1
EXHIBIT 1
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WEBMETHODS, INC.
WOLF ACQUISITION, INC. AND
ACTIVE SOFTWARE, INC.
DATED AS OF MAY 20, 2000
================================================================================
2
TABLE OF CONTENTS
-----------------
Page No.
--------
ARTICLE I THE MERGER.................................................................................................2
1.1 The Merger.................................................................................................2
----------
1.2 Effective Time.............................................................................................2
--------------
1.3 Effect of the Merger.......................................................................................2
--------------------
1.4 Certification of Incorporation; Bylaws.....................................................................2
--------------------------------------
1.5 Directors and Officers.....................................................................................2
----------------------
1.6 Conversion of Company Common Stock, Etc....................................................................3
---------------------------------------
1.7 Stock Options and Warrants.................................................................................3
--------------------------
1.8 Adjustments to Exchange Ratio..............................................................................4
-----------------------------
1.9 Fractional Shares..........................................................................................4
-----------------
1.10 Surrender of Certificates..................................................................................4
-------------------------
1.11 Further Ownership Rights in Company Common Stock...........................................................6
------------------------------------------------
1.12 Closing....................................................................................................7
-------
1.13 Lost, Stolen or Destroyed Certificates.....................................................................7
--------------------------------------
1.14 Tax Consequences...........................................................................................7
----------------
1.15 Accounting Consequences....................................................................................7
-----------------------
1.16 Further Assurances.........................................................................................7
------------------
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................................................8
2.1 Organization and Qualification; Subsidiaries...............................................................8
--------------------------------------------
2.2 Certificate of Incorporation and Bylaws....................................................................9
---------------------------------------
2.3 Capitalization.............................................................................................9
--------------
2.4 Authority; Enforceability.................................................................................11
-------------------------
2.5 Required Vote.............................................................................................11
-------------
2.6 No Conflict; Required Filings and Consents................................................................11
------------------------------------------
2.7 Material Agreements.......................................................................................12
-------------------
2.8 Compliance................................................................................................14
----------
2.9 SEC Filings; Financial Statements.........................................................................14
---------------------------------
2.10 Absence of Certain Changes or Events......................................................................15
------------------------------------
2.11 No Undisclosed Liabilities................................................................................15
--------------------------
2.12 Litigation................................................................................................16
----------
2.13 Employee Benefit Plans....................................................................................16
----------------------
2.14 Employment and Labor Matters..............................................................................18
----------------------------
2.15 Registration Statement; Proxy Statement/Prospectus........................................................19
--------------------------------------------------
2.16 Absence of Restrictions on Business Activities............................................................20
----------------------------------------------
2.17 Title to Assets; Leases...................................................................................20
-----------------------
2.18 Taxes.....................................................................................................21
-----
2.19 Environmental Matters.....................................................................................22
---------------------
2.20 Intellectual Property.....................................................................................24
---------------------
2.21 Insurance.................................................................................................28
---------
2.22 No Restrictions on the Merger; Takeover Statutes..........................................................28
------------------------------------------------
2.23 Pooling; Tax Matters......................................................................................28
--------------------
3
2.24 Brokers...................................................................................................29
-------
2.25 Certain Business Practices................................................................................29
--------------------------
2.26 Interested Party Transactions.............................................................................29
-----------------------------
2.27 Opinion of Financial Advisor..............................................................................30
----------------------------
2.28 Disclosure................................................................................................30
----------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...................................................30
3.1 Organization and Qualification............................................................................30
------------------------------
3.2 Capitalization............................................................................................31
--------------
3.3 Authority; Enforceability.................................................................................32
-------------------------
3.4 Required Vote.............................................................................................33
-------------
3.5 No Conflict; Required Filings and Consents................................................................33
------------------------------------------
3.6 Material Agreements.......................................................................................34
-------------------
3.7 Compliance................................................................................................34
----------
3.8 SEC Filings; Financial Statements.........................................................................35
---------------------------------
3.9 Absence of Certain Changes or Events......................................................................36
------------------------------------
3.10 Absence of Litigation.....................................................................................36
---------------------
3.11 Registration Statement; Proxy Statement/Prospectus........................................................36
--------------------------------------------------
3.12 Taxes.....................................................................................................37
-----
3.13 Environmental Matters.....................................................................................38
---------------------
3.14 Pooling; Tax Matters......................................................................................39
--------------------
3.15 Brokers...................................................................................................39
-------
3.16 Opinion of Financial Advisor..............................................................................39
----------------------------
3.17 Absence of Restrictions on Business Activities............................................................39
----------------------------------------------
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER....................................................................40
4.1 Conduct of Business by the Company Pending the Merger.....................................................40
-----------------------------------------------------
4.2 Solicitation of Other Proposals...........................................................................43
-------------------------------
4.3 Conduct of Business by Parent Pending the Merger..........................................................44
---------- -------------------------------------
ARTICLE V ADDITIONAL AGREEMENTS.....................................................................................45
5.1 Registration Statement; Proxy Statement/Prospectus........................................................45
--------------------------------------------------
5.2 Company Stockholders' Meeting.............................................................................46
-----------------------------
5.3 Parent Stockholders Meeting...............................................................................48
---------------------------
5.4 Access to Information; Confidentiality....................................................................49
--------------------------------------
5.5 Reasonable Best Efforts; Further Assurances...............................................................50
-------------------------------------------
5.6 Stock Options and Stock Plan; Options.....................................................................51
-------------------------------------
5.7 Form S-8..................................................................................................52
--------
5.8 Employee Benefits.........................................................................................52
-----------------
5.9 Parent Option Pool........................................................................................54
------------------
5.10 Parent Board of Directors.................................................................................54
-------------------------
5.11 Pooling; Reorganization...................................................................................54
-----------------------
5.12 Notification of Certain Matters...........................................................................55
-------------------------------
5.13 Listing on the NASDAQ.....................................................................................56
---------------------
5.14 Public Announcements......................................................................................56
--------------------
5.15 Takeover Laws.............................................................................................56
-------------
-ii-
4
5.16 Accountant's Letters......................................................................................56
--------------------
5.17 Indemnification; Directors and Officer Insurance.........................................................57
------------------------------------------------
5.18 Company Stockholders' Agreement...........................................................................57
-------------------------------
5.19 Strategic Relationship Agreement..........................................................................58
--------------------------------
ARTICLE VI CONDITIONS OF MERGER......................................................................................58
6.1 Conditions to Obligation of Each Party to Effect the Merger...............................................58
-----------------------------------------------------------
6.2 Additional Conditions to Obligations of Parent and Merger Sub.............................................59
-------------------------------------------------------------
6.3 Additional Conditions to Obligations of the Company.......................................................60
---------------------------------------------------
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.........................................................................61
7.1 Termination...............................................................................................61
-----------
7.2 Effect of Termination.....................................................................................63
---------------------
7.3 Fees and Expenses.........................................................................................63
-----------------
7.4 Amendment.................................................................................................64
---------
7.5 Waiver....................................................................................................64
------
ARTICLE VIII GENERAL PROVISIONS........................................................................................65
8.1 Survival of Representations and Warranties................................................................65
------------------------------------------
8.2 Notices...................................................................................................65
-------
8.3 Disclosure Schedules......................................................................................66
--------------------
8.4 Certain Definitions.......................................................................................66
-------------------
8.5 Interpretation............................................................................................69
--------------
8.6 Severability..............................................................................................69
------------
8.7 Entire Agreement..........................................................................................69
----------------
8.8 Assignment................................................................................................69
----------
8.9 Parties in Interest.......................................................................................70
-------------------
8.10 Failure or Indulgence Not Waiver; Remedies Cumulative.....................................................70
-----------------------------------------------------
8.11 Governing Law; Enforcement................................................................................70
--------------------------
8.12 Counterparts..............................................................................................70
------------
EXHIBITS
--------
Exhibit A Form of Company Stockholders' Agreement
Exhibit B Form of Parent Voting Agreement
Exhibit C Form of Strategic Relationship Agreement
Exhibit D Form of the Surviving Company's Certificate of Incorporation
Exhibit E Form of Company Affiliate Pooling Agreement
Exhibit F Form of Parent Affiliate Pooling Agreement
-iii-
5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 20, 2000 (the
"Agreement"), among WEBMETHODS, INC., a Delaware corporation ("Parent"), WOLF
ACQUISITION, INC., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and ACTIVE SOFTWARE, INC., a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company have each approved the merger (the "Merger") of Merger Sub with and into
the Company, in accordance with the General Corporation Law of the State of
Delaware (the "DGCL") and subject to the conditions set forth herein, which
Merger will result in, among other things, the Company becoming a wholly owned
subsidiary of Parent and have approved and declared this Agreement advisable and
in the best interests of their respective stockholders;
WHEREAS, as a condition to the willingness of, and an inducement to,
Parent and Merger Sub to enter into this Agreement, contemporaneously with the
execution and delivery of this Agreement, certain holders of Company Common
Stock (as defined herein), are entering into a Stockholders' Agreement and
Irrevocable Proxy dated as of the date hereof (the "Company Stockholders'
Agreement") in the form of Exhibit A attached hereto, providing for certain
actions relating to the transactions contemplated by this Agreement;
WHEREAS, as a condition to the willingness of, and an inducement to,
Company to enter into this Agreement, contemporaneously with the execution and
delivery of this Agreement, certain holders of Parent Common Stock (as defined
herein), are entering into a Voting Agreement dated as of the date hereof (the
"Parent Voting Agreement") in the form of Exhibit B attached hereto, providing
for certain actions relating to the transactions contemplated by this Agreement;
WHEREAS, as a condition to the willingness of, and an inducement to,
Parent and the Company to enter into this Agreement, contemporaneously with the
execution and delivery of this Agreement, the Company and Parent are entering
into a Strategic Relationship Agreement dated as of the date hereof (the
"Strategic Relationship Agreement") in the form of Exhibit C attached hereto in
order to initiate a strategic relationship between the Company and Parent in the
event that the Merger could be delayed or not consummated;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger
shall qualify for "pooling of interests" treatment.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Merger Sub and the Company hereby
agree as follows:
6
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the DGCL,
(a) Merger Sub shall merge with and into the Company, and the separate corporate
existence of Merger Sub shall thereupon cease, (b) the Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by Delaware law as a
wholly owned subsidiary of Parent and (c) the separate corporate existence of
the Company with all of its assets, property rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger, except as set
forth in this Article I.
1.2 Effective Time. As promptly as practicable after the
satisfaction or, to the extent permitted hereunder, waiver of the conditions set
forth in Article VI, the parties hereto shall cause the Merger to be consummated
by (i) executing and filing on the Closing Date (as hereinafter defined) a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as required by and executed in accordance
with the relevant provisions of the DGCL and (ii) making such other filings and
taking such other actions as may be required by Law to make the Merger effective
hereinafter. The Merger shall become effective at such date and time as the
Certificate of Merger is duly filed with the Delaware Secretary of State or at
such later date and time as may be specified in the Certificate of Merger by
mutual agreement of Parent, Merger Sub and the Company (the date and time the
merger becomes effective being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and in the applicable provisions
of the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the assets, property, rights, privileges,
immunities, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certification of Incorporation; Bylaws. At the Effective Time
and without any further action on the part of the parties hereto, (a) the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read in its entirety as set forth in Exhibit D attached hereto until thereafter
amended as provided by the DGCL and (b) the Bylaws of Merger Sub shall be the
Bylaws of the Surviving Corporation until thereafter amended as provided by the
DGCL.
1.5 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and the Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws. The officers of the Company immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation.
-2-
7
1.6 Conversion of Company Common Stock, Etc. At the Effective Time,
by virtue of the Merger and without any action on the part of the parties hereto
or the holders of the following securities:
(a) Subject to the provisions of this Article I, each share
of Common Stock, par value $.001 per share, of the Company (the "Company Common
Stock") issued and outstanding immediately prior to the Effective Time (other
than any shares of the Company Common Stock to be canceled pursuant to Section
1.6(c) and subject to Section 1.8) will be converted automatically into the
right to receive 0.527 fully paid and nonassessable shares (the "Exchange
Ratio") of the Common Stock, par value $0.01 per share (the "Parent Common
Stock"), of Parent (the "Merger Consideration").
(b) Each share of the Company Common Stock issued and
outstanding immediately prior to the Effective Time shall automatically cease to
be outstanding and shall be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration and any cash in lieu of fractional shares of Parent Common
Stock to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 1.10 hereof, without interest.
(c) Each share of Company Common Stock, if any, owned by
Parent or Merger Sub, in each case immediately prior to the Effective Time,
shall be canceled and extinguished without any conversion thereof and no payment
or distribution shall be made with respect thereto.
(d) Each share of Common Stock, par value $0.01 per share, of
Merger Sub (the "Merger Sub Common Stock") issued and outstanding immediately
prior to the Effective Time shall be automatically converted into one validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation and shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation. Each stock certificate of Merger Sub
evidencing ownership of any shares of Merger Sub Common Stock shall continue to
evidence ownership of such shares of capital stock of the Surviving Corporation.
1.7 Stock Options and Warrants.
(a) The Company and Parent shall take all requisite action
such that, at the Effective Time, all options to purchase Company Common Stock
then outstanding under the Company's 1996 Stock Plan (the "1996 Plan"), the
Company's 1996A Stock Plan (the "1996A Plan"), the Company's 1999 Stock Plan
(the "1999 Stock Plan"), the TransLink Stock Option Plan (the "TransLink Plan"),
the Alier 1996 Stock Option Plan (the "Alier 1996 Plan"), the Alier 1997 Stock
Option Plan (the "Alier 1997 Plan"), and the Company's 1999 Director's Stock
Option Plan (the "1999 Director's Plan", together with the 1996 Plan, 1996A
Plan, the 1999 Plan, the TransLink Plan, the Alier 1996 Plan and the Alier 1997
Plan, the "Option Plans") by virtue of the Merger and, shall be assumed by
Parent in accordance with Section 5.6, without any action on the part of the
holder thereof.
-3-
8
(b) The Company and its Board of Directors shall promptly
take all actions necessary to ensure that following the Effective Time no holder
of any options or other rights pursuant to, nor any participant in or party to,
the Option Plans or any other Employee Plan (as defined herein) or other plan,
program, arrangement, agreement or other commitment providing for the issuance
or grant of any interest in respect of the capital stock of the Company or any
Subsidiary of the Company will have any rights thereunder to acquire equity
securities, or any right to payment in respect of the equity securities, of
Parent, the Company, or the Surviving Corporation or any of their Subsidiaries,
except as provided herein.
1.8 Adjustments to Exchange Ratio. Without limiting any other
provision of this Agreement, the Exchange Ratio shall be adjusted to reflect
fully the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into Parent Common Stock
or Company Common Stock), reorganization, recapitalization or other like change
with respect to Parent Common Stock or Company Common Stock occurring after the
date hereof and prior to the Effective Time.
1.9 Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued in connection with the
Merger, and such fractional interests will not entitle the owner thereof to any
rights of a stockholder of Parent. In lieu of the issuance of fractional shares,
each holder of shares of Company Common Stock exchanged pursuant to Section 1.6
who would otherwise be entitled to a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock to have been
otherwise received by such holder) shall receive from Parent an amount of cash
(rounded down to the nearest whole cent and without interest) equal to the
product of such fractional part of a share of Parent Common Stock multiplied by
the average closing price per share of Parent Common Stock (rounded to the
nearest cent) on the Nasdaq National Market ("NASDAQ") (as reported in The Wall
Street Journal, or, if not reported therein, any other authoritative source
selected by Parent) for the 20 trading days ending on the third trading day
immediately prior to (and excluding the date of) the Effective Time.
1.10 Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company reasonably acceptable to the Company to act as
the Exchange Agent in the Merger.
(b) Parent to Provide Common Stock. When and as needed,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I, through such reasonable procedures as Parent may adopt,
sufficient shares of Parent Common Stock to be exchanged pursuant to Section
1.6.
(c) Exchange Procedures. Promptly after the Effective Time,
the Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock to be
exchanged pursuant to Section 1.6, a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have
-4-
9
such other provisions as Parent may reasonably specify) and instructions for use
in effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of a Certificate to
the Exchange Agent, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock and payment in
lieu of fractional shares which such holder has the right to receive pursuant to
Sections 1.6 and 1.9, after giving effect to any required Tax (as defined
herein) withholdings, and the Certificate so surrendered shall forthwith be
canceled. At any time following the first anniversary of the Effective Time, all
or any number of shares of Parent Common Stock (and any or all cash payable in
lieu of fractional shares of Parent Common Stock) deposited with or made
available to the Exchange Agent pursuant to Section 1.10(b), which remain
undistributed to the holders of the Certificates representing shares of Company
Common Stock, shall be delivered to Parent upon demand, and thereafter such
holders of unexchanged shares of Company Common Stock shall be entitled to look
only to Parent (subject to abandoned property, escheat or other similar Laws)
only as general creditors thereof with respect to the shares of Parent Common
Stock for payment upon due surrender of their Certificates.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to shares of Parent Common Stock with a record date after the Effective
Time will be paid to the holder of any unsurrendered Certificate with respect to
the whole shares of Parent Common Stock represented thereby and no cash payment
in lieu of fractional shares of Parent Common Stock shall be paid to any such
holder pursuant to Section 1.9 until the holder of record of such Certificate
shall surrender such Certificate pursuant to Section 1.10(c). Subject to the
effect of applicable Laws, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of Parent Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of any cash payable in lieu of fractional
shares of Parent Common Stock to which the holder is entitled pursuant to
Section 1.9 and the amount of dividends or other distributions with a record
date after the Effective Time and payable between the Effective Time and the
time of such surrender with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than the name in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that (i) the Certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and accompanied
by all other documents required to evidence and effect such transfer and (ii)
either (x) that the Person requesting such exchange will have paid any transfer
or other Taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in a name other than the name of the registered holder of
the Certificate surrendered or (y) established to the satisfaction of Parent, or
any agent designated by Parent, that such Tax has been paid or is not
applicable.
(f) No Liability. Notwithstanding anything to the contrary in
this Agreement, none of the Exchange Agent, Parent, the Merger Sub or the
Surviving Corporation shall be liable
-5-
10
to a holder of a Certificate for any Parent Common Stock (and any cash payable
for fractional shares of Parent Common Stock or any other amount due, if any)
that was properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
(g) Withholding of Tax. Parent or the Exchange Agent will be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Common Stock such amounts as
Parent (or any Affiliate thereof) or the Exchange Agent shall determine in good
faith they are required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of federal, state, local or
foreign Tax Law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts will be treated for all purposes of this
Agreement as having been paid to the holder of the Company Common Stock in
respect of whom such deduction and withholding were made by Parent.
(h) Affiliates. Notwithstanding anything to the contrary
herein, to the fullest extent permitted by Law, no certificates representing
shares of Parent Common Stock or cash shall be delivered to a Person who may be
deemed an "affiliate" of the Company in accordance with Section 5.8 hereof for
purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"), or for purposes of qualifying the Merger for pooling of
interests accounting treatment under Opinion No. 16 (Business Combinations) of
the Accounting Principles Board of the American Institute of Certified Public
Accountants, the Financial Accounting Standards Board ("APB 16") and applicable
rules and regulations ("Regulations") of the Securities and Exchange Commission
(the "SEC") until such Person has executed and delivered a Company Affiliate
Pooling Agreement (as defined in Section 5.11) to Parent.
(i) Unvested Shares. If any shares of Company Common Stock
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with the
Company, then the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock shall also be unvested to the same extent and in
accordance with such agreement and subject to the same repurchase option, risk
of forfeiture or other condition, and the certificates representing such shares
of Parent Common Stock may accordingly be marked with appropriate legends. The
Company shall take all action that may be necessary to ensure that, from and
after the Effective Time, Parent is entitled to exercise any such repurchase
option or other right set forth in any such restricted stock purchase agreement
or other agreement.
1.11 Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of Company Common
Stock in accordance with the terms of this Article I (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such Company Common Stock. At the Effective Time, the stock
transfer books of the Company shall be closed, and thereafter there shall be no
further registration of transfers of shares of Company Common Stock on the
records of the Surviving Corporation. From and after the Effective Time, the
holders of Certificates evidencing ownership of shares of Company Common Stock
outstanding shall cease to have any rights with respect to such shares of
Company Common Stock except as otherwise provided for herein. If, after the
Effective Time, Certificates are presented to the
-6-
11
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.12 Closing. Unless this Agreement shall have been terminated and
the transactions contemplated by this Agreement abandoned pursuant to the
provisions of Article VII, and subject to the provisions of Article VI, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. (Eastern
time) on a date (the "Closing Date") to be mutually agreed upon by the parties,
which date shall be not later than the third Business Day after all the
conditions set forth in Article VI shall have been satisfied (or waived in
accordance with Section 7.5, to the extent the same may be waived), unless
another time and/or date is agreed by the parties hereto. The Closing shall take
place at the offices of Xxxx Xxxxxxx, 0000 Xxxxxxxxxxxxx Xxxxx, XxXxxx, Xxxxxxxx
00000 or such other place as the parties hereto otherwise agree.
1.13 Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing Company Common Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Parent Common Stock and cash for fractional
shares, if any, as may be required pursuant to Section 1.9; provided, however,
that Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.14 Tax Consequences. For federal income tax purposes, the parties
intend that the Merger be treated as a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code, and that this Agreement
shall be, and is hereby, adopted as a plan of reorganization for purposes of
Section 368 of the Code. Unless otherwise required by Law, the parties shall not
take a position on any Tax Return (as defined herein) or in any proceeding
relating to the Tax consequences of the Merger inconsistent with this Section
1.14.
1.15 Accounting Consequences. For financial reporting purposes, the
Merger is intended to be accounted for as a "pooling-of-interests" transaction
under APB 16 and the Regulations of the SEC.
