CONFORMED COPY
==============================================================================
AGREEMENT AND PLAN OF MERGER
Among
INTERNATIONAL BUSINESS MACHINES CORPORATION
DUKE ACQUISITION CORP.
and
CROSSWORLDS SOFTWARE, INC.
Dated as of October 29, 2001
==============================================================================
TABLE OF CONTENTS
ARTICLE I
The Merger
SECTION 1.01 Effective Time of the Merger................................2
SECTION 1.02 Closing.....................................................2
SECTION 1.03 Effect of the Merger........................................2
SECTION 1.04 Certificate of Incorporation and By-laws....................2
SECTION 1.05 Directors...................................................3
SECTION 1.06 Officers....................................................3
ARTICLE II
Conversion of Securities
SECTION 2.01 Conversion of Capital Stock.................................3
SECTION 2.02 Exchange of Certificates....................................5
ARTICLE III
Representations and Warranties
SECTION 3.01 Representations and Warranties of the Company...............8
SECTION 3.02 Representations and Warranties of Parent and Sub...........44
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01 Conduct of Business........................................46
SECTION 4.02 No Solicitation............................................54
ARTICLE V
Additional Agreements
SECTION 5.01 Preparation of the Proxy Statement; Stockholders Meeting...58
SECTION 5.02 Access to Information; Confidentiality.....................59
SECTION 5.03 Reasonable Efforts; Notification...........................59
SECTION 5.04 Stock Options; Restricted Shares; Warrants.................62
SECTION 5.05 Indemnification, Exculpation and Insurance.................65
SECTION 5.06 Fees.......................................................67
SECTION 5.07 Employee Matters...........................................68
SECTION 5.08 Public Announcements.......................................70
SECTION 5.09 Closing Date Balance Sheet.................................71
ARTICLE VI
Conditions Precedent
SECTION 6.01 Conditions to Each Party's Obligation to Effect the Merger.72
SECTION 6.02 Conditions to Obligations of Parent and Sub................72
SECTION 6.03 Conditions to Obligation of the Company....................74
SECTION 6.04 Frustration of Closing Conditions..........................75
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01 Termination................................................75
SECTION 7.02 Effect of Termination......................................76
SECTION 7.03 Amendment..................................................76
SECTION 7.04 Extension; Waiver..........................................77
ARTICLE VIII
General Provisions
SECTION 8.01 Nonsurvival of Representations and Warranties..............77
SECTION 8.02 Notices....................................................77
SECTION 8.03 Definitions................................................79
SECTION 8.04 Interpretation.............................................80
SECTION 8.05 Counterparts...............................................80
SECTION 8.06 Entire Agreement; No Third-Party Beneficiaries.............81
SECTION 8.07 Governing Law..............................................81
SECTION 8.08 Assignment.................................................81
SECTION 8.09 Consent to Jurisdiction....................................81
SECTION 8.10 Waiver of Jury Trial.......................................82
SECTION 8.11 Enforcement................................................82
-2-
AGREEMENT AND PLAN OF MERGER dated as of
October 29, 2001 (this "Agreement"), by and among
INTERNATIONAL BUSINESS MACHINES CORPORATION, a
New York corporation ("Parent"), DUKE
ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and
CROSSWORLDS SOFTWARE, INC., a Delaware
corporation (the "Company").
WHEREAS the Board of Directors of each of the Company and Sub deems
it in the best interests of their respective stockholders to consummate the
merger (the "Merger"), on the terms and subject to the conditions set forth in
this Agreement, of Sub with and into the Company in which the Company would
become a wholly owned subsidiary of Parent, and such Boards of Directors have
approved this Agreement and declared its advisability (and, in the case of the
Board of Directors of the Company, recommended that this Agreement be adopted
by the Company's stockholders);
WHEREAS, simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Parent and
Sub to enter into this Agreement, Parent and certain stockholders of the
Company are entering into a stockholders agreement (the "Stockholders
Agreement") pursuant to which, among other things, such stockholders have
agreed to vote to adopt this Agreement and to take certain other actions in
furtherance of the Merger, in each case upon the terms and subject to the
conditions set forth therein;
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01 Effective Time of the Merger. As soon as practicable
on or after the Closing Date (as defined in Section 1.02), the parties shall
(i) file a certificate of merger (the "Certificate of Merger") in such form as
is required by, and executed and acknowledged in accordance with, the relevant
provisions of the General Corporation Law of the State of Delaware (the
"DGCL") and (ii) make all other filings or recordings required under the DGCL
to effect the Merger. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of the State
of Delaware or at such subsequent time as Parent and the Company shall agree
and specify in the Certificate of Merger (the date and time the Merger becomes
effective being the "Effective Time").
SECTION 1.02 Closing. The closing of the Merger (the "Closing")
will take place at 11:00 a.m., New York time, on a date to be specified by the
parties, which shall be not later than the second business day after
satisfaction or waiver of the conditions set forth in Article VI that by their
terms are not to be satisfied or waived at the Closing (the "Closing Date"),
at the offices of Cravath, Swaine & Xxxxx, 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, unless another time, date or place is agreed to in writing by
Parent and the Company.
SECTION 1.03 Effect of the Merger. At the Effective Time, Sub shall
be merged with and into the Company, the separate corporate existence of Sub
shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation"). The Merger shall have the effects set forth in
Section 259 of the DGCL.
SECTION 1.04 Certificate of Incorporation and By-laws. (a) The
Amended and Restated Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter
-2-
changed or amended as provided therein or by applicable law.
(b) The By-laws of Sub, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.05 Directors. The directors of Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation until
the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.06 Officers. The officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE II
Conversion of Securities
SECTION 2.01 Conversion of Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock, par value $0.001 per share, of the Company (the
"Company Common Stock"), or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
common stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent-Owned Stock. All shares
of Company Common Stock that are owned by the Company, as treasury stock,
Parent or Sub immediately prior to the Effective Time shall automatically
be canceled and retired and shall cease
-3-
to exist and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled and retired in accordance with Section
2.01(b), the Appraisal Shares (as defined in Section 2.01(d)) and
Restricted Shares (as defined in Section 3.01(c) and which shall be
cancelled in the manner set forth in Section 5.04(a)(i)(B))) shall be
converted into the right to receive $4.65 in cash, without interest (the
"Merger Consideration"). At the Effective Time all such shares shall no
longer be outstanding and shall automatically be cancelled and shall
cease to exist, and each holder of a certificate that immediately prior
to the Effective Time represented any such shares (a "Certificate") shall
cease to have any rights with respect thereto, except the right to
receive the Merger Consideration. The right of any holder of any share of
Company Common Stock to receive the Merger Consideration shall be subject
to and reduced by the amount of any withholding that is required under
applicable tax law.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, shares (the "Appraisal Shares") of Company Common Stock
issued and outstanding immediately prior to the Effective Time that are
held by any holder who is entitled to demand and properly demands
appraisal of such shares pursuant to, and who complies in all respects
with, the provisions of Section 262 of the DGCL ("Section 262") shall not
be converted into the right to receive the Merger Consideration as
provided in Section 2.01(c), but instead such holder shall be entitled to
payment of the fair value of such shares in accordance with the
provisions of Section 262. At the Effective Time, the Appraisal Shares
shall no longer be outstanding and shall automatically be canceled and
shall cease to exist, and each holder of Appraisal Shares shall cease to
have any rights with respect thereto, except the right to receive the
fair value of such shares in accordance with the provisions of Section
262. Notwithstanding the foregoing, if any such holder
-4-
shall fail to perfect or otherwise shall waive, withdraw or lose the
right to appraisal under Section 262 or a court of competent jurisdiction
shall determine that such holder is not entitled to the relief provided
by Section 262, then the right of such holder to be paid the fair value
of such holder's Appraisal Shares under Section 262 shall cease and such
Appraisal Shares shall be deemed to have been converted at the Effective
Time into, and shall have become, the right to receive the Merger
Consideration as provided in Section 2.01(c). The Company shall serve
prompt notice to Parent of any demands for appraisal of any shares of
Company Common Stock, withdrawals of such demands and any other
instruments served pursuant to the DGCL received by the Company, and
Parent shall have the right to participate in and direct all negotiations
and proceedings with respect to such demands. The Company shall not,
without the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands, or agree to
do or commit to do any of the foregoing.
SECTION 2.02 Exchange of Certificates . (a) Paying Agent. Prior to
the Effective Time, Parent shall designate a bank or trust company reasonably
acceptable to the Company to act as agent for the payment of the Merger
Consideration upon surrender of Certificates (the "Paying Agent"), and, from
time to time after the Effective Time, Parent shall make available, or cause
the Surviving Corporation to make available, to the Paying Agent funds in
amounts and at the times necessary for the payment of the Merger Consideration
pursuant to Section 2.01(c) upon surrender of Certificates, it being
understood that any and all interest earned on funds made available to the
Paying Agent pursuant to this Agreement shall be turned over to Parent.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
Certificate (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
held by such person shall pass, only upon proper delivery of the Certificates
to the Paying Agent and
-5-
shall be in a form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancelation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of
transmittal, duly completed and validly executed, and such other documents as
may reasonably be required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount of cash into
which the shares formerly represented by such Certificate shall have been
converted pursuant to Section 2.01(c), and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of shares
that is not registered in the stock transfer books of the Company, payment may
be made to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such
payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. No interest shall be paid or shall accrue on
the cash payable upon surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. All cash
paid upon the surrender of a Certificate in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Company Common Stock formerly represented
by such Certificate. At the close of business on the day on which the
Effective Time occurs the stock transfer books of the Company shall be closed,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent
for transfer or any other reason, they shall be canceled and exchanged as
provided in this Article II.
(d) No Liability. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person
-6-
in respect of any cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates
shall not have been surrendered prior to two years after the Effective Time
(or immediately prior to such earlier date on which any Merger Consideration
would otherwise escheat to or became the property of any Governmental Entity
(as defined in Section 3.01(d)), any such Merger Consideration in respect
thereof shall, to the extent permitted by applicable law, become the property
of the Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
(e) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Paying Agent shall pay in respect of such lost, stolen or
destroyed Certificate the Merger Consideration.
(f) Withholding Rights. Parent, the Surviving Corporation or the
Paying Agent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as Parent, the Surviving
Corporation or the Paying Agent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld and paid over to the appropriate
taxing authority by Parent, the Surviving Corporation or the Paying Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock in
respect of which such deduction and withholding was made by Parent, the
Surviving Corporation or the Paying Agent.
-7-
ARTICLE III
Representations and Warranties
SECTION 3.01 Representations and Warranties of the Company. Except
as set forth on the disclosure schedule (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to the extent
expressly specified therein and such other representations and warranties or
covenants to the extent a matter in such section is disclosed in such a way as
to make its relevance to the information called for by such other
representation and warranty or covenant readily apparent) delivered by the
Company to Parent prior to the execution of this Agreement (the "Company
Disclosure Schedule") or, with respect to actions and matters arising after
the date of this Agreement, as expressly and specifically provided for by this
Agreement or the Company Disclosure Schedule, the Company represents and
warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the Company
and its subsidiaries (as defined in Section 8.03) (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite corporate, company or
partnership power and authority to carry on its business as now being
conducted and (iii) is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, other than where the failure to be so organized,
existing, qualified or licensed or in good standing (except in the case of
clause (i) above with respect to the Company) individually or in the aggregate
could not reasonably be expected to have a material adverse effect (as defined
in Section 8.03) on the Company. The Company has delivered to Parent complete
and correct copies of its Amended and Restated Certificate of Incorporation
and its Amended and Restated By-laws and the certificate of incorporation and
by-laws (or similar organizational documents) of each of its subsidiaries, in
each case as amended to the date of this Agreement. The Company has made
available to Parent and its representatives true and complete copies of the
-8-
minutes (or in the case of draft minutes, the most recent drafts thereof) of
all meetings of the stockholders, the Board of Directors and each committee of
the Board of Directors of the Company and each of its subsidiaries held since
June 1, 2000 (it being understood and agreed that, in respect of minutes (or
draft minutes) of meetings held after the date of this Agreement, the portions
of such minutes (or drafts thereof) that relate to any Takeover Proposal (as
defined in Section 4.02(a)) made after the date of this Agreement have been
redacted).
(b) Subsidiaries. Section 3.01(b) of the Company Disclosure Schedule
lists each subsidiary of the Company. All the outstanding shares of capital
stock of or other equity or voting interests in each such subsidiary are owned
by the Company, by another wholly owned subsidiary of the Company or by the
Company and another wholly owned subsidiary of the Company, free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens"), and are duly
authorized, validly issued, fully paid and nonassessable. Except for the
capital stock of or other equity or voting interests in its subsidiaries, the
Company does not own, directly or indirectly, any capital stock of or other
equity or voting interests in any corporation, partnership, joint venture,
association or other entity.
(c) Capital Structure. (i) The authorized capital stock of the
Company consists of 150,000,000 shares of Company Common Stock. At the close
of business on October 29, 2001, (A) 26,775,214 shares of Company Common Stock
(excluding treasury shares) were issued and outstanding, none of which were
held by any subsidiary of the Company, (B) no shares of Company Common Stock
were held by the Company in its treasury, (C) options to acquire 10,599,897
shares of Company Common Stock from the Company pursuant to the 1996 Stock
Option Plan (as amended), the 1997 Stock Plan (as amended), the 1999 Executive
Stock Plan, the 2000 Directors' Stock Option Plan and the 2000 Non-Executive
Stock Plan (collectively, the "Company Stock Plans") were issued and
outstanding, (D) stock purchase rights to acquire 6,666 shares of Company
Common Stock pursuant to the Company Stock Plans were issued and outstanding,
(E) 13,069 shares of Company Common Stock
-9-
subject to a right of repurchase by the Company were held by service providers
to the Company or its subsidiaries ("Restricted Shares"), (F) warrants to
acquire 201,612 shares of Company Common Stock from the Company pursuant to
the warrant agreements set forth on Schedule 3.01(c) of the Company Disclosure
Schedule and previously provided in true and complete form to Parent or its
counsel (the "Warrants") were issued and outstanding and (G) 804,301 shares of
Company Common Stock were reserved and available for issuance pursuant to the
2000 Employee Stock Purchase Plan (the "ESPP"). The Company has delivered to
Parent a complete and correct list, as of the close of business on October 29,
2001, of all outstanding stock options or other rights to purchase or acquire
Company Common Stock granted under the Company Stock Plans or otherwise
(collectively, the "Stock Options"), including all Restricted Shares and all
outstanding Warrants, the number of shares of Company Common Stock subject to
each such Stock Option or Warrant, the grant dates and exercise prices and
vesting schedule of each such Stock Option or Warrant, the repurchase price of
each Restricted Share and the names of the holders of each Stock Option,
Warrant or Restricted Share. Other than the Stock Options, the Warrants and
rights under the ESPP, there are no outstanding rights of any person to
receive Company Common Stock under the Company Stock Plans or otherwise, or on
a deferred basis or otherwise. As of the close of business on October 29,
2001, there were outstanding Stock Options and Warrants to purchase 4,025,526
shares of Company Common Stock with exercise prices on a per share basis lower
than the Merger Consideration, and the weighted average exercise price of such
Stock Options and Warrants was equal to $3.7304. As of the close of business
on October 29, 2001, there were outstanding rights to purchase no more than
303,000 shares of Company Common Stock under the ESPP. For the most recent
bi-weekly payroll period ending prior to October 29, 2001, the aggregate
amount of accumulated payroll deductions pursuant to the ESPP was $828,313.50
and the aggregate amount actually deducted for that payroll period was
$68,972.40).
