Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
MTS SYSTEMS CORPORATION,
BADGER MERGER CORP.,
AND
DSP TECHNOLOGY INC.
Dated as of March 23, 1999
TABLE OF CONTENTS
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ARTICLE 1 THE MERGER; CONVERSION OF SHARES.................................1
1.1 THE MERGER.......................................................1
1.2 EFFECTIVE TIME...................................................1
1.3 CONVERSION OF SHARES AND OPTIONS.................................2
1.4 NO APPRAISAL RIGHTS..............................................3
1.5 EXCHANGE OF COMPANY COMMON STOCK.................................3
1.6 EXCHANGE OF MERGER SUBSIDIARY COMMON STOCK.......................5
1.7 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION........5
1.8 BYLAWS OF THE SURVIVING CORPORATION..............................6
1.9 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION..............6
ARTICLE 2 CLOSING..........................................................6
2.1 TIME AND PLACE...................................................6
2.2 FILINGS AT THE CLOSING...........................................6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................6
3.1 ORGANIZATION.....................................................7
3.2 AUTHORIZATION....................................................7
3.3 CAPITALIZATION...................................................8
3.4 REPORTS AND FINANCIAL STATEMENTS.................................9
3.5 ABSENCE OF UNDISCLOSED LIABILITIES...............................9
3.6 CONSENTS AND APPROVALS..........................................10
3.7 COMPLIANCE WITH LAWS............................................10
3.8 LITIGATION......................................................11
3.9 ABSENCE OF MATERIAL ADVERSE CHANGES.............................11
3.10 OFFICERS, DIRECTORS AND EMPLOYEES...............................11
3.11 TAXES...........................................................12
3.12 CONTRACTS.......................................................12
3.13 INTELLECTUAL PROPERTY RIGHTS....................................13
3.14 BENEFIT PLANS...................................................14
3.15 MINUTE BOOKS....................................................15
3.16 NO FINDERS......................................................16
3.17 PROXY STATEMENT.................................................16
3.18 FAIRNESS OPINION................................................16
3.19 STATE TAKEOVER LAWS.............................................16
3.20 MERGER FILINGS..................................................16
3.21 ENVIRONMENTAL LAWS..............................................16
3.22 ACCOUNTING MATTERS..............................................17
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TABLE OF CONTENTS
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(continued)
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY
4.1 ORGANIZATION....................................................17
4.2 AUTHORIZATION...................................................18
4.3 CAPITALIZATION..................................................19
4.4 CONSENTS AND APPROVALS..........................................19
4.5 REPORTS AND FINANCIAL STATEMENTS................................20
4.6 REGISTRATION STATEMENT..........................................21
4.7 NO FINDERS......................................................20
4.8 ABSENCE OF UNDISCLOSED LIABILITIES..............................21
4.9 COMPLIANCE WITH LAWS............................................21
4.10 LITIGATION......................................................21
4.11 ABSENCE OF MATERIAL ADVERSE CHANGES.............................21
4.12 REORGANIZATION..................................................22
4.13 MERGER FILINGS..................................................22
4.14 ACCOUNTING MATTERS..............................................22
4.15 TAXES...........................................................22
4.16 CONTRACTS.......................................................22
4.17 BENEFIT PLANS...................................................23
ARTICLE 5 COVENANTS.......................................................24
5.1 CONDUCT OF BUSINESS OF THE COMPANY..............................24
5.2 CONDUCT OF BUSINESS OF PARENT...................................27
5.3 NO SOLICITATION.................................................29
5.4 ACCESS AND INFORMATION..........................................30
5.5 APPROVAL OF STOCKHOLDERS; PROXY STATEMENT;
REGISTRATION STATEMENT..........................................31
5.6 CONSENTS........................................................33
5.7 AFFILIATES' LETTERS.............................................33
5.8 EXPENSES........................................................33
5.9 FURTHER ACTIONS.................................................34
5.10 REGULATORY APPROVALS............................................34
5.11 CERTAIN NOTIFICATIONS...........................................35
5.12 [INTENTIONALLY OMITTED].........................................35
5.13 NASDAQ LISTING APPLICATION......................................35
5.14 LETTERS OF THE COMPANY'S AND PARENT'S ACCOUNTANTS...............35
5.15 SUBSIDIARY SHARES...............................................36
5.16 BENEFIT PLANS AND EMPLOYEE MATTERS..............................36
5.17 OBLIGATIONS OF MERGER SUBSIDIARY................................37
5.18 PLAN OF REORGANIZATION..........................................37
5.19 POOLING.........................................................37
5.20 TAX MATTERS.....................................................37
5.21 INDEMNIFICATION OF OFFICERS AND DIRECTORS.......................38
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(continued)
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ARTICLE 6 CLOSING CONDITIONS..............................................38
6.1 CONDITIONS TO OBLIGATIONS OF PARENT, MERGER
SUBSIDIARY AND THE COMPANY.....................................38
6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY.......39
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY........................40
ARTICLE 7 TERMINATION AND ABANDONMENT.....................................41
7.1 TERMINATION.....................................................41
7.2 EFFECT OF TERMINATION...........................................43
ARTICLE 8 MISCELLANEOUS...................................................44
8.1 AMENDMENT AND MODIFICATION......................................44
8.2 WAIVER OF COMPLIANCE; CONSENTS..................................44
8.3 INVESTIGATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.......44
8.4 NOTICES.........................................................44
8.5 ASSIGNMENT......................................................45
8.6 GOVERNING LAW...................................................45
8.7 COUNTERPARTS....................................................46
8.8 KNOWLEDGE.......................................................46
8.9 INTERPRETATION..................................................46
8.10 PUBLICITY.......................................................46
8.11 ENTIRE AGREEMENT................................................46
8.12 SEVERABILITY....................................................47
8.13 SPECIFIC PERFORMANCE............................................47
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT (the "Agreement") is dated as of March 23, 1999, by and
among MTS SYSTEMS CORPORATION, a Minnesota corporation ("Parent"), BADGER MERGER
CORP., a Delaware corporation and wholly-owned subsidiary of Parent ("Merger
Subsidiary"), and DSP TECHNOLOGY INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary,
and the Company have each approved the merger of Merger Subsidiary with and into
the Company (the "Merger") upon the terms and subject to the conditions set
forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests" transaction within the meaning of
Accounting Principles Board Opinion No. 16 and the rules and regulations of the
Securities and Exchange Commission (the "SEC"); and
WHEREAS, the parties hereto desire to make certain representations,
warranties, and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants, and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.2 hereof), Merger Subsidiary
shall be merged with and into the Company in accordance with the provisions of
the Delaware General Corporation Law (the "DGCL"), whereupon the separate
corporate existence of Merger Subsidiary shall cease. The Company shall
continue as the surviving corporation (the "Surviving Corporation") in the
Merger. From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, immunities, powers, and franchises and be
subject to all the restrictions, disabilities, and duties of the Company and
Merger Subsidiary, all as more fully described in the DGCL.
1.2 EFFECTIVE TIME. As soon as practicable after each of the conditions
set forth in Article 6 has been satisfied or waived on the Closing Date (as
defined in Section 2.1), the Company will file, or cause to be filed, with the
Secretary of State of the State of Delaware a Certificate of Merger for the
Merger, which Certificate shall be in the form required by and executed in
accordance with the applicable provisions of the DGCL. The Merger shall become
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effective at the time such filing is made or, if agreed to by Parent and the
Company, such later time or date set forth in the Certificate of Merger (the
"Effective Time").
1.3 CONVERSION OF SHARES AND OPTIONS. At the Effective Time, by virtue
of the Merger and without any action on the part of the Company, Parent,
Merger Subsidiary or any holder of any share of capital stock, or holder of
options to purchase capital stock, of the Company or Merger Subsidiary:
(a) The holders of shares of common stock of the Company, $.001 par
value per share ("Company Common Stock") and holders of option(s) to purchase
Company Common Stock ("Company Option(s)") will receive an aggregate of
2,077,000 shares of the common stock of Parent ("Parent Common Stock"), $.25
par value per share (the "Merger Consideration"), such that each share of
Company Common Stock outstanding immediately prior to the Effective Time and
each Option Share (as defined in Section 1.3(b)) will represent only the right
to receive a fraction of a share of Parent Common Stock equal to the Merger
Consideration divided by the sum of (i) the total number of shares of Company
Common Stock outstanding immediately prior to the Effective Time and (ii) the
total number of Option Shares represented by the Company Options outstanding
immediately prior to the Effective Time (the "Per Share Merger
Consideration").
(b) Each Company Option outstanding immediately prior to the
Effective Time shall represent the number of Option Shares ("Option Shares")
determined by (i) dividing the Option Value by the Final Company Value and
(ii) multiplying that result by the number of shares subject to each option.
The "Option Value" shall mean the Final Company Value less the option exercise
price, provided, that with respect to any portion of a Company Option which is
not vested immediately prior to the Effective Time, the "Option Value" shall
mean (i) the fair value of the unvested portion of the Company Option (as
determined pursuant to an appropriate discounting method mutually agreed to by
the parties), less (ii) the option exercise price for such unvested portion of
the option. The "Final Company Value" shall mean the value obtained by adding
(x) the Merger Consideration multiplied by the Final Parent Price and (y) the
aggregate exercise price of the Company Options outstanding immediately prior
to the Effective Time, and dividing the sum of (x) and (y) by the sum of the
aggregate number of shares of Company Common Stock outstanding immediately
prior to the Effective Time and the aggregate number of shares of Company
Common Stock subject to Company Options outstanding immediately prior to the
Effective Time. The "Final Parent Price" shall mean the closing sale price of
a share of Parent Common Stock as reported by the Nasdaq National Market on
the trading day immediately prior to the Effective Time.
(c) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is held in the treasury of the
Company shall be canceled in accordance with applicable laws without payment of
any consideration therefor and without any conversion thereof.
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(d) Each share of any other class of capital stock of the Company
(other than Company Common Stock) shall be canceled without payment of any
consideration therefor and without any conversion thereof.
(e) Each share of common stock of Merger Subsidiary, par value $.01
per share ("Merger Subsidiary Common Stock"), issued and outstanding immediately
prior to the Effective Time shall be converted into one share of the common
stock of the Surviving Corporation, par value $.001 per share ("Surviving
Corporation Common Stock").
1.4 NO APPRAISAL RIGHTS. The parties acknowledge that, pursuant to
Section 262(b)(1) of the DGCL, no holders of Company Common Stock shall have
appraisal rights in connection with the Merger.
1.5 EXCHANGE OF COMPANY COMMON STOCK.
(a) At or prior to the Effective Time, Parent shall cause the
Company's stock transfer agent, or such other agent as is mutually agreed to
by the parties, to act as exchange agent (the "Exchange Agent") hereunder. As
promptly as practicable after the Effective Time, Parent shall cause the
Exchange Agent to mail (i) to each holder of record (other than Parent, Merger
Subsidiary, the Company, or any wholly owned subsidiary of Parent or the
Company) of a certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock
("Company Certificates") a form letter of transmittal (which shall specify
that delivery shall be effective, and risk of loss and title to the Company
Certificate(s) shall pass, only upon delivery of the Company Certificate(s) to
the Exchange Agent) and instructions for such holder's use in effecting the
surrender of the Company Certificates in exchange for certificates
representing shares of Parent Common Stock and cash in lieu of any fractional
shares, and (ii) to each holder of Company Option(s) a form letter of
transmittal and instructions for such holder's use in effecting the receipt of
certificates representing shares of Parent Common Stock and cash in lieu of
any fractional shares in exchange for such Company Option(s).
(b) As soon as practicable after the Effective Time, the Exchange
Agent shall distribute to holders of shares of Company Common Stock, upon
surrender to the Exchange Agent of one or more Company Certificates for
cancellation, together with a duly-executed letter of transmittal, (i) one or
more certificates representing the number of whole shares of Parent Common
Stock into which the shares represented by the Company Certificate(s) shall
have been converted pursuant to Section 1.3(a), (ii) a bank check in the
amount of cash into which the shares represented by the Company Certificate(s)
shall have been converted pursuant to Section 1.5(f) (relating to fractional
shares), and (iii) any dividends or other distributions to which such holder
is entitled pursuant to Section 1.5(c), and the Company Certificate(s) so
surrendered shall be canceled. In the event of a transfer of ownership of
Company Common Stock that is not registered in the transfer records of the
Company, it shall be a condition to the issuance of shares of Parent Common
Stock that the Company Certificate(s) so surrendered shall be properly
endorsed or be otherwise in proper form for transfer and that such transferee
shall (i) pay to the Exchange Agent any transfer or other taxes required or
(ii) establish to the
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satisfaction of the Exchange Agent that such tax has been paid or is not
payable. As soon as practicable after the Effective Time, the Exchange Agent
shall distribute to holders of Company Options, upon surrender to the Exchange
Agent of a duly-executed letter of transmittal, (i) one or more certificates
representing the number of whole shares of Parent Common Stock into which the
Option Shares represented by the Company Options shall have been converted
pursuant to Section 1.3(a), (ii) a bank check in the amount of cash into which
the Option Shares represented by the Company Options shall have been converted
pursuant to Section 1.5(f) (relating to fractional shares), and (iii) any
dividends or other distributions to which such holder is entitled pursuant to
Section 1.5(c).
(c) Holders of Company Common Stock or Company Options will be
entitled to any dividends or other distributions pertaining to the Parent
Common Stock received in exchange therefor that become payable to persons who
are holders of record of Parent Common Stock as of a record date that follows
the Effective Time, but only (i) for holders of Company Common Stock, after
they have surrendered their Company Certificates for exchange and (ii) for
holders of Company Options, after they have submitted a duly-executed letter
of transmittal. Subject to the effect, if any, of applicable law, the Exchange
Agent shall receive, hold, and remit any such dividends or other distributions
to each such record holder entitled thereto, without interest, at the time
that such Company Certificates are surrendered to the Exchange Agent for
exchange. Holders of Company Common Stock or Company Options will not be
entitled, however, to dividends or other distributions that become payable
before or after the Effective Time to persons who were holders of record of
Parent Common Stock as of a record date that is prior to the Effective Time.
(d) All certificates evidencing shares of Parent Common Stock that
are issued (i) upon the surrender for exchange of Company Certificates or (ii)
in exchange for Company Options in accordance with the terms hereof, together
with any cash paid for fractional shares pursuant to Section 1.5(f) hereof,
shall be deemed to have been issued in full satisfaction of all rights
pertaining to the shares of Company Common Stock represented by the
surrendered Company Certificates or Option Shares represented by the Company
Options, respectively.
(e) After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Company
Certificates representing such shares are presented to the Surviving
Corporation, they shall be canceled and exchanged as provided in this Article
1. As of the Effective Time, the holders of Company Certificates representing
shares of Company Common Stock shall cease to have any rights as stockholders
of the Company, except such rights, if any, as they may have pursuant to the
DGCL or this Agreement. Except as provided above, until such Company
Certificates are surrendered for exchange, each such Company Certificate
shall, after the Effective Time, represent for all purposes only the right to
receive a certificate or certificates evidencing the number of whole shares of
Parent Common Stock into which the shares of Company Common Stock shall have
been converted pursuant to the Merger as provided in Section 1.3(a) hereof,
the right to receive the cash value of any fraction of a share of Parent
Common Stock as provided in Section 1.5(f) hereof and the right to receive any
dividends or
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distributions as provided in Section 1.5(c). As of the Effective
Time, the holders of Company Options shall cease to have any rights as
optionholders of the Company, except such rights, if any, as they may have
pursuant to this Agreement.