1.16 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record of otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either the
Company or Merger Sub or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Merger Sub, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company or
Merger Sub, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its rights, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of the Company
or Merger Sub, as applicable, and otherwise to carry out the purposes of this
Agreement.
-7-
12
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to the exceptions specifically set forth in writing in the disclosure
schedule delivered by the Company to Parent concurrently herewith (the "Company
Disclosure Schedule") (each Section of which qualifies the correspondingly
numbered representation, warranty or covenant to the extent specified therein),
as follows:
2.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized, validly
existing and in good standing under Delaware law. The Company has all the
requisite corporate power and authority, and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, waivers,
qualifications, certificates, Orders (as defined herein) and approvals
(collectively, "Approvals") necessary to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so qualified, existing and in good standing or to have such power,
authority and Approvals could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. The Company is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except where the failure to be so qualified could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Section 2.1(b) of the Company Disclosure Schedule sets
forth, as of the date hereof, a true and complete list of all of the Company's
directly and indirectly owned Subsidiaries, together with the jurisdiction of
incorporation or organization of each Subsidiary. The Company owns one hundred
percent (100%) of the outstanding capital stock of each of its Subsidiaries.
(c) Each Subsidiary of the Company is a legal entity, duly
organized, validly existing and in good standing under the Laws of its
respective jurisdiction of incorporation or organization and has all the
requisite power and authority, and is in possession of all Approvals necessary
to own, lease and operate its properties and to carry on its business as it is
now being conducted, except where the failure to possess such Approvals could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except where the
failure to be so qualified could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(d) Section 2.1(d) of the Company Disclosure Schedule sets
forth a true and complete list of each equity investment or similar investment
interest made by the Company or any of its Subsidiaries in any Person other than
the Company's Subsidiaries ("Other Interests").
-8-
13
Except as described in Section 2.1(d) of the Company Disclosure Schedule, the
Other Interests are owned by the Company, by one or more of the Company's
Subsidiaries, or by the Company and one or more of its Subsidiaries, in each
case free and clear of all Liens.
2.2 Certificate of Incorporation and Bylaws. The Company has
heretofore furnished to Parent a true, accurate and complete copy of each of its
and each of its Subsidiaries' Certificate of Incorporation and Bylaws or
equivalent organizational documents, as amended or restated to the date hereof.
Such Certificate of Incorporation and Bylaws and equivalent organizational
documents of the Company and each of its Subsidiaries are in full force and
effect, and no other organizational documents are applicable to or binding upon
the Company or its Subsidiaries.
2.3 Capitalization.
(a) The authorized capital of the Company consists of
105,000,000 shares, divided into 100,000,000 shares of Company Common Stock and
5,000,000 shares of preferred stock, par value $.001 per share (the "Company
Preferred Stock"). As of May 16, 2000, (i) 25,937,281 shares of Company Common
Stock were issued and outstanding; (ii) no shares of Company Preferred Stock
were issued or outstanding; (iii) no shares of Company Common Stock were held in
the treasury of the Company; (iv) no shares of Company Common Stock were held by
any Subsidiary of the Company; (v) 4,177,869 shares of Company Common Stock were
duly reserved for future issuance pursuant to employee stock options granted
pursuant to the Option Plans (the "Outstanding Employee Options"); (vi) 641,515
shares of Company Common Stock were duly reserved for future issuance pursuant
to the Company's 1999 Employee Stock Purchase Plan (the "Purchase Plan"); and
(vii) 36,764 shares of Company Common Stock were reserved for issuance upon
exercise of the warrant to purchase the Company Common Stock dated October 28,
1998 held by Intel Corporation. None of the outstanding shares of Company Common
Stock are subject to, nor were they issued in violation of any, purchase option,
call option, right of first refusal, preemptive right, subscription right or any
similar right created by the Company or to which the Company is or was a party,
nor does the Company have knowledge of any such right. Except as set forth above
and in Section 2.3(a) of the Company Disclosure Schedule, as of the date hereof,
no shares of voting or non-voting capital stock, other equity interests, or
other voting securities of the Company were issued, reserved for issuance or
outstanding. Except as described in Section 2.3(a) of the Company Disclosure
Schedule, all outstanding options to purchase Company Common Stock were granted
under Company's Option Plans. In connection with the execution of this
Agreement, the Company has provided to Parent a complete list of all outstanding
options and warrants to purchase Company Common Stock as of the date hereof, the
record holder thereof and the exercise prices thereof. All outstanding shares of
capital stock of the Company are, and all shares which may be issued upon the
exercise of stock options and warrants will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to any kind of
preemptive (or similar) rights. There are no bonds, debentures, notes or other
indebtedness of the Company with voting rights (or convertible into, or
exchangeable for, securities with voting rights) on any matters on which
stockholders of the Company may vote.
(b) Section 2.3(b) of the Company Disclosure Schedule sets
forth the number of authorized and outstanding shares of capital stock, and
ownership thereof, of each of the Company's Subsidiaries. All of the outstanding
shares of capital stock of each of the Company's
-9-
14
Subsidiaries have been duly authorized, validly issued, fully paid and
nonassessable, are not subject to, and were not issued in violation of, any
preemptive (or similar) rights, and are owned, of record and beneficially, by
the Company or one of its direct or indirect Subsidiaries, free and clear of all
Liens whatsoever. Except as set forth in Section 2.3(b) of the Company
Disclosure Schedule, there are no restrictions of any kind which prevent the
payment of dividends by any of the Company's Subsidiaries, and neither the
Company nor any of its Subsidiaries is subject to any obligation or requirement
to provide funds for or to make any investment (in the form of a loan or capital
contribution) to or in any Person.
(c) Except as described in Section 2.3(c) of the Company
Disclosure Schedule, as of the date hereof, there are no outstanding securities,
options, warrants, calls, rights, convertible or exchangeable securities,
commitments, agreements, arrangements or undertakings of any kind (contingent or
otherwise) to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or of any of
its Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock (or options or warrants
to acquire any such shares) of the Company or its Subsidiaries. Except as
described in Section 2.3(c) of the Company Disclosure Schedule, as of the date
hereof, there are no stock-appreciation rights, stock-based performance units,
"phantom" stock rights or other agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any Person is or may be
entitled to receive any payment or other value based on the revenues, earnings
or financial performance, stock price performance or other attribute of the
Company or any of its Subsidiaries or assets or calculated in accordance
therewith (other than ordinary course payments or commissions to sales
representatives of the Company based upon revenues generated by them without
augmentation as a result of the transactions contemplated hereby) (collectively,
"Stock-Based Rights") or to cause the Company or any of its Subsidiaries to file
a registration statement under the Securities Act, or which otherwise relate to
the registration of any securities of the Company. Except as set forth in
Section 2.3(c) of the Company Disclosure Schedule or the Company Stockholders'
Agreement, there are no voting trusts, proxies or other agreements, commitments
or understandings of any character to which the Company or any of its
Subsidiaries is a party or by which any of them is bound or, to the Knowledge
(as defined herein) of the Company, any of the Company's stockholders is a party
or by which any of them is bound, in each case, with respect to the issuance,
holding, acquisition, voting or disposition of any shares of capital stock of
the Company or any of its Subsidiaries.
2.4 Authority; Enforceability. The Company has all necessary
corporate power and authority to execute and deliver this Agreement, each
Related Agreement (as defined herein) to which it is a party and each instrument
required to be executed and delivered by it at the Closing, and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Company of
this Agreement and each Related Agreement to which it is a party, the
performance of its obligations hereunder and thereunder, and the consummation by
the Company of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all corporate action
-10-
15
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or any Related Agreement to which it is a party or to
consummate the transactions so contemplated (other than, with respect to the
Merger, the adoption of this Agreement by the affirmative vote of the holders of
a majority of the outstanding Company Common Stock in accordance with Delaware
law and the Company's Certificate of Incorporation and Bylaws) herein or
therein. Each of this Agreement and Related Agreements to which it is a party
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery thereof by Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
2.5 Required Vote. As of the date hereof and, except as permitted
by Section 5.2(c), as of the Effective Time, the Board of Directors of the
Company has, at a meeting duly called and held, (i) unanimously approved and
declared advisable this Agreement and each Related Agreement to which the
Company is a party, (ii) determined that the transactions contemplated hereby
and thereby are advisable, fair to and in the best interests of the holders of
Company Common Stock, (iii) resolved to recommend adoption of this Agreement by
the stockholders of the Company and (iv) directed that this Agreement be
submitted to the stockholders of the Company for their adoption. The Board of
Directors has not withdrawn, rescinded or modified and will not, except in
accordance with Section 4.2 hereof, withdraw, rescind or modify such approvals,
determination, and resolutions to recommend. The affirmative vote of a majority
of all outstanding shares of Company Common Stock for the adoption of this
Agreement is the only vote of the holders of any class or series of capital
stock of the Company necessary to adopt this Agreement or to approve or
authorize the Merger, the Related Agreements and the other transactions
contemplated hereby and thereby. As of May 19, 2000, the holders of the Company
Common Stock that are parties to the Company Stockholders' Agreement own
(beneficially and of record) and have the right to vote, in the aggregate,
approximately 5,991,884 shares of Company Common Stock.
2.6 No Conflict; Required Filings and Consents.
(a) The execution and delivery by the Company of this
Agreement, the Related Agreements to which it is a party or any instrument
required by this Agreement to be executed and delivered by the Company or any of
its Subsidiaries at the Closing do not, and the performance of this Agreement,
the Related Agreements to which it is a party or any instrument required by this
Agreement to be executed and delivered by the Company or any of its Subsidiaries
at the Closing, shall not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws or equivalent organizational documents of the Company or
any of its Subsidiaries, state securities laws or blue sky laws (ii) conflict
with or violate any Law or Order in each case applicable to the Company or any
of its Subsidiaries or by which its or any of their respective properties or
assets is bound or affected, or (iii) result in any breach or violation of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties or
assets of the Company or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, Contract, permit, franchise or other instrument or
obligation to which the Company or any of its
-11-
16
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
its or any of their respective properties or assets is bound or affected, except
(A) as set forth in Section 2.6(a) of the Company Disclosure Schedule or (B) in
the case of clause (ii) or (iii) above, for any such conflicts, breaches,
violations, defaults or other occurrences that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The execution and delivery by the Company of this
Agreement, the Related Agreements to which it is a party or any instrument
required by this Agreement to be executed and delivered by the Company or any of
its Subsidiaries at the Closing do not, and the performance of this Agreement,
any Related Agreement to which it is a party and any instrument required by this
Agreement to be executed and delivered by the Company or any of its Subsidiaries
at the Closing, shall not, require the Company or any of its Subsidiaries to,
except as set forth in Section 2.6(b) of the Company Disclosure Schedule, obtain
any Approval of, observe any waiting period imposed by, or make any filing with
or notification to, any Governmental Authority, domestic or foreign, except for
(A) compliance with applicable requirements of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), state
securities laws ("Blue Sky Laws"), the pre-Merger notification requirements of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or Foreign Competition Laws, (B) the filing of the Certificate of Merger
in accordance with Delaware law or (C) where the failure to obtain such
Approvals, or to make such filings or notifications, could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
2.7 Material Agreements.
(a) Section 2.7(a) of the Company Disclosure Schedule sets
forth a true and complete list, and if oral, an accurate and complete summary,
of all Contracts material to the business, financial condition, prospects or
commercial relationships of the Company and its Subsidiaries, taken as a whole,
to which the Company or any of its Subsidiaries is a party or by which any of
them or their properties or assets are bound as of the date hereof and the
following types of agreements (collectively, "Material Agreements"):
(i) employment Contracts with officers of the Company
and other Contracts with current or former officers, directors or stockholders
of the Company, and all severance, change in control (except pursuant to the
Option Plans) or similar Contracts with any current or former stockholders,
directors, officers, employees or agents of the Company that will result in any
obligation (absolute or contingent) of the Company or any of its Subsidiaries to
make any payment to any current or former stockholders, directors, officers,
employees or agents of the Company following either the consummation of the
transactions contemplated hereby, termination of employment (or the relevant
relationship), or both;
(ii) labor Contracts (if any);
(iii) Contracts involving annual revenues, expenditures
or liabilities in excess of $100,000 per annum or $250,000 in the aggregate
which are not cancelable (without material penalty, cost or other liability)
within 60 days;
-12-
17
(iv) promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments and Contracts providing for the
borrowing or lending of money, whether as borrower, lender or guarantor, in each
case, relating to indebtedness or obligations in excess of $100,000;
(v) Contracts containing a covenant limiting or
purporting to limit the freedom of the Company or any of its Subsidiaries to
engage in any line of business or compete with any Person or operate at any
location in the world;
(vi) joint venture or partnership agreements or joint
development, distribution or similar agreements pursuant to which any third
party is entitled or obligated to develop or distribute any products on behalf
of the Company or any of its Subsidiaries or pursuant to which the Company or
any of its Subsidiaries is entitled or obligated to develop or distribute any
products on behalf of any third party;
(vii) Contracts for the acquisition, directly or
indirectly (by merger or otherwise) of material assets (whether tangible or
intangible) or the capital stock of another Person;
(viii) Contracts involving the issuance or repurchase of
any capital stock of the Company or any of its Subsidiaries (including newly
formed Subsidiaries), other than, with respect to the issuance of Company Common
Stock, the options or warrants listed in Section 2.3(a) of the Company
Disclosure Schedule or agreements for the repurchase of Company Common Stock
upon the termination of status as an employee or consultant governed by a Stock
Option Plan;
(ix) Contracts under which the Company or any of its
Subsidiaries has granted or received exclusive rights;
(x) any interest rate swaps, caps, floors or option
agreements or any other interest rate risk management arrangement or foreign
exchange Contracts; and
(xi) Contracts for the license or supply of any
geographic or similar data to the Company or any of its Subsidiaries.
True and complete copies of all written Material Agreements have been delivered
or been made available to Parent by the Company. Section 2.7(a) of the Company
Disclosure Schedule sets forth a true and complete list of all Contracts that
would purport to bind Parent or any of its Affiliates (other than the Company or
its Subsidiaries) following the consummation of the Merger.
(b) Other than Material Agreements that have terminated or
expired in accordance with their terms, each Material Agreement is in full force
and effect, is a valid and binding obligation of the Company or such Subsidiary
and of each other party thereto and is enforceable, in accordance with its
terms, against the Company or such Subsidiary and against each other party
thereto, and such Material Agreements will continue to be valid, binding and
enforceable in accordance with their respective terms and in full force and
effect immediately following the consummation of the transactions contemplated
hereby, with no material alteration
-13-
18
or acceleration or increase in fees or liabilities. Neither the Company nor any
of its Subsidiaries is or is alleged to be and, to the best Knowledge of the
Company, no other party is or is alleged to be in default under, or in breach or
violation of, any Material Agreement and, to the best Knowledge of the Company,
no event has occurred which, with the giving of notice or passage of time or
both, would constitute such a default, breach or violation. The designation or
definition of Material Agreements for purposes of this Section 2.7 and the
disclosures made pursuant thereto shall not be construed or utilized to expand,
limit or define the terms "material" and "Material Adverse Effect" as otherwise
referenced and used in this Agreement.
2.8 Compliance. The Company and each of its Subsidiaries are in
compliance with, and are not in default or violation of, (i) the Certificate of
Incorporation and Bylaws of the Company or the equivalent organizational
documents of such Subsidiary, (ii) any Law or Order or by which any of their
respective assets or properties are bound or affected and (iii) the terms of all
notes, bonds, mortgages, indentures, Contracts, permits, franchises and other
instruments or obligations to which any of them are a party or by which any of
them or any of their respective assets or properties are bound or affected,
except, in the case of clauses (ii) and (iii), for any such failures of
compliance, defaults and violations which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
and its Subsidiaries are in compliance with the terms of all Approvals, except
where the failure to so comply could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Section 2.8 of the Company Disclosure Schedule or as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect,
neither the Company nor any of its Subsidiaries has received notice of any
revocation or modification of any Approval of any federal, state, local or
foreign Governmental Authority that is material to the Company or any of its
Subsidiaries.
2.9 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, schedules,
statements and documents required to be filed with the SEC since August 13, 1999
(collectively, as such forms, reports, schedules, statements and documents have
been amended since the time of their filing, the "Company SEC Reports") pursuant
to the federal securities Laws and the Regulations of the SEC promulgated
thereunder, and all Company SEC Reports have been filed in all material respects
on a timely basis. The Company SEC Reports were prepared in accordance, and
complied as of their respective filing dates in all material respects, with the
requirements of the Exchange Act and the Securities Act and the Regulations
promulgated thereunder and did not at the time they were filed (or if amended or
superseded by a filing prior to the date hereof, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of the Company's Subsidiaries has filed, or is
obligated to file, any forms, reports, schedules, statements or other documents
with the SEC.
(b) Each of the audited and unaudited consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports (i) complied in all material respects with applicable
accounting requirements and the published Regulations of the SEC with respect
thereto, (ii) were prepared in accordance with GAAP
-14-
19
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis throughout the periods involved (except as
may be expressly described in the notes thereto) and (iii) fairly present the
consolidated financial position of the Company and its Subsidiaries as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements included in the Company's Form 10-Q reports were or are subject to
normal and recurring year-end adjustments that have not been and are not
expected to be material to the Company.
2.10 Absence of Certain Changes or Events.
(a) Except as described in Section 2.10(a) of the Company
Disclosure Schedule, since December 31, 1999, the Company and its Subsidiaries
have conducted their, businesses only in the ordinary and usual course and in a
manner consistent with past practice, and, since such date, there has not been
any change, development, circumstance, condition, event, occurrence, damage,
destruction or loss that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Except as described in Section 2.10(b) of the Company
Disclosure Schedule, during the period from December 31, 1999 to the date
hereof, (i) there has not been any change by the Company in its accounting
methods, principles or practices, any revaluation by the Company of any of its
assets, including, writing down the value of inventory or writing off notes or
accounts receivable, and (ii) there has not been any action or event, and
neither the Company nor any of its Subsidiaries has agreed in writing or
otherwise to take any action, that would have required the consent of Parent
pursuant to Section 4.1 had such action or event occurred or been taken after
the date hereof and prior to the Effective Time.
2.11 No Undisclosed Liabilities. Neither the Company nor any of
its Subsidiaries has any liabilities or obligations of any nature (whether
absolute, accrued, fixed, contingent or otherwise), and there is no existing
fact, condition or circumstance which could reasonably be expected to result in
such liabilities or obligations, except liabilities or obligations (i) disclosed
in the Company SEC Reports filed and publicly available prior to the date
hereof, (ii) disclosed in Section 2.11 of the Company Disclosure Schedule, or
(iii) incurred in the ordinary course of business since December 31, 1999 which
do not have, and could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
2.12 Litigation. Except as described in Section 2.12 of the Company
Disclosure Schedule or expressly described in the Company SEC Reports filed and
publicly available prior to the date hereof, there is no Litigation pending on
behalf of or against or, to the Knowledge of the Company, threatened against the
Company, any of its Subsidiaries, or any of their respective properties or
rights before or subsequent to any Court or Governmental Authority where the
amount in controversy could exceed $100,000; provided, that such amount in
controversy shall not be construed or utilized to expand, limit or define the
terms "material" or "Material Adverse Effect" as otherwise referenced and used
in this Agreement. Neither the Company nor any of its Subsidiaries is subject to
any outstanding Litigation or Order which, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect.
-15-
20
2.13 Employee Benefit Plans.
(a) Section 2.13(a) of the Company Disclosure Schedule
describes all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), including without
limitation multiemployer plans within the meaning of Section 3(37) of ERISA, and
all bonus, stock option, stock purchase, stock appreciation rights, incentive,
deferred compensation, retirement or supplemental retirement, severance, golden
parachute, vacation, cafeteria, dependent care, medical care, employee
assistance program, education or tuition assistance programs, insurance and
other similar fringe or employee benefit plans, programs or arrangements, and
any employment or executive compensation or severance agreements, written or
otherwise, which is or has been entered into, contributed to, established by,
participated in and/or maintained by the Company, any trade or business (whether
or not incorporated) which is a member of a controlled group or which is under
common control with the Company (an "ERISA Affiliate") within the meaning of
Section 414 of the Code, or any Subsidiary of the Company, whether or not such
plan is terminated, for the benefit of, or relating to, any present or former
employee or director of the Company or any of its ERISA Affiliates (together,
the "Employee Plans"). The Company has provided to Parent correct and complete
copies of (where applicable) (a) all plan documents, summary plan descriptions,
summaries of material modifications, amendments, and resolutions related to such
plans (b) the most recent determination letters received from the IRS, (c) the
three most recent Form 5500 Annual Reports, (d) the most recent audited
financial statement and actuarial valuation, and (e) all related agreements,
insurance Contracts and other Contracts which implement each such Employee Plan.
Except with regard to outstanding options, there are no restrictions on the
ability of the sponsor of each Employee Plan (which is currently the Company or
a Subsidiary of the Company) to amend or terminate any Employee Plan, and
sponsorship of each Employee Plan may be transferred by the Company or any of
its Subsidiaries to Parent or the Merger Sub, as the case may be.
