EXHIBIT 99.2
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
MEDICAL DYNAMICS, INC., A COLORADO CORPORATION,
INFOCURE CORPORATION, A DELAWARE CORPORATION
AND
CADI ACQUISITION CORPORATION, A COLORADO CORPORATION
DATED: DECEMBER 21 1999
TABLE OF CONTENTS
Page
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1. DEFINITIONS........................................................... 5
1.1. "Affiliate"..................................................... 5
1.2. "Best Efforts".................................................. 6
1.3. "Breach"........................................................ 6
1.4. "Closing"....................................................... 6
1.5. "Closing Date".................................................. 6
1.6. "Code".......................................................... 6
1.7. "Company Disclosure Schedule" is defined in
this Agreement in Section 3..................................... 6
1.8. "Company Material Adverse Effect"............................... 6
1.9. "Consent"....................................................... 6
1.10. "Contemplated Transactions"..................................... 6
1.11. "Contract"...................................................... 7
1.12. "Damages"....................................................... 7
1.13. "Effective Time"................................................ 7
1.14. "Encumbrance"................................................... 7
1.15. "Environmental Requirements".................................... 7
1.16. "ERISA"......................................................... 7
1.17. "ERISA Affiliate"............................................... 7
1.18. "Exchange Act".................................................. 7
1.19. "Facilities".................................................... 7
1.20. "GAAP".......................................................... 8
1.21. "Governmental Authorization".................................... 8
1.22. "Governmental Body"............................................. 8
1.23. "HSR Act"....................................................... 8
1.24. "IRS"........................................................... 8
1.25. "Knowledge"..................................................... 8
1.26. "Legal Requirement"............................................. 8
1.27. "Order"......................................................... 8
1.28. "Ordinary Course of Business"................................... 9
1.29. "Organizational Documents"...................................... 9
1.30. "Parent Disclosure Schedule".................................... 9
1.31. "Parent Material Adverse Effect"................................ 9
means a material adverse effect on the financial condition,
results of operation, business or properties of the Parent
and all of it subsidiaries taken as a whole..................... 9
1.32. "Person"........................................................ 9
1.33. "Plan".......................................................... 9
1.34. "Proceeding".................................................... 9
1.35. "Related Person"................................................ 9
1.36. "Representative"................................................ 10
1.37. "Securities Act"................................................ 10
1.38. "Subsidiary".................................................... 10
1.39. "Tax Returns"................................................... 10
1.40. "Taxes"......................................................... 10
1.41. "Threatened".................................................... 11
2. MERGER................................................................ 11
2.1. The Merger...................................................... 11
2.2. Effective Time; Closing......................................... 11
2.3. Effect of the Merger............................................ 11
2.4. Articles of Incorporation; Bylaws; Directors and Officers....... 11
2.5. Effect on Capital Stock......................................... 12
2.6. Exchange of Certificates........................................ 13
2.7. Lost, Stolen or Destroyed Certificates.......................... 15
2.8. No Further Ownership Rights in Company Common Stock............. 15
2.9. Additional Actions.............................................. 16
2.10. Tax and Accounting Consequences................................. 16
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................... 16
3.1. Organization, Good Standing, Corporate Power
and Subsidiaries................................................ 16
3.2. Authority; No Conflict.......................................... 17
3.3. Capitalization.................................................. 18
3.4. SEC Filings; Financial Statements............................... 19
3.5. Books and Records............................................... 20
3.6. Real Property Interests......................................... 20
3.7. Condition and Sufficiency of Assets............................. 20
3.8. Accounts Receivable............................................. 20
3.9. Inventory....................................................... 21
3.10. No Undisclosed Liabilities...................................... 21
3.11. Taxes........................................................... 21
3.12. No Company Material Adverse Effect.............................. 22
3.13. Employee Benefits Matters....................................... 22
3.14. Compliance With Legal Requirements;
Governmental Authorizations..................................... 25
3.15. Legal Proceedings; Orders....................................... 26
3.16. Absence of Certain Changes and Events........................... 27
3.17. Contracts; No Defaults.......................................... 28
3.18. Insurance....................................................... 30
3.19. Environmental Matters........................................... 31
3.20. Employees....................................................... 31
3.21. Government Contracts............................................ 32
3.22. Intellectual Property Rights of the Company..................... 33
3.23. Certain Payments................................................ 39
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3.24. Relationships With Related Persons.............................. 40
3.25. Brokers or Finders.............................................. 40
3.26. Labor Relations; Compliance..................................... 40
3.27. Disclosure Documents............................................ 41
3.28. Disclosure...................................................... 41
3.29. Vote Required................................................... 41
3.30. Pooling-of-Interests............................................ 41
4. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF MERGER SUB AND PARENT.. 41
4.1. Organization.................................................... 42
4.2. Authorization................................................... 42
4.3. Absence of Restrictions and Conflicts........................... 42
4.4. Capitalization of Parent and Merger Sub......................... 43
4.5. SEC Filings; Financial Statements............................... 44
4.6. Litigation...................................................... 44
4.7. Registration Statement; Proxy Statement......................... 44
4.8. Certain Proceedings............................................. 45
4.9. Brokers or Finders.............................................. 45
5. CERTAIN AGREEMENTS OF THE PARTIES..................................... 45
5.1. No Solicitation................................................. 45
5.2. Public Disclosure............................................... 47
5.3. Reasonable Efforts; Notification................................ 47
5.4. Third Party Consents............................................ 48
5.5. Indemnification................................................. 48
5.6. Nasdaq Listing.................................................. 48
5.7. Affiliates...................................................... 49
5.8. Provision of Loan By Parent to Company.......................... 50
6. ADDITIONAL COVENANTS OF THE PARTIES................................... 50
6.1. Mutual Covenants................................................ 50
6.2. Covenants of the Company........................................ 52
6.3. Form S-8........................................................ 54
6.4. Stock Options and Warrants...................................... 54
7. CONDITIONS............................................................ 54
7.1. Mutual Conditions............................................... 54
7.2. Conditions to Obligations of Merger Sub and Parent.............. 55
7.3. Conditions to Obligations of the Company........................ 56
8. TERMINATION........................................................... 57
8.1. Termination..................................................... 57
8.2. Notice of Termination; Effect of Termination.................... 58
8.3. Fees and Expenses............................................... 59
iii
8.4. Amendment....................................................... 60
8.5. Extension; Waiver............................................... 60
9. MISCELLANEOUS......................................................... 60
9.1. Survival of Representations and Warranties...................... 60
9.2. Notices......................................................... 60
9.3. Further Assurances.............................................. 61
9.4. Waiver.......................................................... 61
9.5. Entire Agreement and Modification............................... 62
9.6. Assignments, Successors and No Third-Party Rights............... 62
9.7. Pooling-of-Interests............................................ 62
9.8. Section Headings, Construction.................................. 62
9.9. Time of Essence................................................. 63
9.10. Governing Law................................................... 63
9.11. Counterparts.................................................... 63
EXHIBITS:
Exhibit A Form of Shareholder Agreement
Exhibit B Stock Option Agreement
Exhibit C-1 Form of Company Affiliate Agreement
Exhibit C-2 Form of Parent Affiliate Agreement
Exhibit D-1 Form of Employment Agreement for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Exhibit D-2 Form of Employment Agreement for ▇▇▇▇ ▇. ▇▇▇
Exhibit E Form of Norton ▇▇▇▇▇▇▇▇, P.C. Legal Opinion
Exhibit F Form of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. Legal Opinion
iv
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement"), is
made and entered into as of November ___, 1999 [sic], by and among InfoCure
Corporation, a Delaware corporation ("Parent"), CADI Acquisition Corporation, a
Colorado corporation and a wholly-owned subsidiary of Parent ("Merger Sub") and
Medical Dynamics, Inc., a Colorado corporation ("Company").
RECITALS:
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Colorado Business Corporation Act ("Colorado Law"), Parent
and Company intend to enter into a business combination transaction.
B. The Board of Directors of Company (i) has determined that the Merger
(as defined in Section 2.1.) is consistent with and in furtherance of the long-
term business strategy of Company and fair to, and in the best interests of,
Company and its shareholders; (ii) has approved and declared advisable this
Agreement, and has approved the Merger and the other transactions contemplated
by this Agreement and (iii) has determined to recommend that the shareholders of
Company adopt and approve this Agreement and approve the Merger.
C. The Board of Directors of Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and is fair to, and in the best interests of, Parent and its stockholders; (ii)
has approved this Agreement, the Merger and the other transactions contemplated
by this Agreement and (iii) has approved the issuance of shares of common stock,
$.001 par value per share, of Parent ("Parent Common Stock") pursuant to the
Merger.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement (i) ▇▇▇▇▇ ▇.
▇▇▇▇▇, M.D. and ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇; (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; (iii) ▇▇▇▇ ▇. ▇▇▇
and (iv) Van ▇. ▇▇▇▇▇▇▇ (such individuals collectively referred to as the
"Principal Shareholders") are entering into Shareholder Agreements in the form
attached hereto as Exhibit A (the "Shareholder Agreements").
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
F. It is also intended by the parties hereto that the Merger shall qualify
for pooling-of-interests accounting treatment.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. DEFINITIONS.
The following terms shall have the following meanings:
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1.1. "Affiliate" is used in this Agreement to indicate a relationship with
one (1) or more persons and when used shall mean any corporation or organization
of which such person is an executive officer, director or partner or is directly
or indirectly the beneficial owner of ten percent (10%) or more of any class of
equity securities or financial interest therein; any trust or other estate in
which such person has a beneficial interest or as to which such person serves as
trustee or in any similar fiduciary capacity; any relative or spouse of such
person, or any relative of such spouse (such relative being related to the
person in question within the second degree); or any person that directly, or
indirectly through one (1) or more intermediaries, controls or is controlled by,
or is under common control with, the person specified.
1.2. "Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would reasonably use in similar circumstances to ensure that
such result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation to take actions that would result in a materially
adverse change in the benefits of this Agreement and the Contemplated
Transactions to such Person.
1.3. "Breach" means a "breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement and will be deemed to have
occurred if there is or has been any inaccuracy in or any failure to perform or
comply with, such representation, warranty, covenant, obligation, or other
provision.
1.4. "Closing" is defined in this Agreement in Section 2.2.
1.5. "Closing Date" is defined in this Agreement in Section 2.2.
1.6. "Code" means the Internal Revenue Code of 1986, as amended, including
regulations or other authoritative notices or rulings issued by the Internal
Revenue Service thereunder.
1.7. "Company Disclosure Schedule" is defined in this Agreement in
Section 3.
1.8. "Company Material Adverse Effect" means a material adverse effect
on the financial condition, results of operation, business or properties of the
Company and Subsidiary taken as a whole.
1.9. "Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
1.10. "Contemplated Transactions" means all of the transactions
contemplated by this Agreement, including, without limitation:
A. The Merger; and
B. The performance by Merger Sub, Parent and the Company of their
respective covenants and obligations under this Agreement.
1.11. "Contract" means any agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan, commitment, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
1.12. "Damages" means any loss, liability, claim, damages, expense
(including, without limitation, costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving a
third party.
1.13. "Effective Time" is defined in this Agreement in Section 2.2.
1.14. "Encumbrance" means any security interest, mortgage, lien, charge,
adverse claim
6
or restriction of any kind, including, but not limited to, any restriction on
the use, voting, transfer, receipt of income or other exercise of any attributes
of ownership.
1.15. "Environmental Requirements" means federal, state and local laws
relating to pollution or protection of the environment, including laws or
provisions relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials, substances, or wastes
into air, surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials, substances, or wastes.
1.16. "ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
1.17. "ERISA Affiliate" means any Person which would be required to be
aggregated with the Company under Code (S) 414(b), (c), (m) and/or (o) and/or
under ERISA (S) 4001(a)(14) at any time during the period beginning seven (7)
years prior to the Closing Date and ending immediately prior to the Closing.
1.18. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
1.19. "Facilities" means any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company or any Subsidiary and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the Company
or any Subsidiary.
1.20. "GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the financial statements
referred to in Section 3.4. were prepared.