(f) No fractional shares of Parent Common Stock and no certificates
or scrip therefor, or other evidence of ownership thereof, shall be issued in
connection with the Merger, no dividend or other distribution of Parent shall
relate to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any rights of a shareholder of Parent.
All fractional shares of Parent Common Stock to which a holder of Company
Common Stock or Company Option(s) immediately prior to the Effective Time
would otherwise be entitled, at the Effective Time, shall be aggregated if and
to the extent multiple Company Certificates of such holder are submitted
together to the Exchange Agent and/or multiple Company Options are held by
such holder. If a fractional share results from such aggregation, then (in
lieu of such fractional share) the Exchange Agent shall pay to each holder of
shares of Company Common Stock or Company Options who otherwise would be
entitled to receive such fractional share of Parent Common Stock an amount of
cash (without interest) determined by multiplying (i) the closing sale price
of a share of Parent Common Stock as reported by the Nasdaq National Market on
the Closing Date by (ii) the fractional share of Parent Common Stock to which
such holder would otherwise be entitled. Parent will make available to the
Exchange Agent any cash necessary for this purpose.
(g) In the event any Company Certificates shall have been lost,
stolen, or destroyed, the Exchange Agent shall issue in respect of such lost,
stolen, or destroyed Company Certificates, upon the making of an affidavit of
that fact by the holder thereof, such shares of Parent Common Stock, cash for
fractional shares, if any, and dividends or other distributions, if any, as
may be required pursuant to this Article 1; 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 Company Certificate to
deliver a bond in such sum as Parent may reasonably direct as indemnity
against any claim that may be made against Parent or the Exchange Agent with
respect to such Company Certificate alleged to have been lost, stolen, or
destroyed.
1.6 EXCHANGE OF MERGER SUBSIDIARY COMMON STOCK. From and after the
Effective Time, each outstanding certificate previously representing shares of
Merger Subsidiary Common Stock shall be deemed for all purposes to evidence
ownership of and to represent the number of shares of Surviving Corporation
Common Stock into which such shares of Merger Subsidiary Common Stock shall
have been converted, such conversion to be on the basis of one share of
Surviving Corporation Common Stock for each share of Merger Subsidiary Common
Stock. Promptly after the Effective Time, the Surviving Corporation shall
issue to Parent a stock certificate or certificates representing such shares
of Surviving Corporation Common Stock in exchange for the certificate or
certificates that formerly represented shares of Merger Subsidiary Common
Stock, which shall be canceled.
1.7 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended as set forth on EXHIBIT A attached
hereto, and
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shall, as amended, subject to Section 5.21, be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable law.
1.8 BYLAWS OF THE SURVIVING CORPORATION. The Bylaws of the Company, as in
effect immediately prior to the Effective Time, shall, subject to Section 5.21,
be the Bylaws of the Surviving Corporation until thereafter amended in
accordance with applicable law.
1.9 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors
and officers of Merger Subsidiary immediately prior to the Effective Time shall
be the directors and officers, respectively, of the Surviving Corporation until
their respective successors shall be duly elected and qualified.
ARTICLE 2
CLOSING
2.1 TIME AND PLACE. Subject to the satisfaction or waiver of the
provisions of Article 6, the closing of the Merger (the "Closing") shall take
place at 1:00 p.m., local time, on the date that the Required Company
Stockholder Vote (as defined in Section 3.2) is obtained, or as soon
thereafter as, and in any event no later than the second business day after,
all conditions to Closing have been satisfied or waived, or on such other date
and/or at such other time as Parent and the Company may mutually agree. The
date on which the Closing actually occurs is herein referred to as the
"Closing Date." The Closing shall take place at the corporate headquarters
offices of Parent, or at such other place or in such other manner (e.g., by
facsimile exchange of signature pages with originals to promptly follow by
overnight delivery) as the parties hereto may agree.
2.2 FILINGS AT THE CLOSING. At the Closing, subject to the provisions of
Article 6, Parent, Merger Subsidiary, and the Company shall cause the
Certificate of Merger to be filed in accordance with the provisions of Section
252 of the DGCL, and take any and all other lawful actions and do any and all
other lawful things necessary to cause the Merger to become effective.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except: (i) as set forth in a document of even date herewith and
concurrently delivered herewith (the "Company Disclosure Schedule") or (ii) as
specifically described through express disclosure of current, specific facts set
forth in the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1998 or in any other filing by the Company with the SEC (as defined
in Section 3.4) filed after the date of filing such Form 10-K and prior to the
date hereof (for purposes of clauses (i) and (ii) above, disclosures in the
Company Disclosure Schedule and such Company SEC filings shall be deemed to
qualify or limit only those particular representations and warranties set forth
in this Article 3 to which the relevancy of such disclosures is readily
apparent), the Company hereby makes the following representations and warranties
to Parent and Merger Subsidiary:
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3.1 ORGANIZATION. The Company and each subsidiary (referred to herein
with respect to the Company or Parent, as applicable, as a "Subsidiary") of
the Company is an entity duly organized, validly existing, and in good
standing (where such concept is recognized) under the laws of its respective
jurisdiction of organization and has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its
business as now being conducted, except where the failure to be so organized,
existing or in good standing or to have such corporate power and authority
would not, individually or in the aggregate, have a Company Material Adverse
Effect (as defined below). The Company and each Subsidiary is duly qualified
and in good standing to do business in each jurisdiction in which the property
owned, leased, or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so
qualified or in good standing would not have a Company Material Adverse
Effect. "Company Material Adverse Effect" means an effect that is, or at the
time of such effect it is probable that the effect will be, materially
adverse: (i) to the business, results of operation, or financial condition of
the Company and its Subsidiaries, considered as a whole; (ii) to the ability
of the Surviving Corporation to conduct such business, as presently conducted,
following the Effective Time or the ability of Parent to derive the benefits
of owning all of the stock of the Surviving Corporation; or (iii) to the
Company's ability to perform any of its material obligations under this
Agreement or to consummate the Merger; provided, however, that none of the
following shall be deemed to have a Material Adverse Effect on the Company:
(A) a change in the market price or trading volume of the Company Common
Stock, (B) a failure by the Company to meet any published securities analyst
estimates of revenue or earnings for any period ending or for which earnings
are released on or after the date of this Agreement and prior to the Closing,
(C) an event, violation, inaccuracy, circumstance or other matter that results
from conditions affecting the U.S. or world economy, (D) an event, violation,
inaccuracy, circumstance or other matter that results from conditions
affecting the powertrain testing or instrumentation industry generally, (E) an
event, violation, inaccuracy, circumstance or other matter that results
primarily from the announcement or the pendency of the Merger or the
transactions contemplated by this Agreement or (F) an event violation,
inaccuracy, circumstance or other matter that results from the taking of any
action required or permitted by this Agreement. The jurisdictions in which the
Company and each Subsidiary are incorporated are listed in the Company
Disclosure Schedule. The Company has heretofore delivered or made available to
Parent or its advisers complete and accurate copies of the Certificate of
Incorporation and Bylaws of the Company, as currently in effect, and of the
organizational documents and agreements defining the rights of the Company or
any Subsidiary with respect to any material joint ventures, partnerships or
other business in which the Company owns less than substantially all of the
outstanding equity interest. As of the date hereof, neither the Company nor
any Subsidiary, directly or indirectly, owns or controls or has any material
equity, partnership, or other similar ownership interest in any corporation,
partnership, joint venture, or other business association or entity that is
material to the Company and its Subsidiaries, considered as a whole.
3.2 AUTHORIZATION. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and, subject to obtaining the
necessary approval of its stockholders, to consummate the transactions
contemplated hereby. The execution and delivery by the Company of this
Agreement and the other agreements contemplated hereby to which the Company is
a party, and the consummation by the Company of the transactions
7
contemplated hereby and thereby, have been duly and validly authorized and
approved by the Company's Board of Directors, no other corporate proceedings
on the part of the Company, other than a meeting of the Company's stockholders
(the "Company Stockholders' Meeting"), are necessary to authorize this
Agreement, and, subject to obtaining the approval and adoption of this
Agreement and approval of the Merger by a majority of the shares of the
Company Common Stock outstanding as of the record date of the Company
Stockholders' Meeting (the "Required Company Stockholder Vote"), no other
corporate action on the part of the Company is necessary to consummate the
transactions contemplated hereby. The Merger has been declared advisable by
the Board of Directors of the Company. This Agreement has been duly and
validly executed and delivered by the Company and, assuming due execution and
delivery by the other parties hereto, constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and rules of law governing specific
performance, injunctive relief, or other equitable remedies.
3.3 CAPITALIZATION. As of the close of business on February 26, 1999, the
authorized capital stock of the Company consisted of (i) 25,000,000 shares of
Company Common Stock, $.001 par value per share, of which 2,242,179 were issued
and outstanding and 90,200 shares were held in the Company's treasury, and (ii)
2,500,000 shares of Company Preferred Stock, none of which were issued or
outstanding. All issued and outstanding shares of capital stock of each
Subsidiary are owned, beneficially and of record, by the Company, free and clear
of any mortgage, pledge, security interest, encumbrance, lien or other charge of
any kind ("Lien") that would materially affect the Company's interest in such
shares. All issued and outstanding shares of Company Common Stock have been
validly issued, are fully paid and nonassessable, and have not been issued in
violation of and are not currently subject to any preemptive rights. As of the
close of business on February 26, 1999, except for (i) Company Options to
purchase an aggregate total of 51,000 shares of Company Common Stock not granted
pursuant to the 1991 Stock Option Plan or 1991 Outside Directors Stock Option
Plan (collectively, the "Stock Option Plans") and that are listed, together with
their respective exercise prices, in the Company Disclosure Schedule, and (ii)
Company Options to purchase an aggregate total of 637,051 shares of Company
Common Stock that were granted pursuant to the Stock Option Plans and that are
listed, together with their respective exercise prices, in the Company
Disclosure Schedule, there were not any outstanding or authorized subscriptions,
options, warrants, calls, rights, convertible securities, commitments,
restrictions, arrangements, or any other agreements of any character to which
the Company or any Subsidiary was a party that, directly or indirectly, (a)
obligated the Company or any Subsidiary to issue any shares of capital stock or
any securities convertible into, or exercisable or exchangeable for, or
evidencing the right to subscribe for, any shares of capital stock, (b) called
for or related to the sale, pledge, transfer, or other disposition or
encumbrance by the Company or any Subsidiary of any shares of its capital stock,
or (c) related to the voting or control of such capital stock. The Company
Disclosure Schedule sets forth a complete and accurate list of all stock
options, warrants, and other rights to acquire Company Common Stock that were
outstanding as of February 26, 1999, including the name of the holder, the date
of grant, acquisition price, number of shares, exercisability schedule, and, in
the case of options, the type of option under the Code. No consent of holders
or participants under the Stock Option Plans is required to carry out the
8
provisions of Section 1.3. All actions, if any, required on the part of the
Company under the Stock Option Plans to allow for the treatment of Company
Options as is provided in Section 1.3, have been, or prior to the Closing will
be, validly taken by the Company.
3.4 REPORTS AND FINANCIAL STATEMENTS. The Company has filed all forms,
reports, registration statements, and other documents required to be filed by it
with the SEC since February 1, 1995 (such forms, reports, registration
statements, and documents, together with any amendments thereto, are referred to
as the "Company SEC Filings"). As of their respective dates, the Company SEC
Filings (i) complied as to form in all material respects with the applicable
requirements of the Securities Act of 1933, and the rules and regulations
thereunder (the "1933 Act") and the Securities Exchange Act of 1934 (the "1934
Act"), as the case may be, and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The audited financial statements
included or incorporated by reference or to be included or incorporated by
reference in the Company SEC Filings, including but not limited to the Company's
audited financial statements at and for the year ended January 31, 1999 (the
"Company January 31, 1999 Financials"), and the unaudited interim financial
statements at and for periods commencing on or after February 1, 1999, to be
included or incorporated by reference in the forms, reports, registration
statements and other documents filed by the Company with the SEC (i) were or
will be prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q filed
with the SEC) applied on a consistent basis during the periods involved (except
as may be indicated therein or in the notes thereto), subject, in the case of
unaudited interim financial statements, to the absence of notes and to year-end
adjustments, (ii) complied or will comply as of their respective dates in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, and (iii) fairly present
or will fairly present in all material respects the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated income, cash flows, and changes in stockholders'
equity of the Company and its consolidated subsidiaries for the periods
involved, except as otherwise noted therein and subject, in the case of
unaudited statements, to normal year-end audit adjustments. The statements of
operations included in or to be included in the audited or unaudited interim
financial statements in the Company SEC Filings do not contain and will not
contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business required to be disclosed separately in
accordance with generally accepted accounting principles, except as expressly
specified in the applicable statement of operations or notes thereto.
3.5 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any Subsidiary
has any liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise) of the type required to be reflected on or reserved
against in, or disclosed in the notes to, a balance sheet prepared in accordance
with U.S. generally accepted accounting principles except: (a) liabilities or
obligations that will be accrued or reserved against in the audited consolidated
balance sheet of the Company and its consolidated subsidiaries as of January 31,
1999 contained in the Company January 31, 1999 Financials (the "Company Audited
9
Balance Sheet") or referred to in the notes thereto, (b) liabilities incurred in
the ordinary course of business since January 31, 1999, and (c) liabilities or
obligations that would not have a Company Material Adverse Effect.
3.6 CONSENTS AND APPROVALS. Except for: (i) any applicable requirements
of the 1933 Act, the 1934 Act, state securities laws, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976 and the regulations thereunder (the "HSR
Act"), and the antitrust, competition, foreign investment, or similar laws of
any foreign countries or supranational commissions or boards that require pre-
merger notifications or filings with respect to the Merger (collectively,
"Foreign Merger Laws"), (ii) obtaining the Required Company Stockholder Vote,
(iii) the filing and recordation of appropriate merger documents as required
by the DGCL, the execution and delivery by the Company of this Agreement and
the other agreements contemplated hereby to which the Company is a party and
the consummation by the Company of the transactions contemplated hereby and
thereby will not: (a) violate any provision of the Certificate or Articles of
Incorporation or Bylaws of the Company or any Subsidiary; (b) violate in any
material way any material statute, rule, regulation, order, or decree of any
federal, state, local, or foreign governmental or regulatory body or authority
(a "Governmental Body") or any nongovernmental self-regulatory agency by which
the Company or any Subsidiary, or any of their respective properties or assets
may be bound; (c) require any filing by the Company with or permit, consent,
or approval to be obtained by the Company from any Governmental Body or any
nongovernmental self-regulatory agency; or (d) result in any violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default under, result in the loss of any material benefit under, or give
rise to any right of termination, cancellation, increased payments, or
acceleration under, or result in the creation of any Lien (as defined in
Section 3.3) on any of the properties or assets of the Company or any
Subsidiary under, any of the terms, conditions, or provisions of any material
note, bond, mortgage, indenture, license, franchise, permit, authorization,
agreement, or other instrument or obligation to which the Company or any
Subsidiary is a party, or by which it or any of its properties or assets may
be bound, except, in the case of clauses (b), (c) and (d), for any such
filings, permits, consents or approvals or violations, breaches, defaults, or
other occurrences that could not reasonably be expected to prevent or delay
consummation of any of the transactions contemplated hereby in any material
respect, or otherwise prevent the Company from performing its obligations
under this Agreement in any material respect, and would not have a Company
Material Adverse Effect.