(ii) Except as set forth above, as of the close of business on
October 29, 2001, no shares of capital stock of or other equity or voting
interests in the Company, or options, warrants or other rights to
-10-
acquire or receive any such stock or interests were issued, reserved for
issuance or outstanding. Since October 29, 2001, until the date of this
Agreement, (x) there have been no issuances by the Company of shares of
capital stock of or other equity or voting interests in the Company other
than issuances of shares of Company Common Stock pursuant to the exercise
of Stock Options, Warrants or rights under the ESPP, in each case
outstanding on such date as required by their terms as in effect on the
date of this Agreement and (y) there have been no issuances by the
Company of options, warrants or other rights to acquire shares of capital
stock or other equity or voting interests from the Company, other than
for rights that may have arisen under the ESPP. There are no outstanding
stock appreciation rights or other rights (other than rights that may
have arisen under the ESPP) that are linked in any way to the price of
the Company Common Stock or the value of the Company or any part thereof
that were not granted in tandem with a related Stock Option.
(iii) All outstanding shares of capital stock of the Company are,
and all shares that may be issued pursuant to the Company Stock Plans,
the Warrants and the ESPP will be, when issued in accordance with the
terms thereof, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company or any of it
subsidiaries, and no securities or other instruments or obligations of
the Company or any of its subsidiaries the value of which is in any way
based upon or derived from any capital or voting stock of the Company,
having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders
of the Company may vote. Except as set forth above and except as
expressly permitted under Section 4.01(a), there are no securities,
options, warrants, calls, rights, contracts, commitments, agreements,
instruments, arrangements, understandings, obligations or undertakings of
any kind to which the Company or any of its subsidiaries is a party, or
by which the Company or any of its subsidiaries is bound,
-11-
obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock of, or other equity or voting interests in, or securities
convertible into, or exchangeable or exercisable for, shares of capital
stock of or other equity or voting interests in the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to
issue, grant, extend or enter into any such security, option, warrant,
call, right, contract, commitment, agreement, instrument, arrangement,
understanding, obligation or undertaking. Each Stock Option intended to
qualify as an "incentive stock option" under Section 422 of the Code so
qualifies and the exercise price of each other Stock Option is no less
than the fair market value of a share of Company Common Stock as
determined on the date of grant of such Stock Option. As of the date of
this Agreement, the Subject Shares (as such term is defined in the
Stockholders Agreement) represent approximately 35.19% of the shares of
Company Common Stock outstanding. There are not any outstanding
contractual obligations of the Company or any of its subsidiaries to (i)
repurchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its subsidiaries or (ii) vote or dispose of any
shares of the capital stock of any of its subsidiaries. The Company is
not a party to any voting agreements with respect to any shares of the
capital stock of or other equity or voting securities in the Company or
any of its subsidiaries and, to the knowledge of the Company, as of the
date of this Agreement, there are no irrevocable proxies and no voting
agreements with respect to any shares of the capital stock of or other
equity or voting interests in the Company or any of its subsidiaries.
(iv) All Stock Options may, by their terms, be converted into an
option to acquire Parent Common Stock (as defined in Section 5.04(a)) in
accordance with and to the extent required by Section 5.04(a).
(v) The information set forth on Section 3.01(c)(v) of the Company
Disclosure Schedule with respect to the Warrants is true and complete and
each
-12-
Warrant either (A) terminates automatically, without the need for any
action by any person, upon the consummation of the Merger or (B) has an
exercise price that is more than the Merger Consideration and becomes
exercisable on or after the Effective Time solely for the Merger
Consideration (the Warrants having the terms described in this clause
(B), the "Surviving Warrants").
(vi) The outstanding indebtedness of the Company and its
subsidiaries is as set forth on Section 3.01(c)(vi) of the Company
Disclosure Schedule. There are no outstanding guarantees (or any similar
instruments or contracts) of indebtedness by the Company or any of its
subsidiaries.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to execute and deliver this Agreement, to
consummate the transactions contemplated by this Agreement, subject, in the
case of the Merger, to obtaining the Stockholder Approval (as defined in
Section 3.01(r)), and to comply with the provisions of this Agreement. The
execution and delivery of this Agreement by the Company, the consummation by
the Company of the transactions contemplated by this Agreement and the
Stockholders Agreement and the compliance by the Company with the provisions
of this Agreement have been duly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement, subject, in the case of the
Merger, to obtaining the Stockholder Approval. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and Sub, constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms (except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws). The Board of Directors of
the Company, at a meeting duly called and held at which all but one of the
directors of the Company were present either in person or by telephone, duly
and with the unanimous approval of those directors in attendance adopted
resolutions (i) approving and declaring advisable the Merger, this Agreement
and the
-13-
transactions contemplated by this Agreement, (ii) declaring that it is in the
best interests of the Company's stockholders that the Company enter into this
Agreement and consummate the Merger on the terms and subject to the conditions
set forth in this Agreement, (iii) declaring that the consideration to be paid
to the Company's stockholders in the Merger is fair to such stockholders, (iv)
directing that this Agreement be submitted to a vote at a meeting of the
Company's stockholders to be held as promptly as reasonably practicable
following the date of this Agreement, (v) recommending that such stockholders
adopt this Agreement and (vi) approving the Stockholders Agreement and the
transactions contemplated thereby, which resolutions have not been
subsequently rescinded, modified or withdrawn in any way except as is
expressly and specifically permitted under Section 4.02(b). The execution and
delivery of this Agreement and the Stockholders Agreement and the consummation
of the transactions contemplated hereby and thereby and compliance by the
Company with the provisions of this Agreement do not and will not conflict
with, or result in any violation or breach of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of, or result
in, termination, cancelation or acceleration of any obligation or to a loss of
a material benefit under, or result in the creation of any Lien in or upon any
of the properties or assets of the Company or any of its subsidiaries under,
or give rise to any increased, additional, accelerated or guaranteed rights or
entitlements under, any provision of (i) the Amended and Restated Certificate
of Incorporation or Amended and Restated By-laws of the Company or the
certificate of incorporation or by-laws (or similar organizational documents)
of any of its subsidiaries, (ii) any loan or credit agreement (including the
Amended and Restated Loan and Security Agreement dated as of September 18,
2000, as amended to the date hereof, between the Company and Silicon Valley
Bank), bond, debenture, note, mortgage, indenture, guarantee, lease or other
contract, commitment, agreement, instrument, arrangement, understanding,
obligation, undertaking, permit, concession, franchise or license, whether
oral or written (each, including all amendments thereto, a "Contract") to
which the Company or any of its subsidiaries is a party or any of their
respective properties or assets is subject or (iii) subject to the
-14-
governmental filings and other matters referred to in the following sentence,
any (A) statute, law, ordinance, rule or regulation or (B) judgment, order or
decree, in each case applicable to the Company or any of its subsidiaries or
their respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, breaches, defaults, rights, losses,
Liens or entitlements that individually or in the aggregate could not
reasonably be expected to (x) have a material adverse effect on the Company,
(y) impair in any material respect the ability of the Company to perform its
obligations under this Agreement or (z) prevent or materially impede,
interfere with, hinder or delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or authorization
of, or registration, declaration or filing with any Federal, state or local,
domestic or foreign, government or any court, administrative agency or
commission or other governmental or regulatory authority or agency, domestic
or foreign (a "Governmental Entity"), is required by or with respect to the
Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company, the consummation by the Company of
the transactions contemplated by this Agreement or the compliance by the
Company with the provisions of this Agreement, except for (1) the filing of a
premerger notification and report form by the Company under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act") or any other applicable competition, merger control, antitrust or
similar law, (2) the filing with the Securities and Exchange Commission (the
"SEC") of a proxy statement relating to the adoption of this Agreement by the
Company's stockholders (as amended or supplemented from time to time, the
"Proxy Statement") and such reports under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as may be required in connection with this
Agreement, the Stockholders Agreement and the transactions contemplated hereby
and thereby, (3) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company or any of its subsidiaries is
qualified to do business, (4) any filings required under the rules and
regulations of The Nasdaq Stock Market Inc. and (5) such other consents,
approvals, orders, authorizations, registrations,
-15-
declarations and filings the failure of which to be obtained or made
individually or in the aggregate could not reasonably be expected to (x) have
a material adverse effect on the Company, (y) impair in any material respect
the ability of the Company to perform its obligations under this Agreement or
(z) prevent or materially impede, interfere with, hinder or delay the
consummation of any of the transactions contemplated by this Agreement.
(e) SEC Documents. The Company has filed with the SEC, and has
heretofore made available to Parent true and complete copies of, all reports,
schedules, forms, statements and other documents required to be filed with the
SEC by the Company since June 1, 2000 (together with all information
incorporated therein by reference, the "SEC Documents"). No subsidiary of the
Company is required to file any report, schedule, form, statement or other
document with the SEC. As of their respective dates, each of the SEC Documents
complied in all material respects with the requirements of the Securities Act
of 1933, as amended (the "Securities Act") or the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents at the time
they were filed contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Except to the extent that information contained in
any SEC Document filed and publicly available prior to the date of this
Agreement (a "Filed SEC Document") has been revised or superseded by a later
filed Filed SEC Document, none of the SEC Documents contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial
statements (including the related notes) of the Company included in the SEC
Documents complied, as of the date filed, or will comply when filed, as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been or
will be prepared in accordance with generally accepted accounting principles
("GAAP") (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC)
-16-
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented or will present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal and recurring year-end audit
adjustments and the absence of footnotes). Except as set forth in the Filed
SEC Documents, the Company and its subsidiaries have no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which are or could reasonably be expected to become material to the Company
and its subsidiaries, taken as a whole.
(f) Information Supplied. None of the information included or
incorporated by reference in the Proxy Statement will, at the date it is first
mailed to the Company's stockholders or at the time of the Stockholders
Meeting (as defined in Section 5.01(b)) or at the time of any amendment or
supplement thereof, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading, except that no representation is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement. The Proxy Statement will
comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.
(g) Absence of Certain Changes or Events. (i) Since the date of the
most recent audited financial statements included in the Filed SEC Documents,
the Company and its subsidiaries have conducted their respective businesses
only in the ordinary course consistent with past practice, and there has not
been (A) any material adverse effect on the Company or any state of facts,
change, development, effect or occurrence that could reasonably be expected to
result in a material adverse effect on the Company, (B) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash,
-17-
stock or property) in respect of, any of the Company's or any of its
subsidiaries' capital stock, except for dividends by a wholly owned subsidiary
of the Company to its parent, (C) any split, combination or reclassification
of any of the Company's or any of its subsidiaries' capital stock or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock or other
securities of the Company or any of its subsidiaries, (D) (w) any granting by
the Company or any of its subsidiaries of any increase in compensation or
benefits, except for normal increases of cash compensation prior to the date
of this Agreement in the ordinary course of business consistent with past
practice, or any payment by the Company or any of its subsidiaries of any
bonus, except for bonuses made prior to the date of this Agreement in the
ordinary course of business consistent with past practice, in each case to any
current or former director, officer, employee or consultant, (x) any granting
by the Company or any of its subsidiaries to any current or former director,
officer, employee or consultant of any increase in severance or termination
pay, (y) any entry by the Company or any of its subsidiaries into, or any
amendment of, (1) any employment, deferred compensation, severance,
termination, employee benefit, loan, indemnification, stock repurchase, stock
option, consulting or similar agreement between the Company or any of its
subsidiaries, on the one hand, and any current or former director, officer,
employee or consultant of the Company or any of its subsidiaries, on the other
hand, or (2) any agreement between the Company or any of its subsidiaries, on
the one hand, and any current or former director, officer, employee or
consultant of the Company or any of its subsidiaries, on the other hand, the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company of the
nature contemplated by this Agreement or the Stockholders Agreement (all such
agreements under this clause (y), collectively, "Benefit Agreements"), or (z)
any amendment to, or modification of, any Company Stock Plan, any Stock
Option, any Restricted Share award, any Warrant or the ESPP, (E) any damage,
destruction or loss, whether or not covered by insurance, that individually or
in the aggregate could reasonably be expected to have a material adverse
effect on the Company, (F) any change in financial or tax accounting methods,
-18-
principles or practices by the Company, except insofar as may have been
required by a change in GAAP or applicable law, (G) any tax election that
individually or in the aggregate could reasonably be expected to have a
material adverse effect on the Company or any of its tax attributes or any
settlement or compromise of any material income tax liability, (H) any
revaluation by the Company of any of its material assets or (I) any licensing
or other agreement with regard to the acquisition or disposition of any
material Intellectual Property (as defined in Section 3.01(p)) or rights
thereto.
(ii) Since December 31, 2000, each of the Company and its
subsidiaries has continued all pricing, sales, receivables and payables
production practices in accordance with the ordinary course of business
consistent with past practice and has not engaged in (A) any trade loading
practices or any other promotional sales or discount activity with any
customers or distributors with the effect of accelerating to pre-Closing
periods sales to the trade or otherwise that would otherwise be expected
(based on past practice) to occur in post-Closing periods, (B) any practice
which would have the effect of accelerating to pre-Closing periods collections
of receivables that would otherwise be expected (based on past practice) to be
made in post-Closing periods, (C) any practice which would have the effect of
postponing to post-Closing periods payments by the Company or any of its
subsidiaries that would otherwise be expected (based on past practice) to be
made in pre-Closing periods or (D) any other promotional sales, discount
activity or inventory overstocking or understocking, in each case in this
clause (D) in a manner outside the ordinary course of business.
(h) Litigation. There is no suit, claim, action, investigation or
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries (other than, in respect of
suits, claims, actions, investigations or proceedings arising after the date
of this Agreement, those that individually or in the aggregate could not
reasonably be expected to be material to the Company and its subsidiaries,
taken as a whole), nor is there any statute, law, ordinance, rule, regulation,
judgment, order or decree, of any Governmental Entity or arbitrator
-19-
outstanding against, or, to the knowledge of the Company, investigation by any
Governmental Entity involving, the Company or any of its subsidiaries (other
than statutes, laws, ordinances, rules, regulations, judgments, orders or
decrees arising after the date of this Agreement that individually or in the
aggregate could not reasonably be expected to be material to the Company and
its subsidiaries, taken as a whole).