1.21. "Governmental Authorization" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
1.22. "Governmental Body" means any national, state or municipal or other
local government, state or municipal or other local governmental body, any
subdivision, agency, commission or authority thereof, or any quasi-governmental
or private body exercising any regulatory or taxing authority thereunder.
1.23. "HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, 15 U.S.C. (S) 18a, et seq.
1.24. "IRS" means the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
1.25. "Knowledge" means an individual will be deemed to have "Knowledge" of
a particular fact or other matter if such individual is actually aware of such
fact or other matter, or a prudent individual given his position with the
Company could be expected to discover or otherwise become aware of such fact or
other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving or has served within the last five (5) years as a director, executive,
officer, partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
1.26. "Legal Requirement" means any federal, state, local, municipal or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, statute, or treaty.
1.27. "Order" means any award, decision, injunction, judgment, order,
ruling or verdict entered, issued, made or rendered by any court, administrative
agency or other Governmental
7
Body or by any arbitrator.
1.28. "Ordinary Course of Business" means an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person.
1.29. "Organizational Documents" means (i) the Articles of Incorporation
and the Bylaws of a corporation; (ii) any charter or similar document adopted or
filed in connection with the creation, formation, or organization of a Person
and (iii) any amendment to any of the foregoing.
1.30. "Parent Disclosure Schedule" is defined in this Agreement in
Section 4.
1.31. "Parent Material Adverse Effect" means a material adverse effect on
the financial condition, results of operation, business or properties of the
Parent and all of it subsidiaries taken as a whole.
1.32. "Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
1.33. "Plan" as defined in Section 3.13.A. of this Agreement.
1.34. "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
1.35. "Related Person" means with respect to a particular individual:
A. Each other member of such individual's Family;
B. Any Person that is directly or indirectly controlled by such
individual or one (1) or more members of such individual's Family;
C. Any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
D. Any Person with respect to which such individual or one (1) or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
A. Any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
B. Any Person that holds a Material Interest in such specified
Person;
C. Each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
8
D. Any Person in which such specified Person holds a Material
Interest;
E. Any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
F. Any Related Person of any individual described in clause B. or C.
For purposes of this definition, (i) the "Family" of an individual includes
(1) the individual's spouse and (2) any other natural person who is related to
the individual or the individual's spouse within the second degree and (ii)
"Material Interest" means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or
other voting interests representing at least five percent (5%) of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least five percent (5%) of the outstanding equity
securities or equity interests in a Person.
1.36. "Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
1.37. "Securities Act" means the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
1.38. "Subsidiary" shall mean Computer Age Dentist, Inc., a California
corporation.
1.39. "Tax Returns" means any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Governmental Body in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
1.40. "Taxes" means all taxes, charges, fees, levies, interest, penalties,
additions to tax or other assessments, including, but not limited to, income,
excise, property, sales, use, value added and franchise taxes and customs
duties, imposed by any Governmental Body and any payments with respect thereto
required under any tax-sharing agreement.
1.41. "Threatened" means a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing), or any other event has occurred or any other circumstances exist, that
would lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action or other matter is likely to be asserted, commenced, taken or otherwise
pursued in the future.
2. MERGER.
2.1. The Merger. At the Effective Time and subject to and upon the terms
and conditions of this Agreement, Merger Sub shall be merged with and into
Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and Company shall continue as the surviving corporation under the
corporate name it possesses immediately prior to the Effective Time. Company as
the surviving corporation after the Merger is sometimes hereinafter referred to
as the "Surviving Corporation."
2.2. Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing Articles
of Merger with the Secretary of State of the State of Colorado in accordance
with the relevant provisions of Colorado Law (the "Articles of Merger") (the
time of such filing (or such later time as may be agreed in writing by Company
and Parent and specified in the Articles of Merger) being the "Effective Time")
as
9
soon as practicable on or after the Closing Date (as herein defined). The
closing of the Merger (the "Closing") shall take place at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., 1600 Atlanta Financial Center, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, at a time and date to be specified by the parties,
which shall be no later than the second (2nd) business day after the
satisfaction or waiver of the conditions set forth in Section 7., or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date").
2.3. Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Colorado
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
2.4. Articles of Incorporation; Bylaws; Directors and Officers. At the
Effective Time, the Articles of Incorporation of Company, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Corporation and thereafter shall continue to be its Articles of
Incorporation (until amended as provided under Colorado Law); provided, however,
that at the Effective Time the Articles of Incorporation of the Surviving
Corporation shall be amended so that the name of the Surviving Corporation shall
be "Medical Dynamics, Inc."
The Bylaws of Company, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation and thereafter shall
continue to be its bylaws (until amended as provided therein and under Colorado
Law).
The initial directors and officers of the Surviving Corporation shall be
the directors and the officers of Merger Sub who are serving in such capacities
immediately prior to the Effective Time, and such directors and officers shall
continue to serve as the directors and officers of the Surviving Corporation in
accordance with the bylaws of the Surviving Corporation.
2.5. Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, Company or the holders of any of the following
securities, the following shall occur:
A. Conversion of Company Common Stock. Each share of Common Stock,
$.001 par value per share, of Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Company Common Stock to be canceled pursuant to Section 2.5.B. and any
Dissenting Shares (as defined and to the extent provided in Section 2.5.), will
be canceled and extinguished and automatically converted (subject to Section
2.5.F.) into the right to receive .05672 of a share, subject to adjustment as
provided further in this Section 2.5.A., of Parent Common Stock (the "Exchange
Ratio") upon surrender of the certificate representing such share of Company
Common Stock in the manner provided in Section 2.6. (or in the case of a lost,
stolen or destroyed certificate, upon delivery of an affidavit (and bond, if
required) in the manner provided in Section 2.7.). Subject to Section 2.5.E.,
the Exchange Ratio shall not be adjusted if the Share Value (as defined below)
is equal to or greater than $13.22, but no greater than $22.04. If the Share
Value is greater than $22.04, then the Exchange Ratio shall automatically be
adjusted to equal the product of (i) .05672 multiplied by (ii) a fraction, the
numerator of which is 22.04 and the denominator of which is the Share Value. If
the Share Value is less than 13.22, then the Exchange Ratio shall automatically
be adjusted to
10
equal the product of (i) .05672 multiplied by (ii) a fraction, the numerator of
which is 13.22 and of the denominator of which is the Share Value. For purposes
hereof, the term "Share Value" shall mean an amount equal to the average closing
price of a share of Parent Common Stock as reported on NASDAQ for the twenty
consecutive trading days immediately preceding closing. If any shares of Company
Common Stock outstanding immediately prior to the Effective Time are unvested or
are subject to a repurchase option, risk of forfeiture or other condition under
any applicable restricted stock purchase agreement or other agreement with the
Company, then the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take all action that may be necessary to
ensure that, from and after the Effective Time, Parent is entitled to exercise
any such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
B. Cancellation of Company-Owned Stock. Each share of Company Common
Stock held by Company or any direct or indirect wholly-owned subsidiary of
Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
C. Warrants. All warrants to purchase Company Common Stock
(collectively, the "Warrants") then outstanding shall be assumed by Parent in
accordance with Section 6.4.
D. Stock Options. All options (collectively, the "Options") to
purchase Company Common Stock then outstanding under the Company's stock option
plans referenced in Schedule 3.3 (collectively, the "Company Stock Option
Plans") shall be assumed by Parent in accordance with Section 6.4.
E. Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Company Common Stock or Parent Common Stock), reorganization, recapitalization
or other like change with respect to Company Common Stock or Parent Common Stock
occurring after the date hereof and prior to the Effective Time.
F. Fractional Shares; Odd Lot Shares As of the Effective Time, all
such shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously representing any such shares shall thereafter represent
only the right to receive a certificate representing the shares of Parent Common
Stock into which such Company Common Stock was converted in the Merger. The
holders of such certificates previously evidencing such shares of the Company
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of the Company Common Stock as of
the Effective Time except as otherwise provided herein or by law. Such
certificates previously representing shares of the Company Common Stock shall be
exchanged for certificates representing whole shares of Parent Common Stock
issued in consideration therefor upon the surrender of such certificates in
accordance with the provisions of Section 2.6., without interest. No fractional
shares of Parent
11
Common Stock will be issued in connection with the Merger, but in lieu thereof,
the holder of any shares of Company Common Stock who would otherwise be entitled
to receive a fraction of a share of Parent Common Stock shall receive cash in an
amount equal to the value of such fractional shares, which shall be equal to the
fraction of a share of Parent Common Stock that would otherwise be issued
multiplied by the average closing price of Parent Common Stock for the twenty
(20) trading days immediately preceding the last full trading day prior to the
Effective Time, as reported on the Nasdaq National Market System ("Nasdaq"). In
addition, Parent may elect to pay cash to any holder of any shares of Company
Common Stock who would otherwise be entitled to receive less than ten (10)
shares (the "Odd Lot Shares") of Parent Common Stock in an amount equal to the
number of such shares multiplied by the Share Value.
2.6. Exchange of Certificates.
A. Exchange Agent; Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall supply, or shall cause to be supplied, to or for
the account of a bank or trust company designated by Parent (the "Exchange
Agent"), for exchange in accordance with this Section 2.6., through the Exchange
Agent, certificates evidencing the Parent Common Stock issuable pursuant to
Section 2.5. in exchange for outstanding shares of Company Common Stock, and
cash in an amount sufficient for payment in lieu of fractional shares or Odd Lot
Shares pursuant to Section 2.5.F. and any dividends or other distributions to
which holders of shares of Company Common Stock may be entitled pursuant to
Section 2.6.C.
B. Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record (as of the Effective Time) of a certificate or certificates which
immediately prior to the Effective Time evidenced outstanding shares of Company
Common Stock (the "Certificates") whose shares were converted into shares of
Parent Common Stock pursuant to Section 2.5. cash in lieu of any fractional
shares or Odd Lot Shares pursuant to Section 2.5.F. and any dividends or other
distributions to which holders of shares of Company Common Stock may be entitled
pursuant to Section 2.6.C. (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates evidencing shares of Parent Common
Stock, cash in lieu of any fractional shares or Odd Lot Shares pursuant to
Section 2.5.F. and any dividends or other distributions pursuant to Section
2.6.C. Upon surrender of a Certificate for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, and such other customary documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange thereof (1) certificates evidencing that number of whole
shares of Parent Common Stock into which such holder's shares of Company Common
Stock were converted at the Effective Time; (2) any dividends or other
distributions to which such holder is entitled pursuant to Section 2.6.C. and
(3) cash in lieu of fractional shares or Odd Lot Shares to which such holder is
in entitled pursuant to Section 2.5.F., and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of shares of
Company Common Stock which is not registered in the transfer records of the
Company as of the Effective Time, Parent Common Stock and cash may
12
be issued and paid in accordance with this Section 2. to a transferee if the
Certificate evidencing such shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
pursuant to this Section 2.6. and by evidence that any applicable stock transfer
taxes have been paid. Until so surrendered, each outstanding Certificate that,
prior to the Effective Time, represented shares of Company Common Stock will be
deemed from and after the Effective Time, for all corporate purposes, other than
the payment of dividends, to evidence only the ownership of the number of full
shares of Parent Common Stock into which such shares of Company Common Stock
shall have been so converted and the right to receive an amount in cash in lieu
of the issuance of any fractional shares or Odd Lot Shares in accordance with
Section 2.5.F. and any dividends or distributions payable pursuant to Section
2.6.C.
C. Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time, with respect to
Parent Common Stock with a record date after the Effective Time, shall be paid
to the holder of any unsurrendered Certificate until the holder of such
Certificate shall surrender such Certificate or comply with the lost instrument
procedure set forth in Section 2.7. Subject to applicable law, following
surrender of any such Certificate, there shall be paid to the record holder of
the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock.
D. Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any person designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
E. Required Withholding. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable legal requirement.
To the extent such amounts are so deducted or withheld, such amounts shall be
treated for all purposes under this Agreement as having been paid to the person
to whom such amounts would otherwise have been paid.
