger Sub shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) Affiliate Agreements, executed by each Affiliate, as contemplated
by Section 4.6;
(b) Employment and Noncompetition Agreements in the form of Exhibit
I, executed by each Person identified on Schedule 6.6(b);
(c) a letter from Ernst & Young LLP, dated as of the Closing Date and
addressed to Parent, in form and substance reasonably acceptable to Parent,
updating the letter referred to in Section 4.5;
(d) a legal opinion of Xxxxxx Godward LLP, dated as of the Closing
Date and addressed to Parent, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that in rendering such opinion, Xxxxxx Godward LLP may rely upon the
tax representation letters referred to in Section 5.10);
45.
(e) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming that the conditions set forth in Sections 6.1, 6.2,
6.5, 6.7 and 6.11 have been duly satisfied;
(f) the written resignations of all directors of the Company,
effective as of the Effective Time (it being understood that any such
resignation shall not be deemed to be a voluntary termination of employment
under existing employment, severance or similar agreements); and
(g) the written resignations of all directors and officers of each of
the Acquired Companies (other than the Company), effective as of the Effective
Time.
6.7 No Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Material Adverse Effect on the Acquired Companies,
and no event shall have occurred or circumstance shall exist that, in
combination with any other events or circumstances, could reasonably be expected
to have a Material Adverse Effect on the Acquired Companies.
6.8 HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
6.9 Listing. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing on Nasdaq, subject to notice of issuance.
6.10 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction or other
Governmental Body and remain in effect, and there shall not be any Legal
Requirement enacted or deemed applicable to the Merger that makes consummation
of the Merger illegal.
6.11 No Governmental Litigation. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body (other than a court or similar
tribunal) is or is threatened to become a party or is otherwise involved, and
neither Parent nor the Company shall have received any communication from any
Governmental Body (other than a court or similar tribunal)in which such
Governmental Body indicates the possibility of commencing any Legal Proceeding
or taking any other action: (a) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Agreement; (b) relating to the Merger and seeking to obtain from Parent or
any of its subsidiaries, any damages or other relief that may be material to
Parent; (c) seeking to prohibit or limit in any material respect Parent's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving Corporation; (d)
which would materially and adversely affect the right of Parent, the Surviving
Corporation or any Subsidiary of Parent to own the assets or operate the
business of the Acquired Companies; or (e) seeking to compel Parent or the
Company, or any subsidiary of Parent or the Company, to dispose of or hold
separate any material assets, as a result of the Merger or any of the other
transactions contemplated by this Agreement.
46.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY.
The obligation of the Company to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to the Closing, of the following:
7.1 Accuracy of Representations. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date (except
to the extent that such representations and warranties speak as of another date,
in which case such representations and warranties shall be true and correct as
of such other date), except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and would not
reasonably be expected to have, a Material Adverse Effect on Parent; provided,
however, that for purposes of determining the accuracy of such representations
and warranties, (i) all "Material Adverse Effect" qualifications and other
materiality qualifications contained in such representations and warranties
shall be disregarded and (ii) any update of or modification to the Parent
Disclosure Letter made or purported to have been made after the date of this
Agreement shall be disregarded.
7.2 Performance of Covenants. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued, and no proceeding for
that purpose shall have been initiated or be threatened, by the SEC with respect
to the Form S-4 Registration Statement.
7.4 Stockholder Approval. The Required Company Stockholder Approval shall
have been obtained.
7.5 Agreements and Documents. The Company shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) a legal opinion of Xxxxxxx Xxxxxxx & Xxxxxxxx LLP, dated as of
the Closing Date and addressed to the Company, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368 of the Code
(it being understood that, in rendering such opinion, Xxxxxxx Phleger & Xxxxxxxx
LLP may rely upon tax representation letters including those referred to in
Section 5.10); and
(b) a certificate executed on behalf of Parent by an executive
officer of Parent, confirming that conditions set forth in Sections 7.1, 7.2 and
7.7 have been duly satisfied.
7.6 HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated. All other
material authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any Governmental
Body required to be obtained in connection with the Merger and
47.
the other transactions contemplated by this Agreement shall have been obtained
or made or shall have expired and shall be in full force and effect.