(b) There has been no "prohibited transaction," as such term
is defined in Section 406 of ERISA and Section 4975 of the Code which is not
exempt under Section 406 of ERISA and Section 4975 of the Code, with respect to
any Employee Plan; there are no claims pending (other than routine claims for
benefits) or threatened against any Employee Plan or against the assets of any
Employee Plan, nor are there any current or threatened Liens on the assets of
any Employee Plan; all Employee Plans conform to, and in their operation and
administration are in all material respects in compliance with, the terms
thereof and requirements prescribed by any and all statutes (including ERISA and
the Code), orders, and governmental Regulations currently in effect with respect
thereto (including all applicable requirements for notification, reporting and
disclosure to participants of the Department of Labor, Internal Revenue Service
or Secretary of the Treasury); the Company and each of its Subsidiaries and
ERISA Affiliates have performed in all material respects all obligations
required to be performed by them under each Employee Plan and are not in default
under or violation of, and have no Knowledge of any default or violation by any
other Person with respect to, any of the Employee Plans; to the Knowledge of the
Company, each Employee Plan intended to qualify under Section 401(a) of the Code
is so qualified, and each corresponding trust is exempt under Section 501 of the
Code, and nothing has occurred or failed to occur which would cause the loss of
such qualification or exemption; all contributions required to be made to any
Employee Plan pursuant to Section 412 of the Code or otherwise, the terms of the
Employee Plan or any collective
-16-
21
bargaining agreement, have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Employee Plan for
the current plan years; the transactions contemplated herein will not directly
or indirectly result in an increase of benefits, acceleration of vesting or
acceleration of timing for payment of any benefit to any participant or
beneficiary, except as required under Code section 411(d)(3) or disclosed in
Section 2.13(b) of the Company Disclosure Schedule; each Employee Plan, if any,
that is a voluntary employee beneficiary association intended to be exempt under
Section 501(c)(9) of the Code has been submitted and approved or exempted by the
Internal Revenue Service and nothing has occurred or failed to occur which would
cause the loss of such exemption; and each Employee Plan, if any, which is
maintained outside of the United States has been operated in all material
respects in conformance with the applicable Laws relating to such plans in the
jurisdictions in which such Employee Plan is present or operates and, to the
extent relevant, the United States.
(c) No Employee Plan is an "employee pension benefit plan"
(within the meaning of Section 3(2) of ERISA) subject to Title IV of ERISA, and
neither the Company nor any Subsidiary or ERISA Affiliate has ever partially or
fully withdrawn from any such plan. No Employee Plan is a "multiemployer plan"
(within the meaning of Section 3(37) of ERISA) or "single-employer plan under
multiple controlled groups" as described in Section 4063 of ERISA, and neither
the Company nor any Subsidiary or ERISA Affiliate has ever contributed to or had
an obligation to contribute, or incurred any liability in respect of a
contribution, to any multiemployer plan.
(d) Each Employee Plan that is a "group health plan" (within
the meaning of Code Section 5000(b)(1)) has been operated in compliance in all
material respects with the group health plan continuation coverage requirements
of Section 4980B of the Code and Sections 601 through 608 of ERISA ("COBRA
Coverage"), Section 4980D of the Code and Sections 701 through 707 of ERISA,
Title XXII of the Public Health Service Act and the provisions of the Social
Security Act, to the extent such requirements are applicable. Except as
disclosed in Section 2.13(d) of the Company Disclosure Schedule, no Employee
Plan or written or oral agreement exists which obligates the Company to provide
health care coverage, medical, surgical, hospitalization, death or similar
benefits (whether or not insured) to any employee or former employee of the
Company or any of its Subsidiaries following such employee's or former
employee's termination of employment with the Company or any Subsidiary, other
than COBRA Coverage.
(e) In connection with the execution of this Agreement, the
Company has provided to Parent a true and complete list of each current or
former employee, officer, director and investor of the Company or any of its
Subsidiaries who holds, as of the date hereof, any option, warrant or other
right to purchase Company Common Stock or Company Preferred Stock, if any,
together with the number of shares of Company Common Stock or Company Preferred
Stock, if any, subject to such option, warrant or right, the date of grant or
issuance of such option, warrant or right, the extent to which such option,
warrant or right is vested and/or exercisable, the exercise price of such
option, warrant or right, whether such option is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code, and the
expiration date of each such option, warrant and right. Section 2.13(e) of the
Company Disclosure Schedule sets forth the total number of such options,
warrants and rights. True and complete copies of each agreement (including all
amendments and modifications thereto)
-17-
22
between the Company and each holder of such options, warrants and rights
relating to the same have been furnished or made available to Parent.
(f) Except as set forth in Schedule 2.13(f) of the Company
Disclosure Schedule, (i) no event has occurred and no condition exists that
would subject the Company or any of its Subsidiaries, either directly or by
reason of its affiliation with any ERISA Affiliate, to any Tax, fine, Lien,
penalty or other liability imposed by ERISA; (ii) no "reportable event" (as such
term is defined in Section 4043 of ERISA) has occurred with respect to any
Employee Plan; and (iii) all awards, grants or bonuses made pursuant to any
Employee Plan have been, or will be, fully deductible by the Company or its
Subsidiaries notwithstanding the provisions of Sections 162(m) and 280G of the
Code and the Regulations promulgated thereunder.
2.14 Employment and Labor Matters.
(a) Section 2.14(a) of the Company Disclosure Schedule
identifies all employees and consultants employed or engaged by the Company with
an annual base salary or compensation rate of $100,000 or higher and sets forth
each such individual's rate of pay or annual compensation, job title and date of
hire. Except as set forth in Section 2.14(a) of the Company Disclosure Schedule,
there are no employment, consulting, collective bargaining, severance pay,
continuation pay, termination or indemnification agreements or other similar
Contracts of any nature (whether in writing or not) between the Company or any
Subsidiary and any current or former stockholder, officer, director, employee,
consultant, labor organization or other representative of any of the Company's
or Subsidiary's employees, nor is any such Contract presently being negotiated.
Except as set forth in Section 2.14(a) of the Company Disclosure Schedule, no
individual will accrue or receive additional benefits, service or accelerated
rights to payments under any Employee Plan or any of the agreements set forth in
Section 2.14(a) of the Company Disclosure Schedule, including the right to
receive any parachute payment, as defined in Section 280G of the Code, or become
entitled to severance, termination allowance or similar payments as a result of
the transaction contemplated herein that could result in the payment of any such
benefits or payments. Neither the Company nor any Subsidiary is delinquent in
payments to any of its employees or consultants for any wages, salaries,
commissions, bonuses, benefits or other compensation for any services or
otherwise arising under any policy, practice, agreement, plan, program or Law.
Except as set forth in Section 2.14(a) of the Company Disclosure Schedule,
neither the Company nor any Subsidiary is liable for any severance pay or other
payments to any employee or former employee arising from the termination of
employment, nor will the Company or any Subsidiary have any liability under any
benefit or severance policy, practice, agreement, plan, or program which exists
or arises, or may be deemed to exist or arise, under any applicable Law or
otherwise, as a result of or in connection with the transactions contemplated
hereunder or as a result of the termination by the Company or any Subsidiary of
any persons employed by the Company or any Subsidiary on or prior to the
Effective Time (except to the extent such terminations may be aggregated with
terminations following the Effective Time for purposes of the Worker Adjustment
and Retraining Notification Act of 1988, as amended ("WARN")). None of the
Company's or any Subsidiary's employment policies or practices is currently
being audited or investigated by any Governmental Authority or Court. There is
no pending or, to the Knowledge of the Company, threatened Litigation, unfair
labor practice charge, or other charge or inquiry against the Company or any
Subsidiary brought by or on behalf of any employee, prospective employee, former
employee, retiree, labor
-18-
23
organization or other representative of the Company's or Subsidiary's employee,
or other individual or any Governmental Authority with respect to employment
practices brought by or before any Court or Governmental Authority.
(b) Except as set forth in Section 2.14(b) of the Company
Disclosure Schedule, there are no material controversies pending or threatened,
between the Company or any of its Subsidiaries and any of their respective
employees; neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union Contract applicable to
Persons employed by the Company or its Subsidiaries nor are there any activities
or proceedings of any labor union to organize any such employees of the Company
or any of its Subsidiaries; during the past five years there have been no
strikes, slowdowns, work stoppages, material disputes, lockouts, or threats
thereof, by or with respect to any employees of the Company or any of its
Subsidiaries. Except as set forth in Section 2.14(b) of the Company Disclosure
Schedule, there are no grievances pending or, to the Knowledge of the Company or
any Subsidiary, threatened, which, if adversely decided, could reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any
Subsidiary is a party to, or otherwise bound by, any consent decree with, or
citation or other Order by, any Governmental Authority relating to employees or
employment practices. The Company and each of its Subsidiaries are in compliance
in all material respects with all applicable Laws, Contracts, and policies
relating to employment, employment practices, wages, hours, and terms and
conditions of employment, including the obligations of WARN, and all other
notification and bargaining obligations arising under any collective bargaining
agreement, by Law or otherwise. Neither the Company nor any Subsidiary of the
Company has effectuated a "plant closing" or "mass layoff" as those terms are
defined in WARN, affecting in whole or in part any site of employment, facility,
operating unit or employee of the Company, without complying with all provisions
of WARN or implemented any early retirement, separation or window program within
the past five years, nor has the Company or any Subsidiary planned or announced
any such action or program for the future.
2.15 Registration Statement; Proxy Statement/Prospectus. None of the
information supplied by the Company for inclusion in the registration statement
on Form S-4, or any amendment or supplement thereto, pursuant to which the
shares of Parent Common Stock to be issued in the Merger will be registered with
the SEC (including any amendments or supplements, the "Registration Statement")
shall, at the time such document is filed, at the time amended or supplemented
and at the time the Registration Statement is declared effective by the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the information supplied by the Company for inclusion in the
Joint Proxy Statement/Prospectus shall, on the date the Joint Proxy
Statement/Prospectus is first mailed to the Company stockholders or Parent
stockholders, at the time of the Company Stockholders' Meeting or the Parent
Stockholders' Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the Company Stockholders' Meeting or the Parent
Stockholders' Meeting which has become false or misleading. The Joint Proxy
Statement/Prospectus shall comply in all material respects as to form and
substance with the requirements of the Exchange Act and the Regulations
promulgated
-19-
24
thereunder. The Company makes no representation or warranty with respect to any
information supplied by Parent or Merger Sub which is contained in the
Registration Statement or Joint Proxy Statement/Prospectus.
2.16 Absence of Restrictions on Business Activities. Except as set
forth in Section 2.16 of the Company Disclosure Schedule, there is no agreement
or Order binding upon the Company or any of its Subsidiaries or any of their
assets or properties which has had or could reasonably be expected to have the
effect of prohibiting or impairing any business practice of the Company or any
of its Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted or as proposed to be conducted by the
Company or any of its Subsidiaries. Except as set forth in Section 2.16 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
subject to any non-competition, non-solicitation or similar restriction on their
respective businesses.
2.17 Title to Assets; Leases.
(a) Except as described in Section 2.17(a) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries has good and
marketable title to or the legal right to use all of their real or personal
properties (whether owned or leased) and assets, free and clear of all Liens.
(b) Section 2.17(b) of the Company Disclosure Schedule
contains a list of all of the real property and interests in real property owned
by the Company or any of its Subsidiaries and all leases of real property to
which the Company or any Subsidiary is a party or by which any of them holds a
leasehold interest (collectively, "Real Property"). Except as set forth in
Section 2.17(b) of the Company Disclosure Schedule, (i) each Real Property lease
to which the Company or any of its Subsidiaries is a party is in full force and
effect in accordance with its terms, (ii) all rents and additional rents due to
date from the Company or a Subsidiary on each such lease have been paid, (iii)
neither the Company nor any Subsidiary has received written notice that it is in
material default thereunder, and (iv) there exists no default by the Company or
any Subsidiary under such lease. There are no leases, subleases, licenses,
concessions or any other agreements or commitments to which the Company or a
Subsidiary is a party granting to any Person other than the Company or a
Subsidiary any right to possession, use occupancy or enjoyment of any of the
Real Property or any portion thereof. None of the Company nor any of its
Subsidiaries is obligated under or bound by any option, right or first refusal,
purchase Contract, or other Contract to sell or otherwise dispose of any Real
Property or any other interest in any Real Property.
2.18 Taxes. For purposes of this Agreement, "Tax" or "Taxes" shall
mean taxes and governmental impositions of any kind in the nature of (or similar
to) taxes, payable to any federal, state, local or foreign taxing authority,
including those on or measured by or referred to as income, franchise, profits,
gross receipts, capital ad valorem, custom duties, alternative or add-on minimum
taxes, estimated, environmental, disability, registration, value added, sales,
use, service, real or personal property, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, and interest, penalties
and additions to tax imposed with respect thereto; and "Tax Returns" shall mean
-20-
25
returns, reports and information statements, including any schedule or
attachment thereto, with respect to Taxes required to be filed with the Internal
Revenue Service or any other governmental or taxing authority or agency,
domestic or foreign, including consolidated, combined and unitary tax returns.
Except as set forth in Section 2.18 of the Company Disclosure Schedule:
(a) All material Tax Returns required to be filed by or on
behalf of the Company, each of its Subsidiaries, and each affiliated, combined,
consolidated or unitary group of which the Company or any of its Subsidiaries is
a member have been timely filed, and all such Tax Returns are true, complete and
correct in all material respects.
(b) All material Taxes payable by or with respect to the
Company and each of its Subsidiaries (whether or not shown on any Tax Return)
have been timely paid when due, and adequate reserves (other than a reserve for
deferred Taxes established to reflect timing differences between book and Tax
treatment) in accordance with GAAP are provided on the respective company's
Balance Sheet for any material Taxes not yet due. All assessments for material
Taxes due and owing by or with respect to the Company and each of its
Subsidiaries with respect to completed and settled examinations or concluded
litigation have been paid. Neither the Company nor any of its Subsidiaries has
incurred a Tax liability from the date of the latest Balance Sheet other than a
Tax liability in the ordinary course of business.
(c) No action, suit, proceeding, investigation, claim or
audit has formally commenced and no written notice has been given that such
audit or other proceeding is pending or threatened with respect to the Company
or any of its Subsidiaries or any group of corporations of which any of the
Company and its Subsidiaries has been a member in respect of any Taxes, and all
deficiencies proposed as a result of such actions, suits, proceedings,
investigations, claims or audits have been paid, reserved against or settled.
(d) Except as set forth in Section 2.18(d) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
requested, or been granted any waiver of any federal, state, local or foreign
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax. No extension or waiver of time within which to file any
Tax Return of, or applicable to, the Company or any of its Subsidiaries has been
granted or requested which has not since expired.
(e) Except as set forth in Section 2.18(e) of the Company
Disclosure Schedule, other than with respect to its Subsidiaries, the Company is
not and has never been (nor does the Company have any liability for unpaid Taxes
because it once was) a member of an affiliated, consolidated, combined or
unitary group, and neither the Company nor any of its Subsidiaries is a party to
any Tax allocation or sharing agreement or is liable for the Taxes of any other
person under Treasury Regulations Section 1.1502-6 (or any similar provision of
state, local or foreign Law), as transferee or successor, by Contract, or
otherwise.
(f) Except as disclosed in Section 2.18(f) of the Company
Disclosure Schedule, the Company and its Subsidiaries have not made any
payments, are not obligated to make any payments, and are not a party to any
agreements that under any circumstances could
-21-
26
obligate any of them to make any payments, that will not be deductible under
Section 280G of the Code.
(g) The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(h) The Company and each of its Subsidiaries have complied
with all applicable Laws relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441,
1442 and 3406 of the Code or similar provisions under any foreign Laws) and
have, within the time and in the manner required by Law, withheld from employee
wages and paid over to the proper Governmental Authorities all amounts required
to be so withheld and paid over under all applicable Laws.
(i) Neither the Company nor any of its Subsidiaries has made
an election under Section 341(f) of the Code.
(j) None of the Company and its Subsidiaries will be required
to include any material amount in taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of a change in the
method of accounting for a taxable period ending prior to the Closing Date, any
"closing agreement" as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign Tax Laws) entered into prior
to the Closing Date, any sale reported on the installment method that occurred
prior to the Closing Date, or any taxable income attributable to any amount that
is economically accrued prior to the Closing Date.
2.19 Environmental Matters.
(a) Except as described on Section 2.19 of the Company
Disclosure Schedule, and except as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect: (i) the Company and
each of its Subsidiaries complies and have complied, during all applicable
statute of limitations periods, with all applicable Environmental Laws, and
possess and comply, and have possessed and complied during all applicable
statute of limitations periods, with all Environmental Permits; (ii) there are
and have been no Materials of Environmental Concern or other conditions at any
property owned, operated, or otherwise used by the Company now or in the past,
or at any other location (including without limitation any facility to which
Materials of Environmental Concern from the Company or any of its Subsidiaries),
that are in circumstances that could reasonably be expected to give rise to any
liability of the Company or any of its Subsidiaries, or result in costs to the
Company or any of its Subsidiaries arising out of any Environmental Law; (iii)
no Litigation (including any notice of violation or alleged violation), under
any Environmental Law or with respect to any Materials of Environmental Concern
to which the Company or any of its Subsidiaries is, or to the Knowledge of the
Company will be, named as a party, or affecting their business, is pending or,
to the Knowledge of the Company, threatened; nor is the Company or any of its
Subsidiaries the subject of any investigation or the recipient of any request
for information in connection with any such Litigation or potential Litigation;
(iv) there are no Orders or agreements under any Environmental Law or with
respect to any Materials of Environmental Concern to which the Company or any of
its Subsidiaries is a party or affecting their business; (v) to the Knowledge of
-22-
27
the Company, there are no events, conditions, circumstances, practices, plans,
or legal requirements (in effect or reasonably anticipated), that could be
expected to prevent the Company from, or materially increase the burden on the
Company of: (A) complying with applicable Environmental Laws, or (B) obtaining,
renewing, or complying with all Environmental Permits; and (vi) to the Knowledge
of the Company, each of the foregoing representations and warranties is true and
correct with respect to any entity for which the Company or any of its
Subsidiaries has assumed or retained liability, whether by Contract or operation
of Law.
(b) The Company has furnished to Parent true and complete
copies of all Environmental Reports in the possession or control of the Company
or any of its Subsidiaries.
(c) For purposes of this Agreement, the terms below are
defined as follows:
"Environmental Laws" shall mean any and all Laws, Orders,
guidelines, codes, or other legally enforceable requirement (including, without
limitation, common law) of any foreign government, the United States, or any
state, local, municipal or other Governmental Authority, regulating, relating to
or imposing liability or standards of conduct concerning protection of the
environment or of human health, or employee health and safety.
"Environmental Permits" shall mean, with respect to a
Person, any and all permits, licenses, registrations, notifications, exemptions
and any other Approvals required of a Person under any Environmental Law.
"Environmental Report" shall mean, with respect to a
Person, any report, study, assessment, audit, or other similar document that
addresses any issue of actual or potential noncompliance with, actual or
potential liability under or cost arising out of, or actual or potential impact
on business in connection with, any Environmental Law or any proposed or
anticipated change in or addition to Environmental Law, that may in any way
affect such Person or any entity for which it may be liable or any Subsidiary of
such Person.
"Materials of Environmental Concern" shall mean any
gasoline or petroleum (including crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos,
pollutants, contaminants, radioactivity, and any other substances of any kind,
whether or not any such substance is defined as hazardous or toxic under any
Environmental Law, that is regulated pursuant to or could give rise to liability
under any Environmental Law.
2.20 Intellectual Property.
(a) The Company or its Subsidiaries has sole title to and
ownership of, or possesses legally enforceable rights to use under valid and
subsisting written license agreements, all Intellectual Property used or
proposed to be used in the conduct of the Company's or any of its Subsidiaries'
businesses as currently conducted and proposed to be conducted (the "Company
Intellectual Property"), and neither the Company nor any of its Subsidiaries has
misappropriated, is conflict with or is infringing upon the Intellectual
Property of others. The Company (or, where applicable, its Subsidiaries) is the
sole and exclusive owner of the Company Intellectual Property free and clear of
any Liens or other rights or claims of others, except for Intellectual Property
-23-
28
specifically designated as not owned by the Company or its Subsidiaries ("Third
Party Intellectual Property") in Section 2.20(a)(i) of the Company Disclosure
Schedule. Section 2.20(a) of the Company Disclosure Schedule lists all material
items of Company Intellectual Property, including, without limitation:
(i) all licenses, sublicenses and other agreements to
which the Company or any of its Subsidiaries is a party and pursuant to which
the Company or any of its Subsidiaries is authorized to use any Third Party
Intellectual Property, including, without limitation, Intellectual Property that
is (or is intended to be) incorporated in, embedded in or included with any
Product or service of the Company or any of its Subsidiaries, or any product or
service currently under development ("Embedded Third-Party Components");
(ii) all applications and registrations relating to the
Company Intellectual Property, including, without limitation, all patents and
patent applications (including provisional applications, continuations and
continuations-in-part) and all trademarks, service marks, trade names,
fictitious names, service marks and copyright registrations owned by, or
licensed exclusively to, the Company or any of its Subsidiaries and which are
currently used in connection with the business of the Company or any of its
Subsidiaries, including the jurisdictions in which each item of such Company
Intellectual Property has been issued or registered or in which any such
application for such issuance or registration has been filed. Each such
registration was properly registered and is in good standing and enforceable
under applicable Laws and regulations, and, except as set forth in Section
2.20(a)(ii) of the Company Disclosure Schedule, no renewal, fee payment or other
actions are required to be taken with respect to any registration within six (6)
months after the date hereof. Section 2.20(a)(ii) of the Company Disclosure
Schedule lists, for each application, the current status of each application and
the next steps required to be taken in connection with such application;
(iii) all agreements or other arrangements under which
the Company or any of its Subsidiaries has provided or agreed to provide or make
available source code to any Product to any third party, including, without
limitation, to end-users; and
(iv) all other material items of Company Intellectual
Property.
The Company has made available to Parent correct and complete copies of all
registrations and applications and all licenses, sublicenses and agreements
relating to the Company Intellectual Property, each as amended to date. Neither
the Company nor any of its Subsidiaries is a party to any oral license,
sublicense or other agreement which, if reduced to written form, would be
required to be listed in Section 2.20(a) of the Company Disclosure Schedule
under the terms of this Section 2.20(a).