3.7 COMPLIANCE WITH LAWS. Neither the Company nor any Subsidiary is in
default or violation in any material respect of any applicable federal, state,
local, or foreign laws, ordinances, regulations, published interpretations,
judgments, decrees, injunctions, permits, licenses, certificates, governmental
requirements, orders, or other similar items of any court or other
Governmental Body (and including those of any nongovernmental self-regulatory
agency and including environmental laws or regulations), except for such
defaults or violations that would not have a Company Material Adverse Effect.
10
3.8 LITIGATION.
(a) As of the date of this Agreement, there is no Merger-Related
Proceeding (as defined below) pending, or to the knowledge of the
Company, threatened in writing against the Company. For purposes of this
Agreement, "Merger-Related Proceeding" shall mean any meritorious
asserted claim, action, suit, proceeding, governmental investigation or
governmental review of any kind: (i) challenging or seeking to prevent,
enjoin or delay the Merger or any of the other transactions contemplated
by this Agreement, or (ii) seeking material damages from the Company or
any of its Subsidiaries or from Parent or any of its subsidiaries in
connection with the consummation or anticipated consummation of the
Merger.
(b) There are no asserted claims, actions, suits, proceedings or,
to the knowledge of the Company, governmental investigations or
governmental reviews of any kind pending, or to the knowledge of the
Company, threatened against the Company or any Subsidiary or any asset or
property of the Company or any Subsidiary, other than Merger-Related
Proceedings and except for such claims, actions, suits, proceedings,
governmental investigations or governmental reviews that would not have a
Company Material Adverse Effect.
3.9 ABSENCE OF MATERIAL ADVERSE CHANGES. Between January 31, 1999 and
the date hereof, there has not been any (a) Company Material Adverse Effect;
(b) damage, destruction, or loss, not covered by insurance, that would have a
Company Material Adverse Effect; (c) material change by the Company or any
Subsidiary in accounting methods or principles used for financial reporting
purposes, except as required by a change in applicable law or generally
accepted accounting principles and concurred with by the Company's independent
public accountants; or (d) agreement, whether in writing or otherwise, to take
any action described or referenced in this Section 3.9.
3.10 OFFICERS, DIRECTORS AND EMPLOYEES. Prior to the date hereof, the
Company has provided to Parent a list that completely and accurately sets
forth, as of the date hereof, the name and current annual salary rate of each
current officer of the Company whose total remuneration for the last fiscal
year was, or for the current fiscal year has been set at, in excess of
$100,000, together with a summary of the bonuses, commissions, additional
compensation, and other like cash benefits, if any, paid or payable to such
persons for the last fiscal year and proposed for the current fiscal year. The
Company Disclosure Schedule completely and accurately sets forth (i) the names
of all former officers of the Company whose employment with the Company has
terminated either voluntarily or involuntarily during the 12-month period
preceding the date of this Agreement; and (ii) the names of the officers (with
all positions and titles indicated) and directors of the Company as of the
date hereof. Except as would not have a Company Material Adverse Effect: (i)
no unfair labor practice complaint against the Company or any Subsidiary is
pending before the National Labor Relations Board, and there is no labor
strike, slowdown or stoppage pending or, to the knowledge of the Company,
threatened in writing against or involving the Company or any Subsidiary; (ii)
no unionizing efforts have, to the knowledge of the Company, been made by
employees of the Company or any Subsidiary; (iii) neither the Company nor any
Subsidiary is a party to or subject to any collective bargaining agreement,
and no collective bargaining agreement is currently being negotiated by
11
the Company or any Subsidiary; and (iv) there is no labor dispute pending or,
to the knowledge of the Company, threatened, between the Company or any
Subsidiary and its employees.
3.11 TAXES. Except for such matters that would not have a Company Material
Adverse Effect, (i) the Company and each Subsidiary have filed, or have obtained
extensions to file (which extensions have not expired without filing), all
state, local, United States, foreign, or other tax reports and returns required
to be filed by any of them, (ii) the Company and each Subsidiary have duly paid,
or accrued on their books of account, all taxes (including estimated taxes)
shown as due on such reports and returns (or such extension requests), or
assessed against them, other than taxes being contested in good faith in proper
proceedings, and (iii) the liabilities and reserves for taxes which will be
reflected on the Company Audited Balance Sheet will be adequate to cover all
taxes payable by the Company and its Subsidiaries for all taxable periods and
portions thereof ending on or before the dates thereof. To the Company's
knowledge, no tax audits are pending against and no claims for taxes have been
received in writing by the Company or any of its Subsidiaries, other than audits
and claims that would not have a Company Material Adverse Effect. Neither the
Company nor any Subsidiary has, with regard to any assets or property held,
acquired or to be acquired by any of them, filed a consent to the application of
Section 341(f)(2) of the Code. Neither the Company nor any of its Subsidiaries
has taken or agreed to take any action (other than actions contemplated by this
Agreement) that would prevent the Merger from constituting a reorganization
qualifying under Section 368(a) of the Code. The Company is not aware of any
agreement, plan or other circumstance that would prevent the Merger from so
qualifying under Section 368(a) of the Code.
For the purposes of this Agreement, "tax" shall mean and include taxes, duties,
withholdings, assessments, and charges assessed or imposed by any governmental
authority (together with any interest, penalties and additions to tax imposed
with respect thereto), including but not limited to all federal, state, county,
local, and foreign income, profits, gross receipts, import, ad valorem, real and
personal property, franchise, license, sales, use, value added, stamp, transfer,
withholding, payroll, employment, excise, custom, duty, and any other taxes,
obligations and assessments of any kind whatsoever; "tax" shall also include any
liability for taxes arising as a result of being (or ceasing to be) a member of
any affiliated, consolidated, combined, or unitary group as well as any
liability for taxes under any tax allocation, tax sharing, tax indemnity, or
similar agreement.
3.12 CONTRACTS. The Company Disclosure Schedule lists, and the Company has
heretofore furnished to Parent complete and accurate copies of (or, if oral, the
Company Disclosure Schedule states all material provisions of), every
employment, consulting, severance or change of control agreement or arrangement
for the benefit of any director, officer, employee, other person or stockholder
of the Company or any Subsidiary or any affiliate thereof in effect as of the
date of this Agreement to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any of their properties or assets is
bound. Neither the Company nor any Subsidiary is in material violation of or in
default under any contract, plan, agreement, understanding, arrangement or
obligation that is material to the Company and its Subsidiaries, considered as a
whole, except for such violations or defaults that would not have a Company
Material Adverse Effect. As of the date of this Agreement, neither the Company
nor any
12
Subsidiary is a party to any contract, plan, agreement, understanding,
arrangement or obligation (i) which materially restricts the Company's, or
after the Merger would materially restrict the Surviving Corporation's or
Parent's, ability to conduct any material line of business currently conducted
by the Company, (ii) which imposes on the Company or any Subsidiary material
obligations, the non-performance of which would have a Company Material
Adverse Effect, that are not reflected in the Company's financial statements
included within the Company's SEC Filings, or (iii) that would be required to
be filed with the SEC in a filing to which paragraph (b)(10) of Item 601 of
Regulation S-K of the Rules and Regulations of the SEC is applicable, which
has not been so filed.
3.13 INTELLECTUAL PROPERTY RIGHTS. For purposes of this Section,
"Intellectual Property" shall mean patents, mask works, trademarks, trade
names, service marks, copyrights, know-how, trade secrets and other
proprietary information, the loss, impairment or misappropriation of which,
either individually or in the aggregate, would have a Company Material Adverse
Effect, and all applications for or registrations of any of the foregoing.
Except as set forth in the Company Disclosure Schedule, the Company and its
Subsidiaries own or have a valid license to (or otherwise possess legally
enforceable rights to use) the Intellectual Property used in or necessary for
the conduct of the Company's business as conducted prior to the date of this
Agreement ("Company Intellectual Property"), free and clear of any Lien (as
defined in Section 3.3, but excluding licenses) that would have a Company
Material Adverse Effect. As of the date of this Agreement, the Company
Disclosure Schedule contains a complete and accurate list of (i) all patents,
mask works, trademarks (with a separate listing of registered and unregistered
trademarks), trade names, service marks and registered copyrights in the
Company Intellectual Property, (ii) all applications and registrations
therefor, and (iii) all licenses or other agreements pursuant to which the
Company grants any rights relating to Company Intellectual Property to a third
party (other than end-user licenses). As of the date of this Agreement, the
Company Disclosure Schedule contains a list of all licenses or agreements from
a third party to the Company or any Subsidiary relating to any Intellectual
Property that the Company is licensed or otherwise authorized by such third
parties to use, distribute or otherwise exploit (other than any item of
Intellectual Property generally available on standard terms and conditions).
To the knowledge of the Company, no claim is being asserted and no person is
threatening in a writing delivered to the Company or a Subsidiary to assert a
claim, with respect to the use of the Company Intellectual Property owned by
the Company or challenging or questioning the validity or effectiveness of any
license or agreement with respect to any Company Intellectual Property, except
for such claims that would not have a Company Material Adverse Effect. To the
knowledge of the Company, neither the use by the Company or any Subsidiary of
the Company Intellectual Property in the present conduct of its business nor
any product or service of the Company or any Subsidiary infringes on the valid
intellectual property rights of any person in a manner that would have a
Company Material Adverse Effect. Except as would not have a Company Material
Adverse Effect, (i) unless provided otherwise in the Company Disclosure
Schedule, all applications listed in the Company Disclosure Schedule are still
pending in good standing and have not been abandoned, and (ii) to the
knowledge of the Company, the Company Intellectual Property is not being
challenged in any judicial or administrative (excluding any patent-office or
registration) proceeding. To the knowledge of the Company, no person or
entity, nor such person's or entity's business or products has infringed, or
misappropriated any
13
Company Intellectual Property, or currently is infringing, or misappropriating
any Company Intellectual Property, except as would not have a Company Material
Adverse Effect.
3.14 BENEFIT PLANS.
(a) Except as set forth on the Company Disclosure Schedule,
neither the Company nor any Subsidiary sponsors, maintains, contributes
to, or has, during the five year period ending on the date of this
Agreement, sponsored, maintained, or contributed to or been required to
contribute to, any "employee pension benefit plan" ("Pension Plan"), as
such term is defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including, solely for the
purpose of this subsection, a plan excluded from coverage by Section
4(b)(5) of ERISA. Each such Pension Plan presently maintained by the
Company or any Subsidiary is, in all material respects, in compliance
with applicable provisions of ERISA, the Code, and other applicable law
and the Company or such Subsidiary has performed all of its obligations
under such Pension Plan except for such obligations that would not have a
Company Material Adverse Effect.
(b) Neither the Company nor any Subsidiary sponsors, maintains,
contributes to, or has, during the five year period ending on the date of
this Agreement, sponsored, maintained, or contributed to or been required
to contribute to, any Pension Plan that is subject to Title IV of ERISA.
(c) Except as set forth on the Company Disclosure Schedule, neither
the Company nor any Subsidiary sponsors, maintains, or contributes to any
"employee welfare benefit plan" ("Welfare Plan"), as such term is defined
in Section 3(1) of ERISA, whether insured or otherwise, and any such
Welfare Plan presently maintained by the Company or any Subsidiary is, in
all material respects, in compliance with the provisions of ERISA, the
Code, and all other applicable laws, including, but not limited to,
Section 4980B of the Code and the regulations thereunder, and Part 6 of
Title I of ERISA. Neither the Company nor any Subsidiary has established
or contributed to any "voluntary employees' beneficiary association"
within the meaning of Section 501(c)(9) of the Code.
(d) Except as set forth on the Company Disclosure Schedule,
neither the Company nor any Subsidiary currently maintains or contributes
to any material oral or written bonus, profit-sharing, compensation
(incentive or otherwise), commission, stock option, or other stock-based
compensation, retirement, severance, change of control, vacation, sick or
parental leave, dependent care, deferred compensation, cafeteria,
disability, hospitalization, medical, death, retiree, insurance, or other
benefit or welfare or other similar plan, policy, agreement, trust, fund,
or arrangement providing for the remuneration or benefit of all or any
employees, directors or any other person, that is neither a Pension Plan
nor a Welfare Plan (collectively, the "Compensation Plans").
(e) With respect to the Pension Plans, Welfare Plans or
Compensation Plans, no event has occurred and, to the knowledge of the
Company, there exists no condition or set of circumstances, in connection
with which the Company or any of its Subsidiaries could be subject to any
liability under the terms of such Plans (other than the payment of
benefits thereunder),
14
ERISA, the Code or any other applicable law which would have a Company
Material Adverse Effect.
(f) The Internal Revenue Service has issued favorable
determination letters with respect to all presently maintained Company
and Subsidiary Pension Plans that are intended to be qualified under
Section 401(a) of the Code, or has applied to the Internal Revenue
Service for such a determination letter prior to the expiration of the
requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such a determination
and to make any amendments necessary to obtain a favorable determination,
or has been established under a standardized prototype plan for which an
Internal Revenue Service opinion letter has been obtained by the plan
sponsor and is valid as to the adopting employer. The Company has made
available to Parent the written documents setting forth the terms of all
Pension Plans, Welfare Plans, Compensation Plans, and related agreements,
and complete and accurate copies of the three most recent annual reports
(Form 5500), the most recent favorable determination opinion or letters,
current summary plan descriptions, and all employee handbooks or manuals.
The Company has provided to Parent (i) copies of all employment
agreements with officers of any of the Company, its U.S. Subsidiaries or,
to the extent reasonably available, the Company's non-U.S. Subsidiaries
(or copies of forms of agreements setting forth representative employment
terms and conditions); (ii) copies of all material severance, bonus or
incentive agreements, programs and policies of any of the Company, any
U.S. Subsidiary or, to the extent reasonably available, the Company's non-
U.S. Subsidiaries with or relating to any of its employees; and (iii)
copies of all plans, programs, agreements and other arrangements of any
of the Company, any U.S. Subsidiary or, to the extent reasonably
available, the Company's non-U.S. Subsidiaries with or relating to any of
its employees which contain change in control provisions. With respect to
any items that would be described in the immediately preceding sentence
but for the fact that such copies relate to non-U.S. Subsidiaries and are
not reasonably available to the Company, the Company (i) shall deliver
copies thereof to Parent prior to the Effective Time, and (ii) represents
and warrants to Parent that such items will not, individually or in the
aggregate, be material to the Company and its Subsidiaries.
(g) The execution by the Company of, and performance by the
Company of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any Pension Plan, Welfare Plan,
Compensation Plan, or other arrangement that will result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits, or obligation
to fund benefits. No amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any employee, officer, or
director of the Company or any of its affiliates who is a "disqualified
individual" (as such term is defined in Prop. Treas. Reg. Section 1.280G-
1) under any Pension Plan, Welfare Plan, or Compensation Plan currently
in effect would be an "excess parachute payment" (as such term is defined
in Section 280G(b)(1) of the Code).
3.15 MINUTE BOOKS. The Company has previously made available to Parent
or its representatives all of its minutes of meetings of and corporate actions
or written consents by the
15
stockholders, Board of Directors, and committees of the Board of Directors of
the Company since January 1, 1996.
3.16 NO FINDERS. No act of the Company or any Subsidiary has given or
will give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee, or other like payment in connection with the
transactions contemplated herein, except payments in the amounts specified in
the Company Disclosure Schedule to those parties identified thereon who have
acted as a finder for the Company or have been retained by the Company as
financial advisors pursuant to the agreements or other documents described in
the Company Disclosure Schedule, copies of which have been provided or made
available to Parent or its advisors prior to the date of this Agreement.