7.7 Listing. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing on Nasdaq, subject to notice of issuance.
7.8 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
the Company shall have been issued by any court of competent jurisdiction or
other Governmental Body and remain in effect, and there shall not be any Legal
Requirement enacted or deemed applicable to the Merger that makes consummation
of the Merger by the Company illegal.
SECTION 8. TERMINATION.
8.1 Termination. This Agreement may be terminated prior to the Effective
Time (whether before or after the Required Company Stockholder Approval):
(a) by mutual written consent of the Boards of Directors of Parent
and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by October 31, 2000 (the "End Date") (unless the failure to
consummate the Merger is attributable to a failure on the part of the party
seeking to terminate this Agreement to perform any material obligation required
to be performed by such party at or prior to the Effective Time); provided,
however, that if, between the date of this Agreement and the Closing, the
trading price of the Parent Common Stock declines and, as a result of such
decline, Parent is required to issue additional shares of Parent Common Stock
such that the approval of the stockholders of Parent with respect to the
issuance of the shares of Parent Common Stock in the Merger is required by
applicable Nasdaq rules, either party may in its discretion extend the End Date
for up to 90 days;
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and non-
appealable order, decree or ruling, or shall have taken any other action, having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger;
(d) by either Parent or the Company, if (i) the Company Stockholders'
Meeting shall have been held (either on the date for which such meeting was
originally scheduled or pursuant to any adjournment or postponement thereof) and
(ii) the Required Company Stockholder Approval was not obtained at such meeting
(provided that the right to terminate this Agreement under this Section 8.1(d)
shall not be available to the Company where the failure to obtain the Required
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);
(e) by Parent (at any time prior to Required Company Stockholder
Approval) if a Triggering Event shall have occurred;
48.
(f) by Parent if (i) any of the Company's representations and
warranties contained in this Agreement shall have become inaccurate as of a date
subsequent to the date of this Agreement (as if made on such subsequent date),
such that the condition set forth in Section 6.1 would not be satisfied (it
being understood that, for purposes of determining the accuracy of such
representations and warranties, (A) all "Material Adverse Effect" qualifications
and other materiality qualifications, and any similar qualifications, contained
in such representations and warranties shall be disregarded and (B) any update
of or modification to the Company Disclosure Letter made or purported to have
been made after the date of this Agreement shall be disregarded), or (ii) any of
the Company's covenants contained in this Agreement shall have been breached
such that the condition set forth in Section 6.2 would not be satisfied;
provided, however, that if an inaccuracy in the Company's representations and
warranties or a breach of a covenant by the Company is curable by the Company
and the Company is continuing to exercise commercially reasonable efforts to
cure such inaccuracy or breach, then Parent may not terminate this Agreement
under this Section 8.1(f) on account of such inaccuracy or breach; or
(g) by the Company if (i) any of Parent's representations and
warranties contained in this Agreement shall have become inaccurate as of a date
subsequent to the date of this Agreement (as if made on such subsequent date),
such that the condition set forth in Section 7.1 would not be satisfied (it
being understood that, for purposes of determining the accuracy of such
representations and warranties, (A) all "Material Adverse Effect" qualifications
and other materiality qualifications, and any similar qualifications, contained
in such representations and warranties shall be disregarded and (B) any update
of or modification to the Parent Disclosure Letter made or purported to have
been made after the date of this Agreement shall be disregarded), or (ii) if any
of Parent's covenants contained in this Agreement shall have been breached such
that the condition set forth in Section 7.2 would not be satisfied; provided,
however, that if an inaccuracy in Parent's representations and warranties or a
breach of a covenant by Parent is curable by Parent and Parent is continuing to
exercise commercially reasonable efforts to cure such inaccuracy or breach, then
the Company may not terminate this Agreement under this Section 8.1(g) on
account of such inaccuracy or breach.
8.2 Notice of Termination; Effect of Termination. Any termination under
Section 8.1 above will be effective immediately upon the delivery of written
notice of the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 8.1, this Agreement shall
be of no further force or effect and no party shall have any liability or
obligation arising out of or otherwise by virtue of this Agreement; provided,
however, that (i) this Section 8.2, Section 8.3 and Section 9 shall survive the
termination of this Agreement and shall remain in full force and effect, (ii)
the termination of this Agreement shall not relieve any party from any liability
for any intentional breach of this Agreement and (iii) 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.