(i) Contracts. (i) None of the Company or any of its subsidiaries is
a party to or bound by, and none of their properties or assets are bound by or
subject to, any written or oral:
(A) Contract not made in the ordinary course of business entered
into prior to the date of this Agreement;
(B) Contract pursuant to which the Company or any of its
subsidiaries has agreed not to compete with any person or to engage in
any activity or business, or pursuant to which any benefit is required to
be given or lost as a result of so competing or engaging;
(C) Contract pursuant to which the Company or any of its
subsidiaries is restricted in any material respect in the development,
marketing or distribution of their respective products or services;
(D) Contract with (i) any stockholder of the Company or any of its
subsidiaries, (ii) any affiliate of the Company or any of its
subsidiaries, (iii) any current or former director, officer, employee or
consultant of the Company or any of its subsidiaries or of any affiliate
of the Company or any of its subsidiaries (other than employment
agreements referred to in Section 3.01(k));
(E) license or franchise granted by the Company or any of its
subsidiaries pursuant to which the Company or any such subsidiary has
agreed to refrain from granting license or franchise rights to any other
person;
(F) Contract under which the Company or any of its subsidiaries has
incurred any indebtedness (other
-20-
than payables in the ordinary course of business) that is currently owing
or given any guarantee in respect of indebtedness;
(G) Contract creating or granting a Lien (including Liens upon
properties acquired under conditional sales, capital leases or other
title retention or security devices);
(H) material Contract (except for this Agreement) that requires
consent, approval or waiver of, or notice to, a Governmental Entity or
other third party in the event of or with respect to the Merger or the
transactions contemplated by the Stockholders Agreement, including in
order to avoid termination of or loss of a material benefit under any
such Contract;
(I) Contract providing for future performance by the Company or such
subsidiary in consideration of amounts previously paid to the Company or
such subsidiary;
(J) as of the date hereof, Contract providing for future performance
by the Company or such subsidiary with less than the standard or usual
Company or subsidiary charges to be due for such performance;
(K) Contract of a nature for which the Company or such subsidiary
has a standard form agreement but that materially deviates from such
standard form agreement;
(L) Contract containing (whether in the Contract itself or by
operation of law) any provisions (w) dealing with a "change of control"
or similar event with respect to the Company or such subsidiary, (x)
prohibiting or imposing any restrictions on the assignment of all or any
portion thereof by the Company or any of its subsidiaries to any other
person (without regard to any exception permitting assignments to
subsidiaries or affiliates), or (y) having the effect of providing that
the consummation of any of the transactions contemplated by this
Agreement or the Stockholder Agreement or the
-21-
execution, delivery or effectiveness of this Agreement or the Stockholder
Agreement will conflict with, result in a violation or breach of, or
constitute a default under (with or without notice or lapse of time or
both), such Contract or give rise under such Contract to any right of, or
result in, a termination, right of first refusal, amendment, revocation,
cancelation or acceleration, or loss of material benefit, or to any
increased, guaranteed, accelerated or additional rights or entitlements
or any person or (z) having the effect of providing that the consummation
of any of the transactions contemplated by this Agreement or the
Stockholder Agreement or the execution, delivery or effectiveness of this
Agreement or the Stockholder Agreement will require that a third party be
provided with access to source code or that any source code be released
from escrow and provided to any third party (any such provision of the
nature described in clauses (w), (x), (y) or (z), a "Restrictive
Provision");
(M) Contract providing for payments of royalties or other license
fees to third parties;
(N) Contract granting a third party any license to Intellectual
Property that is not limited to the internal use of such third party;
(O) as of the date hereof, Contract pursuant to which the Company or
any of its subsidiaries has been granted any license to Intellectual
Property;
(P) Contract providing confidential treatment by the Company or any
of its subsidiaries of third party information other than non-disclosure
agreements entered into by the Company in the ordinary course of business
consistent with past practice;
(Q) Contract granting the other party to such Contract or a third
party "most favored nation" status that, following the Merger, would in
any way apply to Parent or any of its subsidiaries (other than the
Company and its subsidiaries and their products or services (other than
any similar products or services
-22-
produced or offered by Parent or its subsidiaries (other than the Company
and its subsidiaries)));
(R) as of the date hereof, Contract that guarantees or warrants that
any of the products or services of the Company are fit for any particular
purpose or that guarantees a result or commits to performance levels; or
(S) Contract providing for any license or franchise granted by the
Company or any of its subsidiaries pursuant to which the Company or any
of its subsidiaries has agreed to provide any third party with access to
source code or to provide for source code to be put in escrow or to
refrain from granting license or franchise rights to any other person
(any such Contract, an "Escrow Agreement");
(T) Contract containing any "non-solicitation" or similar provision
that restricts the Company or any of its subsidiaries;
(U) Contract providing for "exclusivity" or any similar requirement
or under which the Company or any of its subsidiaries is restricted, or
which after the Closing would restrict Parent or any of its subsidiaries,
with respect to distribution, licensing, marketing, development or
manufacture;
(V) Contract providing for arbitration or any similar dispute
resolution process;
(W) Contract not containing a waiver of incidental, consequential,
punitive and special damages in favor of the Company and its subsidiaries
(and their respective assignees) in all circumstances;
(X) Contract not containing a reasonable limitation on the payment
of direct damages by the Company or any of its subsidiaries in connection
herewith;
(Y) Contract entered into in the last five years in connection with
the settlement or other resolution of any suit, claim, action,
investigation or proceeding; and
-23-
(Z) Contract which (A) has aggregate future sums due from the
Company or any of its subsidiaries in excess of $50,000 and is not
terminable by the Company or any such subsidiary for no cost or (B) is
entered into prior to the date of this Agreement and is otherwise
material to the business of the Company and its subsidiaries, taken as a
whole, as presently conducted or as proposed to be conducted.
Each Contract of the Company and its subsidiaries is in full force and effect
and is a legal, valid and binding agreement of the Company or such subsidiary
and, to the knowledge of the Company or such subsidiary, of each other party
thereto, enforceable against the Company or any of its subsidiaries, as the
case may be, and, to the knowledge of the Company, against the other party or
parties thereto, in each case, in accordance with its terms, except for such
failures to be in full force and effect, to be legal valid and binding or to
be enforceable that individually or in the aggregate could not reasonably be
expected to have a material adverse effect on the Company, and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws. Each of the Company and its subsidiaries
has performed or is performing all material obligations required to be
performed by it under its Contracts and is not (with or without notice or
lapse of time or both) in breach or default in any material respect
thereunder, and, to the knowledge of the Company or such subsidiary, no other
party to any of its Contracts is (with or without notice or lapse of time or
both) in breach or default in any material respect thereunder except, in each
case, for such breaches or defaults that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company. Neither the Company nor any of its subsidiaries knows of any
circumstances that are reasonably likely to occur that could reasonably be
expected to materially adversely affect its ability to perform its obligations
under any material Contract.
(ii) The Company has delivered to Parent true and complete copies of
all material Contracts of the Company and its subsidiaries, including copies
of any (A) Escrow Agreements and (B) Contracts between the Company or any of
its subsidiaries and any of the ten largest customers of
-24-
the Company and its subsidiaries (determined on the basis of revenues received
by the Company or any of its subsidiaries in the four consecutive fiscal
quarter period ended September 30, 2001) (the "Major Customers"). The Company
has disclosed to Parent the material terms and status of all negotiations in
respect of any proposed Contracts with any Major Customer. None of the Major
Customers has terminated, failed to renew or requested any material amendment
to any of its Contracts, or any of its existing relationships, with the
Company or any of its subsidiaries.
(iii) Each Contract between the Company or any of its subsidiaries,
on the one hand, and any affiliate of the Company (excluding any subsidiaries
of the Company), on the other hand, was entered into in the ordinary course of
business consistent with past practice on an arm's-length basis.
(j) Compliance with Laws. The Company and its subsidiaries are, and
since December 31, 1998, have been, in compliance with all statutes, laws,
ordinances, rules, regulations, judgments, orders and decrees of any
Governmental Entity applicable to their businesses or operations, except for
instances of possible noncompliance that individually or in the aggregate
could not reasonably be expected to (i) have a material adverse effect on the
Company, (ii) impair in any material respect the ability of the Company to
perform its obligations under this Agreement or (iii) prevent or materially
impede, interfere with, hinder or delay the consummation of any of the
transactions contemplated by this Agreement. None of the Company or any of its
subsidiaries has received, since December 31, 1998, a notice or other written
communication alleging a possible violation of any statute, law, ordinance,
rule, regulation, judgment, order or decree of any Governmental Entity
applicable to its businesses or operations, except for such violations that
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company. The Company and its subsidiaries have
in effect all Federal, state and local, domestic and foreign, governmental
consents, approvals, orders, authorizations, certificates, filings, notices,
permits, concessions, franchises, licenses and rights (collectively "Permits")
necessary for them to own, lease or operate their
-25-
properties and assets and to carry on their businesses as now conducted and
there has occurred no violation of, or default under, any such Permit, except
for the lack of Permits and for violations of, or defaults under, Permits,
which lack of Permits, violations or defaults individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company. The Merger, in and of itself, could not reasonably be expected to
cause the revocation, cancelation, non-renewal or adverse modification of any
such Permit, which revocation, cancelation, non-renewal or adverse
modification could reasonably be expected to have a material adverse effect on
the Company.
(k) Absence of Changes in Benefit Plans; Employment Agreements;
Labor Relations. Except as disclosed in the Filed SEC Documents, since the
date of the most recent audited financial statements included in the Filed SEC
Documents, none of the Company or any of its subsidiaries has terminated,
adopted, amended or agreed to amend in any material respect any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
appreciation, restricted stock, stock option, phantom stock, performance,
retirement, thrift, savings, stock bonus, paid time off, perquisite, fringe
benefit, vacation, severance, disability, death benefit, hospitalization,
medical or other welfare benefit or other material plan, program, arrangement
or understanding (whether or not legally binding) maintained, contributed to
or required to be maintained or contributed to by the Company, its
subsidiaries or any other person or entity that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each, a "Commonly Controlled Entity"), in each case providing benefits to any
current or former director, officer, employee or independent contractor of the
Company or any of its subsidiaries and whether or not subject to United States
law (collectively, "Benefit Plans"), unless such amendment or agreement to
amend is required under applicable law, or has made any material change in any
actuarial or other assumption used to calculate funding obligations with
respect to any Benefit Plan that is a Pension Plan (as defined in Section
3.01(m)), or any material change in the manner in which contributions to any
-26-
such Pension Plan are made or the basis on which such contributions are
determined. Except as disclosed in the Filed SEC Documents, neither the
Company nor any of its subsidiaries is party to any Benefit Agreement. There
are no collective bargaining or other labor union agreements to which the
Company or any of its subsidiaries is a party or by which it is bound. Since
December 31, 1998, neither the Company nor any of its subsidiaries has
encountered any labor union organizing activity, or had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts.
(l) Environmental Matters. Except to the extent that the inaccuracy
of any of the following (or the circumstances giving rise to such inaccuracy)
could not reasonably be expected to have a material adverse effect on the
Company, (i) the Company and each of its subsidiaries are in compliance with
all applicable Environmental Laws (as defined below); and (ii) there are no
facts, circumstances or conditions that are reasonably likely to give rise to
any liability of, or form the basis of a claim against, the Company or any of
its Subsidiaries in connection with any Environmental Law. As used in this
Agreement, the term "Environmental Laws" shall mean any applicable Federal,
state or local, domestic or foreign, statutes, laws, regulations, ordinances,
rules, codes, enforceable requirements, agreements, orders, decrees, judgments
or injunctions issued, promulgated or entered into by any Governmental Entity
relating to protection of the environment, natural resources or human health
and safety.
(m) Employee Benefits Matters. (i) Section 3.01(m)(i) of the Company
Disclosure Schedule contains a list of all Benefit Plans and all material
Benefit Agreements, including without limitation each "employee welfare
benefit plan" (as defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended "ERISA")) and "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) (a "Pension Plan"). The Company has
provided to Parent true, complete and correct copies of (1) each Benefit Plan
and each material Benefit Agreement (or, in the case of any unwritten Benefit
Plans or Benefit Agreements, descriptions thereof), (2) the two most recent
annual reports required to be filed with respect to each
-27-
Benefit Plan (including reports filed on Form 5500), (3) the most recent
summary plan description prepared for each Benefit Plan, (4) each trust
agreement and group annuity contract relating to any Benefit Plan and (5) the
most recent determination or qualification letter issued by any Government
Entity for each Benefit Plan intended to qualify for favorable tax treatment.
Each Benefit Plan has been administered in accordance with its terms, except
where the failure so to be administered individually or in the aggregate could
not reasonably be expected to have a material adverse effect on the Company.
The Company and its subsidiaries and all the Benefit Plans are in compliance
with all applicable provisions of ERISA, the Code, and all other applicable
laws, whether Federal, state or local, domestic or foreign, except for
instances of possible noncompliance that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company. All Pension Plans intended to be tax-qualified have been the subject
of determination letters from the IRS to the effect that such Pension Plans
are qualified and exempt from United States Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code or have remaining a
period of time under applicable Treasury regulations or IRS pronouncements in
which to apply for such a letter and make any amendments necessary to obtain
such a favorable determination as to the qualified status of each such Pension
Plan; no such determination letter has been revoked (or, to the knowledge of
the Company, has revocation been threatened); in the event any Pension Plan
has not applied for such a determination letter, the Company is in the process
of preparing an application for such determination letter and the Company is
not aware of any reason why such determination letter would not be issued by
the IRS; no event occurred relating to any such Pension Plan that would
adversely affect the qualification of such Pension Plan or materially increase
the costs relating thereto or require security under Section 307 of ERISA.
(ii) Neither the Company nor any Commonly Controlled Entity has
maintained, contributed to or been obligated to maintain or contribute
to, or has any actual or contingent liability under, any Benefit Plan
that is subject to Title IV of ERISA.
-28-
(iii) With respect to any Benefit Plan that is an employee welfare
benefit plan (each, a "Welfare Plan"), there are no understandings,
agreements or undertakings, written or oral, that would prevent any such
plan (including any such plan covering retirees or other former
employees) from being amended or terminated without material liability to
the Company or any of its subsidiaries on or at any time after the
Effective Time. No Welfare Plan provides benefits after termination of
employment except where the cost thereof is borne entirely by the former
employee (or his eligible dependents or beneficiaries) or as required by
Section 4980B(f) of the Code. The Company and its subsidiaries comply in
all material respects with the applicable requirements of Section
4980B(f) of the Code with respect to each Benefit Plan that is a group
health plan, as such term is defined in Section 5000(b)(1) of the Code.
(iv) No current or former director, officer, employee or independent
contractor of the Company or any of its subsidiaries will be entitled to
any additional compensation or benefits or any acceleration of the time
of payment or vesting of any compensation or benefits under any Benefit
Plan or Benefit Agreement as a result of the transactions contemplated by
this Agreement or the Stockholders Agreement or any benefits under any
Benefit Plan or Benefit Agreement the value of which will be calculated
on the basis of any of the transactions contemplated by this Agreement or
the Stockholders Agreement.
(v) The deduction of any amount payable pursuant to the terms of the
Benefit Plans, Benefit Agreements or any other employment contracts or
arrangements will not be subject to disallowance under Section 162(m) of
the Code.