3.17 PROXY STATEMENT. The Proxy Statement/Prospectus (as defined in
Section 5.5 hereof) and any amendments or supplements thereto will comply as
to form in all material respects with all applicable laws, and none of the
information supplied by the Company specifically for inclusion or
incorporation therein or in any amendments or supplements thereto, or in any
schedules required to be filed with the SEC in connection therewith, will, at
the date the Proxy Statement/Prospectus (or any amendment or supplement
thereto) is first mailed to stockholders, or at the time of the Company
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that no representation or
warranty is made by the Company with respect to information supplied by Parent
specifically for inclusion in the Proxy Statement/Prospectus.
3.18 FAIRNESS OPINION. The Company has received an opinion from
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ to the effect that, as of the date of such opinion, the Per
Share Merger Consideration is fair, from a financial point of view, to the
holders of Company Common Stock or Company Options, and the Company will
promptly deliver a copy of such opinion to Parent.
3.19 STATE TAKEOVER LAWS The Board of Directors of the Company has
approved the transactions contemplated by this Agreement, such that the
provisions of Section 203 (entitled "Business Combinations with Interested
Stockholders") of the DGCL will not apply to this Agreement or any of the
transactions contemplated hereby or thereby.
3.20 MERGER FILINGS. The information as to the Company or any of its
affiliates or stockholders included in the Company's filing, or submitted to
Parent and Merger Subsidiary for inclusion in their filing, if any, required
to be submitted under the HSR Act or under any Foreign Merger Laws shall be
true, correct, and complete in all material respects and shall comply in all
material respects with the applicable requirements of the HSR Act, the rules
and regulations issued by the Federal Trade Commission pursuant thereto, and
Foreign Merger Laws.
3.21 ENVIRONMENTAL LAWS. Except as set forth on the Company Disclosure
Schedule, the Company and its U.S. Subsidiaries are each in compliance in all
material respects with all Applicable Laws with respect to Hazardous
Substances. There is no pending or, to the knowledge of the Company,
threatened investigation or proceeding with respect to the operations
16
of the Company or any of its U.S. Subsidiaries as they pertain to Hazardous
Substances. Except as set forth on the Company Disclosure Schedule, to the
knowledge of the Company, there is and has been no current or past usage or
practice of the Company or any of its U.S. Subsidiaries with respect to any
Hazardous Substances which may support a claim or cause of action against the
Company or any of its U.S. Subsidiaries under Applicable Law. For purposes of
this Section 3.21, "Applicable Law" means all applicable laws, statutes,
treaties, rules, codes, ordinances, regulations, permits, certificates, orders
and licenses of any governmental authority, interpretations of any of the
foregoing by a governmental authority having jurisdiction with respect
thereto, and judgments, decrees, injunctions, writs, orders or like action of
any court, arbitrator or other judicial or quasi-judicial tribunal (including
without limitation those pertaining to health, safety and the environment);
and "Hazardous Substances" means any substance, material or waste which is as
of the Closing Date regulated or, on or before the Closing Date, is proposed
to be regulated, by any governmental authority, as hazardous, polluting or
toxic pursuant to any Applicable Law.
3.22 ACCOUNTING MATTERS. To the knowledge of the Company, neither the
Company nor any affiliate (as such term is used in Rule 145 under the
Securities Act) of the Company has taken or agreed to take or plans to take
any action that could prevent Parent from accounting for the Merger as a
"pooling of interests" in accordance with generally accepted accounting
principles, Accounting Principles Board Opinion No. 16 and all published
rules, regulations and policies of the SEC.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
Except (i) as set forth in a document of even date herewith and
concurrently delivered herewith (the "Parent Disclosure Schedule") or (ii) as
specifically described through express disclosure of current, specific facts set
forth in Parent's Annual Report on Form 10-K for the fiscal year ended September
30, 1998 or in any other filing by Parent with the SEC filed after the date of
filing such Form 10-K and prior to the date hereof (for purposes of clauses (i)
and (ii) above, disclosures in the Parent Disclosure Schedule and such Parent
SEC filings shall be deemed to qualify or limit only those particular
representations and warranties set forth in this Article 4 to which the
relevancy of such disclosures is readily apparent), Parent and Merger Subsidiary
hereby jointly and severally make the following representations and warranties
to the Company:
4.1 ORGANIZATION. Parent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Minnesota.
Merger Subsidiary is a corporation duly organized and validly existing under
the laws of the State of Delaware. Each of Parent and Merger Subsidiary has
all requisite corporate power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted, except where
the failure to be so organized, existing or in good standing or to have such
corporate power and authority would not, individually or in the aggregate,
have a Parent Material Adverse Effect (as defined below). Each of Parent and
Merger Subsidiary is duly qualified and in good standing to do business in
each
17
jurisdiction in which the property owned, leased, or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or in good standing would not have
a Parent Material Adverse Effect. "Parent Material Adverse Effect" means an
effect that is, or at the time of such effect it is probable that the effect
will be, materially adverse (i) to the business, results of operation, or
financial condition of Parent and its Subsidiaries, considered as a whole,
(ii) to Parent's ability to conduct such business, as presently conducted,
following the Effective Time, or (iii) to Parent's ability to perform any of
its material obligations under this Agreement or to consummate the Merger;
PROVIDED, HOWEVER, that none of the following shall be deemed to have a
Material Adverse Effect on Parent: (A) a change in the market price or trading
volume of the Parent Common Stock, (B) a failure by Parent to meet any
published securities analyst estimates of revenue or earnings for any period
ending or for which earnings are released on or after the date of this
Agreement and prior to the Closing, (C) an event, violation, inaccuracy,
circumstance or other matter that results from conditions affecting the U.S.
or world economy, (D) an event, violation, inaccuracy, circumstance or other
matter that results from conditions affecting the powertrain testing or
instrumentation industry generally, (E) an event, violation, inaccuracy,
circumstance or other matter that results primarily from the announcement or
the pendency of the Merger or the transactions contemplated by this Agreement
or (F) an event, violation, inaccuracy, circumstance or other matter that
results from the taking of any action required or permitted by this Agreement.
Parent has heretofore delivered or made available to Company or its advisers
complete and accurate copies of the Articles of Incorporation and Bylaws of
Parent, as currently in effect, and of the organizational documents and
agreements defining the rights of Parent or any Subsidiary with respect to any
material joint ventures, partnerships or other business in which Parent owns
less than substantially all of the outstanding equity interest. As of the date
hereof, neither Parent nor any Subsidiary, directly or indirectly, owns or
controls or has any material equity, partnership, or other similar ownership
interest in any corporation, partnership, joint venture, or other business
association or entity that is material to Parent and its Subsidiaries,
considered as a whole.
4.2 AUTHORIZATION. Each of Parent and Merger Subsidiary has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery by
Parent and Merger Subsidiary of this Agreement and the other agreements
contemplated hereby to which Parent or Merger Subsidiary is a party, and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby and thereby, have been duly and validly authorized and approved by the
Boards of Directors of Parent and Merger Subsidiary and by Parent as the sole
shareholder of Merger Subsidiary, and no other corporate proceedings on the part
of Parent and Merger Subsidiary, and no vote, consent or approval of Parent's
shareholders, are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. The Merger has been declared advisable by the
Board of Directors of Merger Subsidiary. This Agreement has been duly and
validly executed and delivered by each of Parent and Merger Subsidiary and,
assuming due execution and delivery by the Company, constitutes the valid and
binding obligation of Parent and Merger Subsidiary, enforceable against each of
them in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency, and the relief of debtors and rules of law
governing specific performance, injunctive relief, or other equitable remedies.
18
4.3 CAPITALIZATION. As of February 26, 1999, the authorized capital
stock of Parent consisted of 64,000,000 shares of Common Stock with a par
value of $.25 per share, of which there were 18,626,853 shares issued and
outstanding. The authorized capital stock of Merger Subsidiary consists of
2,500 shares of Merger Subsidiary Common Stock, 1,000 of which are issued and
outstanding and owned by Parent. All issued and outstanding shares of Parent
Common Stock and Merger Subsidiary Common Stock are, and the shares of Parent
Common Stock to be issued and delivered in the Merger pursuant to Article 1
hereof shall be, at the time of issuance and delivery, validly issued, fully
paid, nonassessable, and free of preemptive rights. The shares of Parent
Common Stock to be issued and delivered in the Merger pursuant to Article 1
hereof shall be registered under the 1933 Act and duly listed for quotation on
the Nasdaq National Market, subject to official notice of issuance. All issued
and outstanding shares of capital stock of each Subsidiary of Parent are
owned, beneficially and of record, by Parent, free and clear of any Lien that
would materially affect Parent's interest in such shares. As of the close of
business on February 25, 1999, except for options to purchase an aggregate
total of 2,845,299 shares of Parent Common Stock that were granted pursuant to
Parent's 1990 Stock Option Plan, 1994 Stock Option Plan or its 1997 Stock
Option Plan and that are listed, together with their respective exercise
prices, in the Parent Disclosure Schedule, there were not any outstanding or
authorized subscriptions, options, warrants, calls, rights, convertible
securities, commitments, restrictions, arrangements, or any other agreements
of any character to which Parent or any Subsidiary was a party that, directly
or indirectly, (a) obligated Parent or any Subsidiary to issue any shares of
capital stock or any securities convertible into, or exercisable or
exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock, (b) called for or related to the sale, pledge, transfer, or
other disposition or encumbrance by Parent or any Subsidiary of any shares of
its capital stock, or (c) related to the voting or control of such capital
stock.
4.4 CONSENTS AND APPROVALS. Except for (i) any applicable requirements
of the 1933 Act, the 1934 Act, state securities laws, the NASD, the HSR Act,
and Foreign Merger Laws, and (ii) the filing and recordation of appropriate
merger documents as required by the DGCL, the execution and delivery by Parent
and Merger Subsidiary of this Agreement and the other agreements contemplated
hereby to which Parent and Merger Subsidiary are parties, and the consummation
of the transactions contemplated hereby and thereby will not: (a) violate any
provision of the Certificate or Articles of Incorporation or Bylaws of Parent
or Merger Subsidiary; (b) violate in any material way any material statute,
rule, regulation, order, or decree of any Governmental Body or any
nongovernmental self-regulatory agency by which Parent or any of its
Subsidiaries or any of their respective properties or assets may be bound; (c)
require any filing by Parent or Merger Subsidiary with or permit, consent, or
approval to be obtained by Parent or Merger Subsidiary from any Governmental
Body or any nongovernmental self-regulatory agency; or (d) result in any
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default under, result in the loss of any material benefit
under, or give rise to any right of termination, cancellation, increased
payments, or acceleration under, or result in the creation of any Lien on any
of the properties or assets of Parent or its Subsidiaries under, any of the
terms, conditions, or provisions of any material note, bond, mortgage,
indenture, license, franchise, permit, agreement, or other instrument or
obligation to which Parent or any of its Subsidiaries is a party, or by which
any of them or any of their respective
19
properties or assets may be bound, except, in the case of clauses (b), (c) and
(d), for any such filings, permits, consents or approvals or violations,
breaches, defaults, or other occurrences that could not reasonably be expected
to prevent or delay consummation of any of the transaction contemplated hereby
in any material respect, or otherwise prevent Parent from performing its
obligations under this Agreement in any material respect, and would not have a
Parent Material Adverse Effect.
4.5 REPORTS AND FINANCIAL STATEMENTS. Parent has filed all forms,
reports, registration statements, and other documents required to be filed by
it with the SEC since October 1, 1994 (such forms, reports, registration
statements and other documents, together with any amendments thereto, are
referred to as the "Parent SEC Filings"). As of their respective dates, the
Parent SEC Filings (i) complied as to form in all material respects with the
applicable requirements of the 1933 Act and the 1934 Act, as the case may be,
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The audited financial statements included or
incorporated by reference in the Parent SEC Filings, including but not limited
to Parent's audited financial statements at and for the year ended September
30, 1998 (the "Parent September 30, 1998 Financials"), and the unaudited
interim financial statements at and for periods commencing on or after October
1, 1998 included or incorporated by reference in the forms, reports,
registration statements and other documents filed by Parent with the SEC (i)
were prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q filed
with the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) subject, in the
case of unaudited interim financial statements, to the absence of notes and to
year-end adjustments, (ii) complied as of their respective dates in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, and (iii) fairly
present in all material respects the consolidated financial position of Parent
and its consolidated Subsidiaries as of the dates thereof and the consolidated
income, cash flows, and changes in shareholders' equity of Parent and its
consolidated Subsidiaries for the periods involved, except as otherwise noted
therein and subject, in the case of unaudited statements, to normal year-end
audit adjustments. The statements of operations included in the audited or
unaudited interim financial statements in the Parent SEC Filings do not
contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business required to be disclosed separately
in accordance with generally accepted accounting principles, except as
expressly specified in the applicable statement of operations or notes
thereto.
4.6 REGISTRATION STATEMENT. The Registration Statement (as defined in
Section 5.5 hereof) and any amendments or supplements thereto will comply as
to form in all material respects with the 1933 Act, and none of the
information supplied by Parent specifically for inclusion or incorporation
therein or in any amendments or supplements thereto, or in any schedules
required to be filed with the SEC in connection therewith, will, at the time
the Registration Statement becomes effective, at the date the Proxy
Statement/Prospectus (or any amendment or supplement thereto) is first mailed
to the Company's stockholders or at the time of the Company Stockholders'
Meeting, or at the Effective Time, contain any untrue statement of a
20
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, provided, however,
that no representation or warranty is made by Parent with respect to
information supplied by or on behalf of the Company or any affiliate of the
Company specifically for inclusion in the Registration Statement.
4.7 NO FINDERS. No act of Parent or Merger Subsidiary has given or will
give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee, or other like payment in connection with the
transactions contemplated herein.
4.8 ABSENCE OF UNDISCLOSED LIABILITIES. To the best of Parent's
knowledge, neither Parent nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether absolute, accrued, contingent or otherwise)
of the type required to be reflected on or reserved against in, or disclosed
in the notes to, a balance sheet prepared in accordance with U.S. generally
accepted accounting principles except: (a) liabilities or obligations that are
accrued or reserved against in the audited consolidated balance of Parent as
of September 30, 1998 contained in the Parent SEC Filings or in the unaudited
consolidated balance sheet of Parent as of December 31, 1998 contained in
Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended December
31, 1998 (collectively, the "Parent Balance Sheets") or referred to in the
notes thereto, (b) liabilities incurred in the ordinary course of business
since December 31, 1998 and (c) liabilities or obligations that would not have
a Parent Material Adverse Effect.
4.9 COMPLIANCE WITH LAWS. Neither Parent nor any of its Subsidiaries is
in default or violation in any material respect of any applicable federal,
state, local or foreign laws, ordinances, regulations, published
interpretations, judgments, decrees, injunctions, permits, licenses,
certificates, governmental requirements, orders or other similar items of any
court or other Governmental Body (and including those of any nongovernmental
self-regulatory agency and including environmental laws or regulations),
except for such defaults or violations that would not have a Parent Material
Adverse Effect.
4.10 LITIGATION.
(a) As of the date of this Agreement, there is no Merger-Related
Proceeding pending, or to the knowledge of Parent, threatened in writing
against Parent.
(b) There are no asserted claims, actions, suits, proceedings or
to the knowledge of Parent, governmental investigations governmental reviews
of any kind pending, or to the knowledge of Parent, threatened in writing
against Parent or any of its Subsidiaries or any asset or property of Parent
or any of its subsidiaries, other than Merger-Related Proceedings and except
for such claims, actions, suits, proceedings, governmental investigations or
governmental reviews that would not have a Parent Material Adverse Effect.