8.3 Expenses; Termination Fees.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, whether or
not the Merger is consummated; provided,
49.
however, that Parent and the Company shall share equally all fees and expenses,
other than attorneys' and accountants' fees and expenses, incurred in connection
with the printing and filing of the Form S-4 Registration Statement and the
Proxy Statement/Prospectus and any amendments or supplements thereto.
(b) If this Agreement is terminated by Parent pursuant to Section
8.1(e) then the Company shall pay to Parent (at the time specified in Section
8.3(c)), a nonrefundable fee in the amount of $5,500,000 (the "Termination Fee")
in cash within three days of such termination.
(c) If this Agreement is terminated by Parent or the Company pursuant
to Section 8.1(d) and, after the date of this Agreement and prior to the time of
such termination, an Acquisition Proposal shall have been disclosed, announced,
commenced, submitted or made, then the Company shall pay to Parent in cash a
nonrefundable fee in the amount of $1,833,333 (the "Initial Termination Fee"),
such fee to be paid prior to such termination (in the case of termination by the
Company) or within two days after such termination (in the case of termination
by Parent). If, within 365 days after the payment of the Initial Termination
Fee, an Acquisition Transaction (other than with Parent or one of Parent's
Affiliates) is consummated, or the Company enters into a definitive agreement
with respect to an Acquisition Transaction (other than with Parent or one of
Parent's Affiliates), the Company shall pay to Parent in cash an additional
nonrefundable fee of $3,666,667, such fee to be paid at or prior to the
consummation of such Acquisition Transaction or the entering into of such
definitive agreement, whichever is earlier. For purposes of this Section 8.3(c),
the term "Acquisition Transaction" shall have the meaning assigned to it in
Exhibit A except that all references to 20% shall be deemed to be references to
30%),
SECTION 9. MISCELLANEOUS PROVISIONS.
9.1 Amendment. This Agreement may be amended with the approval of the
respective boards of directors of the Company and Parent at any time (whether
before or after the Required Company Stockholder Approval is obtained);
provided, however, that after any such Required Company Stockholder Approval is
obtained, no amendment shall be made which by law or NASD regulation requires
further approval of the stockholders of the Company without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
9.2 Waiver.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No party shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of
50.
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such party; and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
9.3 No Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Merger.
9.4 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the
other agreements referred to herein constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
or between any of the parties with respect to the subject matter hereof and
thereof and is not intended to confer upon any person other than the Company,
Parent and Merger Sub, any rights or remedies hereunder; provided, however,
that, after the Effective Time (a) the stockholders of the Company will be
third-party beneficiaries under this Agreement; (b) the Persons referred to in
Section 5.5(a) and Section 5.5(b) will be third-party beneficiaries under those
Sections, and (c) the Continuing Employees will be third-party beneficiaries
under Section 5.3(d).
9.5 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same instrument.
9.6 Applicable Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF. In any action between any of the parties, arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement: (a) each of the parties irrevocably and unconditionally consents and
submits to the exclusive jurisdiction and venue of the state and federal courts
located in the State of Delaware; (b) if any such action is commenced in any
other state or federal court, then, subject to applicable law, no party shall
object to the removal of such action to any federal court located in the State
of Delaware; (c) each of the parties irrevocably waives the right to trial by
jury; and (d) each of the parties irrevocably consents to service of process in
the manner contemplated by Section 9.10.
9.7 Disclosure Letter. Each of the Company Disclosure Letter and the
Parent Disclosure Letter shall be arranged in separate parts corresponding to
the numbered and lettered sections contained in Sections 2 and 3, respectively,
and the information disclosed in any numbered or lettered part shall be deemed
to relate to and to qualify only the particular representation or warranty set
forth in the corresponding numbered or lettered section in Section 2 or 3,
respectively, and shall not be deemed to relate to or to qualify any other
representation or warranty unless such relationship or qualification is
reasonably apparent.
9.8 Attorneys' Fees. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive a reasonable sum for
its attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
51.
9.9 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns. Neither this Agreement nor any of the
parties' rights hereunder may be assigned by any of the parties without the
prior written consent of the other party, and any attempted assignment of this
Agreement or any of such rights without such consent shall be void and of no
effect.