(vi) All reports, returns and similar documents with respect to all
Benefit Plans required to be filed with any Governmental Entity or
distributed to any Benefit Plan participant have been duly and timely
filed or distributed, except for failures to file or distribute that
individually or in the aggregate have
-29-
not had and could not reasonably be expected to have a material adverse
effect on the Company. The Company has received no notice of and, to the
knowledge of the Company there are no, pending investigations by any
Governmental Entity with respect to, or pending termination proceedings
or other claims (except claims for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings against or
involving any Benefit Plan or asserting any rights or claims to benefits
under, any Benefit Plan that could give rise to any material liability,
and, to the knowledge of the Company, there are not any facts that
individually or in the aggregate have had or could reasonably be expected
to have a material adverse effect on the Company.
(vii) All contributions, premiums and benefit payments under or in
connection with the Benefit Plans that are required to have been made by
the Company or any of its subsidiaries as of the date of this Agreement
in accordance with the terms of the Benefit Plans have been timely made
or have been reflected on the most recent consolidated balance sheet
filed or incorporated by reference into the Filed Company SEC Documents.
Neither the Company nor any of its subsidiaries has incurred, or would
reasonably be expected to incur, any unfunded liabilities in relation to
any Benefit Plan. No Pension Plan has an "accumulated funding deficiency"
(as such term is defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived.
(viii) With respect to each Benefit Plan, (A) there has not occurred
any prohibited transaction in which the Company, any of its subsidiaries
or any of their employees has engaged that could subject the Company, its
subsidiaries or any of their employees, or, to the knowledge of the
Company, a trustee, administrator or other fiduciary of any trust created
under any Benefit Plan, to the tax or penalty on prohibited transactions
imposed by Section 4975 of the Code or the sanctions imposed under Title
I of ERISA and (B) neither the Company nor, to the knowledge of the
Company, any trustee, administrator or other fiduciary of any Benefit
Plan nor any agent of any of the foregoing has
-30-
engaged in any transaction or acted in a manner that could, or failed to
act so as to, subject the Company or, to the knowledge of the Company,
any trustee, administrator or other fiduciary to any liability for breach
of fiduciary duty under ERISA or any other applicable law. No Benefit
Plan or related trust has been terminated, nor has there been any
"reportable event" (as that term is defined in Section 4043 of ERISA) for
which the 30-day reporting requirement has not been waived with respect
to any Benefit Plan during the last five years, and no notice of a
reportable event will be required to be filed in connection with the
transactions contemplated hereby.
(ix) The Company and its subsidiaries do not have any material
liability or obligations, including under or on account of a Benefit Plan
or Benefit Agreement, arising out of the hiring of persons to provide
services to the Company or any of its subsidiaries and treating such
persons as consultants or independent contractors and not as employees of
the Company or its subsidiaries.
(x) There are no grievances, unfair labor practices, employment
discrimination charges, wrongful dismissal, pay equity or employment
equity complaints or claims against the Company or any of its
subsidiaries pending or threatened before any Governmental Entity, except
those that would not reasonably be expected to lead to material liability
on the part of the Company or any of its subsidiaries. The Company and
its subsidiaries are in material compliance with all labor, employment
and workplace safety laws.
(xi) On or prior to the date of this Agreement, the Company has
taken all such actions with respect to the Company's Executive Management
Retention Plan (such plan with an effective date of August 23, 2001) (as
set forth in Section 3.01(m)(xi) of the Company Disclosure Schedule, the
"Retention Plan") necessary (including amending the Retention Plan
pursuant to Section 10 thereof or obtaining any required consents) to
provide that, except to the extent required by Section 6(c) of the
Retention Plan, no Participant (as
-31-
defined in the Retention Plan) shall be eligible to receive any payments
under the Retention Plan unless and until such Participant is
continuously employed by the Company or its successor during the 180 day
period following the Effective Time.
(n) Taxes. (i) Each of the Company and its subsidiaries and each
Company Affiliated Group (as defined in clause (x) below) has timely filed all
Federal, state and local, domestic and foreign, income and franchise tax
returns and reports and all other tax returns and reports required to be filed
by it and all such returns and reports are complete and correct, except for
such failures to file or to be complete and correct that individually or in
the aggregate could not reasonably be expected to result in a material
liability on the part of the Company or any of its subsidiaries. Each of the
Company and its subsidiaries and each Company Affiliated Group has timely paid
all taxes due with respect to the taxable periods covered by such returns and
reports and all other taxes, except where the failures so to pay individually
or in the aggregate could not reasonably be expected to result in a material
liability on the part of the Company or any of its subsidiaries, and the most
recent financial statements contained in the Filed SEC Documents reflect an
adequate reserve for all taxes payable by the Company and its subsidiaries for
all taxable periods and portions thereof through the date of such financial
statements.
(ii) No Federal, state or local, domestic or foreign, income or
franchise tax return or report or any other material tax return or report
of the Company or any of its subsidiaries or any Company Affiliated Group
is currently under audit or examination by any taxing authority, and no
written or unwritten notice of such an audit or examination has been
received by the Company or any of its subsidiaries, except for such
audits or examinations that individually or in the aggregate could not
reasonably be expected to result in a material liability on the part of
the Company or any of its subsidiaries. There is no deficiency, refund
litigation, proposed adjustment or matter in controversy with respect to
any taxes due and owing by the Company, any of its subsidiaries or any
Company Affiliated Group, except for those that
-32-
individually or in the aggregate could not reasonably be expected to
result in a material liability on the part of the Company or any of its
subsidiaries. Each deficiency resulting from any audit or examination or
any concluded litigation relating to taxes by any taxing authority has
been timely paid, except where the failures so to pay individually or in
the aggregate could not reasonably be expected to result in a material
liability on the part of the Company or any of its subsidiaries. No
issues relating to taxes were raised by the relevant taxing authority
during any presently pending audit or examination, and no issues relating
to taxes were raised by the relevant taxing authority in any completed
audit or examination that could reasonably be expected to recur in a
later taxable period, in each case except for those that individually or
in the aggregate could not reasonably be expected to result in a material
liability on the part of the Company or any of its subsidiaries. All
assessments for taxes due and owing by the Company, any of its
subsidiaries or any Company Affiliated Group with respect to completed
and settled audits or examinations or concluded litigation have been
paid. No Federal, state or other material local, domestic or foreign, tax
return or report of the Company or any of its subsidiaries or any Company
Affiliated Group has ever been under audit or examination by any taxing
authority.
(iii) There is no currently effective agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any material taxes, and no power of attorney with respect
to any taxes has been executed or filed with any taxing authority.
(iv) No material Liens for taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for
statutory Liens for taxes not yet due.
(v) None of the Company or any of its subsidiaries is a party to or
bound by any tax sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to
-33-
taxes (including any advance pricing agreement, closing agreement or
other agreement relating to taxes with any taxing authority).
(vi) None of the Company or any of its subsidiaries will be required
to include in a taxable period ending after the Effective Time taxable
income attributable to income that accrued in a prior taxable period but
was not recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract method of
accounting, the long-term contract method of accounting, the cash method
of accounting or Section 481 of the Code or comparable provisions of
state or local, domestic or foreign, tax law or for any other reason,
except where the inclusions of such income in a taxable period ending
after the Effective Time individually or in the aggregate could not
reasonably be expected to result in a material liability on the part of
the Company or any of its subsidiaries.
(vii) No amount or other entitlement that could be received (whether
in cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement or the Stockholders Agreement
by any director, officer, employee or independent contractor of the
Company or any of its affiliates who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1)
under any Benefit Plan, Benefit Agreement or other compensation
arrangement currently in effect would be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the
Code) and no such disqualified individual is entitled to receive any
additional payment from the Company, the Surviving Corporation or any
other person in the event that the excise tax required by Section 4999(a)
of the Code is imposed on such disqualified individual.
(viii) The Company and its subsidiaries have complied with all
applicable statutes, laws, ordinances, rules and regulations relating to
the payment and withholding of taxes (including
-34-
withholding of taxes pursuant to Sections 1441, 1442, 3121 and 3402 of
the Code or similar provisions under any Federal, state or local,
domestic or foreign, laws) and have, within the time and the manner
prescribed by law, withheld from and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under
applicable laws, except where the failures to so comply, withhold and pay
over individually or in the aggregate could not reasonably be expected to
result in a material liability on the part of the Company or any of its
subsidiaries.
(ix) Neither the Company nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355
of the Code (i) in the two years prior to the date of this Agreement or
(ii) in a distribution that could otherwise constitute part of a "plan"
or "series of related transactions" (within the meaning of Section 355(e)
of the Code) in conjunction with the Merger.
(x) Each of the Company and its subsidiaries has disclosed on its
Federal income tax returns and reports all positions taken therein that
could give rise to a substantial understatement of Federal income tax
within the meaning of Code Section 6662.
(xi) Each of the Company and its subsidiaries has delivered, or will
deliver prior to Closing, to Parent and Sub complete and correct copies
of all resale certificates required to claim an exemption from sales and
use taxes by the taxing authority of any state in which the Company or
any of its subsidiaries has claimed an exemption from sales and use
taxes.
(xii) All related-party transactions involving the Company or any of
its subsidiaries are at arm's-length and in compliance with Code
-35-
Section 482 and the Treasury Regulations promulgated thereunder. Each of
the Company and its subsidiaries has maintained all necessary
documentation in connection with such related-party transactions in
accordance with Code Sections 482 and 6662 and the Treasury Regulations
promulgated thereunder.
(xiii) As used in this Agreement, "taxes" shall include all (i)
Federal, state and local, domestic and foreign, income, franchise,
property, sales, excise, employment, payroll, social security,
value-added, ad valorem, transfer, withholding and other taxes, including
taxes based on or measured by gross receipts, profits, sales, use or
occupation, tariffs, levies, impositions, assessments or governmental
charges of any nature whatsoever, including any interest penalties or
additions with respect thereto, and any obligations under any agreements
or arrangements with any other person with respect to such amounts, (ii)
liability for the payment of any amounts of the type described in clause
(i) as a result of being a member of an affiliated, consolidated,
combined, unitary or aggregate group and (iii) liability for the payment
of any amounts as a result of an express or implied obligation to
indemnify any other person with respect to the payment of any amounts of
the type described in clause (i) or (ii). As used in this Agreement,
"Company Affiliated Group" shall mean each affiliated, combined,
consolidated or unitary group of which the Company or any of its
subsidiaries is or has been a member.
(o) Title to Properties. (i) The Company and each of its
subsidiaries has good and marketable title to, or valid leasehold interests
in, all of its material properties and assets except for such material
properties and assets as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of business and
except for defects in title, easements, restrictive covenants and similar
encumbrances that individually or in the aggregate could not reasonably be
expected to have a material adverse effect on the Company. All such material
assets and properties, other than assets and properties in which the Company
or any of its subsidiaries has a leasehold interest, are free and clear of all
Liens, except for Liens that individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the Company.
-36-
(ii) Each of the Company and its subsidiaries has complied in all
material respects with the terms of all material leases to which it is a
party and under which it is in occupancy, and all such leases are in full
force and effect, except for such instances of noncompliance or failures
to be in full force and effect that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company. The Company and its subsidiaries enjoy peaceful and undisturbed
possession under all such material leases, except for failures to do so
that individually or in the aggregate could not reasonably be expected to
have a material adverse effect on the Company.
(iii) Neither the Company nor any of its subsidiaries holds any fee
or other ownership interest in any real property. Section 3.01(o)(iii) of
the Company Disclosure Schedule sets forth a complete list of all real
property and interests in real property leased by the Company.
(p) Intellectual Property. (i) Section 3.01(p)(i) of the Company
Disclosure Schedule lists all patents, patent applications, trademarks,
trademark applications, tradenames, service marks, registered copyrights and
applications therefor and unregistered copyrightable works of authorship, if
any, owned by or licensed to the Company or any of its subsidiaries as of the
date of this Agreement. The Company has made available to Parent true and
correct copies of, and Section 3.01(p)(i) of the Company Disclosure Schedule
lists, all license agreements relating to Intellectual Property (as defined
below in clause (iv)) to which the Company or any of its subsidiaries is a
party as of the date of this Agreement.
(ii) Except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy) could not
reasonably be expected to have a material adverse effect on the Company:
(A) the Company and each of its subsidiaries owns, or is
licensed or otherwise has the right to use (in each case, without
-37-
payments to third parties and free and clear of any Liens), all
Intellectual Property used in or necessary to carry on its business
as now being conducted;
(B) all issued patents, patent applications, trademarks,
trademark applications, tradenames, service marks and copyrights of
the Company or any of its subsidiaries have been duly registered
and/or filed, as applicable, with or issued by each appropriate
Governmental Entity in each appropriate jurisdiction, all necessary
affidavits of continuing use have been filed, and all necessary
maintenance fees have been paid to continue all such rights in
effect;
(C) none of the Company or any of its subsidiaries or any of
its or their products or services has infringed upon or otherwise
violated, or is infringing on or otherwise violating, the rights of
any person with regard to any Intellectual Property owned by,
licensed to or otherwise used by the Company or any of its
subsidiaries;
(D) there is no suit, written claim, action, investigation or
proceeding pending or, to the knowledge of the Company, threatened
with respect to, and the Company has not been notified of, any
possible infringement or other violation by the Company or any of
its subsidiaries of the rights of any person with regard to any
Intellectual Property;
(E) to the knowledge of the Company, no person is infringing on
or otherwise violating any right of the Company or any of its
subsidiaries with respect to any Intellectual Property owned by,
licensed to and/or otherwise used by the Company or any of its
subsidiaries;
(F) each of the former or current members of management or key
personnel of the Company or any of its subsidiaries, including all
former and current employees, agents, consultants and
-38-
contractors who have contributed to or participated in the
conception and development of Intellectual Property owned or used by
the Company or any of its subsidiaries, have assigned or otherwise
transferred to the Company all ownership and other rights of any
nature whatsoever (to the extent permitted by law) of such person in
any Intellectual Property owned or used by the Company or any of its
subsidiaries and none of the former or current members of management
or key personnel of the Company or any of its subsidiaries,
including all former and current employees, agents, consultants and
contractors who have contributed to or participated in the
conception and development of Intellectual Property owned or used by
the Company or any of its subsidiaries, have a valid claim against
the Company or any of its subsidiaries in connection with the
involvement of such persons in the conception and development of
Intellectual Property owned or used by the Company or any of its
subsidiaries, and no such claim has been asserted or threatened;
(G) the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to any
right, license or encumbrance relating to, Intellectual Property
owned by the Company or any of its subsidiaries or with respect to
which the Company or any of its subsidiaries now has or has had any
agreement with any third party, or any right of termination,
cancelation or acceleration of any material Intellectual Property
right or obligation set forth in any agreement to which the Company
or any of its subsidiaries is a party, or the loss or encumbrance of
any Intellectual Property or benefit related thereto, or result in
the creation of any Lien in or upon any Intellectual Property or
right;
-39-
(H) to the extent third party software is marketed to customers
of the Company or any of its subsidiaries together with the
Intellectual Property of the Company or any of its subsidiaries, (x)
the third party rights have been identified in Section 3.01(p) of
the Company Disclosure Schedule, (y) all necessary licenses have
been obtained and (z) no royalties or payments are due (or such
royalties and payments are identified in Section 3.01(p) of the
Company Disclosure Schedule);
(I) none of the trade secrets of the Company or any of its
subsidiaries has been published or disclosed by the Company or any
of its subsidiaries except pursuant to a non-disclosure agreement
that is in the standard form used by the Company that has been
provided to Parent prior to the date of this Agreement, or, to the
knowledge of the Company or any of its subsidiaries, by any other
person to any person except pursuant to licenses or Contracts
requiring such other persons to keep such trade secrets
confidential;
(J) no person has any marketing rights to the Intellectual
Property of the Company or any of its subsidiaries;
(K) neither the Company nor any of its subsidiaries has
assigned, sold or otherwise transferred ownership of any issued
patent, patent application, trademark, trademark application,
service xxxx, copyright or application therefor;
(L) except in the ordinary course of business consistent with
past practice, no licenses or rights have been granted to a third
party to distribute the source code of, or to use the source code to
create Derivative Works (as defined below in clause (iii)) of, any
product currently marketed by, commercially available from or under
development by the Company or any
-40-
of its subsidiaries for which the Company legally owns the source
code; and
(M) the Company and each of its subsidiaries has taken all
reasonable and necessary steps to protect their Intellectual
Property and their rights thereunder, and to the knowledge of the
Company no material rights to Intellectual Property have been lost
or are in jeopardy of being lost through failure to act by the
Company or any of its subsidiaries.