F. No Liability. Notwithstanding anything to the contrary in this
Section 2.6., neither the Exchange Agent, Parent, Merger Sub nor the Company
shall be liable to any holder of shares of Company Common Stock or Parent Common
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
2.7. Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been
13
lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, such shares of Company Common Stock as may be
required pursuant to Section 2.5.; provided, however, that Parent may, in its
sole discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Parent or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
2.8. No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid in
respect thereof pursuant to Section 2.5.F. and 2.6.C.) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Section 2.
2.9. Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation or Parent shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of the Company or otherwise to carry out the
purposes of this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of the Company, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of the Company, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out the purposes of
this Agreement.
2.10. Tax and Accounting Consequences.
A. It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations.
B. It is intended by the parties hereto that the Merger shall be
treated as a pooling of interests for accounting purposes.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
As of the date hereof and as of the Closing Date, Company represents and
warrants to Merger Sub and Parent, subject to such exceptions as are
specifically disclosed in writing in the disclosure letter and referencing a
specific representation supplied by the Company to Merger Sub and Parent dated
as of the date hereof and certified by a duly authorized officer of Company (the
"Company Disclosure Schedule"), as follows:
3.1. Organization, Good Standing, Corporate Power and Subsidiaries.
14
A. Schedule 3.1.A of the Company Disclosure Schedule contains a
complete and accurate list of the Company and each Subsidiary's name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business.
The Company and the Subsidiary is each a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction in
which it is organized, with full corporate power and authority to conduct its
business as it is now being conducted and to own or use the properties and
assets that it purports to own or use.
The Company and the Subsidiary is each duly qualified or licensed to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to be so qualified or
licensed would not result in a Company Material Adverse Effect.
B. The Company and Subsidiary have delivered to Merger Sub copies of
the Organizational Documents of the Company and Subsidiary, as currently in
effect.
C. Neither Company nor Subsidiary has agreed nor is obligated to make
nor be bound by any Contract under which it may become obligated to make, any
future investment in or capital contribution to any other entity. Neither the
Company nor the Subsidiary owns, directly or indirectly, any equity or similar
interest convertible, exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
3.2. Authority; No Conflict.
A. The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and,
subject only to obtaining the approval of the shareholders of the Company of the
Merger (the "Shareholder Approval"), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Company and the
consummation by Company of the transactions contemplated hereby have been duly
and validly approved by the Company Board of Directors, as required by
applicable law and the Company Board of Directors has, as of the date of this
Agreement, determined (i) that the Merger is advisable and fair to, and in the
best interests of Company and its shareholders and (ii) to recommend that the
shareholders of Company approve and adopt this Agreement and approve the Merger.
This Agreement is, or when executed and delivered by the Company will be, a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors generally
and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies.
B. Except as set forth in Schedule 3.2 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement and the Stock
Option Agreement by the Company nor, after obtaining the Shareholder Approval,
the consummation or performance of
15
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) Contravene, conflict with, or result in a violation of any
provision of the Organizational Documents of the Company or the Subsidiary;
(ii) Contravene, conflict with, or result in a violation of, or
give any Governmental Body or, to the Knowledge of the Company, other Person the
right to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order to which
the Company or the Subsidiary, or any of the assets owned or used by the Company
or the Subsidiary, may be subject;
(iii) Subject to the filing of the Articles of Merger with the
Colorado Secretary of State, contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or the Subsidiary or that otherwise
relates to the business of, or any of the assets owned or used by the Company or
the Subsidiary;
(iv) Cause the Company or the Subsidiary to become subject to, or
to become liable for the payment of, any Tax;
(v) Cause any of the assets owned by the Company or the
Subsidiary to be reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) Contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any material Contract to which Company or the
Subsidiary is a party or by which Company or the Subsidiary or its or any of
their respective properties are bound or affected; or
(vii) Result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Company or the
Subsidiary.
C. Except as set forth in Schedule 3.2 of the Company Disclosure
Schedule and such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Company Material
Adverse Effect or have a material adverse effect on the ability of the parties
to consummate the Merger, the Company and the Subsidiary are not or will not be
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
3.3. Capitalization. The authorized capital stock of the Company consists
of (i) thirty million (30,000,000) shares of Company Common Stock, par value
$.001 per share and five million (5,000,000) shares of Preferred Stock, $.001
par value per share ("Company Preferred Stock"). At the close of business on
December 32, 1999 (i) twelve million eight hundred sixty-six thousand two
hundred sixty-nine (12,866,269) shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable; (ii)
no shares of Company Common Stock were held in treasury by Company or by any
Subsidiary; (iii)
16
three million four hundred thirty-three thousand two hundred thirty-seven
(3,433,237) shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase Company Common Stock under the
Company Stock Option Plans; (iv) one million one hundred four thousand two
hundred twenty (1,104,220) shares of Company Common Stock were available for
future grant under the Company Stock Option Plans; and (v) six hundred seventy-
three thousand eight hundred thirty-four (673,834) shares of Company Common
Stock were reserved for future issuance upon conversion of warrants of the
Company. As of the date hereof, no shares of Company Preferred Stock were issued
or outstanding. Schedule 3.3 of the Company Disclosure Schedule sets forth the
following information with respect to each Option and Warrant (as defined in
Section 6.4.) outstanding as of the date of this Agreement: (i) the name and
address of the optionee or warrant holder; (ii) the particular plan pursuant to
which such Option was granted; (iii) the number of shares of Company Common
Stock subject to such Option or Warrant; (iv) the exercise price of such Option
or Warrant; (v) the date on which such Option or Warrant was granted; (vi) the
applicable vesting schedule and (vii) the date on which such Option or Warrant
expires. Company has made available to Parent accurate and complete copies of
all stock option plans pursuant to which the Company has granted such Options
that are currently outstanding and the form of all stock option agreements and
instruments evidencing such Options and Warrants. Except as set forth in
Schedule 3.3, all shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the instrument
pursuant to which they are issuable, would be duly authorized, validly issued,
fully paid and nonassessable. There are no commitments or agreements of any
character to which the Company is bound obligating the Company to accelerate the
vesting of any Option as a result of the Merger. All outstanding shares of
Company Common Stock, all outstanding Options and Warrants, and all outstanding
shares of capital stock of Subsidiary have been issued and granted in compliance
with (i) all applicable securities laws and other applicable Legal Requirements
and (ii) all requirements set forth in applicable Contracts. Except for
securities Company owns free and clear of all Encumbrances, as of the date of
this Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of equity security of Subsidiary, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Schedule 3.3, there
are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which Company or
Subsidiary is a party or by which it is bound obligating Company or Subsidiary
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock, partnership interests or similar
ownership interests of the Company or Subsidiary or obligating the Company or
Subsidiary to grant, extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right, commitment or
agreement. As of the date of this Agreement, except as contemplated by this
Agreement and except as set forth in Schedule 3.3, there are no registration
rights and there is no voting trust, proxy, rights plan, anti-takeover plan or
other agreement or understanding to which the Company or Subsidiary is a party
or by which they are bound with respect to any equity security of any class of
the Company or with respect to any equity security, partnership interest or
similar ownership interest of any class of Subsidiary. Stockholders of the
Company will not be entitled to dissenters' rights under applicable state law in
connection with the Merger.
3.4. SEC Filings; Financial Statements.
17
A. Company has made available to Parent a correct and complete copy
of each report, schedule, registration statement and definitive proxy statement
filed by Company with the Securities and Exchange Commission ("SEC") since
September 1, 1998 (the "Company SEC Reports"), which are all the forms, reports
and documents required to be filed by Company with the SEC since September 1,
1998. The Company SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be and
(ii) did not at the time they were filed (and if amended or superseded by a
filing prior to the date of this Agreement then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of Company's Subsidiaries is required to file any reports or
other documents with the SEC.
B. Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with GAAP (except as may be indicated in the notes
thereto or, in the case of unaudited statements, do not contain footnotes as
permitted by Form 10-Q of the Exchange Act) and each fairly presents the
consolidated financial position of Company and the Subsidiary at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal adjustments which were not or are not expected to
be material in amount.
C. Company has previously furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC, but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Company with the SEC pursuant to
the Securities Act or the Exchange Act.
3.5. Books and Records. The books of account, stock record books, and
other records of the Company and the Subsidiary, all of which have been made
available to Merger Sub and Parent, are complete and correct in all material
respects.
The minute books of the Company and the Subsidiary made available to
counsel for Parent are the only minute books of the Company and the Subsidiary
and contain a reasonably accurate summary, in all material respects, of all
meetings held of, and corporate action taken by, the stockholders, the Board of
Directors and committees of the Board of Directors of Company and the Subsidiary
since the time of its incorporation. At the Closing, all of those books and
records will be in the possession of the Company.
3.6. Real Property Interests. Neither the Company nor the Subsidiary owns
real property. Schedule 3.6 of the Company Disclosure Schedule contains a
complete and accurate list of all leaseholds or other interests in real property
of the Company and the Subsidiary. The Company has delivered or made available
to Merger Sub and Parent copies of the lease agreements and other instruments by
which the Company and the Subsidiary acquired such leasehold and other real
property interests.
3.7. Condition and Sufficiency of Assets. Except as set forth on Schedule
3.7 of the Company Disclosure Schedule, to the Company's Knowledge, the
buildings, plants, structures and equipment of the Company and the Subsidiary
are structurally sound, are in good operating condition and repair, subject to
normal wear and tear, and are adequate for the uses to which they are being put.
3.8. Accounts Receivable. All accounts receivable of the Company and the
Subsidiary
18
that are reflected on the Financial Statements or on the accounting records of
the Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will
be as of the Closing Date current and collectible net of the respective reserves
shown on the Financial Statements or on the accounting records of the Company
and the Subsidiary as of the Closing Date (which reserves are adequate and
calculated consistent with past practice).
Subject to such reserves, each of the Accounts Receivable either has been
or will be collected in full, without any set-off, within one hundred fifty
(150) days on which it first becomes due and payable. To the Knowledge of the
Company, there is no contest, claim, or right of set-off, other than returns in
the Ordinary Course of Business, under any material Contract with any obligor of
an Accounts Receivable relating to the amount or validity of such Accounts
Receivable.
Schedule 3.8 of the Company Disclosure Schedule contains a complete and
accurate list of all Accounts Receivable as of October 31, 1999, which list sets
forth the aging of such Accounts Receivable.
3.9. Inventory. All inventory of the Company and the Subsidiary, whether
or not reflected in the Financial Statements, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, all of which have been or will be written
off or written down to net realizable value in the Financial Statements or on
the accounting records of the Company and the Subsidiary as of the Closing Date,
as the case may be.
3.10. No Undisclosed Liabilities. Except as set forth in Schedule 3.10 of
the Company Disclosure Schedule, neither the Company nor the Subsidiary have any
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise) except for liabilities or
obligations reflected or reserved against in the Financial Statements and not
heretofore paid or discharged and current liabilities incurred in the Ordinary
Course of Business since June 30, 1999.
3.11. Taxes.
A. Except as set forth on Schedule 3.11 to the Company Disclosure
Schedule, the Company and the Subsidiary have timely filed all Tax Returns that
they were required to file. All such Tax Returns were correct and complete in
all material respects. The Company and the Subsidiary have paid in full or made
adequate provision by the establishment of reserves for all Taxes which have
become due or which are attributable to the conduct of the Company's and the
Subsidiary's business prior to the date hereof. The Company and the Subsidiary
will continue to make adequate provision for all such Taxes for all periods
through the Closing Date. The Company and the Subsidiary are not the
beneficiaries of any extension of time within which to file any Tax Return.
Except as set forth on Schedule 3.11, the Company has no Knowledge of any
Tax deficiency proposed or Threatened against the Company or the Subsidiary.
There are no Tax
19
liens upon any property or assets of the Company or the Subsidiary to secure the
payment of any delinquent Taxes.
Except as set forth on Schedule 3.11, the Company and the Subsidiary have
made all payments of estimated Taxes when due in amounts sufficient to avoid the
imposition of any penalty.