4.11 ABSENCE OF MATERIAL ADVERSE CHANGES. Between September 30, 1998 and
the date hereof, there has not been any (a) Parent Material Adverse Effect,
(b) damage, destruction or loss, not covered by insurance, that would have a
Parent Material Adverse Effect, (c) material change by Parent or any of its
Subsidiaries in accounting methods or principles used
21
for financial reporting purposes, except as required by a change in applicable
law or generally accepted accounting principles and concurred with by Parent's
independent public accountants, or (d) agreement, whether in writing or
otherwise, to take any action described or referenced in this Section 4.11.
4.12 REORGANIZATION. Neither Parent nor, to the knowledge of Parent, any
of its Subsidiaries has taken or agreed to take any action (other than actions
contemplated by this Agreement) that would prevent the Merger from
constituting a reorganization qualifying under Section 368(a) of the Code.
Parent is not aware of any agreement, plan or other circumstances that would
prevent the Merger from so qualifying under Section 368(a) of the Code.
4.13 MERGER FILINGS. The information as to Parent and Merger Subsidiary
or any of their affiliates or shareholders included in Parent's filing, or
submitted to the Company for inclusion in its filing, if any, required to be
submitted under the HSR Act or under any Foreign Merger Laws shall be true,
correct, and complete in all material respects and shall comply in all
material respects with the applicable requirements of the HSR Act, the rules
and regulations issued by the Federal Trade Commission pursuant thereto, and
Foreign Merger Laws.
4.14 ACCOUNTING MATTERS. To the knowledge of Parent, neither Parent nor
any affiliate (as such term is used in Rule 145 under the Securities Act) of
Parent has taken or agreed to take or plans to take any action that could
prevent Parent from accounting for the Merger as a "pooling of interests" in
accordance with generally accepted accounting principles, Accounting
Principles Board Opinion No. 16 and all published rules, regulations and
policies of the SEC.
4.15 TAXES. Except for such matters that would not have a Parent Material
Adverse Effect, (i) Parent and each Subsidiary have filed, or have obtained
extensions to file (which extensions have not expired without filing), all
state, local, United States, foreign, or other tax reports and returns
required to be filed by any of them, (ii) Parent and each Subsidiary have duly
paid, or accrued on their books of account, all taxes (including estimated
taxes) shown as due on such reports and returns (or such extension requests),
or assessed against them, other than taxes being contested in good faith in
proper proceedings, and (iii) the liabilities and reserves for taxes which are
reflected on the Parent Balance Sheets are adequate to cover all taxes payable
by Parent and its Subsidiaries for all taxable periods and portions thereof
ending on or before the dates thereof. To Parent's knowledge, no tax audits
are pending against and no claims for taxes have been received in writing by
Parent or any of its Subsidiaries, other than audits and claims that would not
have a Parent Material Adverse Effect. Neither Parent nor any Subsidiary has,
with regard to any assets or property held, acquired or to be acquired by any
of them, filed a consent to the application of Section 341(f)(2) of the Code.
Neither Parent nor any of its Subsidiaries has taken or agreed to take any
action (other than actions contemplated by this Agreement) that would prevent
the Merger from constituting a reorganization qualifying under Section 368(a)
of the Code. Parent is not aware of any agreement, plan or other circumstance
that would prevent the Merger from so qualifying under Section 368(a) of the
Code.
4.16 CONTRACTS. Neither Parent nor any Subsidiary is in material
violation of or in default under any contract, plan, agreement, understanding,
arrangement or obligation that is
22
material to Parent and its Subsidiaries, considered as a whole, except for
such violations or defaults that would not have a Parent Material Adverse
Effect. As of the date of this Agreement, neither Parent nor any Subsidiary is
a party to any contract, plan, agreement, understanding, arrangement or
obligation (i) which materially restricts Parent's, or after the Merger would
materially restrict the Surviving Corporation's or Parent's, ability to
conduct any material line of business currently conducted by Parent, (ii)
which imposes on Parent or any Subsidiary material obligations , the non-
performance of which would have a Parent Material Adverse Effect, that are not
reflected in Parent's financial statements included within the Parent SEC
Filings, or (iii) that would be required to be filed with the SEC in a filing
to which paragraph (b)(10) of Item 601 of Regulation S-K of the Rules and
Regulations of the SEC is applicable, which has not been so filed.
4.17 BENEFIT PLANS.
(a) Except as set forth on the Parent Disclosure Schedule, neither
Parent nor any subsidiary sponsors, maintains, contributes to, or has, during
the five year period ending on the date of this Agreement, sponsored,
maintained, or contributed to or been required to contribute to, any "employee
pension benefit plan" ("Pension Plan"), as such term is defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, solely for the purpose of this subsection, a plan excluded from
coverage by Section 4(b)(5) of ERISA. Each such Pension Plan presently
maintained by Parent or any Subsidiary is, in all material respects, in
compliance with applicable provisions of ERISA, the Code, and other applicable
law and Parent or such Subsidiary has performed all of its obligations under
such Pension Plan except for such obligations that would not have a Parent
Material Adverse Effect.
(b) Neither Parent nor any Subsidiary sponsors, maintains,
contributes to, or has, during the five year period ending on the date of this
Agreement, sponsored, maintained, or contributed to or been required to
contribute to, any Pension Plan that is subject to Title IV of ERISA.
(c) Except as set forth on the Parent Disclosure Schedule, neither
Parent nor any Subsidiary sponsors, maintains, or contributes to any "employee
welfare benefit plan" ("Welfare Plan"), as such term is defined in Section 3(1)
of ERISA, whether insured or otherwise, and any such Welfare Plan presently
maintained by Parent or any Subsidiary is, in all material respects, in
compliance with the provisions of ERISA, the Code, and all other applicable
laws, including, but not limited to, Section 4980B of the Code and the
regulations thereunder, and Part 6 of Title I of ERISA. Neither Parent nor any
Subsidiary has established or contributed to any "voluntary employees'
beneficiary association" within the meaning of Section 501(c)(9) of the Code.
(d) Except as set forth on the Parent Disclosure Schedule, neither
Parent nor any Subsidiary currently maintains or contributes to any material
oral or written bonus, profit-sharing, compensation (incentive or otherwise),
commission, stock option, or other stock-based compensation, retirement,
severance, change of control, vacation, sick or parental leave,
23
dependent care, deferred compensation, cafeteria, disability, hospitalization,
medical, death, retiree, insurance, or other benefit or welfare or other similar
plan, policy, agreement, trust, fund, or arrangement providing for the
remuneration or benefit of all or any employees, directors or any other person,
that is neither a Pension Plan nor a Welfare Plan (collectively, the
"Compensation Plans").
(e) With respect to the Pension Plans, Welfare Plans or Compensation
Plans, no event has occurred and, to the knowledge of Parent, there exists no
condition or set of circumstances, in connection with which Parent or any of its
Subsidiaries could be subject to any liability under the terms of such Plans
(other than the payment of benefits thereunder), ERISA, the Code or any other
applicable law which would have a Parent Material Adverse Effect.
(f) The Internal Revenue Service has issued favorable determination
letters with respect to all presently maintained Parent and Subsidiary Pension
Plans that are intended to be qualified under Section 401(a) of the Code, or has
applied to the Internal Revenue Service for such a determination letter prior to
the expiration of the requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for such a
determination and to make any amendments necessary to obtain a favorable
determination, or has been established under a standardized prototype plan for
which an Internal Revenue Service opinion letter has been obtained by the plan
sponsor and is valid as to the adopting employer. Parent has made available to
the Company the written documents setting forth the terms, or with respect to
those plans for which a written document does not exist, a summary of the
material terms, of all presently maintained Pension Plans, Welfare Plans,
Compensation Plans, and related agreements, and complete and accurate copies of
the three most recent annual reports (Form 5500), the most recent favorable
determination opinion or letters, current summary plan descriptions, and all
employee handbooks or manuals.
ARTICLE 5
COVENANTS
5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by this
Agreement or as set forth in Section 5.1 of the Company Disclosure Schedule,
unless Parent shall otherwise consent in writing (such consent not to be
unreasonably withheld or delayed), during the period from the date of this
Agreement to the Effective Time, the Company and each Subsidiary will (i)
conduct its respective operations, to the extent commercially reasonable,
according to its ordinary and usual course of business and consistent with past
practice, and (ii) use commercially reasonable efforts to preserve substantially
intact its respective business organization, to keep available the services of
its respective officers and employees and to maintain satisfactory relationships
with licensors, licensees, suppliers, contractors, distributors, consultants,
customers, and others having material business relationships with it. The
Company will promptly advise Parent of any material change in the management,
present or planned business, properties, liabilities, results of operations, or
financial condition of the Company or any Subsidiary. The Company will, prior
to distributing or otherwise circulating any notices, directives, or other
communications directed to all or groups of customers, vendors, employees,
distributors, or others associated with its business relating to the
transactions contemplated
24
hereby or to the operation of business after consummation of such transactions,
consult with Parent and give Parent reasonable opportunity to comment thereon.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in or contemplated by this Agreement or as set forth in
Section 5.1 of the Company Disclosure Schedule, from the date of this Agreement
until the Effective Time, neither the Company nor any Subsidiary will, without
the prior written consent of Parent (such consent not to be unreasonably
withheld or delayed):
(a) amend its Certificate or Articles of Incorporation or, pursuant
to action by the Company's Board of Directors, amend its Bylaws;
(b) authorize for issuance, issue, sell, pledge, or deliver (whether
through the issuance or granting of additional options, warrants, commitments,
subscriptions, rights to purchase, or otherwise) any stock of any class or any
securities convertible into shares of stock of any class (other than, so long as
treatment of the Merger as a pooling of interests is not reasonably expected by
Parent's or the Company's independent accountants to be jeopardized, the (i)
issuance of shares of Company Common Stock pursuant to the exercise of stock
options outstanding on the date of this Agreement or granted in accordance with
this subsection (b) and (ii) the issuance, in the ordinary course of business
and consistent with past practice, of stock options to purchase, at not less
than the fair market value on the date of grant, up to the number of shares
specified in Section 5.1 of the Company Disclosure Schedule).
(c) split, combine, or reclassify any shares of its capital stock,
declare, set aside, or pay any dividend or other distribution (whether in cash,
stock, or property or any combination thereof) in respect of its capital stock;
or redeem or otherwise acquire any shares of its capital stock or its other
securities (other than, so long as treatment of the Merger as a pooling of
interests is not jeopardized, pursuant to contractual agreements with employees,
directors or consultants existing as of the date of this Agreement); or amend or
alter any material term of any of its outstanding securities;
(d) other than indebtedness incurred in the ordinary course of
business and consistent with past practice and other than intercompany
indebtedness or as described in Section 5.1 of the Company Disclosure Schedule,
create, incur or assume any indebtedness for borrowed money, or assume,
guarantee, endorse, or otherwise agree to become liable or responsible for the
obligations of any other person, or make any loans, advances or capital
contributions to, or investments in, any other person; or create, incur or
assume any Lien on any material asset other than any Lien that would not
materially adversely affect the Company's or any Subsidiary's rights with
respect thereto;
(e) (i) increase in any manner the compensation of any of its
directors, officers, employees, or consultants, or accelerate the payment of any
such compensation, except in each case in the ordinary course of business and
consistent with past practice (including, without limitation, annual year end
increases and accelerated payments customarily made upon termination of
employment) or consistent with existing contractual commitments or as required
by applicable law; (ii) pay or accelerate or otherwise modify in any material
respect the payment,
25
vesting, exercisability, or other feature or requirement of any pension,
retirement allowance, severance, change of control, stock option, or other
employee benefit to any of its directors, officers, employees or consultants
except as required by any existing plan, agreement, or arrangement, or as set
forth in Section 5.1 of the Company Disclosure Schedule; or (iii) except for
normal increases in the ordinary course of business in accordance with its
customary past practices or consistent with existing contractual commitments or
as required by applicable laws, commit itself to any additional or increased
pension, profit-sharing, bonus, incentive, deferred compensation, group
insurance, severance, change of control, retirement or other benefit, plan,
agreement, or arrangement, or to any employment or consulting agreement, with or
for the benefit of any person, or amend any of such plans or any of such
agreements in existence on the date hereof (except any amendment required by law
or that would not materially increase benefits under the relevant plan);
(f) except in the ordinary course of business and consistent with
past practice or pursuant to contractual obligations existing on the date hereof
or as described in Section 5.1 of the Company Disclosure Schedule, sell,
transfer, mortgage, or otherwise dispose of or encumber any assets or properties
material to the Company and its Subsidiaries, considered as a whole other than
any Lien that would not materially adversely affect the Company's and its
Subsidiaries' rights with respect to such assets or properties;
(g) acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business of any corporation, partnership, joint venture,
association, or other business organization or division thereof or (ii) any
assets that are material, individually or in the aggregate, to the Company and
its Subsidiaries, except as provided in subsection (h) below and except
purchases of inventory in the ordinary course of business consistent with past
practice;
(h) make or agree to make any new capital expenditure or
expenditures, except for up to $50,000 of capital expenditures pursuant to the
Company's budget previously provided to Parent or as described in Section 5.1 of
the Company Disclosure Schedule;
(i) enter into, amend in any material respect, or terminate any
joint ventures or any other agreements, commitments, or contracts that are
material to the Company and its Subsidiaries, considered as a whole (except
agreements, commitments, or contracts expressly provided for or contemplated by
this Agreement or for the purchase, sale, or lease of goods, services, or
properties in the ordinary course of business, consistent with past practice),
except as set forth in Section 5.1 of the Company Disclosure Schedule;
(j) enter into or terminate, or amend, extend, renew, or otherwise
modify in any material respect (including, but not limited to, by default or by
failure to act) any material distribution, OEM, independent sales
representative, noncompetition, licensing, franchise, research and development,
supply, or similar contract, agreement, or understanding (except agreements,
commitments, or contracts expressly provided for or contemplated by this
Agreement or for the purchase, sale, or lease of goods, services, or properties
in the ordinary course of business, consistent with past practice), or enter
into any contract, plan, agreement,
26
understanding, arrangement or obligation which materially restricts the
Company's, or after the Merger would restrict the Surviving Corporation's or
Parent's, ability to conduct any material line of business, except as set forth
in Section 5.1 of the Company Disclosure Schedule;
(k) change in any material respect its credit policy as to sales of
inventories or collection of receivables or its inventory consignment practices;
(l) remove or permit to be removed from any building, facility, or
real property any material machinery, equipment, fixture, vehicle, or other
personal property or parts thereof, except in the ordinary course of business or
unless the same is replaced with similar items of equal quality;
(m) alter or revise its accounting principles, procedures, methods,
or practices in any material respect, except as required by applicable law or by
a change in generally accepted accounting principles and concurred with by the
Company's independent public accountants;
(n) institute, settle, or compromise any claim, action, suit, or
proceeding pending or threatened by or against it involving amounts in excess of
$50,000 at law or in equity or before any Governmental Body or any
nongovernmental self-regulatory agency;
(o) knowingly take any action that would render any representation,
warranty, covenant, or agreement of the Company in this Agreement inaccurate or
breached such that the conditions in Section 6.2 will not be satisfied as of the
Closing Date; or
(p) agree, whether in writing or otherwise, to do any of the
foregoing.