(iii) As used in this Agreement, "Derivative Work" shall have the
meaning set forth in 17 U.S.C. Section 101.
(iv) As used in this Agreement, "Intellectual Property" shall mean
trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patented, patentable or not in
any jurisdiction; computer programs and software (including source code,
object code and data), know-how and any other technology; trade secrets
and confidential information and rights in any jurisdiction to limit the
use or disclosure thereof by a third party; writings and other works,
whether copyrighted, copyrightable or not in any jurisdiction;
registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof; any similar
intellectual property or proprietary rights similar to any of the
foregoing; licenses, immunities, covenants not to xxx and the like
relating to any of the foregoing; and any claims or causes of action
arising out of or related to any infringement, misuse or misappropriation
of any of the foregoing.
-41-
(q) Insurance. Section 3.01(q) of the Company Disclosure Schedule
sets forth a complete and accurate list of all policies of fire, liability,
product liability, workmen's compensation, health and other forms of insurance
presently in effect with respect to the Company's and its subsidiaries'
business, true and complete copies of which have been delivered to, or made
available for review by, Parent. All such policies are valid, outstanding and
enforceable policies and provide insurance coverage for the properties, assets
and operations of the Company and each of its subsidiaries, of the kinds, in
the amounts and against the risks required to comply with applicable law.
Neither the Company nor any of its subsidiaries has been refused any insurance
with respect to any aspect of the operations of its business, nor has its
coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance. No notice of cancelation or
termination has been received with respect to any such policy. The activities
and operations of the Company and each of its subsidiaries have been conducted
in a manner so as to conform in all material respects to all applicable
provisions of such insurance policies.
(r) Disclosure. Neither the Company nor any of its subsidiaries has
knowingly failed to disclose to Parent any fact (other than those generally
affecting the lines of business in which the Company or any of its
subsidiaries operates) that could reasonably be expected to have a material
adverse effect on the Company or on the ability of the Company to perform its
obligations under this Agreement. No representation or warranty of the Company
contained in this Agreement contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to
make the statements herein or therein not misleading in any material respect.
(s) State Takeover Statutes. The approval of the Merger and the
Stockholders Agreement and the transactions contemplated thereby by the Board
of Directors of the Company referred to in Section 3.01(d) constitutes
approval of the Merger and the Stockholders Agreement and the transactions
contemplated thereby for purposes of
-42-
Section 203 of the DGCL and represents the only action necessary to ensure
that Section 203 of the DGCL does not and will not apply to the execution and
delivery of this Agreement or the Stockholders Agreement or the consummation
of the Merger or the other transactions contemplated hereby or thereby. No
other state takeover or similar statute or regulation is applicable to this
Agreement, the Merger or the other transactions contemplated by this
Agreement.
(t) Voting Requirements. The affirmative vote at the Stockholders
Meeting or any adjournment or postponement thereof of the holders of a
majority of the outstanding shares of Company Common Stock in favor of
adopting this Agreement (the "Stockholder Approval") is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve or adopt this Agreement, the Stockholders Agreement or the
consummation of the transactions contemplated hereby and thereby.
(u) Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than Xxxxxx Xxxxxx Partners
LLC, the fees and expenses of which will be paid by the Company, is entitled
to any broker's, finder's, financial advisor's or other similar fee or
commission, or the reimbursement of expenses, in connection with the
transactions contemplated by this Agreement or the Stockholders Agreement
based upon arrangements made by or on behalf of the Company. The Company has
delivered to Parent true and complete copies of all agreements under which any
such fees or expenses are payable and all indemnification and other agreements
related to the engagement of the persons to whom such fees are payable. The
fees and expenses of any accountant, broker, financial advisor, consultant,
legal counsel or other person retained by the Company in connection with this
Agreement or the transactions contemplated hereby incurred or to be incurred
by the Company in connection with this Agreement and the transactions
contemplated by this Agreement will not exceed the fees and expenses set forth
and identified by category of advisor in Section 3.01(u) of the Company
Disclosure Schedule.
(v) Opinion of Financial Advisor. The Company has received the
written opinion of Xxxxxx Xxxxxx Partners LLC, in customary form and based on
customary assumptions,
-43-
to the effect that the Merger Consideration to be received by the stockholders
of the Company pursuant to the Merger is fair to such stockholders from a
financial point of view as of the date hereof, a copy of which opinion has
been delivered to Parent.
SECTION 3.02 Representations and Warranties of Parent and Sub.
Parent and Sub represent and warrant to the Company as follows:
(a) Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power
and authority to carry on its business as now being conducted.
(b) Authority; Noncontravention. Parent and Sub have the requisite
corporate power and authority to execute and deliver this Agreement, to
consummate the transactions contemplated by this Agreement and to comply
with the provisions of this Agreement. The execution and delivery of this
Agreement by Parent and Sub, the consummation by Parent and Sub of the
transactions contemplated by this Agreement and the compliance by Parent
and Sub with the provisions of this Agreement have been duly authorized
by all necessary corporate action on the part of Parent and Sub and no
other corporate proceedings on the part of Parent or Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated
by this Agreement. This Agreement has been duly executed and delivered by
Parent and Sub, as applicable, and, assuming the due authorization,
execution and delivery by the Company, constitutes a valid and binding
obligation of Parent and Sub, as applicable, enforceable against Parent
and Sub, as applicable, in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement and compliance by Parent and Sub with the provisions of this
Agreement do not and will not conflict with, or result in any
-44-
violation or breach of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of, or result in,
termination, cancelation or acceleration of any obligation or to a loss
of a material benefit under, or result in the creation of any Lien in or
upon any of the properties or assets of Parent or Sub under, or give rise
to any increased, additional, accelerated or guaranteed rights or
entitlements under, any provision of (i) the Certificate of Incorporation
or By-laws of Parent or Sub, (ii) any Contract to which Parent or Sub is
party or any of their respective properties or assets is subject or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any (A) statute, law, ordinance, rule or regulation
or (B) judgment, order or decree, in each case, applicable to Parent or
Sub or any of their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations, breaches,
defaults, rights, losses, Liens or entitlements that individually or in
the aggregate could not reasonably be expected to impair in any material
respect the ability of each of Parent and Sub to perform its obligations
under this Agreement or prevent or materially impede, interfere with,
hinder or delay the consummation of any of the transactions contemplated
by this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Parent or Sub in connection with the
execution and delivery of this Agreement by Parent and Sub, the
consummation by Parent and Sub of the transactions contemplated by this
Agreement or the compliance by Parent or Sub with the provisions of this
Agreement, except for (1) the filing of a premerger notification and
report form under the HSR Act or any other applicable competition, merger
control, antitrust or similar law, (2) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in
which the Company or any of its subsidiaries is qualified to do business
and (3) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of
-45-
which to be obtained or made individually or in the aggregate could not
reasonably be expected to impair in any material respect the ability of
each of Parent and Sub to perform its obligations under this Agreement or
prevent or materially impede, interfere with, hinder or delay the
consummation of any of the transactions contemplated by this Agreement.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the Proxy Statement will (except to the extent revised or
superseded by amendments or supplements contemplated hereby), at the date
the Proxy Statement is first mailed to the Company's stockholders or at
the time of the Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
(d) Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement, and Sub
has engaged in no business other than in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01 Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Effective
Time, except with the prior consent of Parent or as expressly and specifically
contemplated by this Agreement, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice and use their reasonable best efforts to comply
with all applicable laws, rules and regulations and, to the extent consistent
therewith, use their reasonable best efforts to keep available the services of
their present officers and employees and to preserve their assets
-46-
and technology and preserve their relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with
them. Without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Effective Time, except as consented to in
writing by Parent, as expressly and specifically contemplated by this
Agreement or as expressly and specifically set forth in Section 4.01 of the
Company Disclosure Schedule, the Company shall not, and shall not permit any
of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of,
any of its capital stock, except for dividends by a direct or indirect
wholly owned subsidiary of the Company to its parent, (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (z) purchase, redeem or otherwise acquire
any shares of capital stock or any other securities of the Company or its
subsidiaries or any options, warrants, calls or rights to acquire any
such shares or other securities (including any Stock Option or Warrant),
other than repurchases of Company Common Stock in connection with the
termination of the services of any employee of the Company or any of its
subsidiaries to the extent such repurchase is required by the Company
Stock Plans;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any securities
convertible into, or exchangeable for, or any options, warrants, calls or
rights to acquire, any such shares, voting securities or convertible
securities (other than (A) the issuance of shares of Company Common Stock
upon the exercise of Stock Options, Warrants or rights under the ESPP
outstanding on the date of this Agreement and in accordance with their
present terms and (B) the granting of rights that may arise under the
terms of the ESPP, as modified by Section 5.07(b));
-47-
(iii) amend or propose to amend its certificate of incorporation or
by-laws (or similar organizational documents);
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
purchasing all of or a substantial equity interest in, or by any other
manner, any business or any corporation, partnership, limited liability
company, joint venture, association or other entity or division thereof
or (y) any assets other than acquisitions in the ordinary course of
business consistent with past practice of inventory, components, raw
materials or other immaterial assets;
(v) sell, lease, license, sell and leaseback, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any of its
properties or assets (including any shares of capital stock, voting
securities or other rights, instruments or securities), except sales of
inventory or used equipment and licenses of Intellectual Property to
end-user customers for their internal use or solely as necessary for such
customers to use the Company's products and services, in each case in the
ordinary course of business consistent with past practice;
(vi) (x) repurchase, prepay or incur any indebtedness or guarantee
any indebtedness of another person or issue or sell any debt securities
or options, warrants, calls or other rights to acquire any debt
securities of the Company or any of its subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the
foregoing or (y) make any loans, advances or capital contributions to, or
investments in, any other person, other than the Company or any direct or
indirect wholly owned subsidiary of the Company;
(vii) make any new capital expenditure or expenditures, or incur any
obligations or liabilities in connection therewith, which, individually
is in
-48-
excess of $5,000 or, in the aggregate, are in excess of $50,000;
(viii) (x) pay, discharge, settle or satisfy any claims (including
claims of stockholders), liabilities or obligations (whether absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business
consistent with past practice or as required by their terms as in effect
on the date of this Agreement, of claims, liabilities or obligations
reflected or reserved against in the most recent audited financial
statements (or the notes thereto) of the Company included in the Filed
SEC Documents (for amounts not in excess of such reserves) or incurred
since the date of such financial statements in the ordinary course of
business consistent with past practice, (y) waive, release, grant or
transfer any right of material value or (z) waive any material benefits
of, or agree to modify in any adverse respect, or fail to enforce, any
confidentiality, standstill or similar agreement to which the Company or
any of its subsidiaries is a party;
(ix) modify, amend or terminate any Contract (including any Contract
with any Major Customer) to which the Company or such subsidiary is a
party, including any arrangements involving material Intellectual
Property, or waive, release or assign any material rights or claims
thereunder, in each case in any manner which is in any way outside the
ordinary course of business or inconsistent with past practice or which
in any way could have an effect that is material and adverse to the
Company and its subsidiaries, taken as a whole;
(x) enter into any Contract (including any Contract with any Major
Customer), including any arrangements involving material Intellectual
Property, which is in any way outside the ordinary course of business or
inconsistent with past practice or which could in any way have an effect
that is material and adverse to the Company and its subsidiaries, taken
as a whole;
-49-
(xi) enter into any Contract, or extend the term of any Contract to
which the Company or any of its subsidiaries is a party as of the date
hereof, that (A) provides for any use restrictions on the Company or any
of its subsidiaries with respect to confidential information, (B)
includes any arbitration or similar dispute resolution provision, (C)
does not contain a waiver of incidental, consequential, punitive,
indirect and special damages in favor of the Company and its subsidiaries
(and their respective assignees) in all circumstances, (D) does not
include a reasonable limitation on the payment of direct damages by the
Company or any of its subsidiaries in connection therewith, (E) contains
any non-competition, non-solicitation or similar provision that restricts
the Company or any of its subsidiaries, (F) provides for "exclusivity" or
any similar requirement or under which the Company or any of its
subsidiaries is restricted, or under which Parent or any of its
subsidiaries would after the Closing be restricted, with respect to
distribution, licensing, marketing, development or manufacturing, or (G)
provides for the assignment, sale or other transfer of any material
rights in any Intellectual Property owned or used by the Company or any
of its subsidiaries to any third party, in each of cases (A) to (G) in a
manner that is not reasonably satisfactory to Parent;
(xii) except as required to comply with applicable law or any
Contract, Benefit Plan or Benefit Agreement existing on the date of this
Agreement, (A) increase in any manner the compensation or fringe benefits
of, or pay any bonus to, any current or former director, officer,
employee or consultant of the Company or any of its subsidiaries, (B) pay
to any current or former director, officer, employee or consultant of the
Company or any of its subsidiaries any benefit not provided for under any
Contract, Benefit Plan or Benefit Agreement other than the payment of
cash compensation in the ordinary course of business consistent with past
practice, (C) grant any awards under any Benefit Plan (including the
grant of stock options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock or the removal of
existing restrictions in any
-50-
Contract, Benefit Plan or Benefit Agreement or awards made thereunder),
(D) take any action to fund or in any other way secure the payment of
compensation or benefits under any Contract, Benefit Plan or Benefit
Agreement or (E) take any action to accelerate the vesting or payment of
any compensation or benefit under any Contract, Benefit Plan or Benefit
Agreement;
(xiii) form any subsidiary of the Company;
(xiv) enter into any Contract if consummation of the transactions
contemplated hereby or compliance by the Company with the provisions of
this Agreement will violate or conflict with, or result in any violation
or breach of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of, or result in, termination,
cancelation or acceleration of any obligation or to loss of a material
benefit under, or result in the creation of any Lien in or upon any of
the properties or assets of the Company or Parent or any of their
respective subsidiaries under, or give rise to any increased, additional,
accelerated or guaranteed rights or entitlements under, any provision of
such Contract;
(xv) enter into any Contract containing any restriction on the
ability of the Company or any of its subsidiaries to assign its rights,
interests or obligations thereunder, unless such restriction expressly
excludes any assignment to Parent or any of its subsidiaries in
connection with or following the consummation of the Merger and the other
transactions contemplated by this Agreement;
(xvi) take any action (or omit to take any action) if such action
(or omission) would or could reasonably be expected to result in (A) any
representation and warranty of the Company set forth in this Agreement
that is qualified as to materiality becoming untrue, (B) any such
representation and warranty that is not so qualified becoming untrue in
any material respect or (C) any condition to the Merger set forth in
Article VI not being satisfied;
-51-
(xvii) adopt or enter into any collective bargaining agreement or
other labor union contract applicable to the employees of the Company or
any subsidiary thereof or terminate, either expressly or constructively,
the employment of any employee of the Company or any subsidiary thereof
that has an employment, severance or similar agreement or arrangement
with the Company or any of its subsidiaries;
(xviii) maintain insurance at less than current levels or otherwise
in a manner inconsistent with past practice;
(xix) commence any suit, claim, action or proceeding (other than a
suit, claim, action or proceeding in connection with the collection of
accounts receivable, to enforce the terms of this Agreement or as a
result of a suit, action or proceeding commenced against the Company or
any of its subsidiaries);
(xx) change its fiscal year, revalue any of its material assets or,
except as required by GAAP, make any changes in accounting methods,
principles or practices;
(xxi) engage in (A) any trade loading practices or any other
promotional sales or discount activity with any customers or distributors
with the effect of accelerating to pre-Closing periods sales to the trade
or otherwise that would otherwise be expected (based on past practice) to
occur in post-Closing periods, (B) any practice which would have the
effect of accelerating to pre-Closing periods collections of receivables
that would otherwise be expected (based on past practice) to be made in
post-Closing periods, (C) any practice which would have the effect of
postponing to post-Closing periods payments by the Company or any of its
subsidiaries that would otherwise be expected (based on past practice) to
be made in pre-Closing periods or (D) any other promotional sales,
discount activity or inventory overstocking or understocking, in each
case in this
-52-
clause (D) in a manner outside the ordinary course of business; or
(xxii) authorize any of, or commit, resolve or agree to take any of,
the foregoing actions.