B. Except as set forth on Schedule 3.11, all Taxes and other
assessments and levies which the Company or the Subsidiary were required by law
to withhold or to collect have been duly withheld and collected, and have been
paid over to the proper Governmental Body.
C. Except as set forth in Schedule 3.11, the Tax Returns of the
Company and the Subsidiary have never been audited by the IRS or other
Governmental Body, nor are any such audits in process. Except as set forth in
Schedule 3.11, there are no outstanding agreements or waivers extending the
statute of limitations applicable to any Tax Returns of the Company or the
Subsidiary for any period.
D. For federal income tax purposes, the Company and the Subsidiary
have a taxable year ending on September 30 in each year.
E. The Company has not filed a consent under Code (S) 341(f)
concerning collapsible corporations. The Company and the Subsidiary have not
made any material payments, are not obligated to make any material payments, and
are not a party to any agreement that under any circumstances could obligate it
to make any material payments that will not be deductible under Code (S) 280G.
The Company and the Subsidiary have not been a United States real property
holding corporation within the meaning of Code (S) 897(c)(2) during the
applicable period specified in Code (S) 897(c)(1)(A)(ii). The Company and the
Subsidiary are not a party to any Tax allocation or sharing agreement. Except
with respect to the Subsidiary, the Company (i) has not been a member of an
affiliated group filing a consolidated federal income Tax Return and (ii) has no
liability for the Taxes of any Person under Reg. (S)1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
F. The Company's and the Subsidiary's Tax basis in its assets for
purposes of determining its future amortization, depreciation and other federal
income tax deductions is accurately reflected on the Company's and the
Subsidiary's books and records in all material respects.
3.12. No Company Material Adverse Effect. Since June 30, 1999, there has
not been any Company Material Adverse Effect, and to the Company's Knowledge, no
event has occurred and no circumstance exists that may result in a Company
Material Adverse Effect other than with respect to general domestic or
international economic conditions.
3.13. Employee Benefits Matters.
A. Schedule 3.13.1 lists all plans, programs, and similar agreements,
commitments or arrangements (including, but not limited to, any bonus, profit
sharing, pension, deferred compensation, stock option, stock purchase, fringe
benefit, severance, post-retirement, scholarship, tuition reimbursement,
disability, sick leave, vacation, commission, retention or other arrangements),
whether oral or written, sponsored or maintained by or on behalf of, or to
20
which contributions are or were made by, Company and/or any ERISA Affiliate
within the last seven (7) years that provide or provided benefits, compensation
or other remuneration to, or for the benefit of, current or former employees of
Company and/or any ERISA Affiliate or any or any other individual who provides
services to the Company and/or any ERISA Affiliate (including, but not limited
to, any shareholder, officer, director, employee or consultant), or any spouse,
child or other dependent of such current or former employee or other individual
("Plan" or "Plans"). Except as disclosed on Schedule 3.13.1, there are no other
benefits to which any current or former employees of Company and/or any ERISA
Affiliate or any or any other individual who provides services to the Company
and/or any ERISA Affiliate (including, but not limited to, any shareholder,
officer, director, employee or consultant), or any spouse, child or other
dependent of such current or former employee or other individual is entitled or
for which the Company and/or any ERISA Affiliate has any obligation. Except as
set forth on Schedule 3.13.1, only current employees of Company participate in
the Plans, except as required by I.R.C. (S) 4980B and/or ERISA (S)(S) 601-609.
Copies of all Plans and, to the extent applicable, all related trust agreements,
actuarial reports, and valuations for the most recent three (3) years, all
summary plan descriptions, prospectuses, Annual Report Form 5500's or similar
forms (and attachments thereto) for the most recent three (3) years, all
Internal Revenue Service determination letters, and any related documents
requested by Buyer, including all amendments, modifications and supplements
thereto, all material employee and/or participant communications relating to
each such Plan, and all insurance contracts, administrative services agreements
or contracts, have been delivered to Buyer, and all of the same are true,
correct and complete.
B. With respect to each Plan to the extent applicable:
(i) No litigation or administrative or other proceeding or
investigation, claim, lawsuit, arbitration or other action is pending or
threatened involving such Plan or any administrator, fiduciary, employee,
contributing employer, contractor or agent of such Plan, other than routine
claims for benefits in the ordinary course for such Plan.
(ii) Such Plan has been administered and operated in compliance
with, and has been amended to comply with, all applicable laws, rules, and
regulations, including, without limitation, ERISA, the Code, and the regulations
issued under ERISA and the Code.
(iii) Company and ERISA Affiliates have made and as of the Closing
Date will have made or accrued, all payments and contributions required, or
reasonably expected to be required, to be made under the provisions of such Plan
or required to be made under applicable laws, rules and regulations, with
respect to any period prior to the Closing Date, such amounts to be determined
using the ongoing actuarial and funding assumptions of the Plan if applicable.
(iv) Such Plan is fully funded in an amount sufficient to pay all
liabilities (whether or not vested) accrued (including liabilities and
obligations for health care, life insurance and other benefits after termination
of employment) and claims incurred to the date hereof.
(v) On the Closing Date such Plan will be fully funded in an
amount sufficient to pay all liabilities (whether or not vested) accrued as of
the Closing Date (including liabilities and obligations for health care, life
insurance and other benefits after termination of
21
employment) and claims incurred as of the Closing Date, or adequate reserves
will be set up on Company's books and records, or paid-up insurance will be
provided, therefor.
(vi) Such Plan has been administrated and operated only in the
ordinary and usual course and in accordance with its terms, and there has not
been in the four (4) years prior hereto any increase in the liabilities of such
Plan beyond increases typically experienced as a result of changes in the
workforce.
(vii) Such Plan is not a multiemployer plan (as defined in ERISA
(S) 3(37) or 4001(a)(3)), is not a single-employer plan (as defined in ERISA (S)
4001(a)(15)), and is not a defined benefit plan (as defined in ERISA (S) 3(35)),
and is not a plan maintained by more than one employer (within the meaning of
Code (S) 413(c)).
(viii) No Person has engaged in any "prohibited transaction" (as
defined in ERISA (S) 406 or Code (S) 503(b) or 4975) with respect to such Plan
on or prior to the Closing Date, and no Person who would be a fiduciary with
respect to such Plan has breached any of his responsibilities or obligations
imposed upon fiduciaries under Title I of ERISA which would subject Company or
any ERISA Affiliate, or any Person whom the Company has an obligation to
indemnify, to any liability.
(ix) Such Plan contains provisions which allow additional
benefits under the Plan to be discontinued at any time and for any reason, and
which allow the Plan to be terminated (or the Company's participation in the
Plan to be terminated) by the Company at any time and for any reason, and, if
such Plan were terminated (or the Company's participation in such Plan were
terminated) on or prior to the Closing Date, no additional liability would be
incurred by the Company by such action.
(x) All communications with respect to such Plan by any Person
on or prior to the Closing Date have reflected accurately the documents and
operations of such Plan, and no Person has, as of the Closing Date, any
liability under any applicable law by reason of any communication or failure to
communicate with respect to or in connection with such Plan.
(xi) Such Plan does not provide benefits to any former employee,
or any other Person who is not performing services for the Company, except as
required by Code (S) 4980B and/or ERISA (S)(S) 601-609.
(xii) No liability to the Pension Benefit Guaranty Corporation
("PBGC") has been incurred or will be incurred as of the Closing Date by Company
or any ERISA Affiliate, except for PBGC insurance premiums (if any), and all
such insurance premiums incurred or accrued up to and including the Closing Date
have been timely paid, or will be timely paid prior to the Closing Date.
(xiii) Neither the Company nor any ERISA Affiliate has ceased
operations at any facility or withdrawn from such Plan in a manner which could
subject the Company to liability under ERISA (S) 4062, 4063 or 4064, and no
events have occurred or will occur on or prior to the Closing Date which might
give rise to any liability of Company to the PBGC under Title IV of ERISA or
which could reasonably be anticipated to result in any claims being made against
Company by the PBGC.
22
(xiv) No entitlement to any benefit (including, but not limited
to, severance pay, unemployment compensation or payment contingent upon a change
in control or ownership of the Company) from such Plan shall arise, and no
acceleration or increase in benefits due any Person shall occur, by reason of
the consummation of the transactions contemplated by this Agreement.
(xv) An ERISA fiduciary insurance policy issued by a licensed
insurance company is in place covering each and every fiduciary of such Plan.
(xvi) If such Plan purports to provide benefits which qualify for
tax-favored treatment under Code (S) 79, 105, 106, 117, 120, 125, 127 129 or
132, the Plan satisfies the requirements of said Code sections.
C. The participants and beneficiary records with respect to each Plan
providing benefits to employees or other Persons performing services for the
Company and their spouses, dependents, etc., are in the custody of the Company
(or an agent of the Company who must, upon demand, provide such records to the
Company), and such records accurately state the history of each participant and
beneficiary in connection with each such Plan and accurately state the benefits
earned by and/or owed to each such participant and beneficiary.
D. Except as otherwise set forth on Schedule 3.13.2, the Company is
not liable for and neither the Company nor Merger Sub nor Parent will be liable
for, any contribution, Tax, lien, penalty, cost, interest, claim, loss, action,
suit, damage, cost assessment or other similar type of liability or expense of
any ERISA Affiliate (including predecessors thereof) with regard to any Plan
maintained, sponsored or contributed to by an ERISA Affiliate, including,
without limitation, withdrawal liability arising under Title IV of ERISA,
liabilities to the PBGC, or liabilities under Code (S) 412 or ERISA (S) 302.
3.14. Compliance With Legal Requirements; Governmental Authorizations.
For purposes of this Section 3.14. only, the term "Company" shall be deemed to
include the Company and the Subsidiary.
A. Except as set forth in Schedule 3.14 of the Company Disclosure
Schedule:
(i) The Company is, and at all times since September 30, 1998
has been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets except where the failure to comply with a Legal
Requirement would not have a Company Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (1) may
constitute or result in a violation by the Company of, or a failure on the part
of the Company to comply with, any Legal Requirement or (2) may give rise to any
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature except for events or
circumstances which in the aggregate would not have a Company Material Adverse
Effect; and
(iii) The Company has not received, at any time since September
30, 1998, any written notice or other written communication from any
Governmental Body or any other Person regarding (1) any actual, alleged,
possible, or potential violation of, or failure to
23
comply with, any Legal Requirement or (2) any actual, alleged, possible, or
potential obligation on the part of the Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature.
B. The Company has all Governmental Authorizations necessary to
conduct its business as presently conducted. Each Governmental Authorization is
valid and in full force and effect. Except as set forth in Schedule 3.14 of the
Company Disclosure Schedule:
(i) The Company is, and at all times since September 30, 1998
has been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Schedule
3.14 of the Company Disclosure Schedule, except where the failure to comply with
a Governmental Authorization would not have a Company Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that may (with or without notice or lapse of time) (1)
constitute or result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental Authorization listed or
required to be listed in Schedule 3.14 of the Company Disclosure Schedule or (2)
result directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any Governmental
Authorization listed or required to be listed in Schedule 3.14 of the Company
Disclosure Schedule, except for events or circumstances which in the aggregate
would not have a Company Material Adverse Effect;
(iii) The Company has not received, at any time since September
30, 1998, any written notice or other written communication from any
Governmental Body or any other Person regarding (1) any actual or alleged
violation of or failure to comply with any term or requirement of any
Governmental Authorization or (2) any actual or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) All applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in Schedule
3.14 of the Company Disclosure Schedule have been duly filed on a timely basis
with the appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental Bodies, except where the
failure to make such filings in a timely manner would not have a Company
Material Adverse Effect.