9.10 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received (a) when delivered by hand, or (b)
one business day after sent by internationally recognized courier or express
delivery service (such as Federal Express) or by facsimile (with confirmation of
receipt)), to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
parties hereto):
if to Parent: Clarent Corporation
000 Xxxxxxxxxx Xxxxx
Xxxxxxx xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
with a copy (which shall not constitute notice) to:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
if to Merger Sub: Copper Acquisition Sub, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxx xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
with a copy (which shall not constitute notice) to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
52.
if to the Company: ACT Networks, Inc.
00000 X. Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
with a copy (which shall not constitute notice) to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxxx
9.11 Cooperation. The Company agrees to cooperate in a reasonable manner
with Parent and to execute and deliver such further documents, certificates,
agreements and instruments and to take such other actions as may be reasonably
requested by Parent to evidence or reflect the transactions contemplated by this
Agreement and to carry out the intent and purposes of this Agreement
9.12 Heading. The headings contained in this Agreement are for reference
purposes only and shall not be used in the construction or interpretation of
this Agreement.
9.13 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the maximum extent possible.
9.14 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
masculine and feminine genders.
53.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
(e) A reference to any party to this Agreement or any other agreement
or document shall include such party's successors and permitted assigns.
(f) A reference to any legislation or to any provision of any
legislation shall include any modifications or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.
54.
In Witness Whereof, the parties have caused this Agreement and Plan of
Merger and Reorganization to be executed as of the date first above written.
Clarent Corporation
By:_______________________________________
Printed Name: Xxxxxxx X. Xxxxx
Title: Chief Operating Officer and Chief
Financial Officer
Copper Acquisition Sub, Inc.
By:_______________________________________
Printed Name: Xxxxxxx X. Xxxxx
Title: President, Chief Executive Officer
and Chief Financial Officer
ACT Networks, Inc.
By:_______________________________________
Printed Name:_____________________________
Title:____________________________________
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
SIGNATURE PAGE
Exhibits Index
Exhibit A.......... Certain Definitions
Exhibit B.......... Company Stockholders who have executed Voting Agreements
Exhibit C.......... Form of Voting Agreement for Company Stockholders
Exhibit D.......... Individuals executing Company Affiliate Agreement in Form of
Exhibit E
Exhibit E.......... Form of Affiliate Agreement for Company Affiliates
Exhibit F.......... Form of Option Agreement
Exhibit G-1........ Form of Surviving Corporation Articles of Incorporation
Exhibit G-2........ Form of Surviving Corporation Bylaws
Exhibit H-1........ Form of Tax Representation Letter to be delivered by Parent
and Merger Sub
Exhibit H-2........ Form of Tax Representation Letter to be delivered by Company
Exhibit I.......... Form of Employment and Noncompetition Agreement
i.
Exhibit A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquired Company Contract. "Acquired Company Contract" shall mean any
Contract: (a) to which any of the Acquired Companies is a party; (b) by which
any of the Acquired Companies or any asset of any of the Acquired Companies is
or may become bound or under which any of the Acquired Companies has, or may
become subject to, any obligation; or (c) under which any of the Acquired
Companies has or may acquire any right or interest.
Acquired Company Proprietary Asset. "Acquired Company Proprietary Asset"
shall mean any Proprietary Asset owned by or licensed to any of the Acquired
Companies or otherwise used by any of the Acquired Companies, and material to
the business of any of the Acquired Companies as presently conducted.
Acquisition Proposal. "Acquisition Proposal" shall mean any offer or
proposal (other than an offer or proposal by Parent) contemplating or otherwise
relating to any Acquisition Transaction.
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction or series of related transactions involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange offer
or other similar transaction (i) in which any of the Acquired Companies is a
constituent corporation, (ii) in which a Person or "group" (as defined in the
Exchange Act) of Persons directly or indirectly acquires the Company or more
than 50% of the Company's business or directly or indirectly acquires beneficial
or record ownership of securities representing more than 20% of the outstanding
securities of any class of voting securities of any of the Acquired Companies,
or (iii) in which any of the Acquired Companies issues securities representing
more than 20% of the outstanding securities of any class of voting securities of
the Company;
(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 50% of the assets of the Company; or
(c) any liquidation or dissolution of the Company.
Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
Closing Price. "Closing Price" shall mean the 4:00 p.m. (Eastern Time)
closing price of a share of Parent Common Stock as reported on Nasdaq for the
trading day immediately preceding the day on which the Effective Time occurs.
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Company Disclosure Letter. "Company Disclosure Letter" shall mean the
disclosure letter that has been prepared by the Company in accordance with the
requirements of Section 9.7 of the Agreement and that has been delivered by the
Company to Parent on the date of the Agreement and signed by the President of
the Company.