(b) Certain Tax Matters. During the period from the date of this
Agreement to the Effective Time, (i) the Company and each of its subsidiaries
shall timely file all Federal, state and local, domestic and foreign, income
and franchise tax returns and reports and all other material tax returns and
reports ("Post-Signing Returns") required to be filed by each such entity
(after taking into account any extensions) and all Post-Signing Returns shall
be complete and correct; (ii) the Company and each of its subsidiaries will
timely pay all taxes due and payable in respect of such Post-Signing Returns
that are so filed; (iii) the Company will accrue a reserve in its books and
records and financial statements in accordance with past practice for all
taxes payable by the Company or any of its subsidiaries for which no
Post-Signing Return is due prior to the Effective Time; (iv) the Company and
each of its subsidiaries will promptly notify Parent of any suit, claim,
action, investigation, proceeding or audit (collectively, "Actions") pending
against or with respect to the Company or any of its subsidiaries in respect
of any tax and will not settle or compromise any such Action without Parent's
consent; and (v) none of the Company or any of its subsidiaries will make or
change any material tax election without Parent's consent, which consent shall
not be unreasonably withheld.
(c) Advice of Changes; Filings. The Company and each of its
subsidiaries shall (i) confer on a regular and frequent basis with Parent to
report on operational matters and other matters requested by Parent and (ii)
promptly advise Parent orally and in writing of any change or event that could
reasonably be expected to have a material adverse effect on the Company. Upon
obtaining knowledge thereof, the Company shall give prompt notice to Parent of
any representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate such that the condition set forth in Section 6.02(a)
would not be satisfied; provided, however, that no such notification shall
affect the representations, warranties, covenants or
-53-
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. The Company and Parent shall each promptly provide the
other copies of all filings made by such party with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby, other
than the portions of such filings that include confidential information not
directly related to the transactions contemplated by this Agreement.
(d) Litigation. The Company shall provide to Parent immediate
written notice and copies of all pleadings and correspondence in connection
with any suit, claim, action, investigation or proceeding before or by a
Governmental Entity against the Company, any of its subsidiaries and/or any of
their respective directors relating to the transactions contemplated by this
Agreement.
(e) Other Actions. Neither the Company nor its Board of Directors
shall take any action that would, or that could reasonably be expected to,
prevent or materially impede, interfere with, hinder or delay the consummation
of any of the transactions contemplated by this Agreement, the Stockholders
Agreement (including pursuant to the option to purchase Subject Shares granted
under Section 3(h) thereof) or have the effective result, directly or
indirectly, of depriving Parent of any material right or benefit to which it
is entitled under the Stockholders Agreement. The covenants and agreements of
the Company relating to the Stockholders Agreement contained in this Section
4.01(e) shall survive termination of this Agreement.
SECTION 4.02 No Solicitation. (a) The Company shall not, nor shall
it permit any of its subsidiaries to, or authorize or permit any director,
officer or employee of the Company or any of its subsidiaries or any
investment banker, attorney, accountant or other advisor or representative of
the Company or any of its subsidiaries to, directly or indirectly, (i)
solicit, initiate or encourage, or take any other action knowingly to
facilitate, any Takeover Proposal (as defined below) or any inquiries or the
making of any proposal that constitutes or could reasonably be expected to
lead to a Takeover Proposal or (ii) enter into, continue or otherwise
participate in
-54-
any discussions or negotiations regarding, or furnish to any
person any information with respect to, or otherwise cooperate in any way
with, any Takeover Proposal; provided, however, that at any time prior to
obtaining the Stockholder Approval, the Board of Directors of the Company may,
in response to a bona fide written Takeover Proposal that such Board of
Directors reasonably determines in good faith constitutes or is reasonably
likely to lead to a Superior Proposal (as defined below), and which Takeover
Proposal was unsolicited and did not otherwise result from a breach of this
Section 4.02, and subject to compliance with Section 4.02(c) and (d), (A)
furnish information with respect to the Company and its subsidiaries to the
person making such Takeover Proposal (and its representatives) pursuant to a
customary confidentiality agreement, provided that all such information is
provided on a prior or substantially concurrent basis to Parent, and (B)
participate in discussions or negotiations with the person making such
Takeover Proposal (and its representatives) regarding such Takeover Proposal.
Without limiting the foregoing, it is understood that any violation in any
material respect of the restrictions set forth in the preceding sentence by
any director, officer or employee of the Company or any of its subsidiaries or
any investment banker, attorney, accountant or other advisor or representative
of the Company or any of its subsidiaries shall be deemed to be a breach of
this Section 4.02(a) by the Company.
The term "Takeover Proposal" means any inquiry, proposal or offer
from any person (other than by Parent or Sub) relating to, or that is
reasonably likely to lead to, any direct or indirect acquisition, in one
transaction or a series of transactions, including any merger, consolidation,
tender offer, exchange offer, stock acquisition, asset acquisition, binding
share exchange, business combination, recapitalization, liquidation,
dissolution, joint venture or similar transaction, of (A) assets or businesses
that constitute or represent 15% or more of the total revenue, operating
income, EBITDA or assets of the Company and its subsidiaries, taken as a
whole, or (B) 15% or more of the outstanding shares of Company Common Stock or
capital stock of, or other equity or voting interests in, any of the Company's
subsidiaries directly or indirectly holding, individually or taken
-55-
together, the assets or businesses referred to in clause (A) above, in each
case other than the transactions contemplated by this Agreement or the
Stockholders Agreement.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw (or modify in a manner adverse to Parent or Sub) or
propose publicly to withdraw (or modify in a manner adverse to Parent or Sub)
the recommendation or declaration of advisability by such Board of Directors
or any such committee of this Agreement or the Merger, or resolve or agree to
take any such action (any such action or any such resolution or agreement to
take such action being referred to herein as an "Adverse Recommendation
Change"), unless the Board of Directors or a committee thereof reasonably
determines in good faith that the failure to take such action would be
reasonably likely to result in a breach of its fiduciary duties under
applicable law, (ii) recommend, adopt or approve, or propose publicly to
recommend, adopt or approve, any Takeover Proposal, or withdraw its approval
of the Merger, or resolve or agree to take any such action, or (iii) cause or
permit the Company to enter into any letter of intent, memorandum of
understanding, agreement in principle, acquisition agreement, merger
agreement, option agreement, joint venture agreement, partnership agreement or
other agreement (each, an "Acquisition Agreement") constituting or related to,
or which is intended to or is reasonably likely to lead to, any Takeover
Proposal (other than a confidentiality agreement referred to in Section
4.02(a)) or resolve or agree to take any such action.
The term "Superior Proposal" means any bona fide binding written
offer not solicited by or on behalf of the Company or any of its subsidiaries
made by a third party that if consummated would result in such third party (or
in the case of a direct merger between such third party and the Company, the
stockholders of such third party) acquiring, directly or indirectly, more than
50% of the voting power of the Company Common Stock or all or substantially
all the assets of the Company and its subsidiaries, taken as a whole, for
consideration consisting of cash and/or securities that the Board of Directors
of the Company determines in its good faith
-56-
judgment (after consultation with a financial advisor of nationally recognized
reputation) to have a higher value than the consideration to be received by
the Company's stockholders in connection with the Merger, taking into account,
among other things, any changes to the terms of this Agreement proposed by
Parent in response to such Superior Proposal or otherwise.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.02, the Company promptly shall advise
Parent in writing of any request for information that the Company reasonably
believes could lead to or contemplates a Takeover Proposal or of any Takeover
Proposal, or any inquiry the Company reasonably believes could lead to any
Takeover Proposal, the terms and conditions of such request, Takeover Proposal
or inquiry (including any subsequent material amendment or modification to
such terms and conditions) and the identity of the person making any such
request, Takeover Proposal or inquiry. The Company shall keep Parent informed
on a current basis in all material respects of the status and details
(including material amendments or proposed amendments) of any such request,
Takeover Proposal or inquiry.
(d) Nothing contained in this Section 4.02 or elsewhere in this
Agreement shall prohibit the Company from (i) taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or (ii) making any disclosure to the Company's stockholders if,
in the good faith judgment of the Board of Directors of the Company, after
consultation with outside counsel, failure so to disclose would be
inconsistent with applicable law; provided, however, that in no event shall
the Company or its Board of Directors or any committee thereof take, agree or
resolve to take any action prohibited by Section 4.02(b)(i) (after giving
effect to the final clause thereof) or 4.02(b)(ii).
-57-
ARTICLE V
Additional Agreements
SECTION 5.01 Preparation of the Proxy Statement; Stockholders
Meeting. (a) As promptly as reasonably practicable following the date of this
Agreement, the Company shall prepare and file with the SEC the Proxy Statement
and the Company shall use its reasonable best efforts to respond as promptly
as practicable to any comments of the SEC with respect thereto and to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly as
reasonably practicable following the date of this Agreement. The Company shall
promptly notify Parent upon the receipt of any comments from the SEC or its
staff or any request from the SEC or its staff for amendments or supplements
to the Proxy Statement and shall provide Parent with copies of all
correspondence between the Company and its representatives, on the one hand,
and the SEC and its staff, on the other hand. Notwithstanding anything to the
contrary stated above, prior to filing or mailing the Proxy Statement (or any
amendment or supplement thereto) or responding to any comments of the SEC with
respect thereto, the Company shall (i) provide Parent an opportunity to
review, comment on and approve (which approval shall not be unreasonably
withheld or delayed) such document or response, (ii) include in such document
or response all comments reasonably proposed by Parent and (iii) not file or
mail such document or respond to the SEC prior to receiving Parent's approval,
which approval shall not be unreasonably withheld or delayed.
(b) The Company shall, as promptly as reasonably practicable
following the date of this Agreement, establish a record date (which will be
as promptly as reasonably practicable following the date of this Agreement)
for, duly call, give notice of, convene and hold a meeting of its stockholders
(the "Stockholders Meeting") for the purpose of obtaining the Stockholder
Approval, regardless of whether the Board of Directors of the Company
determines at any time that this Agreement is no longer advisable and
recommends that the stockholders of the Company reject it or any other Adverse
Recommendation Change has occurred. The Company shall cause the Stockholders
Meeting to be held as promptly as reasonably practicable after the date of
-58-
this Agreement. Subject to Section 4.02(b)(i), the Company shall, through its
Board of Directors, recommend to its stockholders that they adopt this
Agreement, and shall include such recommendation in the Proxy Statement.
Without limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to this Section 5.01(b) shall not be affected by the
commencement, public proposal, public disclosure or communication to the
Company or any other person of any Takeover Proposal.
SECTION 5.02 Access to Information; Confidentiality. The Company
shall, and shall cause each of its subsidiaries to, afford to Parent, and to
Parent's officers, employees, investment bankers, attorneys, accountants and
other advisors and representatives, full access during normal business hours
during the period prior to the Effective Time or the termination of this
Agreement to all their respective properties, books, contracts, commitments,
directors, officers, employees, attorneys, accountants, auditors (and, to the
extent within the Company's control, former auditors), other advisors and
representatives and records and, during such period, the Company shall, and
shall cause each of its subsidiaries to, make available to Parent (a) a copy
of each report, schedule, form, statement and other document filed or received
by it during such period pursuant to the requirements of Federal, state or
local, domestic or foreign, laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request (including
the work papers of KPMG LLP). Except as required by law, Parent will hold, and
will direct its officers, employees, investment bankers, attorneys,
accountants and other advisors and representatives to hold, any and all
information received from the Company, directly or indirectly, in confidence
in accordance with the Agreement for Exchange of Confidentiality Information
dated March 23, 1998, as supplemented on July 13, 2001, between Parent and the
Company (as it may be amended from time to time, the "Confidentiality
Agreement").