The Governmental Authorizations listed in Schedule 3.14 of the Company
Disclosure Schedule collectively constitute all of the Governmental
Authorizations that are material to the conduct of the Company's business in the
manner it is currently conducted and to operate such business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
3.15. Legal Proceedings; Orders.
A. Except as set forth in Schedule 3.15 of the Company Disclosure
Schedule, there is no pending Proceeding:
24
(i) That has been commenced by or against the Company or the
Subsidiary; or
(ii) To the Knowledge of the Company, that challenges, or that
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
Except as set forth in Schedule 3.15 of the Company Disclosure Schedule, to
the Knowledge of the Company, (i) no such Proceeding has been Threatened and
(ii) no event has occurred or circumstance exists that may give rise to or serve
as a basis for the commencement of any Proceeding that could reasonably be
expected to result in a Company Material Adverse Effect. The Company and the
Subsidiary have delivered to Merger Sub and Parent copies of all pleadings,
correspondence, and other documents relating to each pending Proceeding listed
in Schedule 3.15 of the Company Disclosure Schedule. The Proceedings listed in
Schedule 3.15 of the Company Disclosure Schedule will not have a Company
Material Adverse Effect.
B. Except as set forth in Schedule 3.15 of the Company Disclosure
Schedule:
(i) There is no Order to which the Company or the Subsidiary,
or, to the Company's Knowledge, any of the assets owned or used by the Company
or the Subsidiary, is subject; and
(ii) To the Company's Knowledge, no officer, director, or
employee of the Company or the Subsidiary is subject to any Order that prohibits
such officer, director, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company or the Subsidiary
as currently conducted.
C. Except as set forth in Schedule 3.15 of the Company Disclosure
Schedule:
(i) The Company and the Subsidiary are, and at all times since
September 30, 1998 have been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned or used by
it, is or has been subject, except where the failure to comply would not have a
Company Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that may constitute or result in (with or without notice or
lapse of time) a violation of or failure to comply with any term or requirement
of any Order to which the Company or the Subsidiary, or any of the assets owned
or used by the Company or the Subsidiary, is subject, except for events or
circumstances which in the aggregate would not have a Company Material Adverse
Effect; and
(iii) Neither the Company nor the Subsidiary have received, at any
time since September 30, 1998, any written notice from any Governmental Body or
any other Person regarding any actual or alleged violation of, or failure to
comply with, any term or requirement of any Order to which the Company, or any
of the assets owned or used by the Company or the Subsidiary, is or has been
subject.
3.16. Absence of Certain Changes and Events. Except as set forth in
Schedule 3.16 of the Company Disclosure Schedule, since June 30, 1999, the
Company and the Subsidiary have
25
conducted their businesses only in the Ordinary Course of Business and there has
not been any:
A. Change in the Company's or the Subsidiary's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of the Company or the Subsidiary; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company or the Subsidiary of any shares
of any such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
B. Amendment to the Organizational Documents of the Company or the
Subsidiary;
C. Except in the Ordinary Course of Business, payment or increase by
the Company or the Subsidiary of any bonuses, salaries, or other compensation to
any stockholder, director, officer or employee or entry into any employment,
severance, or similar Contract with any director, officer, or employee;
D. Adoption of, or substantial increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company or the Subsidiary;
E. Damage to or destruction or loss of any asset or property of the
Company or the Subsidiary, whether or not covered by insurance that had a
Company Material Adverse Effect;
F. Entry into, termination of, or receipt of written notice of
termination of any Contract or transaction involving a total remaining
commitment by or to the Company or the Subsidiary of at least Twenty-Five
Thousand and No/100 Dollars ($25,000.00);
G. Sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or the Subsidiary or mortgage, pledge, or imposition of any Encumbrance on any
material asset or property of the Company or the Subsidiary, including the sale,
lease, or other disposition of any of the Software and Intangibles;
H. Cancellation or waiver of any claims or rights with a value to the
Company or the Subsidiary in excess of Twenty-Five Thousand and No/100 Dollars
($25,000.00);
I. Material change in the accounting methods used by the Company or
the Subsidiary; or
J. Agreement, whether oral or written, by the Company or the
Subsidiary to do any of the foregoing.
3.17. Contracts; No Defaults.
A. Schedule 3.17(a) of the Company Disclosure Schedule contains a
complete and accurate list (other than Customer License Agreements which are
disclosed in
26
Section 3.22.), and the Company has delivered to Merger Sub and Parent true and
complete copies, of:
(i) Each Contract that involves performance of services or
delivery of goods or materials by the Company or the Subsidiary of an amount or
value in excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00);
(ii) Each Contract that involves performance of services or
delivery of goods or materials to the Company or the Subsidiary of an amount or
value in excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00);
(iii) Except for customer Contracts and inventory and equipment
purchase orders incurred in the Ordinary Course of Business, each Contract that
was not entered into in the Ordinary Course of Business and that involves
expenditures or receipts of the Company or the Subsidiary in excess of Twenty-
Five Thousand and No/100 Dollars ($25,000.00);
(iv) Each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than Twenty-Five Thousand and No/100 Dollars
($25,000.00) and with terms of less than one (1) year) of the Company or the
Subsidiary;
(v) Each collective bargaining agreement and other Contract to
or with any labor union or other employee representative of a group of employees
relating to the Company or the Subsidiary;
(vi) Each joint venture, partnership, and other Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
the Company or the Subsidiary with any other Person;
(vii) Each Contract containing covenants that in any way purport
to restrict the business activity of the Company or the Subsidiary or limit the
freedom of the Company or the Subsidiary to engage in any line of business or to
compete with any Person;
(viii) Each Contract (relating to the Company or the Subsidiary)
providing for payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(ix) Each power of attorney relating to the Company or the
Subsidiary that is currently effective and outstanding;
(x) Each Contract relating to the Company or the Subsidiary for
capital expenditures in excess of Twenty-Five Thousand and No/100 Dollars
($25,000.00);
27
(xi) Each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company or
the Subsidiary other than in the Ordinary Course of Business; and
(xii) Each amendment, supplement, and modification in respect of
any of the foregoing.
B. Except as set forth in Schedule 3.17(b) of the Company Disclosure
Schedule, to the Knowledge of the Company, no officer, director, or employee of
the Company or the Subsidiary is bound by any Contract that purports to limit
the ability of such officer, director or employee to (i) engage in or continue
any conduct, activity, or practice relating to the business of the Company or
any Subsidiary, as currently conducted or (ii) assign to the Company or any
Subsidiary any rights to any invention, improvement, or discovery relating to
the business of the Company or any Subsidiary.
C. Except as set forth in Schedule 3.17(c) of the Company Disclosure
Schedule, each Contract identified or required to be identified in Schedule
3.17(a) of the Company Disclosure Schedule is in full force and effect, except
as to matters or default which in the aggregate would not have a Company
Material Adverse Effect.
D. Except as set forth in Schedule 3.17(d) of the Company Disclosure
Schedule:
(i) The Company and each Subsidiary is in full compliance with
all material terms and requirements of each Contract under which Company or such
Subsidiary has or had any obligation or liability or by which Company or such
Subsidiary or any of the assets owned or used by Company or such Subsidiary is
or was bound, except where the failure to comply with such terms and
requirements would not have a Company Material Adverse Effect;
(ii) To the Knowledge of the Company, each other Person that has
or had any obligation or liability under any Contract under which the Company
has or had any rights is in full compliance with all material terms and
requirements of such Contract;
(iii) To the Knowledge of the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give the
Company or other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel, terminate,
or modify, any material Contract, except for events or circumstances which in
the aggregate would not have a Company Material Adverse Effect; and
(iv) Neither the Company nor any Subsidiary has given to or
received from any other Person, at any time since March 31, 1999, any written
notice regarding any actual, alleged, possible, or potential violation or breach
of, or default under, any material Contract.
E. There are no renegotiations of or attempts to renegotiate any
material amounts paid or payable to the Company or any Subsidiary under current
or completed Contracts with any Person and the Company has not received any
written demand for such renegotiation.
28
3.18. Insurance.
A. The Company has delivered to Merger Sub and Parent:
(i) True and complete copies of all policies of insurance to
which the Company or the Subsidiary is a party;
(ii) True and complete copies of all pending applications for
policies of insurance; and
(iii) Any written statement by the auditor of the Financial
Statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
B. Except as set forth on Schedule 3.18(b) of the Company Disclosure
Schedule:
(i) All policies to which the Company or the Subsidiary is a
party or that provide coverage to the Company or the Subsidiary, or any director
of the Company or the Subsidiary:
(1) Are in full force and effect, except as to matters or
defaults which in the aggregate, would not have a Company Material Adverse
Effect; and
(2) Taken together in the reasonable judgment of the
Company, provide adequate insurance coverage for the assets and the operations
of the Company or any Subsidiary for all risks to which the Company or the
Subsidiary is normally exposed.
(ii) Neither the Company nor Subsidiary has received any written
notice of cancellation or other indication that any insurance policy is no
longer in full force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations thereunder.
(iii) The Company and Subsidiary has paid all premiums due and has
otherwise performed all of its material obligations under each policy to which
the Company or such Subsidiary is a party or that provides coverage to the
Company or such Subsidiary or any director thereof, except where the failure to
so perform would not in the aggregate have a Company Material Adverse Effect.
29
3.19. Environmental Matters. Except as set forth in Schedule 3.19 of the
Company Disclosure Schedule, the Company and the Subsidiary have obtained and
are in compliance with all permits, licenses and other authorizations
(collectively, "Permits") required to do business by Environmental Requirements.
To the Company's Knowledge, there are no conditions, circumstances, activities,
practices, incidents, or actions (collectively, "Conditions") resulting from the
conduct of its business which Conditions may reasonably form the basis of any
claim or suit against the Company or the Subsidiary based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling by the Company or the Subsidiary, or the emission,
discharge, release or Threatened release by the Company or the Subsidiary into
the environment, of any pollutant, contaminant, or hazardous or toxic materials,
substances or wastes.
3.20. Employees.
A. Schedule 3.20.1 contains a complete and accurate list of the following
information for each employee or director of Company and Subsidiary, including
each employee on leave of absence or layoff status: name of employee or
director; date of hire, job title and "essential functions" (as defined in 29
C.F.R. Section 1630.2(n)); current compensation and any change in compensation
during the past two (2) years; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under Company's Plans to the
extent applicable under such Plans.
B. No employee or director of Company or Subsidiary is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of Company or Subsidiary or (ii) the ability of Company or
Subsidiary to conduct its business, including any Proprietary Rights Agreement
with Company or Subsidiary by any such employee or director. No key employee of
Company or Subsidiary intends to terminate his employment with Company or
Subsidiary.
C. Schedule 3.20.2 contains a complete and accurate list of the following
information for each retired employee or director of Company or the Subsidiary,
or their dependents, receiving benefits or scheduled to receive benefits in the
future: name, listing of benefits to which they are entitled and funding
mechanism for such benefits.
D. Schedule 3.20.3 contains a complete listing of all "covered employees"
and "qualified beneficiaries" (as each is defined in ERISA (S)(S) 607(2) and (3)
and/or Code (S) 4980B(f)(7)) who have experienced a qualifying event (within the
meaning of ERISA (S) 603 and/or Code (S) 4980B(f)(3)) with respect to a Plan,
and/or who are eligible for continuation coverage (within the meaning of ERISA
(S) 602 and/or Code (S) 4980B(f)(2)) and/or whose period for continuation
coverage has not expired. Included in this listing is the current address for
each such individual, the date on which they would have (absent continuation
coverage) lost coverage, whether the individual has elected continuation
coverage, and for individuals who have not yet elected continuation coverage,
the date on which the individual was notified of their right to continuation
coverage.
30
E. Schedule 3.20.4 contains a complete listing of all employees who are on
a leave of absence from the Company or the Subsidiary (indicating also whether
or not such leave is pursuant to the Family and Medical Leave Act of 1993, as
amended) and denoting whether such employee is receiving or entitled to receive
health coverage under a Plan during such period of leave.
3.21. Government Contracts. Except as set forth in Schedule 3.21 of the
Company Disclosure Schedule, neither the Company nor the Subsidiary have any
business contracts with any independent or executive agency, division,
subdivision, audit group or procuring office of the federal government or of a
state government, including any prime contractor of the federal government and
any higher level subcontractor of a prime contractor of the federal government,
and including any employees or agents thereof, in each case acting in such
capacity.
3.22. Intellectual Property Rights of the Company. For purposes of this
Section 3.22. only, the term "Company" shall be deemed to include the Company
and the Subsidiary.