(b) Except as set forth in Section 2.20(b) of the Company
Disclosure Schedule, with respect to each item of Third Party Intellectual
Property: (i) the license, sublicense or other agreement covering such item is
legal, valid, binding, enforceable and in full force and effect with respect to
the Company and its Subsidiaries, and, to the Company's Knowledge, is legal,
valid, binding, enforceable and in full force and effect with respect to each
other party thereto; (ii) neither the Company nor any of its Subsidiaries is in
breach or default thereunder, and, to the Company's Knowledge, no other party to
such license, sublicense or other
-24-
29
agreement is in material breach or default thereunder, and, to the Company's
Knowledge, no event has occurred which with notice or lapse of time would
constitute a material breach or default by the Company or any of its
Subsidiaries or permit termination, modification or acceleration thereunder by
the other party thereto; (iii) to the Company's Knowledge, the underlying item
of Third Party Intellectual Property is not subject to any Lien that materially
interferes with or may reasonably be expected to materially interfere with the
rights granted to the Company or any of its Subsidiaries with respect to such
item; and (iv) there are no royalty, commission or other executory payment
agreements, arrangements or understandings relating to such item.
(c) Except as set forth in Section 2.20(c) of the Company
Disclosure Schedule, no action, suit, proceeding or investigation with respect
to the Company Intellectual Property has ever been instituted, is pending or, to
the Company's Knowledge, threatened. The Company has made available to Parent
correct and complete copies of all such suits, actions or proceedings or written
notices. To the Knowledge of the Company, neither the development,
manufacturing, marketing, licensing or sale of the Products, the performance of
the services offered by the Company nor the conduct of the business of the
Company or any of its Subsidiaries infringe, conflict with or misappropriate,
and have not infringed, conflicted with or misappropriated, any Intellectual
Property right of any third party. To the Knowledge of the Company, none of the
Company Intellectual Property is being infringed by activities, products or
services of, or is being misappropriated by, any third party.
(d) Except as set forth in Section 2.20(d) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the
Company, and the consummation of the transactions contemplated hereby, will not
cause the Company or any of its Subsidiaries to be in violation or default under
any license, sublicense or other agreement relating to Intellectual Property,
nor terminate nor modify nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement, nor limit in any way the Company's or any Subsidiary's ability to
conduct its business or use or provide the use of Company Intellectual Property
or any Intellectual Property of others, which violation, default, termination,
modification or limitation would reasonably be expected, individually or in the
aggregate, to result in a material loss of benefits or material loss to the
Company.
(e) Except for Embedded Third-Party Components for which the
Company (or, as applicable, any of its Subsidiaries) has valid non-exclusive
licenses which are disclosed in Section 2.20(e) of the Company Disclosure
Schedule, the Company (or, as applicable, its Subsidiaries) is the sole and
exclusive owner of, with all right, title and interest in and to all Company
Intellectual Property (free and clear of any Liens), and has sole and exclusive
rights (and is not contractually obligated to pay any compensation to any third
party in respect thereof) to the use and distribution thereof or the material
covered thereby in connection with the services or products in respect of which
Company Intellectual Property is being used.
(f) The Company has made available to Parent copies of the
Company's and its Subsidiaries' standard forms of end-user license agreements
("End-User Licenses"). Except as disclosed in Section 2.20(f) of the Company
Disclosure Schedule (which describes the material variations from the standard
form of End-User License), as of the date hereof, neither the Company nor any of
its Subsidiaries has entered into any End-User Licenses which contain
-25-
30
terms materially different than as set forth in the standard forms of such
agreements made available to Parent.
(g) The Company has in effect a comprehensive trade secrets
and confidential information protection program ("Trade Secrets Program"), a
description of which has been supplied to Parent. The Company has used
reasonable efforts to enforce its Trade Secrets Program and otherwise to
safeguard and maintain the secrecy and confidentiality of all Company
Intellectual Property. All officers, employees and consultants of the Company
and its Subsidiaries who have had access to proprietary information or Company
Intellectual Property have executed and delivered to the Company agreements
(copies of which have been provided to Parent) to maintain the confidentiality
of the Company Intellectual Property and to assign to the Company all
Intellectual Property arising from the services performed for the Company by
such persons. No current or prior officers, employees or consultants of the
Company or any of its Subsidiaries have claimed any ownership interest in any
Company Intellectual Property as a result of having been involved in the
development of such property while employed by or consulting to the Company or
any of its Subsidiaries, or otherwise. To the Knowledge of the Company, there
has been no violation of the Trade Secrets Program or any confidentiality or
nondisclosure agreement relating to the Company Intellectual Property. Except as
set forth in Section 2.20(g) of the Company Disclosure Schedule and except for
the Embedded Third-Party Components, all Company Intellectual Property have been
developed by employees of the Company and its Subsidiaries, within the course
and scope of their employment.
(h) No third party has claimed or, to the best of the
Company's Knowledge, has reason to claim, that any person employed by or
affiliated with the Company or any of its Subsidiaries has (i) violated or, may
be violating any of the terms or conditions of his employment, noncompetition or
nondisclosure agreement with such third party, (ii) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party, or (iii) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
the Company, which suggests that such a claim might be contemplated. To the best
of the Company's Knowledge, no person employed by or affiliated with the Company
or any of its Subsidiaries has employed or proposes to employ any trade secret
or any information or documentation proprietary to any former employer and, to
the best of the Company's knowledge, no other person employed by or affiliated
with the Company or any of its Subsidiaries has violated any confidential
relationship which such person may have had with any third party, in connection
with the development, manufacture or sale of any product or proposed product or
the development or sale of any service or proposed service of the Company, and
the Company has no reason to believe there will be any such employment or
violation. None of the execution or delivery of this Agreement, or the carrying
on of the business of the Company or its Subsidiaries as officers, employees or
agents by any officer, director or key employee of the Company or its
Subsidiaries, or the conduct or proposed conduct of the business of the Company
and its Subsidiaries, will, to the Company's Knowledge, conflict with or result
in a breach of the terms, conditions or provisions of or constitute a default
under any contract, covenant or instrument under which any such person is
obligated, except where such conflict, breach or default would not, individually
or in the aggregate, have a Material Adverse Effect on the Company.
-26-
31
(i) Except as set forth in Section 2.20(i) of the Company
Disclosure Schedule (i) to the Knowledge of the Company, there are no material
errors, omissions, issues or defects in the Products, (ii) the occurrence in or
use by Products of dates on or after January 1, 2000 (the "Millennial Dates")
will not adversely affect the performance of the software with respect to date
dependent data, computations, output or other functions (including without
limitation, calculating, computing and sequencing) and the Products create,
process output data related to or including Millennial Dates without errors,
omissions or ambiguities, and (iii) none of the Products contains or includes
Malicious Code.
(j) No Federal, state, local or other government funding or
university or college facilities were used in the development of the Products
and such software was not developed pursuant to any contract or other agreement
with any person or entity except pursuant to contracts or agreements listed in
Section 2.20(j) of the Company Disclosure Schedule.
(k) Section 2.20(k) of the Company Disclosure Schedule lists
all unresolved warranty and support claims (including any pending claims)
related to the products of the Company and its Subsidiaries and the nature of
such claims, except for claims arising in the ordinary course of business
pursuant to customary product support and maintenance obligations of Company.
Except as set forth in Section 2.20(k) of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries has made any material oral or
written representations or warranties with respect to its products or services.
(l) Except as set forth in Section 2.20(l) of the Company
Disclosure Schedule (i) the Company has been and is in compliance with the U.S.
Export Administration Act of 1979, as amended, and all regulations promulgated
thereunder, and (ii) neither the Products nor any other Company Intellectual
Property were conceived or developed outside of the United States.
(m) The Company and its Subsidiaries have taken reasonable
actions to maintain, protect and police the integrity and security of their
Software, including the protection and policing against all unauthorized use of,
access to, or "hacking" into the Software or the introduction into the Software
of viruses or other unauthorized, damaging or corrupting elements.
2.21 Insurance. Section 2.21 of the Company Disclosure Schedule sets
forth a true and complete list of all material insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company and its Subsidiaries. There is
no claim by the Company or any of its Subsidiaries pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and the Company and its
Subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). Such policies of insurance and bonds are of the
type and in amounts customarily carried by Persons conducting businesses similar
to those of the Company and its Subsidiaries and reasonable in light of the
assets of the Company and its Subsidiaries. To the Knowledge of the Company,
there is not any threatened termination of or material premium increase with
respect to any of such policies or bonds.
-27-
32
2.22 No Restrictions on the Merger; Takeover Statutes. The Board of
Directors of the Company has, unanimously approved this Agreement and the Merger
and the other transactions contemplated hereby and such approval is sufficient
to render inapplicable to this Agreement, the Merger and any other transactions
contemplated hereby, the restrictions on business combinations of Section 203 of
the DGCL. No Delaware law or other takeover statute or similar Law and no
provision of the Certificate of Incorporation or Bylaws, or other organizational
documents or governing instruments of the Company or any of its Subsidiaries or
any Material Agreement to which any of them is a party (a) would or would
purport to impose restrictions which might adversely affect or delay the
consummation of the transactions contemplated by this Agreement, the Company
Stockholders' Agreement or the Strategic Relationship Agreement, or (b) as a
result of the consummation of the transactions contemplated by this Agreement,
the Company Stockholders' Agreement or the Strategic Relationship Agreement or
the acquisition of securities of the Company or the Surviving Corporation by
Parent or Merger Sub (i) would or would purport to restrict or impair the
ability of Parent to vote or otherwise exercise the rights of a stockholder with
respect to securities of the Company or any of its Subsidiaries that may be
acquired or controlled by Parent or (ii) would or would purport to entitle any
Person to acquire securities of the Company.
2.23 Pooling; Tax Matters.
(a) The Company intends that the Merger be accounted for
under the "pooling of interests" method under the requirements of APB 16 and the
Regulations of the SEC.
(b) To the Company's Knowledge, neither the Company nor any
of its Affiliates has taken or agreed to take any action, failed to take any
action or is aware of any fact or circumstance that could reasonably be expected
to prevent (i) the Merger from being treated for financial accounting purposes
as a "pooling of interests" in accordance with GAAP and the Regulations of the
SEC or (ii) the Merger from constituting a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
(c) The Company has no Knowledge of any reason why it may not
receive a letter from Deloitte and Touche LLP (the "Company's Accountants")
dated as of the Closing Date and addressed to the Company in which the Company's
Accountants will concur with the Company management's conclusion that no
conditions exist related to the Company that would preclude Parent from
accounting for the Merger as a "pooling of interests."
(d) Section 2.24(d) of the Company Disclosure Schedule
contains a true and complete list of all Persons who may be deemed to be
Affiliates of the Company, excluding all of its Subsidiaries but including all
directors and executive officers of the Company.
2.24 Brokers. No broker, financial advisor, finder or investment
banker or other Person is entitled to any broker's, financial advisor's,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company, except for Xxxxxxx Xxxxx & Co. and Xxxxxx Xxxxxx Partners (the
"Company Financial Advisors"). The Company has heretofore furnished to Parent a
true and complete copy of, all agreements between the Company and the Company
Financial
-28-
33
Advisors pursuant to which such Person would be entitled to any payment relating
to the transactions contemplated hereunder.
2.25 Certain Business Practices. As of the date hereof, neither the
Company nor any of its Subsidiaries nor any director, officer, employee or agent
of the Company or any of its Subsidiaries has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful payments relating to
political activity, (ii) made any unlawful payment to any foreign or domestic
government official or employee or to any foreign or domestic political party or
campaign or violated any provision of the Foreign Corrupt Practices Act of 1977,
as amended, (iii) consummated any transaction, made any payment, entered into
any agreement or arrangement or taken any other action in violation of Section
1128B(b) of the Social Security Act, as amended, or (iv) made any other unlawful
payment.
2.26 Interested Party Transactions. Except as disclosed in the
Company's filings with the SEC under the Exchange Act filed prior to the date
hereof or in Section 2.26 of the Company Disclosure Schedule, (i) there are no
existing, and since December 31, 1999 there has been no Contract, transaction,
indebtedness or other arrangement, or any related series thereof, between the
Company and any of its Subsidiaries, on the one hand, and any of the directors,
officers, stockholders or other Affiliates of the Company and its Subsidiaries,
or any of their respective Affiliates or family members, on the other (except
for amounts due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and (ii) except for the Outstanding Employee Options, at the Closing
or as indicated in Section 2.26 of the Company Disclosure Schedule, all such
Contracts, transactions, indebtedness and other arrangements shall be terminated
(except for amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses).
2.27 Opinion of Financial Advisor. The Board of Directors of the
Company has received the oral opinion of Xxxxxxx, Sachs & Co. to the effect that
as of the date hereof the Exchange Ratio pursuant to this Agreement is fair from
a financial point of view to the holders of shares of the Company Common Stock
and will receive their written opinion promptly after the date hereof. The
Company shall provide copies of such written opinion to Parent promptly after
receipt. The Board of Directors of the Company has received the oral opinion of
Xxxxxx Xxxxxx Partners LLP to the effect that as of the date hereof the Exchange
Ratio pursuant to this Agreement is fair from a financial point of view to the
holders of shares of the Company Common Stock and will receive their written
opinion promptly after the date hereof. The Company shall provide copies of such
written opinion to Parent promptly after receipt.
2.28 Disclosure. The representations and warranties by the Company
in this Agreement and the documents referred to herein (including the Schedules
and Exhibits hereto), taken together with all the other information provided to
Parent or its representatives in connection with the transactions contemplated
hereby, do not contain any statements of a material fact or omit to state any
material fact necessary, in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading.
-29-
34
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company, subject to the exceptions specifically set forth in
writing in the disclosure schedule delivered by Parent to the Company
concurrently herewith (the "Parent Disclosure Schedule") (each Section of which
qualifies the correspondingly numbered representation, warranty or covenant to
the extent specified therein), as follows:
3.1 Organization and Qualification.
(a) Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the Delaware law. Parent
has all the requisite corporate power and authority, and is in possession of all
Approvals necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
qualified, existing and in good standing or to have such power, authority and
Approvals could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Each of Parent and Merger Sub is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that could not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Merger Sub
is a newly-formed single purpose entity which has been formed solely for the
purposes of the Merger and has not carried on any business or engaged in any
activities other than those reasonably related to the Merger.
(b) Section 3.1(b) of the Parent Disclosure Schedule sets
forth, as of the date hereof, a true and complete list of all of Parent's
directly and indirectly owned Subsidiaries, together with the jurisdiction of
incorporation or organization of each Subsidiary and the percentage of each
Subsidiary's outstanding capital stock or other equity or other interest owned
by Parent or another Subsidiary of Parent.
(c) Each Subsidiary of Parent is a legal entity, duly
organized, validly existing and in good standing under the Laws of its
respective jurisdiction of incorporation or organization and has all the
requisite power and authority, and is in possession of all Approvals necessary
to own, lease and operate its properties and to carry on its business as it is
now being conducted, except where the failure to possess such Approvals could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except where the
failure to be so qualified could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(d) Section 3.1(d) of the Parent Disclosure Schedule sets
forth a true and complete list of each equity investment in an amount of
$300,000 or more or that represents a
-30-
35
5% or greater ownership interest in the subject of such investment made by
Parent or any of its Subsidiaries in any person other than the Parent's
Subsidiaries (the "Parent Other Interests"). Except as described in Section
3.1(d) of the Parent Disclosure Schedule, the Parent Other Interests are owned
by Parent, by one or more of the Parent's Subsidiaries, or by Parent and one or
more of its Subsidiaries, in each case free and clear of all Liens.
(e) Parent has heretofore furnished to the Company a true,
accurate and complete copy of each of its and each of its Subsidiaries'
Certificate of Incorporation and Bylaws or equivalent organizational documents,
as amended or restated to the date hereof. Such Certificate of Incorporation and
Bylaws and equivalent organizational documents of Parent and each of its
Subsidiaries are in full force and effect, and no other organizational documents
are applicable to or binding upon Parent or its Subsidiaries.
3.2 Capitalization.
(a) As of the date hereof, the authorized capital stock of
Parent consists of 200,000,000 shares of Parent Common Stock and 50,000,000
shares of preferred stock, par value $.01 per share. As of May 15, 2000, (i)
32,482,297 shares of Parent Common Stock were issued and outstanding; (ii) no
shares of Parent Preferred Stock were issued or outstanding; (iii) no shares of
Parent Common Stock were held in the treasury of the Company; (iv) no shares of
Parent Common Stock were held by any Subsidiary of Parent; (v) 6,595,138 shares
of Parent Common Stock were duly reserved for future issuance pursuant to
employee stock options granted pursuant to the option plans; (vi) 1,500,000
shares of Parent Common Stock were duly reserved for future issuance pursuant to
Parent's Employee Stock Purchase Plan; and (vii) no shares of Company Common
Stock were reserved for issuance upon exercise of outstanding warrants. All of
the outstanding shares of Parent Common Stock are, and all shares to be issued
as part of the Merger Consideration will be, when issued in accordance with the
terms hereof, duly authorized, validly issued, fully paid and nonassessable.
None of the outstanding shares of Parent Common Stock are subject to, nor were
they issued in violation of any, purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right created by
Parent or to which Parent is or was a party, nor does Parent have Knowledge of
any such right. Except as set forth above and in Section 3.2(a) of the Parent
Disclosure Schedule, as of the date hereof, no shares of voting or non-voting
capital stock, other equity interests, or other voting securities of the Company
were issued, reserved for issuance or outstanding. All outstanding shares of
capital stock of the Company are, and all shares which may be issued upon the
exercise of stock options and warrants will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to any kind of
preemptive (or similar) rights. There are no bonds, debentures, notes or other
indebtedness of Parent with voting rights (or convertible into, or exchangeable
for, securities with voting rights) on any matters on which stockholders of
Parent may vote.
(b) Except as described in this Section 3.2(b) or in Section
3.2(b) of the Parent Disclosure Schedule, as of the date hereof, there are no
outstanding securities, options, warrants, calls, rights, convertible or
exchangeable securities, commitments, agreements, arrangements or undertakings
of any kind (contingent or otherwise) to which Parent or any of its Subsidiaries
is a party or by which any of them is bound obligating Parent or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other
-31-
36
voting securities of Parent or of any of its Subsidiaries or obligating Parent
or any of its Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking. There are no outstanding contractual obligations of Parent or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock (or options or warrants to acquire any such shares) of Parent or
its Subsidiaries. Except as set forth in Section 3.2(b) of the Parent Disclosure
Schedule and the Parent Voting Agreement, there are no voting trusts, proxies or
other agreements, commitments or understandings of any character to which Parent
or any of its Subsidiaries or, to the Knowledge (as defined herein) of Parent,
any of Parent's stockholders is a party or by which any of them is bound with
respect to the issuance, holding, acquisition, voting or disposition of any
shares of capital stock of Parent or any of its Subsidiaries.
(c) As of the date hereof, the authorized capital stock of
Merger Sub consists of 100 shares of Merger Sub Common Stock, of which 100
shares of Merger Sub Common Stock are outstanding. All of the outstanding shares
of Merger Sub Common Stock are owned by Parent.
3.3 Authority; Enforceability. Each of Parent and Merger Sub has
all requisite corporate power and authority to execute and deliver this
Agreement, each Related Agreement to which it is a party, and each instrument
required hereby to be executed and delivered by it at the Closing, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by each of Parent
and Merger Sub of this Agreement, each Related Agreement to which it is a party,
and each instrument required hereby to be executed and delivered by Parent and
Merger Sub at the Closing and the performance of their respective obligations
hereunder and thereunder have been duly and validly authorized by the Board of
Directors of each of Parent and Merger Sub and by Parent as the sole stockholder
of Merger Sub. Except for filing of the Certificate of Merger and obtaining the
approval and authorization of this Agreement and the transactions contemplated
hereby by votes of the holders of a majority of the then outstanding Parent
Common Stock, no other corporate proceedings on the part of Parent or Merger Sub
are necessary to authorize the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of Parent
and Merger Sub and, assuming due authorization, execution and delivery hereof by
the Company, constitutes a legal, valid and binding obligation of each of Parent
and Merger Sub, enforceable against each of Parent and Merger Sub in accordance
with its terms.
3.4 Required Vote. As of the date hereof and as of the Effective
Time, the Board of Directors of Parent has, at a meeting duly called and held,
(i) by a unanimous vote of the members present, approved and declared advisable
this Agreement and each Related Agreement to which Parent is a party, (ii)
determined that the transactions contemplated hereby and thereby are advisable,
fair to and in the best interests of the holders of Parent Common Stock, (iii)
resolved to recommend approval of the issuance of shares of Parent Common Stock
in connection with the Merger pursuant to the terms of this Agreement. The Board
of Directors has not withdrawn, rescinded or modified such approvals,
determination, and resolutions to recommend. The affirmative vote of a majority
of all outstanding shares of Parent Common Stock is the only vote of the holders
of any class or series of capital stock of Parent necessary to approve and
authorize such issuance of Parent Common Stock. As of May 20, 2000, the holders
of the Parent Common Stock that are parties to the Parent Voting Agreement own
(beneficially
-32-
37
and of record) and have the right to vote, in the aggregate, approximately
14,996,724 shares of Parent Common Stock.