Company Common Stock. "Company Common Stock" shall mean the Common Stock,
$.001 par value per share, of the Company.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any company
limited by shares, limited liability company or joint stock company), firm,
society or other enterprise, association, organization or entity.
Environmental Law. "Environmental Law" shall mean any federal, state, local
or foreign Legal Requirement relating to pollution or protection of human health
or the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern,
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, including the rules and regulations promulgated thereunder.
Form S-4 Registration Statement. "Form S-4 Registration Statement" shall
mean the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with issuance of Parent Common Stock in the Merger, as said
registration statement may be amended prior to the time it is declared effective
by the SEC.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, variance, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of
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any Governmental Body or pursuant to any Legal Requirement; or (b) right under
any Contract with any Governmental Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
HSR Act. "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body (or under the
authority of the Nasdaq).
Material Adverse Effect. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on the Acquired
Companies if such event, violation, inaccuracy, circumstance or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties of the Company set forth in the Agreement but
for the presence of "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, in such representations and
warranties) had or could reasonably be expected to have a material adverse
effect on (i) the business, financial condition, capitalization, assets,
liabilities, operations or financial performance of the Acquired Companies taken
as a whole, (ii) the ability of the Company to consummate the Merger or any of
the other transactions contemplated by the Agreement or the Stock Option
Agreement or to perform any of its obligations under the Agreement or the Stock
Option Agreement, or (iii) Parent's ability to vote, receive dividends with
respect to or otherwise exercise ownership rights with respect to the stock of
the Surviving Corporation. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on Parent if
such event, violation, inaccuracy, circumstance or other matter (considered
together with all other matters that would constitute exceptions to the
representations and warranties of Parent set forth in the Agreement but for the
presence of "Material Adverse Effect" or other materiality qualifications, or
any similar qualifications, in such representations and warranties) had or would
reasonably be expected to have a material adverse effect on (i) the business,
financial condition, capitalization, assets, liabilities, operations or
financial performance of Parent and its Subsidiaries taken as a whole or (ii)
the ability of Parent to consummate the Merger or any of the other transactions
A-3
contemplated by the Agreement or to perform any of its obligations under the
Agreement. Notwithstanding the foregoing:
(A) none of the following shall be deemed, in and of itself, to
constitute a Material Adverse Effect on the Acquired
Companies: (1) any event, violation, inaccuracy,
circumstance or other matter that results from conditions
affecting the economy in general or conditions affecting
the industry in which the Acquired Companies operates, or
(2) a decline in the stock price of the Company; and
(B) none of the following shall be deemed, in and of itself, to
constitute a Material Adverse Effect on Parent: (1) any
event, violation, inaccuracy, circumstance or other matter
that results from conditions affecting the economy in
general or conditions affecting the industry in which
Parent or its Subsidiaries operates, or (2) a decline in
the stock price of Parent.
In addition to the foregoing, a Legal Proceeding that is commenced by or on
behalf of one or more of the Company's stockholders against the directors of the
Company after the receipt by the Company of a Superior Offer (to the extent that
such Legal Proceeding relates to such Superior Offer) shall be disregarded for
the purposes of determining whether a Material Adverse Effect on the Acquired
Companies has occurred or could reasonably be expected to occur.
Materials of Environmental Concern. "Materials of Environmental Concern"
shall mean chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.
Nasdaq. "Nasdaq" shall mean the Nasdaq National Market.
Parent Common Stock. "Parent Common Stock" shall mean the Common Stock,
$.001 par value per share, of Parent.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Proprietary Asset. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program source code, algorithm, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset in any jurisdiction in the
world; or (b) right to use or exploit any of the foregoing in any jurisdiction
in the world.
Proxy Statement/Prospectus. "Proxy Statement/Prospectus" shall mean the
proxy statement to be sent to the Company's stockholders in connection with the
Company Stockholders' Meeting which also constitutes the prospectus of Parent
relating to the offer and
A-4
sale of shares of Parent Common Stock pursuant to the Agreement, in the form
reasonably agreed upon by the Company and Parent.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Subsidiary. An entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns or purports to own,
beneficially or of record, (a) an amount of voting securities of other interests
in such Entity that is sufficient to enable such Person to elect at leased a
majority of the members of such Entity's Board of Directors or other governing
body, or (b) at least 50% of the outstanding equity or financial interests or
such Entity.