3.22.1. Schedule 3.22.1 (i) contains a complete list of each governmental
filing, whether federal, state, local, foreign or otherwise, related to patents,
copyrights, trademarks, service marks, trade names, maskworks, other Intangibles
and Software (such terms are defined in Section 3.22.2.M.) (collectively
"Registrations") of Company; (ii) identifies each pending Registration of
Company with respect to the Intangibles and Software (defined in Section
4.9.2.M.); (iii) identifies all of Company's applications for or Registrations
regarding the Intangibles and Software which have been withdrawn, abandoned, or
have lapsed or been denied and (iv) specifies any advice to Company with respect
to such Registration or protectability of the Intangibles and Software
summarizing such advice.
Schedule 3.22.1 also identifies (i) each license agreement or other written
or oral agreement or permission ("License Agreement") and in which Company has
granted to any third party any right with respect to any of the Intangibles or
Software; (ii) each item of the Intangibles and Software used or possessed by
Company that any third party owns and the license, sublicense, agreement or
other permission in connection therewith (the "Third Party License Agreement"),
together with the term thereof, and all royalties or other amounts due thereon
and (iii) each agreement entered into by Company that provides for the sale of
license or access to any source code of the Software, including, without
limitation, any source code escrow agreement ("Source Code Agreement").
Company has supplied Parent with correct and complete copies of all License
Agreements, Third Party License Agreements and Source Code Agreements.
Company has complied with all License Agreements, Third Party License
Agreements and Source Code Agreements, and to the best of Company's knowledge,
all other parties to such agreements have complied with all provisions thereof;
and no default or event of default exists under any of the License Agreements,
Third Party License Agreements, or Source Code Agreements.
31
3.22.2.
A. Schedule 3.22.2 is an accurate and complete list and description
(including a name, product description, the language in which it is written and
the type of hardware platform(s) on which it runs) of all of the following:
(i) All Software owned by Company, whether purchased from a third party,
developed by or on behalf of Company, currently under development or otherwise
("Owned Software").
(ii) All Software, other than the Owned Software, that is either (x)
offered or provided by Company, directly or through Distributors, to customers
of Company or (y) used by Company to provide information or services to
customers of Company for a fee (collectively, "Customer Software"; the Owned
Software and the Customer Software are collectively referred to as the "Company
Software").
(iii) All Software, other than Company Software, that is licensed or
marketed to or from third parties or otherwise used by Company for any purpose
whatsoever (collectively, "Other Software"), other than Other Software that is
generally available for license at retail or directly via the Internet ("COTS").
B. To the extent not set forth in Schedule 3.22.1, Schedule 3.22.2
separately sets forth an accurate and complete list and description of each
copyright, trademark, trademark application or registration, service ▇▇▇▇,
service ▇▇▇▇ application or registration, patent application or registration,
and name and logo included in the Intangibles (as defined below in this Section)
owned, marketed or licensed by Company to or from third parties, used or under
development by Company. Schedule 3.22.2 indicates Company's ownership of such
items or the source of Company's right to use such items.
C. No Software other than the Owned Software, Customer Software and Other
Software is required to operate the Company's businesses as currently conducted
and as contemplated by existing Company Software product and service plans.
Schedule 3.22.2 identifies all individuals who have contributed to the
development of the Owned Software.
D. Except as explained on Schedule 3.22.2, Company owns and has good and
marketable title to the Owned Software and Intangibles attributable to the Owned
Software, and has the full right to use all of the Customer Software and Other
Software, and Intangibles attributable thereto, as used or required to operate
the Company's businesses as currently conducted and as contemplated in the
future in accordance with Company's written business plans, free and clear of
any liens, claims, charges or encumbrances which would affect the use of such
Software in connection with the operation of the Company's businesses as
currently conducted and as contemplated in the future in accordance with
Company's written business plans.
E. No rights of any third party not previously obtained are necessary to
market, license, sell, modify, update, and/or create derivative works for any
Software as to which Company takes any such action in its businesses as
currently conducted.
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F. With respect to Software which is licensed by Company to third parties
or used in connection with the providing of services to third parties in the
Company's businesses:
(i) Company maintains machine-readable master-reproducible copies,
reasonably complete technical documentation and/or user manuals for the most
current releases or versions thereof and for all earlier releases or versions
thereof currently being supported by Company;
(ii) In each case, the machine-readable copy substantially conforms to the
corresponding source code listing;
(iii) Such Software is written in the language set forth on Schedule
3.22.2, for use on the hardware set forth on Schedule 3.22.2 with standard
operating systems;
(iv) Such Software can be maintained and modified by reasonably competent
programmers familiar with such language, hardware and operating systems; and
(v) In each case the Software operates in accordance with the user manual
thereof without operating defects of any material nature.
G. None of the Software or Intangibles listed on Schedule 3.22.1 or
Schedule 3.22.2, or their respective past or current uses by or through Company
has violated or infringed upon, or is violating or infringing upon, any
Software, patent, copyright, trade secret or other Intangible of any person.
Company has adequately maintained all trade secrets and copyrights with respect
to the Software. Company has performed all obligations imposed upon it with
regard to the Customer Software and Other Software which are required to be
performed by it on or prior to the date hereof, and neither Company nor, to the
knowledge of Company, any other party, is in breach of or default thereunder in
any respect, nor to Company's knowledge, is there any event which with notice or
lapse of time or both would constitute a default thereunder.
H. To the knowledge of Company, no person is violating or infringing upon,
or has violated or infringed upon at any time, any of Company's proprietary
rights to any of the Software or Intangibles listed on either Schedule 3.22.1 or
Schedule 3.22.2.
I. None of the Software or Intangibles listed on Schedule 3.22.1 and
Schedule 3.22.2 are owned by or registered in the name of any of Company's
shareholders, any current or former owner or shareholder, partner, director,
executive, officer, employee, salesperson, agent, customer, contractor of
Company or its representative nor does any such person have any interest therein
or right thereto, including, but not limited to, the right to royalty payments.
Except as listed on Schedule 3.22.2, Company has granted no third party any
exclusive rights related to any Owned Software.
J. No litigation is pending and no claim has been made against Company or,
to the knowledge of Company, is threatened, which contests the right of Company
to sell or license to any person or entity or use any of the Owned Software,
Customer Software or
33
Other Software. No former employer of any employee or consultant of Company has
made a claim against Company or, to the knowledge of Company, against any other
person, that Company or such employee or consultant is misappropriating or
violating the Intangibles of such former employer.
K. Company is not a party to or bound by and, upon the consummation of the
transactions contemplated by this Agreement, will not be a party to or bound by
(as a result of any acts or agreements of Company), any license or other
agreement requiring the payment by Company or its assigns of any royalty or
license payment, excluding such agreements relating to the Customer Software to
the extent such royalty or license payment is expressly set forth on Schedule
3.22.2.
L. [Intentionally Left Blank].
M. For purposes of this Agreement, "Software" means any computer program,
operating system, applications system, microcode, firmware or software of any
nature, whether operational, under development or inactive, including all object
code, source code, technical manuals, compilation procedures, execution
procedures, flow charts, programmers notes, user manuals and other documentation
thereof, whether in machine-readable form, programming language or any other
language or symbols and whether stored, encoded, recorded or written on disk,
tape, film, memory device, paper or other media of any nature.
"Intangible" means:
(i) Patents, patent applications, patent disclosures, all re-issues,
divisions, continuations, renewals, extensions and continuation-in-parts thereof
and improvements thereto;
(ii) Trademarks, service marks, trade dress, logos, trade names, and
corporate names and registrations and applications for registration thereof and
all goodwill associated therewith;
(iii) Copyrights and registrations and applications for registration
thereof;
(iv) Maskworks and registrations and applications for registration thereof;
(v) All right, title and interest in all computer software, data and
documentation (including, without limitation, modifications, enhancements,
revisions or versions of or to any of the foregoing and prior releases of any of
the foregoing applicable to any operating environment);
(vi) Trade secrets and confidential business information (including,
without limitation, ideas, formulas, compositions, inventions, whether
patentable or unpatentable and whether or not reduced to practice, know-how,
manufacturing and production processes and techniques, research and development
information, drawings, flow charts, processes ideas, specifications, designs,
plans, proposals, technical data, copyrightable works,
34
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information);
(vii) Other proprietary rights;
(viii) All rights necessary to prevent claims of invasion of privacy,
right of publicity, defamation, infringement of moral rights, or any other
causes of action arising out of the use, adaptation, modification, reproduction,
distribution, sale, or exhibition of the Software;
(ix) All income, royalties, damages and payments due at Closing or
thereafter with respect to the Owned Software, Customer Software, Other
Software, or other Intangibles and all other rights thereunder including,
without limitation, damages and payments for past, present or future
infringements or misappropriations thereof, the right to ▇▇▇ and recover for
past, present or future infringements or misappropriations thereof;
(x) All rights to use all of the foregoing forever; and
(xi) All other rights in, to, and under the foregoing in all countries.
"Distributor" means Company and any other person or entity that has been
authorized by Company to sell, license or offer to sell or license any Company
Software, other than an employee of Company. Distributors may include, without
limitation, value added resellers, original equipment manufacturers, dealers,
sales agents, and distributors.
3.22.3. Millennium Compliance.
A. Except as noted in Schedule 3.22.3, the Owned Software and to the best
knowledge of Company, the Customer Software and Other Software, are "Millennium
Compliant." For the purposes of this Agreement "Millennium Compliant" means:
(i) The functions, calculations, and other computing processes of the Owned
Software, Other Software and Customer Software (collectively, "Processes")
perform in an accurate manner regardless of the date in time on which the
Processes are actually performed and regardless of the date input to the Owned
Software, Other Software, and Customer Software, whether before, on, or after
January 1, 2000, and whether or not the dates are affected by leap years;
(ii) The Owned Software, Other Software, and Customer Software accept,
store, sort, extract, sequence, and otherwise manipulate date inputs and date
values, and return and display date values, in an accurate manner regardless of
the dates used, whether before, on, or after January 1, 2000;
(iii) The Owned Software, Other Software, and Customer Software will
function without interruptions caused by the date in time on which the Processes
are actually performed or by the date input to the Owned Software, Other
Software, and Customer Software, whether before, on, or after January 1, 2000;
35
(iv) The Owned Software, Other Software, and Customer Software accept and
respond to two (2) digit year and four (4) digit year date input in a manner
that resolves any ambiguities as to the century in a defined, predetermined, and
accurate manner;
(v) The Owned Software, Other Software, and Customer Software display,
print, and provide electronic output of date information in ways that are
unambiguous as to the determination of the century; and
(vi) The Owned Software, Customer Software, and Other Software have been
tested by Company to determine whether the Owned Software, Customer Software,
and Other Software are Millennium Compliant. Company shall deliver the test
plans and results of such tests upon written request from Parent. Company shall
notify Parent immediately of the results of any tests or any claim or other
information that indicates the Owned Software, Customer Software, and Other
Software are not Millennium Complaint.
B. Except as set forth in Schedule 3.22.3(b) of the Company Disclosure
Schedule and except as described in the next following sentence, the Company has
inquired as to the Millennium Compliance of the Customer Software and any
computer hardware and devices owned or leased by the Company that operates any
of the Company Software ("Company Hardware") with the vendor thereof, has
obtained assurances that such Customer Software and Company Hardware is
Millennium Compliant, and has tested such Customer Software and Company Hardware
in conjunction with the Owned Software to determine whether the operation of the
Owned Software would result in dated-related failures or errors in such Customer
Software or Company Hardware. In the event that the Company obtains information
that such Customer Software or Company Hardware is not Millennium Compliant or
such Customer Software or Company Hardware fails the testing as described above,
the Company has established and has timely implemented written plans to migrate
the Company and all Company customers off of such Customer Software or Company
Hardware before the Company anticipates that errors or failures in such Customer
Software or Company Hardware will occur.