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery by Parent and Merger Sub of
this Agreement, the Related Agreements to which it is a party or any instrument
required by this Agreement to be executed and delivered by Parent or any of its
Subsidiaries at the Closing do not, and the performance of this Agreement and
any such Related Agreement or instrument by Parent or Merger Sub shall not, (i)
conflict with or violate the Certificate of Incorporation or Bylaws of Parent or
the Certificate of Incorporation or Bylaws of Merger Sub, or (ii) conflict with
or violate any Law or Order in each case applicable to Parent or its
Subsidiaries or by which its or any of their respective properties or assets is
bound or affected, or (iii) result in any breach or violation of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or impair Parent's or any of its Subsidiaries' rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of Parent or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, Contract, permit,
franchise or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which Parent or any of its Subsidiaries or its or
any of their respective properties or assets is bound or affected, except (A) as
set forth in Section 3.5(a) of the Parent Disclosure Schedule or (B) in the case
of clause (ii) or (iii) above, for any such conflicts, breaches, violations,
defaults or other occurrences that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) The execution and delivery by Parent and Merger Sub of
this Agreement the Related Agreements to which it is a party or any instrument
required by this Agreement to be executed and delivered by Parent or Merger Sub
at the Closing do not, and the performance by Parent and Merger Sub of this
Agreement and any such Related Agreement or instrument shall not, require Parent
or Merger Sub to obtain the Approval of, observe any waiting period imposed by,
or make any filing with or notification to, any Governmental Authority, domestic
or foreign, except for (A) compliance with applicable requirements of the
Securities Act, the Exchange Act, Blue Sky Laws, or the pre-Merger notification
requirements of the HSR Act or Foreign Competition Laws, (B) the filing of the
Certificate of Merger in accordance with the DGCL, (C) the filing of a listing
application or other documents as required by NASDAQ or (D) where the failure to
obtain such Approvals, or to make such filings or notifications, would not
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
3.6 Material Agreements. Except as set forth in Section 3.6 of the
Parent Disclosure Schedule, Parent is not party to or bound by (a) Contracts
containing a covenant limiting or purporting to limit the freedom of Parent or
any of its Subsidiaries to engage in any line of business or compete with any
Person or operate at any location in the world; (b) Contracts for the
acquisition, directly or indirectly (by merger or otherwise) of material assets
(whether tangible or intangible) or the capital stock of another Person; (c)
promissory notes, loans, agreements, indentures, evidences of indebtedness or
other instruments and Contracts providing for the borrowing or lending of money,
whether as borrower, lender or guarantor, in each case, relating to indebtedness
or obligations in excess of $100,000; or (d) Contracts involving the issuance or
-33-
38
repurchase of any capital stock of Parent or any of its Subsidiaries (including
newly formed Subsidiaries), other than, with respect to the issuance of Parent
Common Stock, the options or warrants described in Section 3.2. The Contracts
required to be disclosed in the Parent Disclosure Schedule pursuant to the
foregoing clauses (a) through (d) or required to be filed with any Parent SEC
Report ("Parent Contracts") are in full force and effect and are valid and
binding obligations of Parent and are enforceable, in accordance with its terms,
against Parent, in each case except that the enforcement thereof may be limited
by (A) the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar Laws affecting creditors' rights
generally, and (B) general principles of equity (whether in a proceeding in
equity or at law). Parent is not and is not alleged to be and, to the best
Knowledge of Parent, no other party is or is alleged to be in default under, or
in breach or violation of, any Parent Contract and, to the best Knowledge of the
Company, no event has occurred which, with the giving of notice or passage of
time or both, would constitute such a default, breach or violation.
3.7 Compliance. Parent and each of its Subsidiaries are in
compliance with, and are not in default or violation of, (i) the Certificate of
Incorporation and Bylaws of Parent or the equivalent organizational documents of
such Subsidiary, (ii) any Law or Order or by which any of their respective
assets or properties are bound or affected and (iii) the terms of all notes,
bonds, mortgages, indentures, Contracts, permits, franchises and other
instruments or obligations to which any of them are a party or by which any of
them or any of their respective assets or properties are bound or affected,
except, in the case of clauses (ii) and (iii), for any such failures of
compliance, defaults and violations which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Parent and
its Subsidiaries are in compliance with the terms of all Approvals, except where
the failure to so comply could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. Except as set forth in Section
3.7 of the Parent Disclosure Schedule or as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, neither
Parent nor any of its Subsidiaries has received notice of any revocation or
modification of any Approval of any federal, state, local or foreign
Governmental Authority that is material Parent or any of its Subsidiaries.
3.8 SEC Filings; Financial Statements.
(a) Parent has filed all forms reports, schedules, statements
and documents required to be filed with the SEC since February 10, 2000
(collectively, as such forms, reports, schedules, statements and documents have
been amended since the time of their filing, the "Parent SEC Reports") pursuant
to the federal securities Laws and Regulations of the SEC promulgated
thereunder, and all Parent SEC Reports have been filed in all material respects
on a timely basis. The Parent SEC Reports were prepared in accordance, and
complied as of their respective filing dates in all material respects, with the
requirements of the Exchange Act, the Securities Act and the Regulations
promulgated thereunder and did not at the time they were filed (or if amended or
superseded by a filing prior to the date hereof, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of Parent's Subsidiaries has filed, or is obligated
to file, any forms, reports, schedules, statements or other documents with the
SEC.
-34-
39
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in Parent SEC Reports (i)
complied in all material respects with applicable accounting requirements and
the published Regulations of the SEC with respect thereto, (ii) were prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis throughout the periods
involved (except as may be expressly described in the notes thereto) and (iii)
fairly presents the consolidated financial position of Parent as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements included in the Company's Form 10-Q reports were or are subject to
normal and recurring year-end adjustments that have not been and are not
expected to be material to Parent.
3.9 Absence of Certain Changes or Events.
(a) Except as described in Section 3.9(a) of the Parent
Disclosure Schedule, since March 31, 2000 Parent has conducted its, businesses
only in the ordinary and usual course and in a manner consistent with past
practice, and, since such date, there has not been any change, development,
circumstance, condition, event, occurrence, damage, destruction or loss that has
had or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(b) Except as described in Section 3.9(b) of the Parent
Disclosure Schedule, during the period from March 31, 2000 to the date hereof
there has not been any change by Parent in its accounting methods, principles or
practices, any revaluation by Parent of any of its assets, including, writing
down the value of inventory or writing off notes or accounts receivable.
(c) Neither Parent nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether absolute, accrued, fixed,
contingent or otherwise), and there is no existing fact, condition or
circumstance which could reasonably be expected to result in such liabilities or
obligations, except liabilities or obligations (i) disclosed in the Parent SEC
Reports filed and publicly available prior to the date hereof or in Parent's
March 31, 2000 financial statements, (ii) disclosed in Section 3.9(c) of the
Parent Disclosure Schedule, (iii) incurred in the ordinary course of business
since March 31, 2000, or (iv) which do not have, and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
3.10 Absence of Litigation. Except as described in Section 3.10 of
the Parent Disclosure Schedule or expressly described in the Parent SEC Reports
filed and publicly available prior to the date hereof, there is no Litigation
pending on behalf of or against or, to the Knowledge of Parent, threatened
against Parent, any of its Subsidiaries, or any of their respective properties
or rights, before or subject to any Court or Governmental Authority where the
amount in controversy could exceed $100,000; provided, that such amount in
controversy shall not be construed or utilized to expand, limit or define the
terms "material" or "Material Adverse Effect" as otherwise referenced and used
in this Agreement. Neither Parent nor any of its Subsidiaries is subject to any
outstanding Litigation or Order which, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect.
-35-
40
3.11 Registration Statement; Proxy Statement/Prospectus. None of the
information supplied by Parent for inclusion in the Registration Statement
shall, at the time such document is filed, at the time amended or supplemented,
or at the time the Registration Statement is declared effective by the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the information supplied by Parent for inclusion in the
Joint Proxy Statement/Prospectus shall, on the date the Joint Proxy
Statement/Prospectus is first mailed to the Company's stockholders or Parent's
stockholders, at the time of the Company Stockholders' Meeting or the Parent
Stockholders' Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the Company Stockholders' Meeting or the Parent
Stockholders' Meeting which has become false or misleading. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act. Notwithstanding the foregoing, Parent makes no
representation, warranty or covenant with respect to any information supplied by
the Company which is contained in the Registration Statement or Joint Proxy
Statement/Prospectus.
3.12 Taxes. Except as set forth in Section 3.12 of the Parent
Disclosure Schedule:
(a) All material Tax Returns required to be filed by or on
behalf of Parent, each of its Subsidiaries, and each affiliated, combined,
consolidated or unitary group of which Parent or any of its Subsidiaries is a
member have been timely filed, and all such Tax Returns are true, complete and
correct in all material respects.
(b) All material Taxes payable by or with respect to Parent
and each of its Subsidiaries (whether or not shown on any Tax Return) have been
timely paid when due, and adequate reserves (other than a reserve for deferred
Taxes established to reflect timing differences between book and Tax treatment)
in accordance with GAAP are provided on the respective company's Balance Sheet
for any material Taxes not yet due. All assessments for material Taxes due and
owing by or with respect to Parent and each of its Subsidiaries with respect to
completed and settled examinations or concluded litigation have been paid.
Neither Parent nor any of its Subsidiaries has incurred a Tax liability from the
date of the latest Balance Sheet other than a Tax liability in the ordinary
course of business.
(c) No action, suit, proceeding, investigation, claim or
audit has formally commenced and no written notice has been given that such
audit or other proceeding is pending or threatened with respect to Parent or any
of its Subsidiaries or any group of corporations of which any of Parent and its
Subsidiaries has been a member in respect of any Taxes, and all deficiencies
proposed as a result of such actions, suits, proceedings, investigations, claims
or audits have been paid, reserved against or settled.
(d) Neither Parent nor any of its Subsidiaries has requested,
or been granted any waiver of any federal, state, local or foreign statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. No extension or waiver of time within
-36-
41
which to file any Tax Return of, or applicable to, Parent or any of its
Subsidiaries has been granted or requested which has not since expired.
(e) Other than with respect to its Subsidiaries, Parent is
not and has never been (nor does Parent have any liability for unpaid Taxes
because it once was) a member of an affiliated, consolidated, combined or
unitary group, and neither Parent nor any of its Subsidiaries is a party to any
Tax allocation or sharing agreement or is liable for the Taxes of any other
person under Treasury Regulations Section 1.1502-6 (or any similar provision of
state, local or foreign Law), as transferee or successor, by Contract, or
otherwise.
(f) Parent and its Subsidiaries have not made any payments,
are not obligated to make any payments, and are not a party to any agreements
that under any circumstances could obligate any of them to make any payments as
a result of the transactions contemplated by this Agreement, that will not be
deductible under Section 280G of the Code.
(g) Parent has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(h) Parent and each of its Subsidiaries have complied with
all applicable Laws relating to the payment and withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections 1441, 1442 and
3406 of the Code or similar provisions under any foreign Laws) and have, within
the time and in the manner required by Law, withheld from employee wages and
paid over to the proper Governmental Authorities all amounts required to be so
withheld and paid over under all applicable Laws.
(i) Neither Parent nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.
(j) None of Parent and its Subsidiaries will be required to
include any material amount in taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of a change in the method of
accounting for a taxable period ending prior to the Closing Date, any "closing
agreement" as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign Tax Laws) entered into prior to the Closing
Date, any sale reported on the installment method that occurred prior to the
Closing Date, or any taxable income attributable to any amount that is
economically accrued prior to the Closing Date.
3.13 Environmental Matters. Except as described on Section 3.13 of
the Parent Disclosure Schedule, and except as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect: (i) Parent
and each of its Subsidiaries complies and have complied, during all applicable
statute of limitations periods, with all applicable Environmental Laws, and
possess and comply, and have possessed and complied during all applicable
statute of limitations periods, with all Environmental Permits; (ii) there are
and have been no Materials of Environmental Concern or other conditions at any
property owned, operated, or otherwise used by Parent now or in the past, or at
any other location (including without limitation any facility to which Materials
of Environmental Concern from Parent or any of its Subsidiaries), that are in
circumstances that could reasonably be expected to give rise to
-37-
42
any liability of Parent or any of its Subsidiaries, or result in costs to Parent
or any of its Subsidiaries arising out of any Environmental Law; (iii) no
Litigation (including any notice of violation or alleged violation), under any
Environmental Law or with respect to any Materials of Environmental Concern to
which Parent or any of its Subsidiaries is, or to the Knowledge of Parent will
be, named as a party, or affecting their business, is pending or, to the
Knowledge of Parent, threatened; nor is Parent or any of its Subsidiaries the
subject of any investigation or the recipient of any request for information in
connection with any such Litigation or potential Litigation; (iv) there are no
Orders or agreements under any Environmental Law or with respect to any
Materials of Environmental Concern to which Parent or any of its Subsidiaries is
a party or affecting their business; (v) to the Knowledge of Parent, there are
no events, conditions, circumstances, practices, plans, or legal requirements
(in effect or reasonably anticipated), that could be expected to prevent Parent
from, or materially increase the burden on Parent of: (A) complying with
applicable Environmental Laws, or (B) obtaining, renewing, or complying with all
Environmental Permits; and (vi) to the Knowledge of Parent, each of the
foregoing representations and warranties is true and correct with respect to any
entity for which Parent or any of its Subsidiaries has assumed or retained
liability, whether by Contract or operation of Law.
3.14 Pooling; Tax Matters.
(a) Parent intends that the Merger be accounted for under the
"pooling of interests" method under the requirements of APB 16 and the
Regulations of the SEC.
(b) To Parent's Knowledge, neither Parent and Merger Sub nor
any of their Affiliates has taken or agreed to take any action or failed to take
any action that could reasonably be expected to prevent (a) the Merger from
being treated for financial accounting purposes as a "pooling of interests" in
accordance with APB 16 and the Regulations of the SEC or (b) the Merger from
constituting a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code.
(c) Parent has no Knowledge of any reason why it may not
receive a letter from PricewaterhouseCoopers, LLP (the "Parent's Accountants")
dated as of the Closing Date and addressed to Parent in which the Parent's
Accountants will concur with Parent's management's conclusion that no conditions
exist related to Parent that would preclude Parent from accounting for the
Merger as a "pooling of interests."
(d) Section 3.14(d) of the Parent Disclosure Schedule
contains a true and complete list of all Persons who may be deemed to be
Affiliates of Parent, excluding all of its Subsidiaries but including all
directors and executive officers of Parent.
3.15 Brokers. No broker, financial advisor, finder or investment
banker or other Person is entitled to any broker's, financial advisor's,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Merger Sub, except for Xxxxxx Xxxxxxx & Co. Incorporated (the
"Parent's Financial Advisors").
3.16 Opinion of Financial Advisor. The Board of Directors of Parent
has received the oral opinion of the Parent's Financial Advisors. to the effect
that as of the date hereof the
-38-
43
Exchange Ratio pursuant to this Agreement is fair from a financial point of view
to the holders of shares of the Parent Common Stock and will receive their
written opinion promptly after the date hereof. Parent shall provide copies of
such written opinion to the Company promptly after receipt.
3.17 Absence of Restrictions on Business Activities. Except as set
forth in Section 3.17 of the Parent Disclosure Schedule, there is no agreement
or Order binding upon Parent or any of its Subsidiaries or any of their assets
or properties which has had or could reasonably be expected to have the effect
of prohibiting or impairing any business practice of Parent or any of its
Subsidiaries or the conduct of business by Parent or any of its Subsidiaries as
currently conducted or as proposed to be conducted by Parent or any of its
Subsidiaries. Except as set forth in Section 3.17 of the Parent Disclosure
Schedule, neither Parent nor any of its Subsidiaries is subject to any
non-competition, non-solicitation or similar restriction on their respective
businesses.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, between the date hereof and the Effective
Time, except as expressly required or permitted by this Agreement or unless
Parent shall otherwise agree in writing in advance, the Company shall conduct
and shall cause the businesses of each of its Subsidiaries to be conducted only
in, and the Company and its Subsidiaries shall not take any action except in,
the ordinary course of business and in a manner consistent with past practice
and in compliance with applicable Laws. The Company shall use its reasonable
best efforts to preserve intact the business organization and assets of the
Company and each of its Subsidiaries, and to keep available the services of the
present officers, employees and consultants of the Company and each of its
Subsidiaries, to maintain in effect its Contracts and to preserve the present
relationships of the Company and each of its Subsidiaries with advertisers,
sponsors, customers, licensees, suppliers and other Persons with which the
Company or any of its Subsidiaries has business relations. By way of
amplification and not limitation, neither the Company nor any of its
Subsidiaries shall, between the date hereof and the Effective Time, directly or
indirectly do, or propose to do, any of the following without the prior written
consent of Parent:
(a) amend or otherwise change the Certificate of
Incorporation or Bylaws or equivalent organizational document of the Company or
any of its Subsidiaries or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
the Company or any of its Subsidiaries;
(b) issue, grant, sell, transfer, deliver, pledge, promise,
dispose of or encumber, or authorize the issuance, grant, sale, transfer,
deliverance, pledge, promise, disposition or encumbrance of, any shares of
capital stock of any class (common or preferred), or any options (other than
stock options under the 1999 Stock Option Plan granted to new employees
consistent with past practice in order to continue the employee recruitment
efforts of the Company as mutually and reasonably determined by Parent and the
Company) warrants, convertible or exchangeable securities or other rights of any
kind to acquire any shares of capital stock or any other ownership interest or
Stock-Based Rights of the Company or any of its
-39-
44
Subsidiaries (except for the issuance of Company Common Stock issuable pursuant
to the Outstanding Employee Options); adopt, ratify or effectuate a
stockholders' rights plan or agreement; or redeem, purchase or otherwise
acquire, directly or indirectly, any of the capital stock of the Company or
interest in or securities of any Subsidiary (except for the repurchase of a
stockholder's Company Common Stock upon termination of such stockholder's status
as an employee or consultant pursuant to existing repurchase agreements and the
Option Plans);
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock (except that a wholly owned Subsidiary of
the Company may declare and pay a dividend to its parent); 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 amend the terms of, repurchase, redeem or otherwise acquire,
or permit any Subsidiary to repurchase, redeem or otherwise acquire, any of its
securities or any securities of its Subsidiaries; or propose to do any of the
foregoing;
(d) sell, transfer, deliver, lease, license, sublicense,
mortgage, pledge, encumber or otherwise dispose of (in whole or in part), or
create, incur, assume or subject any Lien on, any of the assets of the Company
or any of its Subsidiaries (including any Intellectual Property), except for the
sale of goods, licenses of Intellectual Property involving annual revenue,
payments or liabilities of less than $100,000 or having a term of less than one
year, and dispositions of other immaterial assets, in any case, in the ordinary
course of business and in a manner consistent with past practice;
(e) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company of any of its Subsidiaries (other than the
Merger);
(f) acquire (by merger, consolidation, acquisition of stock
or assets or otherwise) or organize any corporation, limited liability company,
partnership, joint venture, trust or other entity or any business organization
or division thereof; incur any indebtedness for borrowed money or issue any debt
securities or any warrants or rights to acquire any debt security or assume,
guarantee or endorse or otherwise as an accommodation become responsible for,
the obligations of any Person, or make any loans, advances or enter into any
financial commitments; or authorize or make any capital expenditures which are,
in the aggregate, in excess of $1,000,000 for the Company and its Subsidiaries
taken as a whole;
(g) hire or terminate any employee or consultant, except in
the ordinary course of business consistent with past practice; increase the
compensation or fringe benefits (including, without limitation, bonus) payable
or to become payable to its officers or employees, except for increases in
salary or wages of employees of the Company or its Subsidiaries who are not
officers of the Company in the ordinary course of business consistent with past
practice, or loan or advance any money or other asset or property to, or grant
any bonus, severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the Company
or any of its Subsidiaries, or establish, adopt, enter into, terminate or amend
any Employee Plan or any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, stock purchase, restricted stock, pension,
retirement, deferred
-40-
45
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any current or former
directors, officers or employees, provided that nothing in this Section 4.1(g)
shall restrict the ability of the Company's Board of Directors to adopt
appropriate resolutions, with respect to persons who are officers or directors
of the Company, to cause the transactions relating to the Merger that may be
considered dispositions under Section 16 of the Exchange Act for such persons to
be exempt from such Section;
(h) change any accounting policies or procedures (including
procedures with respect to reserves, revenue recognition, payments of accounts
payable and collection of accounts receivable) unless required by a change in
Law or GAAP used by it;
(i) revalue in any material respect any of its assets,
including without limitation writing down the value of inventory or writing off
notes or accounts receivable, other than in the ordinary course of business;
(j) (v) other than in the ordinary course consistent with
past practice, enter into any agreement that if entered into prior to the date
hereof would be a Material Agreement set forth in Section 2.7(a) of the Company
Disclosure Schedule (excluding any confidentiality agreements permitted pursuant
to Section 4.2); (w) modify, amend in any material respect, transfer or
terminate any Material Agreement or waive, release or assign any rights or
claims thereto or thereunder; (x) enter into or extend any lease with respect to
Real Property with any third party; (y) modify, amend or transfer in any way or
terminate any Material Agreement, standstill or confidentiality agreement with
any third party, or waive, release or assign any rights or claims thereto or
thereunder; or (z) enter into, modify or amend any Contract to provide exclusive
rights or obligations;
(k) make any material Tax election other than an election in
the ordinary course of business consistent with the past practices of the
Company or settle or compromise any federal, state, local or foreign income tax
liability or agree to an extension of a statute of limitations;
(l) fail to file any Tax Returns when due (or, alternatively,
fail to file for available extensions) or fail to cause Tax Returns when filed
to be complete and accurate in all material respects;
(m) fail to pay any Taxes or other material debts when due;
(n) pay, discharge, satisfy or settle any Litigation or
waive, assign or release any material rights or claims. The Company and its
Subsidiaries shall not pay, discharge or satisfy any liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), except in
the ordinary course of business consistent with past practice in an amount or
value not exceeding $100,000 in any instance or series of related instances or
$500,000 in the aggregate or in accordance with their terms as in effect as of
the date hereof;
(o) engage in, enter into or amend any Contract, transaction,
indebtedness or other arrangement with, directly or indirectly, any of the
directors, officers, stockholders or other Affiliates of the Company and its
Subsidiaries, or any of their respective Affiliates or family members, except
for (i) amounts due as normal salaries and bonuses and in reimbursement of
-41-
46
ordinary expenses and (ii) those items existing as of the date hereof and listed
in Section 4.1(o) of the Company Disclosure Schedule;
(p) fail to maintain in full force and effect all
self-insurance and insurance, as the case may be, currently in effect;
(q) take any action that (without regard to any action taken,
or agreed to be taken, by Parent or any of its Affiliates) could reasonably be
expected to prevent (i) Parent from accounting for the business combination to
be effected by the Merger as a "pooling of interests" or (ii) the Merger from
qualifying as a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code;
(r) fail to make in a timely manner any filings with the SEC
required under the Securities Act or the Exchange Act or the rules or
regulations promulgated thereunder; or
(s) authorize, recommend, propose or announce an intention to
do any of the foregoing, or agree or enter into or amend any Contract or
arrangement to do any of the foregoing.