Superior Offer. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to consummate an Acquisition Transaction
involving the acquisition (whether by way of merger, consolidation, share
exchange, business combination, issuance of securities, acquisition of
securities, tender offer, exchange offer or other similar transaction) of more
than 50% of the outstanding voting securities of the Company or the 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 50% of the business or assets of the Company on terms that the Board
of Directors of the Company determines, in its good faith judgment, based upon a
written opinion of an independent financial advisor of nationally recognized
reputation, to be more favorable to the Company's stockholders than the terms of
the Merger; provided, however, that any such offer shall not be deemed to be a
"Superior Offer" if it is not reasonably likely to be completed.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
Triggering Event. A "Triggering Event" shall be deemed to have occurred if:
(i) the Board of Directors of the Company shall have failed to recommend, or
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its unanimous recommendation in favor of, the adoption
of the Agreement; (ii) the Company shall have failed to include in the Proxy
Statement/Prospectus the unanimous recommendation of the Board of
Directors of the Company in favor of the adoption of the Agreement; (iii) after
an Acquisition Proposal shall have been disclosed, announced, commenced,
submitted or made, the Board of Directors of the Company fails to reaffirm its
unanimous recommendation in favor of the adoption of the Agreement within five
business days after Parent requests in writing that such recommendation be
reaffirmed; (iv) the Board of Directors of the Company shall have approved,
endorsed or recommended any Acquisition Proposal; (v) the Company shall have
entered into any letter of intent or Contract relating to a transaction or
series of transactions that, if consummated, would result in an Acquisition
Transaction; (vi) the Company shall have breached in any material respect any of
its obligations under Section 4.4 or Section 5.1(a) of the Agreement; (vii) a
tender or exchange offer relating to securities of the Company that, if
consummated, would result in an Acquisition Transaction, shall have been
commenced and the Company shall not have sent to its securityholders, within 10
business days after the commencement of such tender or exchange offer, a
statement disclosing that the Company recommends rejection of such tender or
exchange offer; (viii) an Acquisition Proposal is publicly announced, and the
Company fails to issue a press release announcing its opposition to such
Acquisition Proposal within ten business days after such Acquisition Proposal is
announced; or (ix) the Company breaches or is deemed to have breached in any
material respect any of its obligations under Section 4.3 of the Agreement.
Unaudited Interim Balance Sheet. "Unaudited Interim Balance Sheet" shall
mean the unaudited consolidated balance sheet of the Company and its
consolidated subsidiaries as of March 31, 2000, as previously provided to
Parent.
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Table of Contents
Page
Section 1. DESCRIPTION OF TRANSACTION.......................................................... 2
1.1 Merger of Merger Sub into the Company............................................... 2
1.2 Closing; Effective Time............................................................. 2
1.3 Effect of the Merger................................................................ 2
1.4 Subsequent Action................................................................... 2
1.5 Certificate of Incorporation and Bylaws; Directors and Officers..................... 2
1.6 Conversion of Shares................................................................ 3
1.7 Stock Options....................................................................... 4
1.8 Closing of the Company's Transfer Books............................................. 4
1.9 Exchange of Certificates............................................................ 4
1.10 Tax Consequences.................................................................... 6
1.11 Accounting Consequences............................................................. 6
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................... 6
2.1 Due Organization; Subsidiaries; Etc................................................. 6
2.2 Certificate of Incorporation and Bylaws............................................. 7
2.3 Capitalization, Etc................................................................. 7
2.4 SEC Filings; Financial Statements................................................... 9
2.5 Absence of Changes.................................................................. 10
2.6 Leasehold; Real Property; Equipment................................................. 11
2.7 Receivables; Customers.............................................................. 12
2.8 Proprietary Assets.................................................................. 12
2.9 Contracts........................................................................... 15
2.10 Sale of Products; Performance of Services........................................... 17
2.11 Liabilities......................................................................... 18
2.12 Compliance with Legal Requirements.................................................. 18
2.13 Certain Business Practices.......................................................... 18
2.14 Governmental Authorizations......................................................... 19
2.15 Tax Matters......................................................................... 19
2.16 Employee and Labor Matters; Benefit Plans........................................... 20
2.17 Environmental Matters............................................................... 23
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(continued)
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2.18 Insurance........................................................................... 23
2.19 Transactions with Affiliates........................................................ 23
2.20 Legal Proceedings; Orders........................................................... 24
2.21 Authority; Inapplicability of Anti-takeover Statutes; Binding Nature of Agreement... 24
2.22 Inapplicability of Section 2115 of California Corporations Code..................... 25
2.23 Vote Required....................................................................... 25
2.24 Non-Contravention; Consents......................................................... 25
2.25 Fairness Opinion.................................................................... 26