C. Except as set forth in Schedule 3.22.3(c) of the Company Disclosure
Schedule and except as described in the next following sentence, the Company has
inquired as to the Millennium Compliance of the Other Software with the vendor
thereof and has obtained assurances that such Other Software is Millennium
Compliant. In the event that the Company obtains information that such Other
Software is not Millennium Compliant, the Company has established and has timely
implemented written plans to migrate the Company off of such Other Software
before the Company anticipates that errors or failures in such Other Software
will occur.
D. Each customer of Company identified on Schedule 3.22.3(d) has received
a copy of the correspondence attached to Schedule 3.21.3(d).
E. Schedule 3.22.3(e) of the Company Disclosure Schedule sets forth true
and correct information called for therein with respect to each customer of
Company.
3.22.4. Without limiting any of the foregoing, to the best knowledge of
Company, none of Company's current or former officers, executives, directors,
partners, shareholders, employees, salespersons, customers, or independent
contractors have disclosed to (without
36
proper obligation of confidentiality) or otherwise used or utilized on behalf of
any person other than Company, any trade secrets or proprietary information,
including, without limitation, the source codes for Company Software.
All License Agreements, Third Party License Agreements, software
development agreements, and any other written agreement between Company and any
third party in which trade secrets or confidential information of Company,
Company's customers, agents, or suppliers are disclosed binds the recipient
thereof to take reasonable steps to protect the proprietary rights of Company
and its customers, agents, and suppliers in such trade secrets and confidential
information.
Schedule 3.22.4 identifies all individuals who have materially contributed
to the development of the Owned Software.
3.22.5. Company Software:
A. Performs in accordance with all published specifications for such
Software;
B. Complies with all other published documentation, descriptions and
literature with respect to such Software; and
C. Complies with all representations, warranties and other requirements
specified in all of Company's License Agreements.
3.22.6. Except as set forth on Schedule 3.22.6, none of Company's
shareholders have an ownership right or other interest in any Software or
Intangibles related to the Acquired Business, and no claims have been made or,
to the knowledge of the Company, is threatened, that the Company Software
substantially fails to perform as set forth in Section 3.22.5.
3.22.7. All Company's contracts with customers (collectively "Customer
Contracts"), whether completed or outstanding, were or are evidenced by written
agreements containing provisions reasonably equivalent to those contained in
Schedule 3.22.7 hereto, with only such changes as would not affect the rights of
Company and would not impose on Company any additional obligations.
No Customer Contract provided for the transfer to the customer therein of
any Intangibles relating to Company Software as to which Company thereafter
shall have no further rights. No current Customer Contract provides that the
customer therein shall be entitled to sublicense or otherwise transfer to a
third party any of the Intangibles relating to Company Software unless such
third party agrees to be bound by the confidentiality provisions thereof and
agrees to pay Company royalties and other amounts comparable to those under such
Customer Contract.
Except as set forth on Schedule 3.22.7, each past or present customer of
Company and each past or present customer of Company to whom Company disclosed
any of the Intangibles relating to Company Software is bound by a
confidentiality provision which requires
37
such past or present customer to take reasonable steps to protect the rights of
Company in the Intangibles relating to Company Software.
3.23. Certain Payments. To the Knowledge of the Company, neither the
Company or any Subsidiary nor any director, officer, agent, or employee of the
Company or any Subsidiary, nor any other Person associated with or acting for or
on behalf of the Company or any Subsidiary, has directly or indirectly:
A. On behalf of the Company or any Subsidiary or for the Company's or any
Subsidiary's benefit, made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services in violation of any
Legal Requirement.
B. Established or maintained any fund or asset on behalf of the Company or
any Subsidiary that has not been recorded in the books and records of the
Company or any Subsidiary.
3.24. Relationships With Related Persons. Except as set forth in Schedule
3.24 of the Company Disclosure Schedule, no Related Person of the Company or the
Subsidiary has, or since September 30, 1998, has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible),
used in the Company's or the Subsidiary's businesses.
Except as set forth in Schedule 3.24 of the Company Disclosure Schedule, to
the Knowledge of the Company, no Related Person of the Company or the Subsidiary
owns, or since September 30, 1998, has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has a material financial interest in any transaction with the Company or
the Subsidiary.
Except as set forth in Schedule 3.24 of the Company Disclosure Schedule, no
Related Person of the Company is a party to any Contract or commitment with the
Company.
3.25. Brokers or Finders. Except as set forth on Schedule 3.25, neither
the Company, the Subsidiary nor their agents have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement .
3.26. Labor Relations; Compliance. Neither the Company nor the Subsidiary
have been nor are a party to any collective bargaining or other labor Contract.
There has not been, there is not presently pending or existing, and there is not
Threatened:
A. Any strike, slowdown, picketing, work stoppage or employee grievance
process;
B. Any Proceeding against or affecting Company or Subsidiary relating to
the alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting any of Company or their
premises; or
C. Any application for certification of a collective bargaining agent.
38
No event has occurred or circumstance exists that could provide the basis
for any work stoppage or other labor dispute. There is no lockout of any
employees by Company or Subsidiary, and no such action is contemplated by
Company or Subsidiary. Company and Subsidiary have complied in all respects with
all Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and health
and plant closing. The Company and Subsidiary have only employed individuals
authorized to work in the United States.
Company and Subsidiary are not liable for the payment of any compensation,
Damages, taxes, fines, penalties, or other amounts, however, designated, for
failure to comply with any of the foregoing Legal Requirements.
3.27. Disclosure Documents. None of the information supplied or to be
supplied by the Company for inclusion in or incorporation by reference in (i)
the Proxy Statement (as defined in section 6.1.) and (ii) the registration
statement (as defined in Section 4.3.) including the Proxy Statement included
therein, will, in the case of the Proxy Statement, at the time of mailing of the
Proxy Statement to stockholders of the Company, contain any untrue statement of
a material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading or will, in the case of
the Registration Statement, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act, the
rules and regulations thereunder, except that no representation is made by the
Company with respect to information supplied by Parent or Merger Sub for
inclusion therein.
3.28. Disclosure. No representation or warranty made by the Company in
this Agreement or any Exhibit hereto or in the Company Disclosure Schedule, when
taken together, contains or contained (as of the date made) any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements or facts contained herein or therein not misleading in light of
the circumstances under which they were made.
3.29. Vote Required. The affirmative vote of a majority of the votes that
holders of the outstanding shares of Company Common Stock are entitled to vote
with respect to the Merger is the only vote of the holders of any class or
series of Company's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
3.30. Pooling-of-Interests. Except for (i) that certain loan previously
obtained by Company and Subsidiary from Parent and (ii) the loan described in
Section 5.8. below, neither the Company, Subsidiary nor any of their directors,
officers or shareholders has taken any action which would interfere with (i)
Parent's ability to account for the Merger as a pooling-of-interests or (ii)
Parent's, Surviving Corporation's or the Company's ability to continue to
account for as a pooling-of-interests any past acquisition by the Company
currently accounted for as a pooling-of-interests.
4. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF MERGER SUB AND PARENT.
39
Merger Sub and Parent, jointly and severally, hereby represent and warrant
to the Company, subject to such exceptions as are specifically disclosed in
writing in the disclosure letter and referenced by a specific representation
supplied by Parent to Company dated as of the date hereof and certified by a
duly authorized officer of Parent (the "Parent Disclosure Schedule"), as
follows:
4.1. Organization. Each of Merger Sub and Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and Merger Sub and Parent each has all
requisite corporate power and authority to own, lease and operate its assets and
to carry on its business as now being conducted. Each of Merger Sub and Parent
is duly qualified to transact business, and is in good standing, as a foreign
corporation in each jurisdiction where the character of its activities requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the assets, liabilities, results of operations,
financial condition, business or prospects of Merger Sub, Parent or their
respective subsidiaries taken as a whole.
4.2. Authorization. Each of Merger Sub and Parent has full corporate power
and authority to execute and deliver this Agreement and to perform its
respective obligations under this Agreement and to consummate the Merger and the
other transactions contemplated hereby (the "Parent/Merger Sub Ancillary
Agreements"). The execution and delivery of this Agreement by Merger Sub and
Parent and the performance by Merger Sub and Parent of their respective
obligations hereunder and the consummation of the Merger, the Parent/Merger Sub
Ancillary Agreements and the other transactions provided for herein have been
duly and validly authorized by all necessary corporate action on the part of
each of Merger Sub and Parent. This Agreement and the Parent/Merger Sub
Ancillary Agreements have been duly executed and delivered by each of Merger Sub
and Parent and each constitutes the legal, valid and binding agreement of Merger
Sub and Parent, enforceable against each of Merger Sub and Parent in accordance
with its terms, subject to applicable bank ruptcy, insolvency and other similar
laws affecting the enforceability of creditors' rights generally, general
equitable principles and the discretion of courts in granting equitable
remedies. Each other agreement to be executed by Merger Sub and Parent in
connection with this Agreement will be duly executed and delivered by Merger Sub
and Parent in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies.
4.3. Absence of Restrictions and Conflicts. The execution, delivery and
performance of this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement, and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, result in the loss of any
material benefit under, or permit the acceleration of any obligation under, (i)
any term or provision of the Organizational Documents of Merger Sub or Parent;
(ii) any Contract material to the business and operations of Merger Sub or
Parent; (iii) any judgment, decree, injunction or order of any court or
governmental authority or agency to which Merger Sub or Parent is a party or by
which Merger Sub or Parent or any of their respective properties is bound or
(iv) any statute, law, regulation or rule applicable to Merger Sub or Parent, so
as to have, in the case of subsections (ii) through (iv) above, a mater ial
adverse effect on the assets, liabilities, results of operations, financial
condition, business or prospects of Merger Sub or Parent and their respective
subsidiaries taken as a whole. Except for (i) filing of the Articles of Merger;
(ii) the filing of a Form S-4 Registration Statement (the "Registration
Statement") with the Securities and
40
Exchange Commission ("SEC") in accordance with the Securities Act; (iii) the
filing of the Proxy Statement (as defined in Section 6.1.) with the SEC in
accordance with the Exchange Act and (iv) the filing of such consents,
approvals, orders, authorizations, registrations, declarations and filing as may
be required under applicable state securities laws, no Consent, approval, order
or authorization of, or registration, declaration or filing with, any government
agency or public or regulatory unit, agency, body or authority with respect to
Merger Sub or Parent is required in connection with the execution, delivery or
performance of this Agreement by Merger Sub or Paren t or the consummation of
the Contemplated Transactions contemplated by this Agreement by Merger Sub or
Parent, the failure to obtain which would have a material adverse effect upon
the assets, liabilities, results of operations, financial condition, business or
prospects of Merger Sub or Parent and its subsidiaries taken as a whole.
4.4. Capitalization of Parent and Merger Sub. The authorized capital stock
of Parent consists of two hundred million (200,000,000) shares of common stock,
$.001 par value per share of which 30,352,765 shares were issued and outstanding
as of December 10, 1999 and two million (2,000,000) shares of preferred stock,
$.001 par value per share, of which zero (0) shares are issued and outstanding.
The authorized capital stock of Merger Sub consists of one thousand (1,000)
shares of common stock, par value $.01 per share, all of which, as of the date
hereof, are issued and outstanding. All of the outstanding shares of Parent's
and Merger Sub's respective capital stock are duly authorized, validly issued,
fully paid and nonassessable. The shares of Parent Common Stock to be issued
pursuant to this Agreement have been duly authorized and, when issued, will be
validly issued, fully paid and nonassessable.
41
4.5. SEC Filings; Financial Statements.
A. Parent has made available to Company a correct and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by Parent with the SEC on or after January 1, 1999 (the "Parent SEC
Reports"), which are all the forms, reports and documents required to be filed
by Parent with the SEC since January 1, 1999. The Parent SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. None of Parent's subsidiaries is required to
file any reports or other documents with the SEC.
B. Each set of consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, do not contain footnotes as permitted by Form 10-Q of the
Exchange Act) and each fairly represents the consolidated financial position of
Parent and its subsidiaries at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal
adjustments which were not or are not expected to be material in amount.