5.2 CONDUCT OF BUSINESS OF PARENT. Except as contemplated by this
Agreement or as set forth in Section 5.2 of the Parent Disclosure Schedule,
unless the Company shall otherwise consent in writing (such consent not to be
unreasonably withheld or delayed), during the period from the date of this
Agreement to the Effective Time, Parent and each Subsidiary will (i) conduct its
respective operations, to the extent commercially reasonable, according to its
ordinary and usual course of business and consistent with past practice, and
(ii) use commercially reasonable efforts to preserve substantially intact its
respective business organization, to keep available the services of its
respective officers and employees and to maintain satisfactory relationships
with licensors, licensees, suppliers, contractors, distributors, consultants,
customers, and others having material business relationships with it. Without
limiting the generality of the foregoing, and except as contemplated by this
Agreement, from the date of this Agreement until the Effective Time, Parent will
not do, and will not permit any of its Subsidiaries to do, any of the following
without the prior written consent of the Company (such consent not to be
unreasonably withheld or delayed):
(a) amend its Certificate or Articles of Incorporation or, pursuant
to action by Parent's Board of Directors, amend its Bylaws;
(b) authorize for issuance, issue, sell, pledge, or deliver (whether
through the issuance or granting of additional options, warrants, commitments,
subscriptions, rights to
27
purchase, or otherwise) any stock of any class or any securities convertible
into shares of stock of any class (other than, so long as treatment of the
Merger as a pooling of interests is not reasonably expected by Parent's or the
Company's independent accounts to be jeopardized, the (i) issuance of shares of
Parent Common Stock pursuant to the exercise of stock options outstanding on the
date of this Agreement or granted in accordance with this subsection (b) and
(ii) the issuance, in the ordinary course of business and consistent with past
practice, of stock options to purchase, at not less than the fair market value
on the date of grant, up to the number of shares specified in Section 5.2 of the
Parent Disclosure Schedule).
(c) combine or reclassify any shares of its capital stock, declare,
set aside or pay any extraordinary dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, or redeem or otherwise acquire any shares of its capital stock or its
other securities (other than, so long as treatment of the Merger as a pooling of
interests is not jeopardized, pursuant to Parent's previously announced stock
repurchase program, or contractual arrangements with employees, directors, or
consultants existing as of the date of this Agreement) or amend or alter any
material term of any of its outstanding securities;
(d) acquire or agree to acquire, by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business of any corporation, partnership, joint venture, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire, or dispose of or agree to dispose of, any assets of any person,
which, in each case, could reasonably be expected to delay materially the
consummation of, or increase materially the risk of non-consummation of, the
transactions contemplated by this Agreement;
(e) except in the ordinary course of business and consistent with
past practice or pursuant to contractual obligations existing on the date hereof
or as described in Section 5.2 of the Parent Disclosure Schedule, sell,
transfer, mortgage, or otherwise dispose of or encumber any assets or properties
material to the Parent and its Subsidiaries, considered as a whole other than
any Lien that would not materially adversely affect the Parent's and its
Subsidiaries' rights with respect to such assets or properties;
(f) alter or revise its accounting principles, procedures, methods
or practices in any material respect, except as required by applicable law or
regulation or by a change in generally accepted accounting principles and
concurred with by Parent's independent public accountants;
(g) knowingly take any action that would result in a failure to
maintain the quotation of Parent Common Stock on the Nasdaq National Market.
(h) knowingly take any action, or knowingly fail to take any action,
that would render any representation, warranty, covenant or agreement of Parent
in this Agreement inaccurate or breached such that the conditions in Section 6.3
will not be satisfied as of the Closing Date; or
(i) agree, whether in writing or otherwise, to do any of the
foregoing.
28
5.3 NO SOLICITATION. The Company and its Subsidiaries shall not, and shall
cause their respective officers, directors, employees, representatives, agents,
or affiliates (including, but not limited to any investment banker, attorney or
accountant retained by the Company or any Subsidiary) not to, directly or
indirectly, solicit, knowingly encourage, initiate, or participate in any way in
discussions or negotiations with, or knowingly provide any nonpublic information
to, any corporation, partnership, person, or other entity or group (other than
Parent or any affiliate or agent of Parent) concerning any proposed Alternative
Transaction (as defined below), or otherwise knowingly facilitate any effort or
attempt to propose, make or implement an Alternative Transaction. For purposes
of this Agreement, "Alternative Transaction" shall mean any of the following
involving the Company or any Subsidiary: (i) any tender offer, exchange offer,
merger, consolidation, share exchange, business combination or similar
transaction; (ii) any transaction or series of related transactions pursuant to
which any person or entity (or its shareholders), other than Parent, Merger
Subsidiary or any of their affiliates (a "Third Party") acquires shares (or
securities exercisable for or convertible into shares) representing more than
50% of the outstanding shares of any class of capital stock of the Company or
any Subsidiary; or (iii) any sale, lease, exchange, licensing, transfer or other
disposition pursuant to which a Third Party acquires control of more than 50% of
the assets (including, but not limited to, Intellectual Property assets) of the
Company and its Subsidiaries taken as a whole (determined by reference to the
fair market value of such assets), in a single transaction or series of related
transactions. The Company will immediately terminate all discussions with Third
Parties concerning any proposed Alternative Transaction, and will request that
such Third Parties promptly return any confidential information furnished by the
Company in connection with any proposed Alternative Transaction. The Company
will not waive any provision of any confidentiality, standstill or similar
agreement entered into with any third party regarding any proposed Alternative
Transaction, and prior to the Closing shall enforce all such agreements in
accordance with their terms. The Company will promptly communicate to Parent the
name of the person or entity submitting, and the terms and conditions of, any
proposal or inquiry that it receives after the date hereof in respect of any
proposed Alternative Transaction or a reasonably detailed description of any
such information requested from it after the date hereof or of any such
negotiations or discussions being sought to be initiated or continued with the
Company after the date hereof in respect of a proposed Alternative Transaction.
The foregoing notwithstanding, this Agreement shall not prohibit the Board of
Directors of the Company from (i) prior to the Required Company Stockholder
Vote, furnishing nonpublic information to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited Superior
Proposal (as defined below), if, and only to the extent that:
(a) the Board of Directors reasonably and in good faith determines
that failure to take such action would be inconsistent with the fiduciary duties
of the Board of Directors to its stockholders under applicable law;
(b) prior to first furnishing nonpublic information to, or first
entering into any substantive discussions and negotiations with, such person or
entity after the date hereof, the Company (i) provides written notice to Parent
to the effect that it intends to furnish information to, or enter into
discussions or negotiations with, a person or entity making a Superior Proposal,
29
and naming and identifying the person or entity making the Superior Proposal,
and (ii) receives from such person or entity an executed confidentiality
agreement with terms no less favorable to the Company than the Confidentiality
Agreement (as defined below) entered into with Parent; and
(c) the Company provides Parent with all non-public information to
be provided to such person or entity which Parent has not previously received
from the Company, and the Company keeps Parent informed, on a daily or more
regular basis if the context requires or Parent so requests, of the status,
terms and conditions and all other material information with respect to any such
discussions or negotiations; and
(ii) to the extent applicable, complying with Rule 14e-2 or 14d-9 promulgated
under the 1934 Act with regard to a proposed Alternative Transaction.
Nothing in this Section shall (x) permit the Company to terminate this Agreement
(except as specifically provided in Article 7 hereof), or (y) permit the Company
to enter into any agreement providing for an Alternative Transaction (other than
as specifically provided in Article 7 hereof, or the confidentiality agreement
as provided, and in the circumstances and under the conditions set forth, above)
for as long as this Agreement remains in effect.
For purposes of this Agreement, a "Superior Proposal" shall mean a proposal for
an Alternative Transaction that the Board of Directors of the Company has
reasonably and in good faith determined (with the advice of its financial
advisors and taking into account all legal, financial and regulatory aspects of
the likelihood of the consummation of such Alternative Transaction, including,
but not limited to, the conditions to consummation and the consequences under
such Alternative Transaction proposal of any material adverse effects or changes
in the Company) to be more favorable to the Company's stockholders than the
transactions contemplated by this Agreement.
5.4 ACCESS AND INFORMATION.
(a) The Company and Parent shall afford each other, and to their
respective accountants, officers, directors, employees, counsel, and other
representatives, reasonable access during normal business hours upon reasonable
prior notice, from the date hereof through the Effective Time, to all of its
properties, books, contracts, commitments, and records, and, during such period,
the Company and Parent shall furnish promptly to each other all information
concerning its and its Subsidiaries' businesses, prospects, properties,
liabilities, results of operations, financial condition, research and
development, intellectual property, officers, employees, consultants, advisers,
distributors, customers, suppliers, and others having material dealings with it
or any Subsidiary as the other may reasonably request, and reasonable
opportunity to contact and obtain information from such officers, employees,
consultants, advisers, distributors, customers, suppliers, and others having
dealings with it or any Subsidiary as the other may reasonably request provided
that each party may require the other to enter into a supplemental
confidentiality agreement with regard to certain technical proprietary or
competitively sensitive information prior to providing such information to the
other party. During the period from the date hereof to the Effective Time, the
parties shall in good faith meet
30
and correspond on a regular basis for mutual consultation concerning the conduct
of their respective businesses and, in connection therewith, Parent and the
Company shall be entitled, during normal business hours upon reasonable prior
notice and in a manner that does not unreasonably interfere with the other
party's business, to have employees or other representatives present at the
offices of the other party to observe, and be kept informed concerning, the
other party's operations and business planning.
(b) Parent and the Company shall hold in confidence all such
nonpublic information as required by and in accordance with the confidentiality
agreement dated February 3, 1999, between Parent and the Company and any
supplemental confidentiality agreements entered into between the parties prior
to the Effective Time (collectively, the "Confidentiality Agreement") .
5.5 APPROVAL OF STOCKHOLDERS; PROXY STATEMENT; REGISTRATION STATEMENT.
(a) The Company shall use commercially reasonable efforts to
promptly, subject to applicable law or SEC or Nasdaq regulations, take all
action necessary in accordance with the DGCL and the Company's Certificate of
Incorporation and Bylaws to cause a special meeting of the Company's
stockholders (the "Company Stockholders Meeting") to be duly called and held as
soon as reasonably practicable following the date upon which the Registration
Statement (as defined below) becomes effective for the purpose of voting upon
the Merger and the adoption and approval of this Agreement and at such Meeting
to submit this Agreement and the Merger to a vote of the stockholders. The
stockholder vote or consent required for adoption and approval of this Agreement
and the approval of the Merger shall be no greater than that set forth in the
DGCL and the Company's Certificate of Incorporation as previously provided to
Parent. Accordingly, the Company represents and warrants that the affirmative
vote of the holders of record of a majority of the shares of Company Common
Stock outstanding on the record date for the Company Stockholders Meeting is all
that is necessary to obtain stockholder adoption and approval of this Agreement
and approval of the Merger. The Company shall use commercially reasonable
efforts to obtain the adoption and approval by the Company's stockholders of
this Agreement and the approval by the Company's stockholders of the Merger,
unless such action is inconsistent with the fiduciary duties of the Board of
Directors to its stockholders imposed by applicable law. In accordance
therewith, the Company shall, with the cooperation of Parent, prepare and file,
as soon as reasonably practicable, a proxy statement/ prospectus to be included
as part of the Registration Statement (such proxy statement/prospectus, together
with notice of meeting, form of proxy, and any letter or other materials to the
Company's stockholders included therein are referred to in this Agreement as the
"Proxy Statement/Prospectus"). Parent shall furnish to the Company all
information concerning Parent and its subsidiaries, officers, directors and
shareholders, and shall take such other action and otherwise cooperate, as the
Company may reasonably request in connection with any such action. The Company
shall use commercially reasonable efforts to cause the definitive Proxy
Statement/Prospectus to be mailed to the stockholders of the Company as soon as
reasonably practicable after the Registration Statement shall have become
effective, with the date of mailing as mutually determined by the Company and
Parent. The Proxy Statement/Prospectus shall
31
include the recommendation of the Company's Board of Directors in favor of the
Merger, unless such action is inconsistent with the fiduciary duties of the
Board of Directors to its stockholders imposed by applicable law. Unless and
until this Agreement is validly terminated pursuant to Article 7, nothing herein
shall limit or eliminate in any way the Company's obligation to call, give
notice of, convene and hold the Company Stockholders Meeting and at such meeting
submit this Agreement and the Merger to a vote of the Company's stockholders
(and not postpone or adjourn such meeting or the vote by the Company's
stockholders upon this Agreement and the Merger to another date without Parent's
approval, not to be unreasonably withheld if and only to the extent such
postponement or adjournment is required by law or by SEC or Nasdaq regulation).
(b) Parent shall, with the cooperation of the Company, prepare and
file, as soon as reasonably practicable following completion of the SEC's review
and comment on the Proxy Statement/Prospectus, a registration statement under
the 1933 Act registering the shares of Parent Common Stock to be issued in the
Merger (the "Registration Statement"), which Registration Statement shall
include the Proxy Statement/Prospectus. Parent will use commercially reasonable
efforts to have the Registration Statement declared effective by the SEC as
promptly thereafter as practicable. Parent shall also take any action required
to be taken under state blue sky or securities laws in connection with the
issuance of Parent Common Stock pursuant to the Merger. The Company shall
furnish to Parent all information concerning the Company and its Subsidiaries
and the holders of its capital stock, and shall take such other action and
otherwise cooperate, as Parent may reasonably request in connection with any
such action.
(c) Parent shall notify the Company promptly (i) of the receipt of
the comments of the SEC, (ii) of any request by the SEC for amendments or
supplements to the Registration Statement, (iii) of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, or the issuance of any stop order and (iv) of the suspension of the
qualification of the Parent Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction and shall supply the Company with
copies of all correspondence with the SEC with respect to the Registration
Statement.
(d) If at any time prior to the Effective Time, any event or
circumstance relating to the Company, any Subsidiary, or the Company's officers
or directors should occur and be discovered by the Company that is required to
be described in an amendment or supplement to the definitive Proxy
Statement/Prospectus or the Registration Statement, the Company shall promptly
inform Parent. If at any time prior to the Effective Time, any event or
circumstance relating to Parent or any of its subsidiaries or their respective
officers or directors should occur and be discovered by Parent that is required
to be described in an amendment or supplement to the definitive Proxy
Statement/Prospectus or the Registration Statement, Parent shall promptly inform
the Company. Whenever any event occurs that should be described in an amendment
of, or supplement to, the definitive Proxy Statement/Prospectus or the
Registration Statement, the Company or Parent, as the case may be, shall, upon
learning of such event, promptly notify the other and consult and cooperate with
the other in connection with the preparation of a mutually acceptable amendment
or supplement. The parties shall promptly file such amendment or supplement with
the SEC and mail such amendment or supplement as soon as practicable after it
32
is cleared by the SEC. No amendment or supplement to the Proxy
Statement/Prospectus or the Registration Statement will be made by Parent or the
Company without the approval of the other party (such approval not to be
unreasonably withheld or delayed).
5.6 CONSENTS. The Company will, at its cost and expense, use commercially
reasonable efforts to obtain all material approvals and consents of all third
parties necessary on the part of the Company or its Subsidiaries to consummate
the transactions contemplated hereby. Parent agrees to cooperate with the
Company in connection with obtaining such approvals and consents. Parent will,
at its cost and expense, use commercially reasonable efforts to obtain all
material approvals and consents of all third parties necessary on the part of
Parent to consummate the transactions contemplated hereby. The Company and
Parent agree to cooperate with each other in connection with obtaining such
approvals and consents.