2.26 Financial Advisor................................................................... 26
2.27 Disclosure.......................................................................... 26
Section 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............................. 26
3.1 Organization, Standing and Power.................................................... 27
3.2 Capitalization, Etc................................................................. 27
3.3 SEC Filings; Financial Statements................................................... 27
3.4 Disclosure.......................................................................... 28
3.5 Authority; Binding Nature of Agreement.............................................. 28
3.6 Non-Contravention; Consents......................................................... 29
3.7 Absence of Changes.................................................................. 30
3.8 Financial Advisor................................................................... 30
3.9 Valid Issuance...................................................................... 30
Section 4. CERTAIN COVENANTS OF THE COMPANY.................................................... 30
4.1 Access and Investigation............................................................ 30
4.2 Operation of the Company's Business................................................. 31
4.3 No Solicitation..................................................................... 34
4.4 Company Stockholders' Meeting....................................................... 36
4.5 Letter of the Company's Accountants................................................. 37
Section 5. ADDITIONAL COVENANTS OF THE PARTIES................................................. 37
5.1 Registration Statement; Proxy Statement/Prospectus.................................. 37
5.2 Regulatory Approvals................................................................ 38
ii.
Table of Contents
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Page
5.3 Stock Options....................................................................... 39
5.4 Form S-8............................................................................ 41
5.5 Indemnification of Officers and Directors........................................... 41
5.6 Reorganization...................................................................... 41
5.7 Additional Agreements............................................................... 41
5.8 Confidentiality..................................................................... 42
5.9 Disclosure.......................................................................... 42
5.10 Tax Matters......................................................................... 42
5.11 Nasdaq Listing...................................................................... 43
5.12 Access to Information............................................................... 43
5.13 Advice of Changes................................................................... 43
Section 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB........................ 44
6.1 Accuracy of Representations......................................................... 44
6.2 Performance of Covenants............................................................ 44
6.3 Effectiveness of Registration Statement............................................. 44
6.4 Stockholder Approval................................................................ 44
6.5 Consents............................................................................ 44
6.6 Agreements and Documents............................................................ 45
6.7 No Material Adverse Effect.......................................................... 45
6.8 HSR Act............................................................................. 45
6.9 Listing............................................................................. 45
6.10 No Restraints....................................................................... 45
6.11 No Governmental Litigation.......................................................... 45
Section 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY................................... 46
7.1 Accuracy of Representations......................................................... 46
7.2 Performance of Covenants............................................................ 46
7.3 Effectiveness of Registration Statement............................................. 46
7.4 Stockholder Approval................................................................ 46
7.5 Agreements and Documents............................................................ 47
iii.
Table Of Contents
(continued)
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7.6 HSR Act............................................................................. 47
7.7 Listing............................................................................. 47
7.8 No Restraints....................................................................... 47
Section 8. TERMINATION.......................................................................... 47
8.1 Termination......................................................................... 47
8.2 Notice of Termination; Effect of Termination........................................ 49
8.3 Expenses; Termination Fees.......................................................... 49
Section 9. MISCELLANEOUS PROVISIONS............................................................ 49
9.1 Amendment........................................................................... 49
9.2 Waiver.............................................................................. 50
9.3 No Survival of Representations and Warranties....................................... 50
9.4 Entire Agreement; No Third-Party Beneficiaries...................................... 50
9.6 Applicable Law; Jurisdiction........................................................ 50
9.7 Disclosure Letter................................................................... 51
9.8 Attorneys' Fees..................................................................... 51
9.9 Assignability....................................................................... 51
9.10 Notices............................................................................. 51
9.11 Cooperation......................................................................... 52
9.12 Heading............................................................................. 52
9.13 Severability........................................................................ 52
9.14 Construction........................................................................ 53
iv.
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages
following the Table of Contents/Authorities.
1.