4.2 Solicitation of Other Proposals.
(a) From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to Article VII, the
Company and its Subsidiaries shall not, nor shall they authorize or permit any
of their respective officers, directors, affiliates or employees or any
investment banker, attorney or other advisor or representative retained by any
of them to, directly or indirectly, (i) solicit, initiate, encourage or induce
the making, submission or announcement of any Acquisition Proposal (as
hereinafter defined), (ii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action to facilitate any inquiries or the making of any
Acquisition Proposal, (iii) engage in discussions with any person with respect
to any Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Proposal; provided, however, that notwithstanding the foregoing,
prior to the adoption of this Agreement by the Company's stockholders, this
Section 4.2(a) shall not prohibit the Company from furnishing nonpublic
information regarding the Company and its subsidiaries to, or entering into
discussions or negotiations with, any person or group who has submitted (and not
withdrawn) to the Company an unsolicited, written, bona fide Acquisition
Proposal that the Board of Directors of the Company reasonably concludes (based
on the written advice of a financial advisor of national standing) may
constitute a Superior Offer (as hereinafter defined) if (1) neither the Company
nor any representative of the Company and its Subsidiaries shall have materially
violated any of the restrictions set forth in this Section 4.2, (2) the Board of
Directors of Company concludes in good faith, after consultation with its
outside legal counsel, that such action is required in order for the Board of
Directors of the Company to comply with its fiduciary obligations to the
Company's stockholders under applicable Law, (3) prior to furnishing any such
nonpublic information to, or entering into any such discussions with, such
person or group, the Company gives Parent written notice of the identity of such
person or group and all of the material terms and conditions of such Acquisition
-42-
47
Proposal and of the Company's intention to furnish nonpublic information to, or
enter into discussions with, such person or group, and the Company receives from
such person or group an executed confidentiality agreement containing terms at
least as restrictive with regard to the Company's confidential information as
the Confidentiality Agreement (as defined in Section 5.4), (4) the Company gives
Parent at least two business days advance notice of its intent to furnish such
nonpublic information or enter into such discussions, and (5) contemporaneously
with furnishing any such nonpublic information to such person or group, the
Company furnishes such nonpublic information to Parent (to the extent such
nonpublic information has not been previously furnished by the Company to
Parent). The Company and its subsidiaries will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding two sentences by any officer, director, employee, agent or
consultant of the Company or any of its Subsidiaries or any investment banker,
attorney, agent or other advisor or representative of the Company or any of its
subsidiaries shall be deemed to be a breach of this Section 4.2 by the Company.
(b) In addition to the obligations of the Company set forth
in paragraph (a) of this Section 4.2, the Company as promptly as reasonably
practicable shall advise Parent orally and in writing of any request for
non-public information which the Company reasonably believes could lead to an
Acquisition Proposal or of any Acquisition Proposal, or any inquiry with respect
to or which the Company reasonably should believe could lead to any Acquisition
Proposal, the material terms and conditions of such request, Acquisition
Proposal or inquiry, and the identity of the person or group making any such
request, Acquisition Proposal or inquiry. The Company will keep Parent informed
as promptly as reasonably practicable in all material respects of the status and
details (including material amendments or proposed amendments) of any such
request, Acquisition Proposal or inquiry.
(c) For the purposes of this Agreement, "Acquisition
Proposal" means any offer or proposal by a third party (other than the Merger)
relating to: (A) any acquisition or purchase from the Company by any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 30% interest in the total outstanding
voting securities of the Company or any of its subsidiaries or any tender offer
or exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 30% or more of the total outstanding voting
securities of the Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such
transaction hold less than 67% of the equity interests in the surviving or
resulting entity of such transaction; (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition, or disposition of more than 50% of
the assets of the Company; or (C) any liquidation or dissolution of the Company.
4.3 Conduct of Business by Parent Pending the Merger. Parent
covenants and agrees that, between the date hereof and the Effective Time,
Parent shall use its reasonable best efforts to preserve intact the business
organization and assets of Parent and each of its Subsidiaries, and to operate,
and cause each of its Subsidiaries to operate, according to plans and budgets,
to keep available the services of the present officers, employees and
consultants of Parent and each of its
-43-
48
Subsidiaries, to maintain in effect its contracts and to preserve the present
relationships of Parent and each of its Subsidiaries with advertisers, sponsors,
customers, licensees, suppliers and other Persons with which Parent or any of
its Subsidiaries has business relations. Neither Parent nor any of its
Subsidiaries shall, between the date hereof and the Effective Time, directly or
indirectly do, or propose to do, any of the following without the prior written
consent of the Company:
(a) amend or otherwise change the Certificate of
Incorporation or Bylaws or equivalent organizational document of Parent or any
of its Subsidiaries;
(b) declare, set aside or pay any cash dividend or cash
distribution in respect of its capital stock (except that a wholly owned
Subsidiary of the Company may declare and pay a dividend to its parent);
(c) take any action that (without regard to any action taken,
or agreed to be taken, by Parent or any of its Affiliates) could reasonably be
expected to prevent (i) Parent from accounting for the business combination to
be effected by the Merger as a "pooling of interests" or (ii) the Merger from
qualifying as a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code; or
(d) fail to make in a timely manner any filings with the SEC
required under the Securities Act or the Exchange Act or the rules or
regulations promulgated thereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Registration Statement; Proxy Statement/Prospectus.
(a) As promptly as reasonably practicable following the date
hereof, the Company and Parent shall prepare and file with the SEC mutually
acceptable proxy materials which shall constitute the Joint Proxy
Statement/Prospectus (such proxy statement/prospectus, and any amendments or
supplements thereto, the "Joint Proxy Statement/Prospectus") and Parent shall
prepare and file the Registration Statement. The Joint Proxy
Statement/Prospectus will be included in and will constitute a part of the
Registration Statement as Parent's prospectus. The Registration Statement and
the Joint Proxy Statement/Prospectus shall comply as to form in all material
respects with the applicable provisions of the Securities Act and the Exchange
Act and the rules and regulations thereunder. Each of Parent and the Company
shall use reasonable best efforts to have the Registration Statement declared
effective by the SEC and to keep the Registration Statement effective as long as
is necessary to consummate the Merger and the transactions contemplated thereby.
(b) Parent and the Company shall, as promptly as practicable
after receipt thereof, provide the other party copies of any written comments
and advise the other party of any oral comments, with respect to the Joint Proxy
Statement/Prospectus received from the SEC. Parent will provide the Company with
a reasonable opportunity to review and comment on any amendment or supplement to
the Registration Statement prior to filing such with the SEC, and will provide
the Company with a copy of all such filings made with the SEC. Notwithstanding
-44-
49
any other provision herein to the contrary, no amendment or supplement
(including by incorporation by reference) to the Joint Proxy
Statement/Prospectus or the Registration Statement shall be made without the
approval of both parties, which approval shall not be unreasonably withheld or
delayed; provided, that with respect to documents filed by a party which are
incorporated by reference in the Registration Statement or the Joint Proxy
Statement/Prospectus, this right of approval shall apply only with respect to
information relating to the other party or its business, financial condition or
results of operations.
(c) Parent will use reasonable best efforts to cause the
Joint Proxy Statements/Prospectus to be mailed to Parent's stockholders, and the
Company will use reasonable best efforts to cause the Joint Proxy
Statement/Prospectus to be mailed to the Company's stockholders, in each case
after the Registration Statement is declared effective under the Securities Act.
(d) Each party will advise the other party, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective, the issuance of any stop order, the suspension of the qualification
of the Parent Common Stock issuable in connection with the Merger for offering
or sale in any jurisdiction, or any request by the SEC for amendment of the
Joint Proxy Statement/Prospectus or the Registration Statement. If at any time
prior to the Effective Time any information relating to Parent or the Company,
or any of their respective affiliates, officers or directors, should be
discovered by Parent or the Company which should be set forth in an amendment or
supplement to any of the Registration Statement or the Joint Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other party hereto and, to the extent required by Law, rules or
regulations, an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and disseminated to the stockholders of
Parent and the Company.
5.2 Company Stockholders' Meeting.
(a) Promptly after the date hereof, the Company shall take
all action necessary in accordance with the applicable Law and its Certificate
of Incorporation and Bylaws and the rules of NASDAQ to call, give notice of,
convene and hold a meeting of its stockholders (the "Company Stockholders'
Meeting") to be held as promptly as practicable, and in any event (to the extent
permissible under applicable Law) within 60 days after the declaration of
effectiveness of the Registration Statement, for the purpose of voting upon
adoption of this Agreement. Subject to Section 5.2(c), the Company shall use its
reasonable best efforts to solicit from its stockholders proxies in favor of the
adoption of this Agreement and will take all other action necessary to secure
the vote or consent of its stockholders required by the rules of NASDAQ and
applicable Law to obtain such approvals. Notwithstanding anything to the
contrary contained in this Agreement, the Company (i) may adjourn or postpone
the Company Stockholders' Meeting to the extent necessary to ensure that any
necessary supplement or amendment to the Joint Proxy Statement/Prospectus is
provided to the Company's stockholders in advance of a vote on this Agreement or
(ii) shall (unless Parent otherwise consents in writing) adjourn or postpone the
Company Stockholders' Meeting, if as of the time for which the Company
Stockholders' Meeting
-45-
50
is originally scheduled (as set forth in the Joint Proxy Statement/Prospectus )
or subsequently rescheduled or reconvened, there are insufficient shares of
Company Common Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the Company Stockholders' Meeting.
The Company shall ensure that the Company Stockholders' Meeting is called,
noticed, convened, held and conducted, and that all proxies solicited by the
Company in connection with the Company Stockholders' Meeting are solicited, in
compliance with applicable Law, the Company's Certificate of Incorporation and
Bylaws, the rules of NASDAQ and all other applicable legal requirements. The
Company's obligation to call, give notice of, convene and hold the Company
Stockholders' Meeting in accordance with this Section 5.2(a) shall not be
limited or affected by the commencement, disclosure, announcement or submission
to Company of any Acquisition Proposal or Superior Offer (as defined below), or
by any withdrawal, amendment or modification of the recommendation of the Board
of Directors of the Company with respect to this Agreement or the Merger.
(b) Subject to Section 5.2(c): (i) the Board of Directors of
the Company shall recommend that the Company's stockholders vote in favor of and
adopt and approve this Agreement and approve the Merger at the Company
Stockholders' Meeting; (ii) the Joint Proxy Statement/Prospectus shall include a
statement to the effect that the Board of Directors of the Company has
unanimously recommended that Company's stockholders vote in favor of and
adoption of this Agreement at the Company Stockholders' Meeting; and (iii)
neither the Board of Directors of the Company nor any committee thereof shall
withdraw, amend or modify, or propose or resolve to withdraw, amend or modify in
a manner adverse to Parent, the recommendation of the Board of Directors of the
Company that the Company's stockholders vote in favor of adoption of this
Agreement.
(c) Nothing in this Agreement shall prevent the Board of
Directors of the Company from withholding, withdrawing, amending or modifying
its recommendation in favor of the Merger if (i) a Superior Offer (as defined
below) is made to the Company and is not withdrawn, (ii) the Company shall have
provided written notice to Parent (a "Notice of Superior Offer") advising Parent
that the Company has received a Superior Offer, specifying all of the material
terms and conditions of such Superior Offer and identifying the person or entity
making such Superior Offer, (iii) Parent shall not have, within three business
days of Parent's receipt of the Notice of Superior Offer, made an offer that the
Company's Board of Directors by a majority vote determines in its good faith
judgment (after having received the written advice of a financial advisor of
national standing) to be at least as favorable to the Company's stockholders as
such Superior Offer (it being agreed that the Board of Directors of the Company
shall convene a meeting to consider any such offer by Parent promptly following
the receipt thereof), (iv) the Board of Directors of the Company concludes in
good faith, after consultation with its outside counsel, that, in light of such
Superior Offer, the withholding, withdrawal, amendment or modification of such
recommendation is required in order for the Board of Directors of Company to
comply with its fiduciary duties to the Company's stockholders under applicable
Law and (v) the Company shall not have violated any of the restrictions set
forth in Section 4.2 or this Section 5.2. The Company shall provide Parent with
at least two business days prior notice of any meeting of the Company's Board of
Directors at which the Company's Board of Directors is to consider any
Acquisition Proposal to determine whether such Acquisition Proposal is a
Superior Offer. Nothing contained in this Section 5.2(c) shall limit the
Company's obligation to hold and convene the Company Stockholders' Meeting
(regardless of whether the
-46-
51
recommendation of the Board of Directors of Company shall have been withdrawn,
amended or modified).
(d) For the purposes of this Agreement, "Superior Offer"
shall mean an unsolicited, bona fide written offer made by a third party to
consummate any of the following transactions: (i) a merger or consolidation
involving the Company pursuant to which the stockholders of the Company
immediately preceding such transaction hold less than 50% of the equity interest
in the surviving or resulting entity of such transaction; (ii) a sale or other
disposition by the Company of assets representing in excess of 50% of the fair
market value of the Company's business immediately prior to such sale; or (iii)
the acquisition by any person or group (including, without limitation, by way of
a tender offer or an exchange offer or a two step transaction involving a tender
offer followed with reasonable promptness by a merger involving the Company),
directly or indirectly, of ownership of 51% or more of the then outstanding
shares of capital stock of the Company, on terms that the Board of Directors of
the Company determines, in its reasonable judgment (based on the written advice
of a financial advisor of national standing) to be more favorable to the Company
stockholders than the terms of the Merger; provided, however, that any such
offer shall not be deemed to be a "Superior Offer" unless the Company or such
third party has obtained bona fide firm commitment letters for any financing
required to consummate the transaction contemplated by such offer.
(e) Nothing contained in this Agreement shall prohibit the
Company or its Board of Directors from taking and disclosing to its stockholders
a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act.
5.3 Parent Stockholders Meeting.
(a) Promptly after the date hereof, Parent will take all
action necessary in accordance with the applicable Law and its Certificate of
Incorporation and Bylaws to call, give notice of, convene and hold a meeting of
its stockholders (the "Parent Stockholders' Meeting") to be held as promptly as
practicable, and in any event (to the extent permissible under applicable Law)
within 60 days after the declaration of effectiveness of the Registration
Statement, for the purpose of approving the issuance of shares of Parent Common
Stock in connection with the Merger. Parent will use its reasonable best efforts
to solicit from its stockholders proxies in favor of approving the issuance of
Parent Common Stock in connection with the Merger and will take all other action
necessary to secure the vote or consent of its stockholders required by the
rules of NASDAQ and applicable Law to obtain such approvals. Notwithstanding
anything to the contrary contained in this Agreement, Parent may adjourn or
postpone the Parent Stockholders' Meeting to the extent necessary to ensure that
any necessary supplement or amendment to the Joint Proxy Statement/Prospectus is
provided to Parent's stockholders in advance of a vote on the approval of the
issuance of shares of Parent Common Stock in connection with the Merger or, if
as of the time for which Parent Stockholders' Meeting is originally scheduled
(as set forth in the Joint Proxy Statement/Prospectus ) there are insufficient
shares of Parent Common Stock represented (either in person or by proxy) to
constitute a quorum necessary to conduct the business of the Parent
Stockholders' Meeting. Parent shall ensure that the Parent Stockholders' Meeting
is called, noticed, convened, held and conducted, and that all proxies solicited
by Parent in connection with the Parent Stockholders' Meeting are
-47-
52
solicited, in compliance with applicable Law, its Certificate of Incorporation
and Bylaws and the rules of NASDAQ.
(b) (i) The Board of Directors of Parent shall recommend that
Parent's stockholders approve the issuance of shares of Parent Common Stock in
connection with the Merger at the Parent Stockholders' Meeting; (ii) the Joint
Proxy Statement/Prospectus shall include a statement to the effect that the
Board of Directors of Parent has recommended that Parent's stockholders approve
such issuance of shares at the Parent Stockholders' Meeting; and (iii) neither
the Board of Directors of Parent nor any committee thereof shall withdraw, amend
or modify, or propose or resolve to withdraw, amend or modify in a manner
adverse to Company, the recommendation of the Board of Directors of Parent that
Parent's stockholders approve such issuance of shares.
(c) Nothing contained in this Agreement shall prohibit Parent
or its Board of Directors from taking and disclosing to its stockholders a
position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange
Act.
5.4 Access to Information; Confidentiality.
(a) Upon reasonable notice, the Company shall (and shall
cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives and agents of Parent
(collectively "Parent Representatives"), reasonable access, during the period
prior to the Effective Time, to all its properties, books, Contracts,
commitments and records and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to the other all information
concerning its business, properties, books, Contracts, commitments, record and
personnel as Parent may reasonably request. The Company shall (and shall cause
each of its Subsidiaries to) make available to the other party the appropriate
individuals for discussion of such entity's business, properties and personnel
as Parent or the Parent Representatives may reasonably request. No investigation
pursuant to this Section 5.4(a) shall affect any representations or warranties
of the parties herein or the conditions to the obligations of the parties
hereto.
(b) Upon reasonable notice, Parent shall (and shall cause
each of its Subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives and agents of the Company (collectively
"Company Representatives"), reasonable access, during the period prior to the
Effective Time, to all its properties, books, Contracts, commitments and records
and, during such period, Parent shall (and shall cause each of its Subsidiaries
to) furnish promptly to the other all information concerning its business,
properties, books, Contracts, commitments, record and personnel as the Company
may reasonably request. Parent shall (and shall cause each of its Subsidiaries
to) make available to the other party the appropriate individuals for discussion
of such entity's business, properties and personnel as the Company or the
Company Representatives may reasonably request. No investigation pursuant to
this Section 5.4(b) shall affect any representations or warranties of the
parties herein or the conditions to the obligations of the parties hereto.
(c) The parties hereto shall keep all information obtained
pursuant to Section 5.4(a) and (b) confidential in accordance with the terms of
the Confidential Non-
-48-
53
Disclosure Agreement (the "Confidentiality Agreement"), between Parent and the
Company. Anything contained in the Confidentiality Agreement to the contrary
notwithstanding, the Company and Parent hereby agree that each such party may
issue press release(s) or make other public announcements in accordance with
Section 5.14.
5.5 Reasonable Best Efforts; Further Assurances.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each party hereto shall use its reasonable best efforts to take,
or cause to be taken, all actions, and do, or cause to be done, and to assist
and cooperate with the other party or parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated hereby,
and by the Related Agreements. The Company and Parent shall use its reasonable
best efforts to (i) as promptly as practicable, obtain all Approvals (including
those referred to in Sections 2.6(a) and 2.6(b) and Sections 2.6(a) and 2.6(b)
of the Company Disclosure Schedule), and the Company and Parent shall make all
filings under applicable Law required in connection with the authorization,
execution and delivery of this Agreement by the Company and Parent and the
consummation by them of the transactions contemplated hereby and thereby,
including the Merger (in connection with which Parent and the Company will
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party and its
advisors prior to filings and, if requested, will accept all reasonable
additions, deletions or changes suggested in connection therewith); (ii) furnish
all information required for any application or other filing to be made pursuant
to the DGCL or any other Law or any applicable Regulations of any Governmental
Authority (including all information required to be included in the Joint Proxy
Statement/Prospectus or the Registration Statement) in connection with the
transactions contemplated by this Agreement and the Related Agreements; and
(iii) lift, rescind or mitigate the effects of any injunction or other Order
adversely affecting the ability of any party hereto to consummate the
transactions contemplated hereby and thereby and to prevent, with respect to any
threatened or such injunction or other Order, the issuance or entry thereof,
provided, however, that neither Parent nor any of its Affiliates shall be under
any obligation to (x) make proposals, execute or carry out agreements or submit
to Orders providing for the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories
of assets of Parent, any of its Affiliates, including its Subsidiaries, the
Company or the holding separate of the Company Common Stock or imposing or
seeking to impose any limitation on the ability of Parent or any of its
Affiliates, including its Subsidiaries, to conduct their business or own such
assets or to acquire, hold or exercise full rights of ownership of Company
Common Stock, or (y) otherwise take any step to avoid or eliminate any
impediment which may be asserted under any Law governing competition, monopolies
or restrictive trade practices which, in the reasonable judgment of Parent,
might result in a limitation of the benefit expected to be derived by Parent as
a result of the transactions contemplated hereby or might adversely affect the
Company or Parent or any of Parent's Affiliates, including its Subsidiaries.
Neither party hereto will take any action which could reasonably be expected to
result in any of the representations or warranties made by such party pursuant
to Articles II or III, as the case may be, becoming untrue or inaccurate in any
material respect.