5.7 AFFILIATES' LETTERS.
(a) As soon as practicable after the date of this Agreement, the
Company shall deliver to Parent a list of names and addresses of those persons,
in the Company's reasonable judgment after consultation with outside legal
counsel, who, as of the date hereof, are affiliates within the meaning of Rule
145 of the rules and regulations promulgated under the 1933 Act or otherwise
applicable SEC accounting releases with respect to pooling-of-interests
accounting treatment (each such person, an "Affiliate") of the Company. The
Company shall provide Parent such information and documents as Parent shall
reasonably request for purposes of reviewing such list and shall promptly update
such list to reflect any changes thereto. As soon as practicable after the date
of this Agreement, the Company will deliver to Parent an affiliate's letter in
the form attached hereto as EXHIBIT B, executed by each of the Affiliates of the
Company identified in the foregoing list, and shall use best efforts to deliver
or cause to be delivered to Parent as soon as practicable after the date hereof
such an affiliate's letter executed by any persons who, to the knowledge of the
Company, become Affiliates after the date hereof. Parent shall be entitled to
place legends as specified in such affiliates' letters on the certificates
evidencing any of the Parent Common Stock received by such Affiliates pursuant
to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the Parent Common Stock, consistent with
the terms of such letters.
(b) For so long as resales of shares of Parent Common Stock issued
pursuant to the Merger are subject to the resale restrictions set forth in Rule
145 under the 1933 Act, Parent will use commercially reasonable efforts to
comply with Rule 144(c)(1) under the ▇▇▇▇ ▇▇▇.
5.8 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement, the transactions
contemplated hereby, the Proxy Statement/Prospectus, and the Registration
Statement will be paid by the party incurring such costs and expenses, except
that the Company and Parent will share equally the cost of printing and filing
with the SEC the Proxy Statement/Prospectus and the Registration Statement and
the filing fees required under the HSR Act or any Foreign Merger Laws.
33
5.9 FURTHER ACTIONS. Subject to the terms and conditions herein provided
and without being required to waive any conditions herein (whether absolute,
discretionary, or otherwise), each of the parties hereto agrees to use
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
5.10 REGULATORY APPROVALS.
(a) The Company and Parent each shall use commercially reasonable
efforts to take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things as may be necessary under federal or state securities
laws or the HSR Act or Foreign Merger Laws (including without limitation,
furnishing all information required under the HSR Act or Foreign Merger Laws and
in connection with approvals of or filings with any other Governmental Entity)
applicable to or necessary for, and will file as soon as reasonably practicable
and, if appropriate, use commercially reasonable efforts to have declared
effective or approved all documents and notifications with the SEC and other
governmental or regulatory bodies (including, without limitation, foreign
regulatory bodies that administer Foreign Merger Laws, and any foreign labor
councils or bodies as may be required) that they deem necessary or appropriate
for the consummation of the Merger or any of the other transactions contemplated
hereby, and each party shall give the other information reasonably requested by
such other party pertaining to it and its subsidiaries and affiliates to enable
such other party to take such actions.
(b) Although the parties do not anticipate any legislative,
administrative or judicial objection to the consummation of the Merger or any of
the transactions contemplated by this Agreement, each of the Company, Parent and
Merger Subsidiary shall use commercially reasonable efforts vigorously to
contest and resist any action, including legislative, administrative or judicial
action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Order") that is in effect and that restricts, prevents or
prohibits the consummation of the Merger or any of the other transactions
contemplated by this Agreement, including, without limitation, by vigorously
pursuing available avenues of administrative and judicial appeal. Each of the
Company, Parent and Merger Subsidiary shall also use commercially reasonable
efforts to take any and all actions necessary to avoid or eliminate each and
every impediment under any antitrust law that may be asserted by any
governmental antitrust authority or any other party so as to enable the parties
to close by the date specified in Section 7.1(b) the transactions contemplated
hereby, including without limitation, committing to and/or effecting, by consent
decree, separate orders, or otherwise, the sale or disposition of such assets or
businesses as are required to be divested in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining order or other
order in any suit or proceeding, which would otherwise have the effect of
preventing the consummation by the date specified in Section 7.1(b) of all or
any material part of the transactions contemplated hereby. The Company and
Parent shall respond as promptly as practicable to (i) any inquiries or requests
received from the Federal Trade Commission or the
34
Department of Justice or any foreign regulatory bodies that administer Foreign
Merger Laws for additional information or documentation and (ii) any inquiries
or requests received from any state attorney general or other governmental
entity in connection with antitrust or related matters. Each of the Company and
Parent shall (1) give the other party prompt notice of the commencement of any
Legal Proceeding by or before any Governmental Entity with respect to the Merger
or any of the other transactions contemplated by this Agreement, (2) keep the
other party informed as to the status of any such Legal Proceeding, and (3)
promptly inform the other party of any communication to or from such Government
Entity regarding the Merger. The Company and Parent will consult with and
cooperate with one another and will consider in good faith the views of one
another, in connection with any analysis, appearance, presentation, memorandum,
brief, argument, opinion or proposal made or submitted in connection with any
Legal Proceeding under or related to the HSR Act or the Foreign Merger Laws or
any other federal or state antitrust or fair trade law. In addition, except as
may be prohibited by any Governmental Entity, in connection with any Legal
Proceeding under or related to the HSR Act or the Foreign Merger Laws or any
other federal or state antitrust or fair trade law, or any other similar Legal
Proceeding, each of the Company and Parent shall permit authorized
representatives of the other party to be present at each meeting or conference
relating to such Legal Proceeding.
Notwithstanding the foregoing or anything herein to the contrary, in no
event shall any party hereto be required under this Section 5.10 to make
arrangements for or to effect the sale, cessation, or other disposition of
product lines or businesses or take any action materially adverse to such party.
5.11 CERTAIN NOTIFICATIONS. The Company shall promptly notify Parent in
writing of the occurrence of any event that will or could reasonably be expected
to result in the failure by the Company or its affiliates to satisfy any of the
conditions specified in Section 6.1 or 6.2. Parent shall promptly notify the
Company in writing of the occurrence of any event that will or could reasonably
be expected to result in the failure by Parent or its affiliates to satisfy any
of the conditions specified in Section 6.1, 6.2(e) or 6.3.
5.12 [Intentionally omitted.]
5.13 NASDAQ LISTING APPLICATION. Parent shall promptly prepare and submit
to the Nasdaq National Market a listing application for the Parent Common Stock
to be issued in the Merger pursuant to Article 1 of this Agreement, and shall
use commercially reasonable efforts to obtain, prior to the Effective Time,
approval for the listing of such Parent Common Stock, subject to official notice
to the Nasdaq National Market of issuance. The Company shall cooperate with
Parent in such listing application.
5.14 LETTERS OF THE COMPANY'S AND PARENT'S ACCOUNTANTS.
(a) The Company shall cooperate with Parent and use reasonable best
efforts to cause to be delivered to Parent and the Company, letters from ▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP addressed to the Company, as of the Closing Date, stating that
based upon discussions with officials of the Company responsible for financial
and accounting matters, and information furnished to Grant
35
▇▇▇▇▇▇▇▇ LLP to the date of its letter, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP is not aware of any
fact concerning the Company or any of the stockholders or affiliates of the
Company that could preclude the Company from being a "poolable entity" in
accordance with generally accepted accounting principles, Accounting Principles
Board Opinion No. 16 and all published rules, regulations and policies of the
SEC.
(b) The Company shall cooperate with Parent and Parent shall use
reasonable best efforts to cause to be delivered to the Company and Parent,
letters from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP addressed to Parent, dated as of the Closing
Date, to the effect that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP concurs with management's
conclusion that the Merger may be accounted for as a pooling of interests
transaction in accordance with generally accepted accounting principles,
Accounting Principles Board Opinion No. 16 and all published rules, regulations
and policies of the SEC.
5.15 SUBSIDIARY SHARES. At or prior to the Closing, the Company shall use
commercially reasonable efforts to cause all issued and outstanding Subsidiary
shares (other than any interests in joint ventures or similar arrangements)
owned by any person other than the Company or any of its Subsidiaries to be
transferred for no or nominal consideration to such qualified person or persons
designated by Parent.
5.16 BENEFIT PLANS AND EMPLOYEE MATTERS.
(a) From and after the Effective Time, Parent shall, to the extent
practicable and commercially reasonable, cause the Surviving Corporation to
provide employee benefits and programs to the Company's and its Subsidiaries'
employees that, in the aggregate, are substantially comparable to or more
favorable than those in existence as of the date hereof and disclosed in writing
to Parent prior to the date hereof; provided that stock-based compensation shall
be comparable, in the aggregate, to that offered by Parent and its subsidiaries
generally. To the extent Parent satisfies its obligations under this Section by
maintaining Company benefit plans, Parent shall not be required to include
employees of the Company in Parent's benefit plans. From and after the Effective
Time, Parent shall honor, in accordance with their terms, all employment, change
of control, consulting and severance agreements and all severance, incentive and
bonus plans as in effect immediately prior to the Closing Date that are
applicable to any current or former employees or directors of the Company or any
of its Subsidiaries and that are disclosed in the Company Disclosure Schedule,
except to the extent that the coverage of any such agreement or plan is
terminated by mutual agreement between the Company and any covered or applicable
current or former employee or director.
(b) To the extent that service is relevant for purposes of
eligibility, level of participation or vesting under any employee benefit plan,
program or arrangement established or maintained by Parent, the Company or any
of their respective subsidiaries, employees of the Company and its Subsidiaries
shall be credited for service accrued or deemed accrued prior to the Effective
Time with the Company or such Subsidiary, as the case may be. Under no
circumstances shall employees receive credit for service accrued or deemed
accrued prior to the Effective Time with the Company or such Subsidiary, as the
case may be, for benefit accruals
36
under any defined benefit plan (as defined by Section 3(23) of ERISA) or any
retiree health plan established or maintained by Parent.
(c) Parent will use commercially reasonable efforts to, or will
cause the Surviving Corporation or any of their respective Subsidiaries to: (i)
waive all limitations as to pre-existing conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
employees who remain employees of the Surviving Corporation or its Subsidiaries,
following the Effective Time ("Continuing Employees") under any welfare benefit
plans that such Continuing Employees may be eligible to participate in after the
Effective Time, other than limitations or waiting periods that are already in
effect with respect to such Continuing Employees and that have not been
satisfied as of the Effective Time, and (ii) provide each Continuing Employee
with credit for the remaining short plan year for any co-payments and
deductibles paid under each comparable welfare plan maintained by the Company or
its Subsidiaries prior to the Effective Time in satisfying any applicable
deductible or co-payment requirements under any welfare plans that such
Continuing Employees are eligible to participate in after the Effective Time.
5.17 OBLIGATIONS OF MERGER SUBSIDIARY. Parent shall take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
5.18 PLAN OF REORGANIZATION. This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the income
tax regulations promulgated under the Code. From and after the date of this
Agreement and after the Effective Time, each party hereto shall use commercially
reasonable efforts to cause the Merger to qualify, and shall not, without the
prior written consent of the other parties hereto, knowingly take any actions or
cause any actions to be taken which could prevent the Merger from qualifying as
a reorganization under the provisions of Section 368(a) of the Code.
5.19 POOLING. From and after the date of this Agreement and until the
Effective Time, neither Parent nor the Company, nor any of their respective
subsidiaries or other affiliates, shall knowingly take any action, or knowingly
fail to take any action, that is reasonably likely to jeopardize the treatment
of the Merger as a "pooling of interests" transaction under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations. Between
the date of this Agreement and the Effective Time, Parent and the Company each
shall use reasonable best efforts to cause the characterization of the Merger as
a pooling of interests for accounting purposes if such a characterization were
jeopardized by action taken by Parent or the Company, respectively, prior to the
date of this Agreement. Following the Effective Time, Parent shall not knowingly
take any action, or fail to take any action, that would jeopardize the
characterization of the Merger as a "pooling of interests" transaction for
accounting purposes.
5.20 TAX MATTERS. At or prior to the filing of the Registration Statement
and at or prior to the Closing, the Company and Parent shall execute and deliver
to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.L.P. and to ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP tax
representation letters reasonably satisfactory to such counsel setting forth
customary representations which may be relied upon by
37
such counsel in rendering any opinions contemplated by this Agreement. Parent
shall use commercially reasonable efforts to cause ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.L.P.
to deliver to Parent a legal opinion, satisfying the requirements of Item 601 of
Regulation S-K promulgated under the 1933 Act and dated as of a date that is no
more than two business days prior to the date of filing of the Registration
Statement and as of the Closing Date, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code,
based in part on the tax representation letters described in this Section 5.20.
The Company shall use commercially reasonable efforts to cause ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ &
Freidenrich LLP to deliver to the Company a legal opinion, satisfying the
requirements of Item 601 of Regulation S-K promulgated under the 1933 Act and
dated as of a date that is no more than two business days prior to the date of
filing of the Registration Statement and as of the Closing Date, to the effect
that the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, based in part on the tax representation letters described in
this Section 5.20.
5.21 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) All rights to indemnification existing in favor of any person
who is now, or has been prior to the date of this Agreement or who becomes prior
to the Effective Time, an officer or director of the Company (the "Indemnified
Persons") for acts and omissions occurring prior to the Effective Time, as
provided in the Company's Certificate of Incorporation or Bylaws or the
Company's predecessor's Articles of Incorporation or Bylaws, or in
indemnification agreements between the Company or its predecessor and any such
Indemnified Persons shall survive the Merger and shall be fulfilled and honored
in all respects by the Parent and the Surviving Corporation.
(b) Parent shall maintain or shall cause the Surviving Corporation
to maintain in effect a policy or policies of directors and officers liability
insurance with coverage substantially comparable to policies in force as of the
date of this Agreement covering the Indemnified Parties for a period of not less
than six years following the Effective Time.
(c) If the Surviving Corporation lacks sufficient capital to comply
with its obligations under this Section 5.21, Parent shall provide Surviving
Corporation with such capital.
(d) The provisions of this Section 5.21 are intended for the benefit
of and shall be enforceable by each Indemnified Party, his or her heirs or
representatives and may not be amended, altered or repealed without the written
consent of the affected Indemnified Parties.
ARTICLE 6
CLOSING CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF PARENT, MERGER SUBSIDIARY AND THE
COMPANY. The respective obligations of each party to consummate the Merger shall
be subject to the fulfillment at or prior to the Closing of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
38
(a) NO INJUNCTION. None of Parent, Merger Subsidiary or the Company
shall be subject to any final order, decree, or injunction of a court of
competent jurisdiction within the United States that is then in effect that (i)
has the effect of making the Merger illegal or otherwise prohibiting the
consummation of the Merger, or (ii) would impose any material limitation on the
ability of Parent to effectively exercise full rights of ownership of the stock
of the Surviving Corporation or of the Surviving Corporation to own and operate
the assets and business of the Company.
(b) STOCKHOLDER APPROVAL. The Required Company Stockholder Vote
shall have been obtained, in accordance with the DGCL and the Company's
Certificate of Incorporation and Bylaws.
(c) REGISTRATION STATEMENT. The Registration Statement (as amended
or supplemented) shall have become effective under the 1933 Act and shall not be
subject to any "stop order," and no action, suit, proceeding, or investigation
by the SEC to suspend the effectiveness thereof shall have been initiated and be
continuing.
(d) NASDAQ LISTING. The shares of Parent Common Stock to be
delivered pursuant to the Merger shall have been duly authorized for quotation
on the Nasdaq National Market, subject to official notice of issuance.
(e) WAITING PERIODS. The waiting periods (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act and any Foreign
Merger Laws shall have expired or been terminated.
(f) BLUE SKY LAWS. Parent shall have received all permits or other
authorizations required under applicable state blue sky laws for the issuance of
shares of Parent Common Stock pursuant to the Merger.
(g) THIRD PARTY CONSENTS. All approvals and consents of third
parties referred to in Section 5.6 shall have been obtained.