SECTION 5.03 Reasonable Efforts; Notification. (a) Upon the terms
and subject to the conditions set forth in this Agreement, each of the parties
agrees to use its reasonable efforts to take, or cause to be taken, all
actions that are necessary, proper or advisable to
-59
consummate and make effective the Merger and the other transactions
contemplated by this Agreement and the Stockholders Agreement, including using
its reasonable efforts to accomplish the following: (i) the taking of all
reasonable acts necessary to cause the conditions precedent set forth in
Article VI to be satisfied, (ii) the obtaining of all necessary actions or
nonactions, waivers, consents, approvals, orders and authorizations from
Governmental Entities and the making of all necessary registrations,
declarations and filings (including filings under the HSR Act and other
registrations, declarations and filings with Governmental Entities, if any),
(iii) the taking of all reasonable steps as may be necessary to avoid any
suit, claim, action, investigation or proceeding by any Governmental Entity
and (iv) the obtaining of all necessary consents, approvals or waivers from
third parties. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to this Agreement, the
Stockholders Agreement, the Merger or any of the other transactions
contemplated hereby or thereby, use their reasonable efforts to ensure that
the Merger and the other transactions contemplated hereby or thereby may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation
on this Agreement, the Stockholders Agreement, the Merger and the other
transactions contemplated hereby or thereby. Notwithstanding the foregoing or
any other provision of this Agreement to the contrary, in no event shall any
party hereto be obligated to (A) agree to, or proffer to, divest or hold
separate, or enter into any licensing or similar arrangement with respect to,
any assets (whether tangible or intangible) or any portion of any business of
Parent, the Company or any of their respective subsidiaries or (B) litigate
any suit, claim, action, investigation or proceeding, whether judicial or
administrative, (1) challenging or seeking to restrain or prohibit the
consummation of the Merger; (2) seeking to prohibit or limit in any material
respect the ownership or operation by the Company, Parent or any of their
respective affiliates of a material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, or to require any
-60-
such person to dispose of or hold separate any material portion of the
business or assets of the Company and its subsidiaries, taken as a whole, or
Parent and its subsidiaries, taken as a whole, as a result of the Merger; or
(3) seeking to prohibit Parent or any of its affiliates from effectively
controlling in any material respect a substantial portion of the business or
operations of the Company or its subsidiaries. The Company and Parent will
provide such assistance, information and cooperation to each other as is
reasonably required to obtain any such nonactions, waivers, consents,
approvals, orders and authorizations and, in connection therewith, will notify
the other person promptly following the receipt of any comments from any
Governmental Entity and of any request by any Governmental Entity for
amendments, supplements or additional information in respect of any
registration, declaration or filing with such Governmental Entity and will
supply the other person with copies of all correspondence between such person
or any of its representatives, on the one hand, and any Governmental Entity,
on the other hand.
(b) The Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate such that the condition set forth in Section 6.02(a)
would not be satisfied; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
(c) Parent shall give prompt notice to the Company of any
representation or warranty made by it or Sub contained in this Agreement
becoming untrue or inaccurate such that the condition set forth in Section
6.03(a) would not be satisfied; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
(d) Without limiting the generality of the foregoing, the Company
shall give Parent the opportunity to participate in the defense of any
litigation against the Company and/or its directors relating to the
transactions
-61-
contemplated by this Agreement at the sole expense of Parent.
SECTION 5.04 Stock Options; Restricted Shares; Warrants. (a) Stock
Options; Restricted Shares. (i) As soon as practicable following the date of
this Agreement, the Company agrees that the Board of Directors of the Company
(or, if appropriate, any committee administering the Company Stock Plans)
shall adopt such resolutions or take such other actions (including obtaining
any required consents) as may be required to effect the following:
(A) The terms of each outstanding Stock Option, whether vested or
unvested, shall be adjusted as necessary to provide that, at the
Effective Time, each such Stock Option outstanding immediately prior to
the Effective Time shall be converted into an option to acquire, on the
same terms and conditions as were applicable under such Stock Option, the
number of shares of Parent common stock, par value $0.20 per share
("Parent Common Stock") (rounded down to the nearest whole share),
determined by multiplying the number of shares of Company Common Stock
subject to such Stock Option by a fraction (the "Option Exchange Ratio"),
the numerator of which is the Merger Consideration and the denominator of
which is the average closing price of Parent Common Stock on the New York
Stock Exchange Composite Transactions Tape on the ten trading days
immediately preceding the date on which the Effective Time occurs, at an
exercise price per share of Parent Common Stock equal to (A) the per
share exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Stock Option divided by (B) the Option
Exchange Ratio (each, as so adjusted, an "Adjusted Option"); provided
that such exercise price shall be rounded up to the nearest whole cent.
(B) At the Effective Time, each Restricted Share shall be canceled
and shall cease to exist. In lieu of payment of the Merger Consideration
for each Restricted Share, Parent agrees to pay the Applicable Amount (as
defined below) to each holder of Restricted Shares promptly after each
Lapse Date (as defined below); provided that if such holder is not
employed
-62-
by Parent or its affiliates on a Lapse Date, Parent shall not be required
to make, and such holder shall not be entitled to receive, the Applicable
Amount. For purposes hereof, (i) "Applicable Amount" means, in respect of
a holder of Restricted Shares, an amount equal to the product of the
Merger Consideration and the number of Restricted Shares held by such
holder with respect to which the Company's right to repurchase would have
lapsed on the applicable Lapse Date if such Restricted Shares had
remained outstanding and (ii) "Lapse Date" means, in respect of any
Restricted Shares, each date on which the Company's right to repurchase
such Restricted Shares would have lapsed if such Restricted Shares had
remained outstanding. Both the Applicable Amount and the Lapse Date shall
be determined (i) after giving effect to Section 5.07(c) and Section
5.07(d) and (ii) with respect to each CIC Employee (as defined below),
without giving effect to the lapse of any Company repurchase rights that
would not have occurred (or would have occurred on a later date) if the
transactions contemplated by this Agreement had not occurred. For
purposes hereof, a "CIC Employee" means any employee of the Company or
its subsidiaries who, as of the date hereof, (A) participates in the
Retention Plan or (B) is party to a contract with the Company or its
subsidiaries that provides benefits or eligibility for enhanced severance
payments in connection with a corporate transaction involving the
Company.
(C) Such other changes to the Company Stock Plans as Parent and the
Company may agree are appropriate to give effect to the Merger shall be
made.
(D) The adjustments provided in Section 5.04(a)(i)(A) with respect
to any Stock Options that are "incentive stock options" as defined in
Section 422 of the Code shall be and are intended to be effected in a
manner which is consistent with Section 424(a) of the Code.
(ii) At the Effective Time, by virtue of the Merger and without the
need of any further corporate
-63-
action, Parent shall assume the Company Stock Plans, with the result that
all obligations of the Company under the Company Stock Plans, including
with respect to Stock Options outstanding at the Effective Time, shall be
obligations of Parent following the Effective Time.
(iii) As soon as reasonably practicable after the Effective Time,
but in any event within 30 business days thereof, Parent shall prepare and
file with the SEC a registration statement on Form S-8 (or another appropriate
form) registering a number of shares of Parent Common Stock equal to the
number of shares subject to the Adjusted Options. Such registration statement
shall be kept effective (and the current status of the prospectus or
prospectuses required thereby shall be maintained) as long as any Adjusted
Options may remain outstanding.
(iv) As soon as reasonably practicable after the Effective Time,
Parent shall deliver to the holders of Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective Company Stock
Plans and the agreements evidencing the grants of such Stock Options and that
such Stock Options and related agreements shall be assumed by Parent and shall
continue in effect on the same terms and conditions (subject to the
adjustments required by this Section 5.04 after giving effect to the Merger).
(v) A holder of an Adjusted Option may exercise such Adjusted Option
in whole or in part in accordance with its terms by delivering a properly
executed notice of exercise to Parent, together with the consideration
therefor and the Federal withholding tax information, if any, required in
accordance with the related Company Stock Plan.
(vi) The Company agrees to take all actions (if any) necessary to
ensure that (except as otherwise expressly and specifically contemplated by
this Section 5.04 and Section 5.07(c) and (d), and except to the extent
required under the respective terms of the Stock Options or Company Stock
Plans which terms are expressly and specifically disclosed in Section
5.04(a)(vi) of the Company Disclosure Schedule) all restrictions or
limitations on transfer and vesting and all repurchase
-64-
rights with respect to Stock Options awarded under the Company Stock Plans or
any other plan, program or arrangement of the Company, to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in
full force and effect with respect to such options in accordance with their
terms after giving effect to the Merger and the assumption by Parent as set
forth above.
(b) Warrants. As soon as practicable following the date of this
Agreement, the Company shall use its reasonable efforts to take such actions
as may be required to amend each outstanding Surviving Warrant such that,
immediately prior to the Effective Time, each such Surviving Warrant shall be
cancelled.
(c) Rule 16b-3 Exemption. The Company shall take all reasonable
steps as may be required to cause the transactions contemplated by this
Section 5.04 and any other dispositions of Company equity securities
(including derivative securities) in connection with this Agreement by each
individual who is a director or officer of the Company to be exempt under Rule
16b-3 promulgated under the Exchange Act, such steps to be taken in accordance
with the Interpretive Letter dated January 12, 1999, issued by the SEC to
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP.
SECTION 5.05 Indemnification, Exculpation and Insurance. (a) Parent
and Sub agree that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
(and rights for advancement of expenses) now existing in favor of the current
or former directors or officers of the Company and its subsidiaries as
provided in their respective certificates of incorporation or by-laws (or
comparable organizational documents) and any indemnification or other
agreements of the Company and/or its subsidiaries as in effect on the date of
this Agreement shall be assumed by the Surviving Corporation in the Merger,
without further action, at the Effective Time and shall survive the Merger and
shall continue in full force and effect in accordance with their terms, and
Parent shall ensure that the Surviving Corporation complies with and honors
the foregoing obligations.
-65-
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all
its properties and assets to any person, or if Parent dissolves the Surviving
Corporation, then, and in each such case, Parent shall cause proper provision
to be made so that the successors and assigns of the Surviving Corporation
assume the obligations set forth in this Section 5.05.
(c) For six years after the Effective Time, Parent shall maintain in
effect either (i) the Company's current directors' and officers' liability
insurance covering each person currently covered by the Company's directors'
and officers' liability insurance policy for acts or omissions occurring prior
to the Effective Time on terms with respect to such coverage and amounts no
less favorable in any material respect to such directors and officers than
those of such policy in effect on the date of this Agreement (provided that
Parent may substitute therefor policies of a reputable insurance company the
material terms of which, including coverage and amount, are no less favorable
in any material respect to such directors and officers than the insurance
coverage otherwise required under this Section 5.05(c)(i)); provided, however,
that in no event shall Parent be required to pay annualized aggregate premiums
for insurance under this Section 5.05(c)(i) in excess of 150% of the amount of
the aggregate premiums paid by the Company for the period from May 31, 2001,
to May 31, 2002, for such purpose (which premiums for such period are hereby
represented and warranted by the Company to be $619,725) (such 150% amount,
the "Maximum Premium"), provided that Parent shall nevertheless be obligated
to provide such coverage as may be obtained for the Maximum Premium, or (ii)
policies of a reputable insurance company for the entirety of such six year
period (or if any insurance maintained under Section 5.05(c)(i) expires or is
terminated or canceled during such six-year period, for the remainder of such
six year period) the material terms of which, including coverage and amount,
are no less favorable in any material respect to such directors and officers
than the insurance coverage otherwise required under Section 5.05(c)(i),
provided,
-66-
however, that in no event shall Parent be required to pay aggregate
premiums for insurance under this Section 5.05(c)(ii) in respect of such
entire six year period in excess of the maximum amount that Parent is
obligated to pay under Section 5.05(c)(i) in respect of directors' and
officers' liability insurance.
(d) The provisions of this Section 5.05 (i) are intended to be for
the benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.06 Fees. (a) Except as expressly set forth in this
Section 5.06, all fees and expenses incurred in connection with this
Agreement, the Stockholder Agreement, the Merger and the other transactions
contemplated hereby and thereby shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated.
(b) In the event that (i) (A) a Takeover Proposal has been made to
the Company or its stockholders or any person has announced an intention
(whether or not conditional and whether or not withdrawn) to make a Takeover
Proposal or a Takeover Proposal otherwise becomes known to the stockholders of
the Company or any person or group (within the meaning of the Exchange Act and
the rules of the SEC thereunder as in effect on the date hereof) acquires
ownership, directly or indirectly, beneficially or of record of 10% or more of
the Company Common Stock, (B) thereafter this Agreement is terminated by
either Parent or the Company pursuant to Section 7.01(b)(i) or 7.01(b)(iii)
and (C) within 12 months after such termination, the Company or any of its
subsidiaries enters into any Acquisition Agreement with respect to, or
consummates, any Takeover Proposal (solely for purposes of this Section
5.06(b)(i)(C), the term "Takeover Proposal" shall have the meaning set forth
in the definition of Takeover Proposal contained in Section 4.02(a) except
that all references to 10% shall be deemed references to 40%), or (ii) this
Agreement is terminated by Parent pursuant to Section 7.01(c), then the
Company shall pay Parent a fee
-67-
equal to $4,800,000 (the "Termination Fee") by wire transfer of same day funds
to an account designated by Parent (x) in the case of a termination by Parent
pursuant to Section 7.01(c), within two business days after such termination
and (y) in the case of a payment as a result of any event referred to in
Section 5.06(b)(i)(C), upon the first to occur of such events. The Company
acknowledges that the agreements contained in this Section 5.06(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent would not enter into this Agreement;
accordingly, if the Company fails promptly to pay the amounts due pursuant to
this Section 5.06(b), and, in order to obtain such payment, Parent commences a
suit that results in a judgment against the Company for the amounts set forth
in this Section 5.06(b), the Company shall pay to Parent its reasonable costs
and expenses (including attorneys' fees and expenses) in connection with such
suit and any appeal relating thereto, together with interest on the amounts
set forth in this Section 5.06(b) at the prime rate of Citibank, N.A. in
effect on the date such payment was required to be made.
SECTION 5.07 Employee Matters. (a) Following the Effective Time,
the Surviving Corporation shall honor, or cause to be honored, all obligations
of the Company and its subsidiaries under Benefit Agreements and Benefit Plans
in accordance with the terms thereof. Nothing herein shall be construed to
prohibit the Surviving Corporation from amending or terminating such Benefit
Agreements and Benefit Plans in accordance with the terms thereof and with
applicable law or from terminating the employment of any employee of the
Company or its subsidiaries at any time following the Effective Time.
(b) The Company shall amend the ESPP on or prior to the date of this
Agreement, or take such other actions with respect to the ESPP (including
making any required determination under Section 20(a) of the ESPP) as are
necessary, (i) to terminate any ongoing Offering Periods (as defined in the
ESPP) effective as of the October 31, 2001 Purchase Date (as defined in the
ESPP) after the purchase scheduled to occur on such date, (ii) to ensure that
no Offering Period or Purchase Period (as defined in the ESPP) commences or
continues between October 31, 2001
-68-
and the date of termination of this Agreement (if any such termination
occurs), (iii) to ensure that on and after November 1, 2001, there are no
rights outstanding under the ESPP to acquire Common Stock, and (iv) to
terminate, contingent on the occurrence of the Closing, the ESPP effective as
of the Closing Date.