-49-
54
(b) The parties hereto shall use their reasonable best
efforts to satisfy or cause to be satisfied all of the conditions precedent that
are set forth in Article VI, as applicable to each of them, and to cause the
transactions contemplated by this Agreement to be consummated. Each party
hereto, at the reasonable request of another party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
(c) The Company and Parent shall cooperate with one another:
(i) in connection with the preparation of the
Registration Statement and the Joint Proxy Statement/Prospectus ;
(ii) in connection with the preparation of any filing
required by the HSR Act or any Foreign Competition Laws;
(iii) in determining whether any action by or in respect
of, or filing with, any Governmental Authority or other third party, is
required, or any Approvals are required to be obtained from parties in
connection with the consummation of the transactions contemplated hereby;
(iv) in seeking any Approvals or making any filings,
including furnishing information required in connection therewith or with the
Registration Statement or the Joint Proxy Statement/Prospectus , and seeking
timely to obtain any such Approvals, or making any filings;
(v) in connection with the admission to NASDAQ of the
Parent Common Stock to be issued in the Merger; and
(vi) in order to facilitate the achievement of the
benefits reasonably anticipated from the Merger.
(d) The Company shall use its reasonable best efforts to
cause its Affiliates and other Persons to transfer and assign all rights
necessary for the Company to continue to conduct its business consistent with
historical operations and as currently conducted, pursuant to documentation and
in a manner reasonably acceptable to Parent.
5.6 Stock Options and Stock Plan; Options.
(a) At the Effective Time, each Outstanding Employee Option,
whether vested or unvested, shall be assumed by Parent. Each such Outstanding
Employee Option so assumed by Parent under this Agreement shall continue to
have, and be subject to, the same terms and conditions set forth in the Option
Plans, option agreements thereunder and other relevant documentation immediately
prior to the Effective Time (including, without limitation, any restrictions on
transfer, vesting provisions and restrictive covenants), except that such
Outstanding Employee Option shall be exercisable solely for that number of whole
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were purchasable under such Outstanding Employee
Option immediately prior to the
-50-
55
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock, and the per-share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Outstanding Employee Option shall be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Outstanding Employee Option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, and rounding the resulting exercise price up to the
nearest whole cent; provided, further, that in the case of any Outstanding
Employee Option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code ("ISOs"), the option price, the
number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 424(a) of the Code. The parties intend that the assumption of
options provided for under this Section 5.6 shall meet the requirements of
Section 424(a) of the Code, and this Section 5.6 shall be interpreted in a
manner consistent with such intent.
(b) Parent shall reserve for issuance a sufficient number of
shares of Parent Common Stock for delivery upon exercise of Outstanding Employee
Options assumed by Parent under this Agreement.
(c) The vesting of each Outstanding Employee Option shall not
accelerate as a result of, or in connection with, the transactions contemplated
hereby, except to the extent required by the existing terms of the Option Plan
or option agreement pursuant to which it was granted. The Company shall take no
action, and shall ensure that no discretion is exercised by the Board of
Directors or any committee thereof or any other body or Person so as to cause
the vesting of any Outstanding Employee Option or any other warrant or right to
acquire shares of Company Common Stock to accelerate.
(d) The parties shall use their reasonable best efforts to
mutually agree with respect to the treatment of the Purchase Plan in the Merger
on terms not inconsistent with the Purchase Plan or the terms of this Agreement;
provided, however, that in no event may Company Common Stock be purchased under
the Purchase Plan after the Effective Time.
5.7 Form S-8. Parent agrees to file a registration statement on
Form S-8 for the shares of Parent Common Stock issuable with respect to assumed
Outstanding Employee Options as soon as is reasonably practicable after the
Effective Time (and in any event within 30 days thereof).
5.8 Employee Benefits.
(a) The Company agrees to provide Parent with, and to cause
each of its Subsidiaries to provide Parent with, reasonable access to its
employees during normal working hours following the date of this Agreement, to
among other things, provide information about Parent to such employees. All
communications by Parent with Company employees shall be conducted in a manner
that does not disrupt or interfere with the Company's efficient and orderly
operation of its business.
(b) All employees of the Company shall be eligible to
participate in the health, vacation and other employee benefit plans of Parent
or a Subsidiary of the Parent to
-51-
56
substantially the same extent as such benefits are provided to employees of
Parent in similar positions and at similar grade levels (it being understood
that such employees shall be eligible to begin to participate (i) in Parent's
employee stock purchase plan upon the commencement of the first new offering
period after the Effective Time and in accordance with the eligibility
provisions of such plan, and (ii) in the other Parent Employee Benefit Plans in
accordance with the terms of such plans; provided, however, that in the case of
plans for which the Company maintains a plan offering the same type of benefit,
such eligibility need not be offered by Parent or its Subsidiary until the
corresponding plan of the Company ceases to be available after the Effective
Time). A Parent Employee Benefit Plan may, if so continued by Parent or its
Subsidiaries, include continuation of a Benefit Plan of the Company. As soon as
administratively feasible following the Effective Time, Parent agrees to take
all reasonable actions necessary to transition the Company's employees into
Parent's or its Subsidiaries' employee benefit plans as contemplated by the
first sentence of this Section 5.8(b). Further, until such time that the
Company's employees are covered under an employee benefit plan of Parent, they
shall continue to be covered under the corresponding Company plan that offers
the same type of benefit. Parent also agrees to provide each Company employee
with full credit under any Parent Plan which is an Employee Benefit Plan for
services as an employee of the Company prior to the Effective Time for purposes
of eligibility, vesting and the determination of the level of benefits under any
Parent plan which is an Employee Benefit Plan (including vacation, but excluding
benefit accruals under a defined benefit pension plan) and shall receive credit
under any Parent health plan for any deductible, copayment or out-of-pocket
limits applicable to such employee to the extent such amounts have been paid by
such employee during the calendar year in which such employee first becomes
eligible for coverage under a Parent plan.
(c) The Company agrees to take all actions necessary to
amend, merge, freeze or terminate any or all compensation and benefit plans,
effective at and contingent upon the Closing Date, as requested in writing by
Parent. Without limiting the generality of the foregoing, if requested by Parent
in writing at least 10 days prior to the Effective Time, the Company shall cause
to be adopted prior to the Effective Time resolutions of the Company's Board of
Directors to cease all contributions to the Company 401(k) Plan (the "401(k)
Plan"), and to terminate the 401(k) Plan at least one day prior to the Effective
Time. Such resolutions shall provide (to the extent required under Section 411
of the Code) that all participants shall be fully vested in their account
balances under the 401(k) Plan. Such resolutions shall also authorize
distributions of 401(k) Plan balances to participants (to the extent permitted
under Section 401(k)(10) of the Code) as soon as practicable following the
Effective Time and following the Company's receipt from the Internal Revenue
Service of a favorable determination letter regarding the tax-qualified status
of the 401(k) Plan following its termination.
(d) The Company shall deliver to Parent an executed copy of
such resolutions as soon as practicable following their adoption by Company's
Board of Directors and shall fully comply with such resolutions. To the extent
permitted by Parent's 401(k) plan, Parent shall (i) cause a tax-qualified
defined contribution plan maintained by Parent or a subsidiary of Parent (the
"Parent 401(k) Plan") to accept rollovers (including direct rollovers) from the
401(k) plan maintained for the benefit of employees of the Company and its
Affiliates in respect of distributions made on account of the transactions
contemplated by this Agreement and (ii) allow loan balances of participants who
have borrowed from the Parent 401(k) Plan, if any, to be rolled over without
requiring that the participant first repay the loan. In the event that the
Parent 401(k)
-52-
57
Plan does not permit such loans, Parent shall use commercially reasonable
efforts to amend such plan to permit rollovers of such loans in a direct
transfer from the 401(k) Plan.
(e) The Board of Directors of Parent shall, to the extent
permitted by applicable Law, take or cause to be taken all actions necessary to
obtain approval in the form required by Rule 16b-3 of the Exchange Act so that,
with respect to persons who will or may become officers or directors of Parent,
the transactions relating to the Merger that may be considered acquisitions
under such Rule for such persons will be exempt from Section 16 of the Exchange
Act.
5.9 Parent Option Pool. As is reasonably practicable after the
Effective Time, subject to the approval of its Board of Directors, Parent will
grant such number of stock options to purchase shares of Parent Common Stock to
the employees of the Company (the "Company Option Grant") as mutually agreed by
the Company and Parent prior to the Effective Time in order to reasonably
provide incentives for, and to retain, such employees after the Effective Time,
and as described in a letter to be delivered to Parent prior to the Closing Date
and approved by Parent promptly after the Effective Time and consistent with
standard Parent practices.
5.10 Parent Board of Directors. The Board of Directors of Parent
will take all actions reasonably necessary, such that, effective upon the
Effective Time, R. Xxxxx Xxxxx ("Xx. Xxxxx") and one other person, as determined
by Parent's Board of Directors and the Company, shall be appointed to Parent's
Board of Directors.
5.11 Pooling; Reorganization.
(a) The Company shall not take, or permit any controlled
Affiliate of the Company to take, any action that could reasonably be expected
to prevent the Merger from being treated (i) for financial accounting purposes
as a "pooling of interests" under GAAP; it being understood and agreed that if
the Company's Accountants advise the Company in writing that such an action
would not prevent the Merger from being so treated, such action will be
conclusively deemed not to constitute a breach of this Section 5.11 or (ii) as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
(b) The Company shall use its reasonable best efforts to
obtain an executed affiliate pooling agreement substantially in the form
attached hereto as Exhibit E (each, a "Company Affiliate Pooling Agreement")
from each of the Persons identified in Section 2.24(d) of the Company Disclosure
Schedule concurrently with the execution of this Agreement and thereafter from
any other person who may be deemed an affiliate of the Company regarding
compliance with Rule 145 under the Securities Act and the requirements for
accounting treatment of the Merger as a "pooling of interests" under APB 16, and
the Regulations of the SEC.
(c) Parent shall not take or permit any controlled Affiliate
of Parent to take, any action that could reasonably be expected to prevent the
Merger from being treated (i) for financial accounting purposes as a "pooling of
interests" under GAAP; it being understood and agreed that if Parent's
Accountants, advises Parent in writing that such an action would not
-53-
58
prevent the Merger from being so treated, such action will be conclusively
deemed not to constitute a breach of this Section 5.11; or (ii) as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
(d) Parent shall use its reasonable efforts to obtain an
executed affiliate pooling agreement substantially in the form attached hereto
as Exhibit F (each, a "Parent Affiliate Pooling Agreement") from each of the
Persons identified in Section 5.11(d) of the Parent Disclosure Schedule
regarding compliance with the requirements for accounting treatment of the
Merger as a "pooling of interests."
5.12 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent, and
Parent shall give prompt notice to the Company, of the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which results
in any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect (or, in the case of any representation or
warranty qualified by its terms by materiality or Material Adverse Effect, then
untrue or inaccurate in any respect) and any failure of the Company, Parent or
Merger Sub, as the case may be, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.12 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
(b) Each of the Company and Parent shall give prompt notice
to the other of (i) any notice or other communication from any Person alleging
that the Approval of such Person is or may be required in connection with the
Merger or the Related Agreements, (ii) any notice or other communication from
any Governmental Authority in connection with the Merger or the Related
Agreements, (iii) any Litigation, relating to or involving or otherwise
affecting the Company or its Subsidiaries or Parent that relates to the Merger
or the Related Agreements; (iv) the occurrence of a default or event that, with
notice or lapse of time or both, will become a default under any Material
Agreement of the Company; and (v) any change that could reasonably be expected
to have a Material Adverse Effect on the Company or Parent or is likely to delay
or impede the ability of either Parent or the Company to consummate the
transactions contemplated by this Agreement or the Related Agreements or to
fulfill their respective obligations set forth herein or therein.
(c) Each of the Company and Parent shall give (or shall cause
their respective Subsidiaries to give) any notices to third Persons, and use,
and cause their respective Subsidiaries to use, its reasonable best efforts to
obtain any consents from third Persons (i) necessary, proper or advisable to
consummate the transactions contemplated by this Agreement, (ii) otherwise
required under any Contracts in connection with the consummation of the
transactions contemplated hereby or (iii) required to prevent a Material Adverse
Effect on the Company or Parent from occurring. If any party shall fail to
obtain any such consent from a third Person, such party shall use its reasonable
best efforts, and will take any such actions reasonably requested by the other
parties, to limit the adverse effect upon the Company and Parent, their
respective Subsidiaries, and their respective businesses resulting, or which
would result after the Effective Time, from the failure to obtain such consent.
-54-
59
5.13 Listing on NASDAQ. Parent shall use its reasonable best efforts
to cause the Parent Common Stock to be issued in the Merger to be admitted for
trading on NASDAQ, subject to official notice of issuance.
5.14 Public Announcements. Parent and the Company shall consult with
and obtain the approval of the other party before issuing any press release or
other public announcement with respect to the Merger or this Agreement and shall
not issue any such press release prior to such consultation and approval, except
as may be required by Law or any listing agreement related to the trading of the
shares of either party on any national securities exchange or national automated
quotation system, in which case the party proposing to issue such press release
or make such public announcement shall use its reasonable best efforts to
consult in good faith with the other party before issuing any such press release
or making any such public announcement. The parties have agreed on the form of a
joint press release announcing the execution of this Agreement.
5.15 Takeover Laws. If any form of anti-takeover statute, Regulation
or charter provision or Contract is or shall become applicable to the Merger or
the transactions contemplated hereby or by the Related Agreements, the Company,
Merger Sub and Parent and their respective Boards of Directors shall grant such
Approvals and take such actions as are necessary under such Laws and provisions
so that the transactions contemplated hereby and thereby may be consummated as
promptly as practicable on the terms contemplated hereby and thereby and
otherwise act to eliminate or minimize the effects of such Law, provision or
Contract on the transactions contemplated hereby or thereby.
5.16 Accountant's Letters.
(a) The Company shall use its reasonable best efforts to
cause to be delivered to Parent a "comfort" letter of the Company's Accountants,
dated a date within two business days before the date on which the Registration
Statement shall become effective and addressed to Parent and the Company, in
form and substance reasonably satisfactory and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
(b) Parent shall use its reasonable best efforts to cause to
be delivered to the Company a "comfort" letter of Parent's Accountants dated a
date within two business days before the date on which the Registration
Statement shall become effective and addressed to Parent and the Company, in
form and substance reasonably satisfactory and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
5.17 Indemnification; Directors and Officer Insurance.
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements between the Company and
its directors and officers as of the Effective Time (the "Indemnified Parties")
and any indemnification or expense advancement provisions under the Company's
Certificate of Incorporation or Bylaws as in effect on the date
-55-
60
hereof. The Certificate of Incorporation and Bylaws of the Surviving Corporation
will contain provisions with respect to exculpation and indemnification and
expense advancement that are at least as favorable to the Indemnified Parties as
those contained in the Certificate of Incorporation and Bylaws of Company as in
effect on the date hereof, which provisions will not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who,
immediately prior to the Effective Time, were directors, officers, employees or
agents of the Company, unless such modification is required by Law.
(b) Parent shall cause to be maintained for a period of six
(6) years from the Effective Time the Company's current directors and officers
insurance policy (the "Company's D&O Insurance") to the extent that it provides
coverage for events occurring prior to the Effective Time for all Persons who
are directors and officers of the Company on the date of this Agreement, so long
as the annual premium therefor would not be in excess of 150% of the last annual
premium paid prior to the date of this Agreement (such amount, the "Maximum
Premium"). Upon request by Parent, the Company shall use its reasonable best
efforts to extend coverage under the Company's D&O Insurance by obtaining a
six-year "tail" policy (provided, that the lump sum payment to purchase such
coverage does not exceed three times the Maximum Premium) and such "tail" policy
shall satisfy Parent's obligations under this Section 5.14(a). Parent's
obligations under this Section 5.14(a) shall also be satisfied if Parent's
directors and officers insurance provides (or is amended to provide)
substantially similar coverage and coverage levels for events occurring prior to
the Effective Time for Persons who are directors and officers of the Company on
the date of this Agreement. If the Company's existing directors and officers
insurance expires, is terminated or canceled during such six-year period or a
"tail" policy cannot be purchased on the terms set forth above and Parent cannot
or determines not to satisfy its obligations under this Section 5.14(a) pursuant
to the preceding sentence, Parent shall use its reasonable best efforts to cause
to be obtained as much directors and officers insurance as can be obtained for
the remainder of such period for an annualized premium not in excess of the
Maximum Premium, on terms and conditions no less advantageous than the Company's
D&O Insurance.
(c) The provisions of this Section 5.17 are intended to be
for the benefit of, and shall be enforceable by, each Person entitled to the
benefits hereof and the heirs and representatives of such Person.
5.18 Company Stockholders' Agreement. The Company shall use its
reasonable best efforts, on behalf of Parent and pursuant to the request of
Parent, to cause each stockholder of the Company named on the signature pages to
the Company Stockholders' Agreement to execute and deliver to Parent,
concurrently with the execution of this Agreement, and to comply with, the
Company Stockholders' Agreement. The Company acknowledges and agrees to be bound
by and comply with the provisions of Section 3.1(a) and (b) of the Company
Stockholders' Agreement as if a party thereto with respect to transfers of
record of ownership of shares of the Company Common Stock, and agrees to notify
the transfer agent for any Company Common Stock and provide such documentation
and do such other things as may be necessary to effectuate the provisions of
such Company Stockholders' Agreement.
-56-
61
5.19 Strategic Relationship Agreement. Contemporaneously with the
execution and delivery of this Agreement, the Company shall deliver to Parent an
executed version of the Strategic Relationship Agreement. The Company agrees to
fully perform to the fullest extent permitted under applicable Law its
obligations under the Strategic Relationship Agreement.
ARTICLE VI
CONDITIONS OF MERGER
6.1 Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective; no stop order
suspending the effectiveness of the Registration Statement or the use of the
Joint Proxy Statement/Prospectus shall have been issued by the SEC, and no
proceedings for that purpose shall have been initiated or, to the Knowledge of
Parent or the Company, threatened by the SEC.
(b) Stockholder Approval. (i) This Agreement shall have been
adopted by the requisite vote of the stockholders of the Company, in accordance
with the DGCL and the Certificate of Incorporation and Bylaws of the Company;
and (ii) the issuance of shares of Parent Common Stock pursuant to this
Agreement shall have been approved by the requisite vote of the stockholders of
Parent in accordance with the DGCL, the Certificate of Incorporation and Bylaws
of Parent and the rules of NASDAQ.
(c) NASDAQ Listing. The shares of Parent Common Stock
issuable to the stockholders of the Company pursuant to this Agreement shall
have been admitted for trading on NASDAQ subject to official notice of issuance.
(d) HSR Act and Foreign Competition Laws. All applicable
waiting periods or approvals under the HSR Act and Foreign Competition Laws
shall have expired or been terminated or received.
(e) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other Order (whether
temporary, preliminary or permanent) issued by any Court of competent
jurisdiction or other legal restraint or prohibition shall be in effect which
prevents the consummation of the Merger on substantially the same terms and
conferring on Parent substantially all the rights and benefits as contemplated
herein, nor shall any proceeding brought by any Governmental Authority, domestic
or foreign, seeking any of the foregoing be pending, and there shall not be any
action taken, or any Law or Order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger on
substantially the same terms and conferring on Parent substantially all the
rights and benefits as contemplated herein illegal.
(f) Tax Opinions. Parent and the Company shall have received
written opinions of, respectively, Xxxx Xxxxxxx and Venture Law Group, in form
and substance reasonably satisfactory to them to the effect that the Merger will
constitute a reorganization
-57-
62
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code. The
issuance of each of such opinions shall be conditioned on the receipt by such
tax counsel of representation letters from each of Parent, Merger Sub and the
Company. The specific provisions of each such representation letter shall be in
form and substance reasonably satisfactory to such tax counsel, and each such
representation letter shall be dated on or before the date of such opinion and
shall not have been withdrawn or modified in any material respect.
6.2 Additional Conditions to Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to effect the Merger are also subject
to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement and the Related
Agreements, shall be true and correct on and as of the Effective Time, with the
same force and effect as if made on and as of the Effective Time (other than
representations and warranties which address matters only as of a particular
date, in which case such representations and warranties shall be true and
correct, on and as of such particular date), except for any failure of such
representations and warranties to be true and correct which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; provided, however, for purposes of this Section 6.2(a), the
representations and warranties of the Company shall be construed as if they did
not contain any qualification that refers to a Material Adverse Effect or
materiality; and Parent and Merger Sub shall have received a certificate to such
effect signed by the Chief Executive Officer and Chief Financial Officer of the
Company.
(b) Agreements and Covenants. The Company shall have
performed or complied with all agreements and covenants required by this
Agreement and the Related Agreements to be performed or complied with by it in
all material respects on or prior to the Effective Time and Parent and Merger
Sub shall have received a certificate to such effect signed by the Chief
Executive Officer and Chief Financial Officer of the Company.
(c) Third Party Consents. Parent shall have received
evidence, in form and substance reasonably satisfactory to it, that those
Approvals of Governmental Authorities and other third parties set forth in
Section 2.6(a) or (b) of the Company Disclosure Schedule (or not described in
Section 2.6(a) or (b) of the Company Disclosure Schedule but required to be so
described) have been obtained, except where failure to have been so obtained,
either individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.
(d) Letter from Parent's Accountants; Pooling of Interests.
Parent shall have received a letter from Parent's Accountants in form and
substance reasonably satisfactory to Parent, dated the Closing Date, concurring
with management's conclusions that the transactions contemplated by this
Agreement, including the Merger, will qualify as a "pooling of interests"
business combination in accordance with GAAP and the criteria of APB 16 and the
Regulations of the SEC.
(e) Company Affiliate Pooling Agreements. Each of the Persons
identified in Section 2.24(d) of the Company Disclosure Schedule shall have
executed and delivered Company Affiliate Pooling Agreement with Parent which
shall be in full force and effect.