6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY. The
respective obligations of Parent and Merger Subsidiary to consummate the Merger
shall be subject to the fulfillment at or prior to the Closing of the following
additional conditions, any or all of which may be waived by Parent, in whole or
in part, to the extent permitted by applicable law:
(a) REPRESENTATIONS AND WARRANTIES TRUE. Each representation and
warranty of the Company contained in this Agreement shall be true and correct on
the Closing Date as though such representations and warranties were made on such
date, except that those representations and warranties that address matters only
as of the date hereof or another particular date shall remain true and correct
as of such date, and except in any case for any inaccuracies that have not had a
Company Material Adverse Effect. Parent shall have received a certificate to the
foregoing effect signed by the Chief Executive Officer of the Company or other
authorized officer of the Company reasonably satisfactory to Parent.
39
(b) PERFORMANCE. The Company shall have performed and complied in
all material respects with all covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing, and Parent shall
have received a certificate to such effect signed by the Chief Executive Officer
of the Company or other authorized officer of the Company reasonably
satisfactory to Parent.
(c) TAX OPINION. Parent shall have received the opinions of
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.L.P. described in Section 5.20.
(d) POOLING OPINION. Parent shall have received each of the letters
described in Section 5.14.
(e) EMPLOYMENT OF KEY EXECUTIVES. Those executive officers of the
Company identified on EXHIBIT C hereto shall have executed and delivered
employment agreements with the Company in the forms set forth as EXHIBIT D.
(f) LEGAL OPINION. Parent shall have received an opinion of ▇▇▇▇
▇▇▇▇ ▇▇▇▇ & Freidenrich LLP as to the matters set forth on EXHIBIT E.
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to consummate the Merger shall be subject to the fulfillment at or prior
to the Closing of the following additional conditions, any or all of which may
be waived by the Company, in whole or in part, to the extent permitted by
applicable law:
(a) REPRESENTATIONS AND WARRANTIES TRUE. Each representation and
warranty of Parent contained in this Agreement shall be true and correct on the
Closing Date as though such representations and warranties were made on such
date, except that those representations and warranties that address matters only
as of the date hereof or another particular date shall remain true and correct
as of such date, and except in any case for any inaccuracies that have not had,
or would not reasonably be expected to have a Parent Material Adverse Effect.
The Company shall have received a certificate to the foregoing effect signed by
the Chief Executive Officer or other authorized officer of Parent reasonably
satisfactory to the Company.
(b) PERFORMANCE. Parent and Merger Subsidiary shall have performed
and complied in all material respects with all material covenants required by
this Agreement to be performed or complied with by them at or prior to the
Closing, and the Company shall have received a certificate to such effect signed
by the Chief Executive Officer or other authorized officer of Parent reasonably
satisfactory to the Company.
(c) TAX OPINION. The Company shall have received the opinions of
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP described in Section 5.20.
(d) POOLING OPINION. The Company shall have received each of the
letters described in Section 5.14.
40
(e) LEGAL OPINION. The Company shall have received an opinion of
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.L.P. as to the matters set forth on EXHIBIT F.
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the stockholders of the
Company, only:
(a) by mutual written consent duly authorized by the Board of
Directors of Parent and the Board of Directors of the Company;
(b) by either Parent or the Company if the Merger shall not have
been consummated on or before July 31, 1999; provided, however, that the
terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have been the
proximate cause of, or resulted in, the failure to consummate the Merger by such
date and provided further, however, that, if a request for additional
information is received from the U.S. Federal Trade Commission ("FTC") or
Department of Justice ("DOJ") pursuant to the HSR Act, or additional information
is requested by a governmental authority (a "Foreign Authority") pursuant to
Foreign Merger Laws, such date shall be extended to the 90th day following
acknowledgment by the FTC, DOJ, or Foreign Authority, as applicable, that Parent
and the Company have complied with such request, but in any event not later than
October 31, 1999;
(c) by either Parent or the Company if a court of competent
jurisdiction or an administrative, governmental, or regulatory authority has
issued a final nonappealable order, decree, or ruling, or taken any other
action, having the effect of permanently restraining, enjoining, or otherwise
prohibiting the Merger;
(d) by either Parent or the Company if, at the Company Stockholder's
Meeting, the requisite vote of the stockholders of the Company for approval and
adoption of this Agreement and the Merger is not obtained, except that the right
to terminate this Agreement under this Section 7.1(d) will not be available to
any party whose failure to perform any material obligation under this Agreement
has been the proximate cause of, or resulted in, the failure to obtain the
requisite vote of the stockholders of the Company;
(e) by Parent if either (i) the Company has breached its obligations
under Section 5.3 in any material respect, (ii) the Board of Directors of the
Company has recommended, approved, or authorized the Company's acceptance or
execution of a letter of intent or definitive agreement providing for an
Alternative Transaction, as defined in Section 5.3, (iii) the Board of Directors
of the Company has modified in a manner materially adverse to Parent, or
withdrawn, its recommendation of this Agreement or (iv) a tender offer or
exchange offer for any outstanding shares of Company Common Stock is commenced,
and the Board of Directors of the Company, within 10 business days after such
tender offer or exchange offer is so commenced, either fails to recommend
against acceptance of such tender offer or exchange offer
41
by its stockholders or takes no position with respect to the acceptance of such
tender offer or exchange offer by its stockholders;
(f) by the Company or Parent prior to the Required Company
Stockholder Vote if (i) the Board of Directors of the Company has complied with,
and continues to comply with, all requirements and procedures of Section 5.3 in
all material respects and has authorized, subject to complying with the terms of
this Agreement, the Company to enter into a letter of intent or binding written
agreement concerning a transaction that constitutes a Superior Proposal and the
Company notifies Parent in writing that it intends to enter into such agreement,
attaching the most current version of such agreement to such notice, (ii) Parent
does not make, within ten business days after receipt of the Company's written
notice of its intention to enter into a letter of intent or binding agreement
for a Superior Proposal, any offer that the Board of Directors of the Company
reasonably and in good faith determines, after consultation with its financial
and legal advisors, is at least as favorable to the stockholders of the Company
as the Superior Proposal and during such ten business-day period the Company
reasonably considers and discusses in good faith all proposals submitted by
Parent and, without limiting the foregoing, meets with, and causes its financial
advisors and legal advisors to meet with, Parent and its advisors from time to
time as requested by Parent to reasonably consider and discuss in good faith
Parent's proposals, and (iii) upon termination pursuant to this Section 7.1(f),
the Company pays to Parent the fee required by Section 7.2 to be paid to Parent
in the manner therein provided. The Company agrees (x) that it will not enter
into a letter of intent or binding agreement referred to in clause (i) above
until at least the 11th business day after Parent has received the notice to
Parent required by clause (i) above, and (y) to notify Parent promptly if its
intention to enter into a letter of intent or binding agreement referred to in
its notice to Parent shall change at any time after giving such notice;
(g) by Parent if (i) Parent is not in material breach of its
obligations under this Agreement and (ii) there has been a material breach by
the Company of any of its representations, warranties, or obligations under this
Agreement such that the conditions in Section 6.2 will not be satisfied
("Terminating Company Breach"); provided, however, that, if such Terminating
Company Breach is curable by the Company through the exercise of reasonable
efforts and such cure is reasonably likely to be completed prior to the
applicable date specified in Section 7.1(b), then for so long as the Company
continues to exercise reasonable efforts, Parent may not terminate this
Agreement under this Section 7.1(g); or
(h) by the Company if (i) the Company is not in material breach of
its obligations under this Agreement and (ii) there has been a material breach
by Parent of any of its representations, warranties, or obligations under this
Agreement such that the conditions in Section 6.3 will not be satisfied
("Terminating Parent Breach"); provided, however, that, if such Terminating
Parent Breach is curable by Parent through the exercise of commercially
reasonable efforts and such cure is reasonably likely to be completed prior to
the applicable date specified in Section 7.1(b), then for so long as Parent
continues to exercise commercially reasonable efforts, the Company may not
terminate this Agreement under this Section 7.1(h).
42
7.2 EFFECT OF TERMINATION.
(a) In recognition of the time, efforts, and expenses expended and
incurred by Parent with respect to the Company and the opportunity that the
acquisition of the Company presents to Parent, if this Agreement is validly
terminated: (i) by Parent pursuant to Section 7.1(e)(i), (ii) by Parent pursuant
to any provision of Section 7.1(e) other than 7.1(e)(i) and within 12 months
after the date of such termination, the Company shall have entered into a letter
of intent or a definitive agreement with a Third Party providing for an
Alternative Transaction or (iii) by Parent or the Company pursuant to Section
7.1(f); then in any such event (but subject to Section 7.2(c)), the Company will
pay to Parent, within five business days after demand by Parent in the case of
termination pursuant to Section 7.1(e)(i), within five business days after the
Company entering into a letter of intent or a definitive agreement covered by
clause (ii) above, or upon the termination date in the event of termination
pursuant to Section 7.1(f) (by wire transfer of immediately available funds to
an account designated by Parent for such purpose), a fee equal to $400,000.
(b) The Company acknowledges that the agreements contained in this
Section 7.2 are an integral part of the transactions contemplated by this
Agreement and are not a penalty, and that, without these agreements, Parent
would not enter into this Agreement. If the Company fails to pay promptly the
fee due pursuant to Section 7.2(a), the Company shall also pay to Parent's costs
and expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of the unpaid fee under this
section, accruing from its due date, at an interest rate per annum equal to two
percentage points in excess of the prime commercial lending or reference rate
quoted by U.S. Bank National Association. Any change in the interest rate
hereunder resulting from a change in such prime or reference rate shall be
effective at the beginning of the day of such change in such rate.
(c) Parent agrees that the payment provided for in Section 7.2(a)
shall be the sole and exclusive remedy of Parent upon termination of this
Agreement pursuant to Section 7.1(e) and 7.1(f), as the case may be, and such
remedy shall be limited to the sum stipulated in such Section 7.2(a), regardless
of the circumstances giving rise to such termination; provided, however, that
nothing herein shall relieve any party from liability for the willful breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement. In no event shall the Company be required to pay to Parent more
than one fee pursuant to Section 7.2(a). Except as otherwise provided in this
paragraph, in the event of the termination of this Agreement pursuant to any
paragraph of Section 7.1, the obligations of the parties to consummate the
Merger will expire, and none of the parties will have any further obligations
under this Agreement except pursuant to Sections 5.4(b), 5.8, 7.2(a), 7.2(b) and
7.2(c) and Article 8.
43
ARTICLE 8
MISCELLANEOUS
8.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement
may be amended, modified, or supplemented only by written agreement of Parent,
Merger Subsidiary, and the Company at any time prior to the Effective Time with
respect to any of the terms contained herein; provided, however, that, after the
approval 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 which would otherwise require stockholder approval under
applicable law unless such stockholder approval shall have been obtained. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
8.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of Parent or Merger
Subsidiary on the one hand, or the Company on the other hand, to comply with any
obligation, covenant, agreement, or condition herein may be waived by the
Company or Parent, respectively, only by a written instrument signed by an
officer of the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement, or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing. Merger
Subsidiary agrees that any consent or waiver of compliance given by Parent
hereunder shall be conclusively binding upon Merger Subsidiary, whether or not
given expressly on its behalf.
8.3 INVESTIGATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
respective representations and warranties of Parent and the Company contained
herein or in any certificates or other documents delivered prior to or at the
Closing shall not be deemed waived or otherwise affected by any investigation
made by any party hereto. The representations, warranties and agreements in this
Agreement and in any certificate delivered pursuant hereto shall terminate at
the Effective Time, except that the agreements set forth in Article I and
Sections 5.7(b), 5.8, 5.9, 5.16, 5.17, 5.18, 5.19, 5.21 and this Article VIII
shall survive the Effective Time.
8.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally by commercial
courier service or otherwise, or by facsimile, or three days after such notice
is mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
44
(a) If to Parent or Merger Subsidiary, to it at:
MTS Systems Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) If to the Company, to it at:
DSP Technology Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: F. ▇▇▇ ▇▇▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, Esq. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
8.5 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Except
for the provisions of Article I and Section 5.21 (the "Third Party Provisions"),
this Agreement is not intended to confer upon any other person, except the
parties hereto, any rights or remedies hereunder, and no third person shall be a
third party beneficiary of this Agreement. The Third Party Provisions may be
enforced by the beneficiaries thereof.
8.6 GOVERNING LAW. Except to the extent that Delaware law is applicable to
the duties of the Company's Board of Directors, this Agreement shall be governed
by the substantive laws of the State of Minnesota (regardless of the laws that
might otherwise govern under
45
applicable Minnesota principles of conflicts of law). The parties hereby (i)
agree and consent to be subject to the jurisdiction of any state or federal
court in the state of Delaware or in Minneapolis or St. ▇▇▇▇, Minnesota or Ann
Arbor, Michigan, with respect to all actions and proceedings arising out of or
relating to this Agreement; (ii) agree that all claims with respect to any such
action or proceeding may be heard and determined in such court; (iii)
irrevocably waive any defense of an inconvenient forum to the maintenance of any
action or proceeding in such court; (iv) consent to service of process by
mailing or delivering such service to the party at its respective principal
business address; and (v) agree that a final judgment in any such action or
proceeding from which there is no further appeal shall be conclusive and may be
enforced in any other jurisdiction by suit on the judgment or in any manner
provided by law.
8.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.8 KNOWLEDGE. As used in this Agreement or the instruments, certificates
or other documents required hereunder, the term "knowledge" of a party hereto
shall mean actual knowledge of the directors or executive officers of such
party.
8.9 INTERPRETATION. The Table of Contents, article and Section headings
contained in this Agreement are inserted for reference purposes only and shall
not affect the meaning or interpretation of this Agreement. This Agreement shall
be construed without regard to any presumption or other rule requiring the
resolution of any ambiguity regarding the interpretation or construction hereof
against the party causing this Agreement to be drafted.
8.10 PUBLICITY. Upon execution of this Agreement by Parent, Merger
Subsidiary, and the Company, the parties shall jointly issue a press release, as
agreed upon by them. The parties intend that all future statements or
communications to the public or press regarding this Agreement or the Merger
will be mutually agreed upon by them. Neither party shall, without such mutual
agreement or the prior consent of the other, issue any statement or
communication to the public or to the press regarding this Agreement, or any of
the terms, conditions, or other matters with respect to this Agreement, except
as required by law or the rules of the SEC, NASD or Nasdaq and then only (a)
upon the advice of such party's legal counsel; (b) to the extent required by law
or the rules of the SEC, NASD or Nasdaq; and (c) following prior notice to, and
consultation with, the other party (which notice shall include a copy of the
proposed statement or communication to be issued to the press or public). The
foregoing shall not restrict Parent's or the Company's communications with their
employees or customers in the ordinary course of business. Each party shall
exercise in good faith all reasonable efforts to agree with the other party
regarding the nature, form and extent of such disclosure.
8.11 ENTIRE AGREEMENT. This Agreement, including the exhibits and schedules
hereto and the Confidentiality Agreement referred to herein, embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement and the Confidentiality Agreement
supersede all prior agreements and the understandings between the parties with
respect to such subject matter, whether written or oral.
46
8.12 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 by this Agreement is not affected in any manner
materially 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 a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
8.13 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or in equity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
MTS SYSTEMS CORPORATION
By: /s/ ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------------
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Chairman and
Chief Executive Officer
BADGER MERGER CORP.
By: /s/ ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
-------------------------------
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., President
DSP TECHNOLOGY INC.
By: /s/ F. ▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
F. ▇▇▇ ▇▇▇▇▇▇▇▇, President and
Chief Executive Officer
47