(c) The Company shall take all necessary actions (including
obtaining all required consents but, except as consented to in writing by
Parent, excluding the payment of any money or the provision of any other
benefit) so that (i) each employment, severance, termination or change in
control agreement between the Company or its affiliates and the individuals
listed in Section 5.07(c) of the Company Disclosure Schedule (each, an
"Executive") is terminated immediately prior to the Closing Date and (ii) each
Executive irrevocably waives any right or entitlement such Executive has to
(A) severance or termination benefits under existing agreements with, or plans
or programs of, the Company or its affiliates or (B) any other payment or
benefit that is related to, or contingent upon, the consummation of the
transactions contemplated by this Agreement, including, without limitation,
the accelerated vesting of Stock Options, the lapse of rights to repurchase
shares of Company Common Stock held by such Executive or the forgiveness of
indebtedness owed by such Executive; provided that (i) the Executives may
participate in the Retention Plan, (ii) any Executive party to an expatriate
employment agreement shall not be required to waive the provisions of such
agreement regarding tax equalization obligations for calendar years 2000 and
2001 and (iii) any Executive party to an employment contract subject to German
law shall terminate such contract as of the effective time of the merger of
the Company or its subsidiaries with and into Parent or the Subsidiary. The
effectiveness of any waiver required above shall be contingent on the Closing,
so that in the event of termination of this Agreement, such waiver shall have
no force and effect. For the avoidance of doubt, if any Executive has received
any benefit or payment described above prior to the date the Company obtained
the Executive's consent to the foregoing, the Company shall be required to
take all necessary actions (including obtaining any required consents) to have
such Executive relinquish or refund such benefit or payment immediately prior
to the Effective Time.
-69-
(d) The Company shall take all necessary actions (including
obtaining required consents but, except as consented to in writing by Parent,
excluding the payment of any money or the provision of any other benefit) to
amend any contract, agreement or plan that the Company sponsors or to which it
is a party to provide that no "Good Reason Trigger" (as defined below)
included in such contract, agreement or plan may be exercised by any CIC
Employee for any reason during the period beginning on the date hereof and
ending on the six-month anniversary of the Effective Time (the "Suspension
Period"), provided that as of the end of the Suspension Period, any event
occurring without the CIC Employee's consent during such the Suspension Period
that would have allowed such CIC Employee to exercise a Good Reason Trigger
shall be treated as if such event had occurred on the last day of the
Suspension Period. For this purpose, a "Good Reason Trigger" is any provision
or agreement that permits an CIC Employee to unilaterally terminate his or her
relationship with the Company or its subsidiaries (or otherwise claim that the
CIC Employee has been constructively terminated) and receive severance or
other benefits or payments.
(e) Notwithstanding anything to the contrary contained herein, in
the event that (i) either (A) an Executive does not consent to each of the
actions described in Section 5.07(c) and Section 5.07(d) or (B) the consent of
an Executive to any of the actions described in Section 5.07(c) and Section
5.07(d) would be invalid under the law of any jurisdiction applicable to such
Executive and (ii) Parent and Sub elect to proceed with the transactions
contemplated by this Agreement, then (I) the Company shall take promptly after
the date hereof all necessary actions to exclude such Executive from
participation in the Retention Plan and (II) such Executive shall not be
entitled to participate in any program or plan established or maintained by
Parent to provide additional compensation to Executives in connection with the
transactions contemplated by this Agreement.
SECTION 5.08 Public Announcements. Parent and Sub, on the one hand,
and the Company, on the other hand, will, to the extent reasonably
practicable, consult with each other before issuing, and give each other a
reasonable opportunity to review and comment upon, any press release
-70-
or other public statements with respect to this Agreement, the Stockholders
Agreement, the Merger and the other transactions contemplated hereby and
thereby, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law, court process or by obligations pursuant to any listing agreement with
any national securities exchange or national securities quotation system. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement and the Stockholders Agreement
shall be in the form heretofore agreed to by the parties.
SECTION 5.09 Closing Date Balance Sheet. The Company shall prepare
and deliver to Parent prior to Closing (i) an unaudited consolidated balance
sheet of the Company as of the last business day of the most recently
completed full month ending immediately preceding the Closing Date (or, if the
Closing Date is before the 15th day of the month, as of the last business day
of the month immediately preceding the most recently completed full month
ending immediately preceding the Closing Date), which balance sheet shall be
prepared in accordance with GAAP (except as permitted by Form 10-Q of the SEC)
and on a basis consistent with the unaudited balance sheets of the Company
included in the SEC Documents and shall fairly present in all material
respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the date thereof, and (ii) the Company's best
estimate (using actual data through at least the end of the third business day
immediately preceding the Closing Date) of closing account information for all
line items that would appear on a consolidated balance sheet of the Company
other than deferred revenue and line items relating to stockholders' equity
(deficit) as of the business day immediately preceding the Closing Date. The
Company shall provide to Parent any information and back-up materials
(including bank account information) reasonably requested by Parent with
respect thereto.
-71-
ARTICLE VI
Conditions Precedent
SECTION 6.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Stockholder Approval shall have been
obtained.
(b) Antitrust. Any waiting period (and any extension thereof)
applicable to the Merger under the HSR Act or any other applicable
competition, merger control, antitrust or similar law shall have been
terminated or shall have expired.
(c) No Injunctions or Legal Restraints. No temporary restraining
order, preliminary or permanent injunction or other order or decree
issued by any court of competent jurisdiction or other legal restraint or
prohibition (collectively, "Legal Restraints") which has the effect of
preventing the consummation of the Merger shall be in effect.
SECTION 6.02 Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein that are qualified as to
materiality shall be true and correct, and the representations and
warranties of the Company contained herein that are not so qualified
shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Closing Date with the same
effect as though made as of the Closing Date except that the accuracy of
representations and warranties that by their terms speak as of a
specified date will be determined as of such date. Parent shall have
-72-
received a certificate signed on behalf of the Company by the chief
executive officer and chief financial officer of the Company to such
effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Parent shall have received a certificate signed on behalf of the Company
by the chief executive officer and the chief financial officer of the
Company to such effect.
(c) No Litigation. There shall not be pending any suit, action or
proceeding brought by any Governmental Entity or any other third party
(or any such suit, action or proceeding threatened by any Governmental
Entity) (i) challenging or seeking to restrain or prohibit the
consummation of the Merger; or (ii) seeking to prohibit or limit in any
material respect the ownership or operation by the Company, Parent or any
of their respective affiliates of a material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or Parent
and its subsidiaries, taken as a whole, or to require any such person to
dispose of or hold separate any material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or Parent
and its subsidiaries, taken as a whole, as a result of the Merger; or
(iii) seeking to impose limitations on the ability of Parent or any of
its affiliates to acquire or hold, or exercise full rights of ownership
of, any shares of Company Common Stock, including the right to vote the
Company Common Stock on all matters properly presented to the
stockholders of the Company; or (iv) seeking to prohibit Parent or any of
its affiliates from effectively controlling in any material respect a
substantial portion of the business or operations of the Company or its
subsidiaries, in each case other than any suit, action or proceeding
referred to on Section 6.02(c) of the Company Disclosure Schedule.
(d) Legal Restraint. No Legal Restraint that could reasonably be
expected to result, directly or
-73-
indirectly, in any of the effects referred to in clauses (i) through (iv)
of paragraph (c) of this Section 6.02 shall be in effect.
(e) Consents. Parent shall have received evidence, in form and
substance reasonably satisfactory to it, that Parent or the Company shall
have obtained (i) all consents, approvals, authorizations, qualifications
and orders of all Governmental Entities or third parties required in
connection with this Agreement and the transactions contemplated by this
Agreement, except for those set forth in Section 6.02(e)(i) of the
Company Disclosure Schedule, and (ii) waivers of all Restrictive
Provisions, except for those set forth in Section 6.02(e)(ii) of the
Company Disclosure Schedule.
SECTION 6.03 Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub contained herein that are qualified as to
materiality shall be true and correct, and the representations and
warranties of Parent and Sub contained herein that are not so qualified
shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Closing Date with the same
effect as though made as of the Closing Date except that the accuracy of
representations and warranties that by their terms speak as of a
specified date will be determined as of such date. The Company shall have
received a certificate signed on behalf of Parent by an authorized
signatory of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf
of Parent by an authorized signatory of Parent to such effect.
-74-
SECTION 6.04 Frustration of Closing Conditions None of the
Company, Parent or Sub may rely on the failure of any condition set forth in
Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such
failure was caused by such party's failure to use reasonable best efforts to
consummate the Merger and the other transactions contemplated by this
Agreement and the Stockholders Agreement, as required by and subject to
Section 5.03.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01 Termination. This Agreement may be terminated, and the
Merger contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether before or after the Stockholder Approval has been
obtained:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by March 31, 2002
for any reason; provided, however, that the right to terminate this
Agreement under this Section 7.01(b)(i) shall not be available to any
party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
(ii) if any Legal Restraint having the effect set forth in Section
6.01(c) shall be in effect and shall have become final and nonappealable;
or
(iii) if the Stockholder Approval shall not have been obtained at
the Stockholders Meeting duly convened therefor or at any adjournment or
postponement thereof;
(c) by Parent in the event (i) an Adverse Recommendation Change has
occurred or (ii) the Board of Directors of the Company or any committee
thereof
-75-
shall have failed to confirm its recommendation and declaration of
advisability of this Agreement and the Merger within ten business days
after a written request by Parent that it do so;
(d) by Parent (i) if the Company shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to
perform (A) would give rise to the failure of a condition set forth in
Section 6.02(a) or 6.02(b), and (B) has not been or is incapable of being
cured by the Company within 25 days after its receipt of written notice
thereof from Parent; (ii) if any Legal Restraint having any of the
effects referred to in clauses (i) through (iv) of Section 6.02(c) shall
be in effect and shall have become final and nonappealable; or
(e) by the Company, if Parent shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to
perform (i) would give rise to the failure of a condition set forth in
Section 6.03(a) or 6.03(b), and (ii) has not been or is incapable of
being cured by Parent within 25 days after its receipt of written notice
thereof from the Company.
SECTION 7.02 Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7.01,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Sub or the Company, other than
the provisions of Section 3.01(u), Section 4.01(e), the last sentence of
Section 5.02, Section 5.06, this Section 7.02 and Article VIII, which shall
survive any such termination, and except to the extent that such termination
results from a material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 7.03 Amendment. This Agreement may be amended by the
parties hereto at any time, whether before
-76-
or after the Stockholder Approval has been obtained; provided, however, that,
after the Stockholder Approval has been obtained, there shall be made no
amendment that by law requires further approval by stockholders of the parties
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 7.04 Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document
delivered pursuant hereto or (c) waive compliance with any of the agreements
or conditions contained herein; provided, however, that, after the Stockholder
Approval has been obtained, there shall be made no waiver that by law requires
further approval by stockholders of the parties without the further approval
of such stockholders. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure or delay by any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights nor shall any single or partial
exercise by any party to this Agreement of any of its rights under this
Agreement preclude any other or further exercise of such rights or any other
rights under this Agreement.
ARTICLE VIII
General Provisions
SECTION 8.01 Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 8.02 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed given
if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
if to Parent or Sub, to:
International Business Machines Corporation
Xxx Xxxxxxx Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
with a copy to:
International Business Machines Corporation
Xxx Xxxxxxx Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
and with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
if to the Company, to:
CrossWorlds Software, Inc.
000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
-78-
with a copy to:
CrossWorlds Software, Inc.
000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
and with a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
and with a copy to:
Venture Law Group
Pier 1, Bay 0
Xxx Xxxxxxxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
SECTION 8.03 Definitions. As used in this Agreement:
(a) an "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) as it relates to the Company, "knowledge" means, with respect to
any matter in question, that any officer of the Company has actual
knowledge of such matter;
(c) "material adverse effect" on or with respect to the Company
means any state of facts, change, development, effect or occurrence that
is, or could
-79-
reasonably be expected to become, materially adverse to the business,
assets, condition (financial or otherwise) or results of operations of
the Company and its subsidiaries, taken as a whole;
(d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, Governmental
Entity, unincorporated organization or other entity; and
(e) a "subsidiary" of any person means another person of which more
than 50% of any class of capital stock, voting securities or other equity
interests are owned or controlled, directly or indirectly, by such first
person.
SECTION 8.04 Interpretation. When a reference is made in this
Agreement to an Article or to a Section, Subsection, Exhibit or Schedule, such
reference shall be to an Article of, a Section or Subsection of, or an Exhibit
or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. The words "date hereof"
shall refer to the date of this Agreement. The term "or" is not exclusive. The
word "extent" in the phrase "to the extent" shall mean the degree to which a
subject or other thing extends, and such phrase shall not mean simply "if".
The definitions contained in this Agreement are applicable to the singular as
well as the plural forms of such terms. Any agreement or instrument defined or
referred to herein or in any agreement or instrument that is referred to
herein means such agreement or instrument as from time to time amended,
modified or supplemented. References to a person are also to its permitted
successors and assigns.
SECTION 8.05 Counterparts. This Agreement may be executed in one or
more counterparts (including by
-80-
telecopy), all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
SECTION 8.06 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (a) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement, except for the
Confidentiality Agreement and any agreement entered into by the parties on the
date of this Agreement, and (b) except for the provisions of Section 5.05, is
not intended to confer upon any person other than the parties hereto any
rights or remedies.
SECTION 8.07 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 8.08 Assignment. Neither this greement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.09 Consent to Jurisdiction. Each of the parties hereto
irrevocably and unconditionally submits to the exclusive jurisdiction of (a)
any Delaware State court and (b) any Federal court of the United States of
America sitting in the State of Delaware, for the purposes of any suit, action
or other proceeding arising out of this Agreement or any transaction
contemplated hereby (and each agrees that no such action, suit or proceeding
relating to this Agreement shall be brought by it or any of its
-81-
affiliates except in such courts). Each of the parties hereto further agrees
that, to the fullest extent permitted by applicable law, service of any
process, summons, notice or document by U.S. registered mail to such person's
respective address set forth above shall be effective service of process for
any action, suit or proceeding in Delaware with respect to any matters to
which it has submitted to jurisdiction as set forth above in the immediately
preceding sentence. Each of the parties hereto irrevocably and unconditionally
waives (and agrees not to plead or claim) any objection to the laying of venue
of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (a) any Delaware State court or (b) any
Federal court of the United State of America sitting in the State of Delaware,
or that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
SECTION 8.10 Waiver of Jury Trial. Each party hereto hereby waives,
to the fullest extent permitted by applicable law, any right it may have to a
trial by jury in respect of any suit, action or other proceeding directly or
indirectly arising out of, under or in connection with this Agreement. Each
party hereto (a) certifies that no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such party would
not, in the event of any action, suit or proceeding, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other parties hereto
have been induced to enter into this Agreement, by, among other things, the
mutual waiver and certifications in this Section 8.10.
SECTION 8.11 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Delaware or in any Delaware state court,
this being in addition to any other remedy to which they are entitled at law
or in equity.
-82-
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
INTERNATIONAL BUSINESS
MACHINES CORPORATION,
by /s/ Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President,
Corporate Development
DUKE ACQUISITION CORP.,
by /s/ Xxxxxxx X. Xxxxx
---------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
CROSSWORLDS SOFTWARE, INC.,
by /s/ Xxxxxx X. Xxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and CEO
-83-