-58-
63
(f) Related Agreements. Each of the Company Stockholders'
Agreement, the Strategic Relationship Agreement, and the Company Affiliate
Pooling Agreements (collectively, the "Related Agreements") shall be in full
force and effect as of the Effective Time and become effective in accordance
with the respective terms thereof and the actions required to be taken
thereunder by the parties thereto prior to the Effective Time shall have been
taken, and each Person who or which is required or contemplated by the parties
hereto to be a party to any Related Agreement who or which did not theretofore
enter into such Related Agreement shall execute and deliver such Related
Agreement, except actions required under the Company Stockholders' Agreement
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on or materially impede the ability of the
parties to consummate the Merger as contemplated herein.
(g) Employment Agreements. The option agreements and
employment offer letters between Parent and Xx. Xxxxx shall be in full force and
effect and shall not have been anticipatorially breached or repudiated by the
individuals party thereto.
(h) Material Adverse Effect. There shall have been no events,
changes or effects, individually or in the aggregate, with respect to the
Company or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect on the Company or its Subsidiaries.
6.3 Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct on and as of the Effective Time (other than representations and
warranties which address matters only as of a particular date, in which case
such representations and warranties shall be true and correct on and as of such
particular date), except for any failure of such representations and warranties
to be true and correct which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of
Parent or Merger Sub to consummate the Merger; provided, however, for purposes
of this Section 6.3(a), the representations and warranties of Parent and Merger
Sub shall be construed as if they did not contain any qualification that refers
to a Material Adverse Effect or materiality; and the Company shall have received
a certificate to such effect signed by the Chief Executive Officer and the Chief
Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall
have performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by them in all material respects on
or prior to the Effective Time, and the Company shall have received a
certificate to such effect signed by the Chief Executive Officer and the Chief
Financial Officer of Parent.
(c) Material Adverse Effect. There shall have been no events,
changes or effects, individually or in the aggregate, with respect to Parent or
any of its Subsidiaries that could reasonably be expected to have a Material
Adverse Effect on Parent or its Subsidiaries.
-59-
64
(d) Board of Directors. The Board of Directors of Parent
shall have taken all such actions, such that, effective upon the Effective Time,
Xx. Xxxxx and one other person designated by the Company, who shall be
reasonably satisfactory to Parent's Board of Directors, shall have been
appointed to Parent's Board of Directors.
(e) Parent Affiliate Pooling Agreements. Each of the Parent
Affiliate Pooling Agreements shall be in full force and effect as of the
Effective Time.
(f) Employment Agreements. The option agreements and
employment offer letters between Parent and Xx. Xxxxx shall be in full force and
effect and shall not have been anticipatorially breached or repudiated by
Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) By mutual written consent duly authorized by the Boards
of Directors of Parent and the Company;
(b) By either Parent or the Company if the Merger shall not
have been consummated on or before November 30, 2000; provided, however, that
the right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose willful failure to fulfill any material obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Merger to have been consummated on or before such date;
(c) By either Parent or the Company, if a Court or
Governmental Authority shall have issued an Order or taken any other action, in
each case which has become final and non-appealable and which restrains, enjoins
or otherwise prohibits the Merger;
(d) By either Parent or the Company, if, (i) at the Company
Stockholders' Meeting (including any adjournment or postponement thereof), the
requisite vote of the stockholders of the Company to adopt this Agreement shall
not have been obtained; or (ii) at the Parent Stockholders' Meeting (including
any adjournment or postponement thereof), the requisite vote of the stockholders
of Parent to approve the issuance of shares of Parent Common Stock in connection
with the Merger shall not have been obtained;
(e) By Parent, if the Company or Board of Directors of the
Company or any committee thereof shall have (i) approved or recommended, or
proposed to approve or recommend, any Acquisition Proposal other than the
Merger, (ii) breached its obligation to present and recommend the adoption of
this Agreement by the stockholders of the Company, or withdrawn or modified, or
proposed to withdraw or modify, in a manner adverse to Parent or Merger Sub, its
recommendation or approval of the Merger, this Agreement or the transactions
contemplated hereby, (iii) failed to mail the Joint Proxy Statement/Prospectus
to the stockholders of the Company when the Joint Proxy Statement/Prospectus was
available for mailing or failed
-60-
65
to include therein such approval and recommendation (including the
recommendation that the stockholders of the Company vote in favor of the
adoption of the Merger Agreement), (iv) upon a request by Parent to publicly
reaffirm the approval and recommendation of the Merger, this Agreement and the
transactions contemplated hereby, failed to do so within ten days after such
request is made, (v) entered, or caused the Company or any Subsidiary to enter,
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Acquisition Proposal, (vi) materially
breached any provision of Section 4.2 or Section 5.2, (vii) materially breached
the Strategic Relationship Agreement or (viii) resolved or announced its
intention to do any of the foregoing;
(f) By Parent, if (i) any Person (other than Parent or an
Affiliate of Parent) acquires beneficial ownership of or the right to acquire
20% or more of the outstanding shares of capital stock or other equity interests
of the Company or any Subsidiary in a transaction or series of transactions that
has been approved by the Board of Directors of the Company; or (ii) a tender or
exchange offer relating to securities of the Company shall have been commenced
by a Person unaffiliated with Parent, and the Company shall not have sent to its
security holders pursuant to Rule 14e-2 promulgated under the Securities Act,
within ten Business Days after such tender or exchange offer is first published,
sent or given, a statement that the Company recommends rejection of such tender
or exchange offer.
(g) By Parent, if neither Parent nor Merger Sub is in
material breach of its obligations under this Agreement, and if (i) at any time
that any of the representations and warranties of the Company herein become
untrue or inaccurate such that Section 6.2(a) would not be satisfied (treating
such time as if it were the Effective Time for purposes of this Section 7.1(g))
or (ii) there has been a breach on the part of the Company of any of its
covenants or agreements contained in this Agreement such that Section 6.2(b)
would not be satisfied (treating such time as if it were the Effective Time for
purposes of this Section 7.1(g)), and, in both case (i) and case (ii), such
breach (if curable) has not been cured within 30 days after notice to the
Company;
(h) By the Company, if it is not in material breach of its
obligations under this Agreement, and if (i) at any time that any of the
representations and warranties of Parent or Merger Sub herein become untrue or
inaccurate such that Section 6.3(a) would not be satisfied (treating such time
as if it were the Effective Time for purposes of this Section 7.1(h)) or (ii)
there has been a breach on the part of Parent or Merger Sub of any of their
respective covenants or agreements contained in this Agreement such that Section
6.3(b) would not be satisfied (treating such time as if it were the Effective
Time for purposes of this Section 7.1(g)), and such breach (if curable) has not
been cured within 30 days after notice to Parent; or
(i) By Parent, if any of the stockholders of the Company that
is a party to the Company Stockholders' Agreement shall have breached or failed
to perform in any material respect any representation, warranty, covenant or
agreement contained therein, that, individually or in the aggregate, would
reasonably be expected to materially impede the ability of the parties to
consummate the Merger as contemplated herein.
7.2 Effect of Termination. Except as provided in this Section 7.2
and Section 7.3, in the event of the termination of this Agreement pursuant to
Section 7.1, this Agreement (other
-61-
66
than this Section 7.2, Sections 5.4(c), 5.14, and 7.3 and Article VIII, which
shall survive such termination) shall forthwith become void, and there will be
no liability on the part of Parent, Merger Sub or the Company or any of their
respective officers or directors to the other and all rights and obligations of
any party hereto will cease, except that nothing herein will relieve any party
from liability for any breach, prior to termination of this Agreement in
accordance with its terms, of any representation, warranty, covenant or
agreement contained in this Agreement.
7.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated; provided, however, that Parent and the Company
shall share equally all fees and expenses, other than attorneys' fees, incurred
in relation to the printing and filing of the Joint Proxy Statement/Prospectus
(including any preliminary materials related thereto), the Registration
Statement (including financial statements and exhibits) and any amendments or
supplements thereto and all filing fees payable in connection with filings made
under the HSR Act or Foreign Competition Laws.
(b) In the event that Parent terminates this Agreement
pursuant to (x) Section 7.1(e), Section 7.1(f), or Section 7.1(i), then the
Company shall pay to Parent, no later than the second Business Day after such
termination of this Agreement, a fee in cash equal to $50,000,000 plus the
amount of Parent Expenses (as defined below), or (y) Section 7.1(d)(i), then (A)
the Company shall pay to Parent no later than the second Business Day after such
termination of this Agreement, a fee in cash equal to $10,000,000 plus the
amount of Parent Expenses and (B) if, and only if, within twelve months
following termination of this Agreement, the Company or any of its Subsidiaries
enters into a definitive agreement with a third party with respect to a Business
Combination, then the Company shall pay to Parent, not later than two Business
Days after the date of consummation of the transaction pursuant to such
definitive agreement or a successor agreement, $40,000,000 (such amounts in
either (x) or (y), the "Termination Fee") which Termination Fee and Parent
Expenses shall be payable by wire transfer of immediately available funds to an
account specified by Parent. As used in this Agreement, the term "Parent
Expenses" shall mean those fees and expenses actually incurred by Parent in
connection with this Agreement, the Related Agreements and the transactions
contemplated hereby and thereby, including fees and expenses of counsel,
investment bankers, accountants, experts, consultants and other Parent
Representatives. As used in this Section 7.2, "Business Combination" mean any of
the following transactions (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company pursuant to which the stockholders of the Company immediately preceding
such transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (ii) a sale or other
disposition by the Company of assets representing in excess of 50% of the
aggregate fair market value of the Company's business immediately prior to such
sale, or (iii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by Company), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of the Company.
-62-
67
(c) The Company acknowledges that the agreements contained in
Section 7.3(b) is 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 to pay in a timely manner the
amounts due pursuant to Section 7.3(b) and, in order to obtain such payment,
Parent makes a claim that results in a judgment against the Company for the
amounts set forth in Section 7.3(b), the Company shall pay to Parent its
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in Section 7.3(b) at the prime rate of Citibank, N.A. in effect on the
date such payment was required to be made. Payment of the fees described in
Section 7.3(b) shall not be in lieu of damages incurred in the event of breach
of this Agreement. Nothing in this Section 7.3 shall be deemed to be exclusive
of any other rights or remedies any party may have hereunder or under any
Related Agreement or at law or in equity for any breach of this Agreement or any
of the Related Agreements.
7.4 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after adoption of
this Agreement by the stockholders of the Company, no amendment may be made
which would reduce the amount or change the type of consideration into which
each share of Company Common Stock shall be converted upon consummation of the
Merger or as otherwise prohibited by the DGCL. This Agreement may not be amended
except by an instrument in writing signed by all of the parties hereto.
7.5 Waiver. At any time prior to the Effective Time, any party
hereto may extend the time for the performance of any of the obligations or
other acts required hereunder, waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations and Warranties. The
representations, warranties and agreements of each party hereto will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any Person controlling any such party or
any of their officers, directors, representatives or agents whether prior to or
after the execution of this Agreement. The representations and warranties in
this Agreement will terminate at the Effective Time.
8.2 Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by nationally recognized overnight courier or by registered
or certified mail, postage prepaid, return receipt requested, or by electronic
mail, with a copy thereof to be delivered or sent as provided above or by
facsimile or telecopier, as follows:
(a) If to Parent or Merger Sub:
-63-
68
webMethods, Inc.
0000 Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
President and CEO
With a copy to:
Xxxx Xxxxxxx
0000 Xxxxxxxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxxxxx
(b) If to the Company:
Active Software, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: R. Xxxxx Xxxxx,
Chairman, CEO, and Founder
With a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Xxxxxx X. Xxxxxxxxx
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be received (i) in the case of personal
delivery, nationally recognized overnight courier or registered or certified
mail, on the date of such delivery and (ii) in the case of facsimile or
telecopier or electronic mail, upon confirmed receipt.
8.3 Disclosure Schedules. The Company Disclosure Schedule and the
Parent Disclosure Schedule each shall be divided into sections corresponding to
the sections and subsections of this Agreement. Disclosure of any fact or item
in any section of a party's Disclosure Schedule shall not, should the existence
of the fact or item or its contents be relevant to any other Section of the
Disclosure Schedule, be deemed to be disclosed with respect to such other
section.
8.4 Certain Definitions. For purposes of this Agreement, the term:
"Affiliate" means any Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person, including, with respect to the
Company, any corporation, partnership, limited liability company or joint
venture in which the Company (either alone, or through or together with any
other Subsidiary) has, directly or indirectly, an interest of 10% or more.
-64-
69
"Balance Sheet" means the balance sheet of the Company
contained in the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000.
"beneficial owner" (including the terms "beneficial ownership"
and "to beneficially own") with respect to a Person's ownership of any
securities means such Person or any of such Person's Affiliates or associates
(as defined in Rule 12b-2 under the Exchange Act) is deemed to beneficially own,
directly or indirectly, within the meaning of Rule 13d-3 under the Exchange Act.
"Business Day" means any day other than a Saturday, Sunday or
day on which banks are permitted to close in the State of New York or the State
of California.
"Contract" means any contract, plan, undertaking,
understanding, agreement, license, lease, note, mortgage or other binding
commitment, whether written or oral.
"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of stock, as trustee or executor, by Contract or
credit arrangement or otherwise.
"Court" means any court or arbitration tribunal of the United
States, any domestic state, or any foreign country, and any political
subdivision or agency thereof.
"Exchange Agent" means any bank or trust company organized
under the Laws of the United States or any of the states thereof and having a
net worth in excess of $100 million designated and appointed to act as the
exchange agent in the Merger.
"Foreign Competition Laws" means any foreign statutes, rules,
Regulations, Orders, administrative and judicial directives, and other foreign
Laws, that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization, lessening of competition or
restraint of trade.
"GAAP" means United States generally accepted accounting
principles, consistently applied.
"Governmental Authority" means any governmental agency or
authority of the United States, any domestic state, or any foreign country, and
any political subdivision or agency thereof, and includes any authority having
governmental or quasi-governmental powers, including any administrative agency
or commission.
"Intellectual Property" means all (i) patents, patent
applications, patent disclosures, (ii) trademarks, service marks, trade dress,
trade names, logos and corporate names and registrations and applications for
registration thereof together with all of the goodwill associated therewith,
(iii) copyrights (registered or unregistered) and copyrightable works and
registrations and applications for registration thereof, together with all
authors' and moral rights, (iv) mask works and registrations and applications
for registration thereof, (v) computer software (including, without limitation,
source code, object code, macros, scripts, objects, routines, modules and other
components), data, data bases and documentation thereof, (vi) trade secrets
-65-
70
and other confidential information (including, without limitation, ideas,
formulas, compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), know-how, products, processes, techniques,
methods, research and development information and results, drawings,
specifications, designs, plans, proposals, technical data, marketing plans and
customer, prospect and supplier lists and information), (vii) other intellectual
property rights, (viii) "technical data" as defined in 48 Code of Federal
Regulations, Chapter 1, and (ix) copies and tangible embodiments thereof (in
whatever form or medium).
"Knowledge" means (i) in the case an individual, knowledge of a
particular fact or other matter if (A) such individual is actually aware of such
fact or other matter, or (B) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonable investigation concerning the existence of such fact or
other matter, and (ii) in the case of an entity (other than an individual) such
entity will be deemed to have "Knowledge" of a particular fact or other matter
if any individual who is serving, or has at any time served, as a director,
officer, partner, executor, or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge (as contemplated by clause (A)
above) of such fact or other matter.
"Law" means all laws, statutes, ordinances and Regulations of
any Governmental Agency including all decisions of Courts having the effect of
law in each such jurisdiction.
"Lien" means any mortgage, pledge, security interest,
attachment, encumbrance, lien (statutory or otherwise), license, claim, option,
conditional sale agreement, right of first refusal, first offer, termination,
participation or purchase or charge of any kind (including any agreement to give
any of the foregoing); provided, however, that the term "Lien" shall not include
(i) statutory liens for Taxes, which are not yet due and payable or are being
contested in good faith by appropriate proceedings, (ii) statutory or common law
liens to secure landlords, lessors or renters under leases or rental agreements
confined to the premises rented, (iii) deposits or pledges made in connection
with, or to secure payment of, workers' compensation, unemployment insurance,
old age pension or other social security programs mandated under applicable
Laws, (iv) statutory or common law liens in favor of carriers, warehousemen,
mechanics and materialmen, to secure claims for labor, materials or supplies and
other like liens, and (v) restrictions on transfer of securities imposed by
applicable state and federal securities Laws.
"Litigation" means any claim, suit, action, arbitration, cause
of action, claim, complaint, criminal prosecution, investigation, demand letter,
or proceeding, whether at law or at equity, before or by any Court or
Governmental Authority, any arbitrator or other tribunal.
"Malicious Code" means (i) any virus, Trojan horse, worm, or
other software or data designed to permit unauthorized access, or to disable,
erase, modify, deactivate or otherwise harm software, hardware, or data and (ii)
any back door, time bomb, drop dead device, protect code, data destruct key, or
other software or data designed to disable a computer program automatically with
the passage of time or under the control of any person or entity other than the
licensee.
-66-
71
"Material Adverse Effect" means, with respect to a Person, any
fact, event, change, development, circumstance or effect that (i) is materially
adverse to the business, condition (financial or otherwise), results of
operations, assets, liabilities, properties or prospects of such Person and its
Subsidiaries, taken as a whole, or (ii) in the event such Person is a party to
this Agreement, would materially impair or delay the ability of the Company to
perform its obligations hereunder or under the Related Agreements, including the
consummation of the Merger; provided that, a Material Adverse Effect shall not
include (x) changes in general economic conditions, (y) changes affecting the
industry generally in which such Person operates (provided that such changes do
not affect such Person in a substantially disproportionate manner), or (z)
changes in the trading prices or volume of such Person's capital stock.
"Order" means any judgment, order, writ, injunction, ruling or
decree of, or any settlement under the jurisdiction of, any Court or
Governmental Authority.
"Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, limited liability company,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act).
"Products" means the software, hardware or firmware now or
within the past three (3) years offered for sale or license by the Company,
together with all user documentation, data, scripts, macros, modules and other
files and information supplied, sold or licensed with such software, hardware
and firmware.
"Regulation" means any rule or regulation of any Governmental
Authority having the effect of Law.
"Software" means any and all (i) computer programs, including
any and all software implementations of algorithms, models and methodologies,
whether in source code or object code, (ii) databases and compilations,
including any and all data and collections of data, whether machine readable, on
paper or otherwise, (iii) descriptions, flow-charts and other work product used
to design, plan, organize and develop any of the foregoing, (iv) the technology
supporting, and the contents and audiovisual displays of any Internet site(s)
operated by or on behalf of Company or any of its Subsidiaries, and (v) all
documentation and other works of authorship, including user manuals and training
materials, relating to any of the foregoing.
"Subsidiary" or "Subsidiaries" of the Company, the Surviving
Corporation, Parent or any other Person means any corporation, partnership,
joint venture, limited liability company or other legal entity of which the
Company, the Surviving Corporation, Parent or such other Person, as the case may
be, owns, directly or indirectly, greater than 50% of the stock or other equity
interests the holder of which is generally entitled to vote as a general partner
or for the election of the board of directors or other governing body of a
corporation, partnership, joint venture, limited liability company or other
legal entity.
8.5 Interpretation. When a reference is made in this Agreement to
Sections, subsections, Schedules or Exhibits, such reference shall be to a
Section, subsection, Schedule or Exhibit to this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without
-67-
72
limitation." The word "herein" and similar references mean, except where a
specific Section or Article reference is expressly indicated, the entire
Agreement rather than any specific Section or Article. The table of contents and
the headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
8.6 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
8.7 Entire Agreement. This Agreement and the Related Agreements
(including all exhibits and schedules hereto and thereto) and other documents
and instruments delivered in connection herewith constitute the entire agreement
and supersedes all prior agreements and undertakings (other than the
Confidentiality Agreement), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and thereof.
8.8 Assignment. This Agreement shall not be assigned by operation
of Law or otherwise, except that Parent and Merger Sub may assign all or any of
the rights of Merger Sub hereunder to another wholly owned subsidiary of the
Parent, provided that no such assignment shall relieve the assigning party of
its obligations hereunder.
8.9 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except as set forth in
Section 5.17, nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
8.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor will any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
8.11 Governing Law; Enforcement. This Agreement and the rights and
duties of the parties hereunder shall be governed by, and construed in
accordance with, the Law of the State of Delaware. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or any Related 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 or any Related Agreement and to enforce specifically the terms
and provisions of this Agreement or any Related Agreement in the Court of
Chancery of the State of Delaware or the Federal District Court for
-68-
73
the District of Delaware, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto,
(a) consents to submit itself to the personal jurisdiction of the Court of
Chancery of the State of Delaware and Federal District Court for the District of
Delaware in the event any dispute arises out of this Agreement or any Related
Agreement or any transaction contemplated hereby or thereby, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (c) agrees that it will not bring any
action relating to this Agreement or any Related Agreement or any transaction
contemplated hereby or thereby in any court other than the Court of Chancery of
the State of Delaware or the Federal District Court for the District of Delaware
and (d) waives any right to trial by jury with respect to any action related to
or arising out of this Agreement or Related Agreement or any transaction
contemplated hereby or thereby.
8.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[Signatures Next Page]
-69-
74
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
WEBMETHODS, INC.
By: /s/ Xxxxxxx Xxxxxxx
----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President and CEO
WOLF ACQUISITION, INC.
By: /s/ Xxxxxxx Xxxxxxx
----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President and CEO
ACTIVE SOFTWARE, INC.
By: /s/ R. Xxxxx Xxxxx
----------------------------------
Name: R. Xxxxx Xxxxx
Title: Chairman, CEO and Founder