C. Parent has previously furnished to Company a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC,
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
4.6. Litigation. Except as may be disclosed in the Parent SEC Reports,
there are no suits, arbitrations, actions, claims, complaints, grievances,
investigations or proceedings pending or, to the Knowledge of Parent or Merger
Sub, Threatened against Parent or Merger Sub that, if resolved against Parent or
Merger Sub could be reasonably expected to have a material adverse effect on
Parent or Merger Sub on their ability to consummate the Merger and the other
transactions contemplated hereby.
4.7. Registration Statement; Proxy Statement. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in (i) the S-4 will, at the time the S-4 becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading and (ii) the Proxy Statement will, at the dates mailed to the
shareholders of Company at the time of the Company Shareholders' Meeting and as
of the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
promulgated by the SEC thereunder. Notwithstanding the for egoing, Parent makes
no representation or warranty with respect to any information supplied by the
Company which is contained in any of the foregoing documents.
42
4.8. Certain Proceedings. There is no pending Proceeding that has been
commenced against Merger Sub or Parent that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To the knowledge of Merger Sub or Parent, no such
Proceeding has been Threatened.
4.9. Brokers or Finders. Except as set forth on Schedule 4.9 of the
Parent Disclosure Schedule, neither Merger Sub or Parent nor any of their
respective officers or agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
5. CERTAIN AGREEMENTS OF THE PARTIES.
5.1. No Solicitation.
A. From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Section 8, Company and Subsidiary will
not, nor will they authorize or permit any of their respective officers,
directors, affiliates or employees or any investment banker, attorney or other
advisor or representative retained by any of them to, directly or indirectly,
(i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal (as defined below); (ii) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes or may reasonably be
expected to lead to, any Acquisition Proposal; (iii) engage in discussions with
any person with respect to any Acquisition Proposal; (iv) approve, endorse or
recommend any Acquisition Proposal or (v) enter into any letter of intent or
similar document or any contract, agreement or commitment contemplating or
otherwise relating to any Acquisition Transaction (as defined below); provided,
however, that nothing contained in this Section 5.1. shall prohibit the Board of
Directors of Company (1) from complying with Rule 14d-9 or 14e-2(a) promulgated
under the Exchange Act with regard to a tender or exchange offer not made in
violation of this Section 5.1. or (2) during the period between mailing of the
Proxy Statement to Company's shareholders and receipt of the approval by the
shareholders of Company of this Agreement and the Merger from, in response to an
unsolicited, bona fide written Acquisition Proposal that Company's Board of
Directors reasonably concludes based upon the advice of its independent
financial advisors constitutes a Superior Proposal (as defined below), engaging
in discussions with and furnishing information to the party making such
Acquisition Proposal to the extent (a) the Board of Directors of the Company
determines in good faith based on the advice of its outside legal counsel that
its fiduciary obligations under applicable law require it to do so; (b) (x) at
least five (5) days prior to furnishing any such nonpublic information to, or
entering into discussions or negotiations with, such party, Company gives Parent
written notice of Company's intention to furnish nonpublic information to, or
enter into discussions or negotiations with, such party and (y) Company receives
from such party an executed confidentiality agreement containing customary
limitations on the use and disclosure of all nonpublic written and oral
information furnished to such party by or on behalf of Company and (c)
contemporaneously with furnishing any such nonpublic information to such party,
Company furnishes such nonpublic information to Parent (to the extent such
nonpublic information has not been previously furnished by the Company to
Parent). Company and its subsidiaries will immediately case any and all existing
activities, discussions or negotiations with any parties cond ucted heretofore
with respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in this Section 5.1.
by any officer, director or employee of Company or any
43
of its subsidiaries or any investment banker, attorney or other advisor or
representative of Company or any of its subsidiaries shall be deemed to be a
breach of this Section 5.1. by Company.
For purposes of this Agreement, (i) "Acquisition Proposal" shall mean any
offer or proposal (other than an offer or proposal by Parent) relating to any
Acquisition Transaction. For the purposes of this Agreement; (ii) "Acquisition
Transaction" shall mean any transaction or series of related transactions other
than the transactions contemplated by this Agreement involving: (1) any
acquisition or purchase from the Company by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a five percent (5%) interest in the total outstanding
voting securities of the Company or any of its subsidiaries or any tender offer
or exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning five percent (5%) or more of the total
outstanding voting securities of the Company or any of its subsidiaries or any
merger, consolidation, business combination or similar transaction involving the
Company pursuant to which the shareholders of the Company immediately preceding
such transaction hold less than ninety-five percent (95%) of the equity
interests in the surviving or resulting entity of such transaction; (2) any
sale, lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition or
disposition of more than five percent (5%) of the assets of the Company or (3)
any liquidation, dissolution, recapitalization or other significant corporate
reorganization of the Company and (iii) "Superior Proposal" shall mean an
Acquisition Proposal with respect to which (x) Company's Board of Directors
shall have concluded in good faith, after considering applicable state law; on
the basis of the written opinion of independent outside counsel that such action
is necessary to prevent Company's Board of directors from violating its
fiduciary duties to Company's shareholders under applicable law; (y) if any cash
consideration is involved, shall not be subject to any financing contingency,
and with respect to which Company's Board of Directors shall have determined
(based upon the written opinion of Company's independent financial advisors) in
the exercise of its fiduciary duties to Company's shareholders that the
acquiring party is capable of consummating the proposed Acquisition Transaction
on the terms proposed and (z) Company's Board of Directors shall have determined
in the exercise of its fiduciary duties to Company's shareholders that the
proposed Acquisition Transaction provides greater value to the shareholders of
Company than the Merger (based upon the written opinion of Company's independent
financial advisors that such Acquisition Transaction is superior to the Merger
from a financial point of view).
B. In addition to the obligations of Company set forth in paragraph A. of
this Section 5.1., Company as promptly as practicable, and in any event within
twenty-four (24) hours, shall advise Parent orally and in writing of any request
for information which Company reasonably believes would lead to an Acquisition
Proposal or of any Acquisition Proposal, or any inquiry with respect to or which
Company reasonably should believe would lead to any Acquisition Proposal, the
material terms and conditions of such request, Acquisition Proposal or inquiry,
and the identity of the person or group making any such request, Acquisition
Proposal or inquiry. Company will keep Parent informed in all material respects
of the status and details (including material amendments or proposed amendments)
or any such request, Acquisition Proposal or inquiry. In addition to the
foregoing, Company shall (i) provide Parent with at least forty-eight (48) hours
prior notice (or such lesser prior notice as provided to the members of
44
Company's Board of Directors, but in no event less than eight (8) hours) of any
meeting of Company's Board of Directors at which Company's Board of Directors is
reasonably expected to consider a Superior Offer and (ii) provide Parent with at
least five (5) business days prior written notice of a meeting of Company's
Board of Directors at which Company's Board of Directors is reasonably expected
to recommend a Superior Offer to its shareholders and together with such notice
a copy of the definitive documentation relating to such Superior Offer.
5.2. Public Disclosure. Parent and Company will consult with each other
and agree before issuing any press release or otherwise making any public
statement with respect to the Merger, this Agreement or an Acquisition Proposal
and will not issue any such press release or make any such public statement
prior to such agreement, except as may be required by law or any listing
agreement with a national securities exchange, in which case reasonable efforts
to consult with the other party will be made prior to any such release or public
statement. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
5.3. Reasonable Efforts; Notification.
A. Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in Section 7. to be satisfied; (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Bodies and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Bodies, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Body; (iii) the obtaining of all necessary consents, approvals or
waivers from third parties; (iv) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Body vacated or reversed and (v) the execution or
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, Company and its Board of
Directors shall, if any state takeover statute or similar statute or regulation
is or becomes applicable to the Merger, this Agreement or any of the
transactions contemplated by this Agreement, use all reasonable efforts to
ensure that the Merger and the other tra nsactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Merger, this Agreement and the transactions
contemplated hereby. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall be deemed to require Parent or Company or any subsidiary or
affiliate thereof to agree to any divestiture by itself or any of its affiliates
of shares of capital stock or of any business, assets or property, or the
imposition of any material limitation on the ability of any of them to conduct
their business or to own or exercise control of such assets, properties and
stock.
45
B. Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate,
or any failure of Company to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, in each case, such that the conditions set forth in Section
7.2.A. or 7.2.B. would not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
C. Parent shall give prompt notice to Company of any representation or
warranty made by it or Merger Sub contained in this Agreement becoming untrue or
inaccurate, or any failure of Parent or Merger Sub to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 7.3.A. or 7.3.B. would not be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.4. Third Party Consents. As soon as practicable following the date
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
5.1. Indemnification.
From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification agreements between Company and its directors and
officers in effect immediately prior to the Effective Time and any
indemnification provisions under the Company Organizational Documents as in
effect on the date hereof. The Certificate of Incorporation and Bylaws of the
Surviving Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the indemnified parties
thereunder (the "Indemnified Parties") as those contained in the Company
Organizational Documents as in effect on the date hereof, which provisions will
not be amended, repealed or otherwise modified for a period of four (4) years
from the Effective Time in any manner that would adversely affect the rights
thereunder of the Indemnified Parties, unless such modification is required by
law.
5.6. Nasdaq Listing. Parent agrees to authorize for listing on Nasdaq the
shares of Parent Common Stock issuable and those required to be reserved for
issuance, in connection with the Merger, upon official notice of issuance.
5.7. Affiliates.
A. Set forth in Schedule 5.7. of the Company Disclosure Schedule is a list
of those persons who may be deemed to be, in Company's reasonable judgment,
affiliates of Company within the meaning of Rule 145 promulgated under the
Securities Act or Opinion 16 of the Accounting Principles Board and applicable
SEC rules and regulations (each, a "Company Affiliate"). Company will provide
Parent with such information and documents as Parent reasonably requests of
reviewing such list. Company will use its commercially reasonable efforts to
deliver or cause to be delivered to Parent, as promptly as practicable on or
following
46
the date hereof, from each Company Affiliate an executed affiliate agreement in
substantially the form attached hereto as Exhibit C-1 (the "Company Affiliate
Agreement"), each of which will be in full force and effect as of the Effective
Time. Parent will be entitled to place appropriate legends on the certificates
evidencing any Parent Common Stock to be received by a Company Affiliate pursu
ant 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 the Company Affiliate Agreement.
B. Set forth in Schedule 5.7. of the Parent Disclosure Schedule is a list
of those persons who may be deemed to be, in Parent's reasonable judgment,
affiliates of Parent under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations (each, a "Parent Affiliate"). Parent will
provide Company with such information and documents as Company reasonably
requests of reviewing such list. Parent will use its commercially reasonable
efforts to deliver or cause to be delivered to Company, as promptly as
practicable on or following the date hereof, from each Parent Affiliate an
executed affiliate agreement in substantially the form attached hereto as
Exhibit C-2 (the "Parent Affiliate Agreement"), each of which will be in full
force and effect as of the Effective Time.
47
5.8. Provision of Loan By Parent to Company. No later than January 15,
2000, Parent shall amend and/or restate that certain Loan and Security Agreement
dated October 28, 1999 by and among Company, Subsidiary and Parent and related
documents (collectively the "Loan Documents") pursuant to which the following
shall occur: (i) Parent shall advance an additional $500,000 to be used for
general working capital purposes and such new advance shall not be used to pay
any indebtedness owed to the Principal Shareholders; (ii) subject to clause
(iii) below, the maturity date on the original advance under the Loan Documents
and the advance under clause (i) above (and all interest accrued thereon) shall
be July 31, 2000; (iii) if the Agreement is terminated by Company pursuant to
Section 8.6., the maturity date for such original advance and such new advance
shall be modified to become the later of (x) 120 days from the date of such
termination or (y) July 31, 2000; (iv) all security covered under the Loan
Documents shall continue in place; and (v) the Principal Sh areholders shall
sign such subordination agreements and/or forbearance agreements as are
requested by Parent to ensure that no payments are made by the Company to the
Principal Shareholders until all amounts due Parent for the foregoing advances
are paid in full.
6. ADDITIONAL COVENANTS OF THE PARTIES.
The parties hereto hereby agree as follows with respect to the period from
and after the date of this Agreement.
6.1. Mutual Covenants.
A. Pooling-of- Interests. Each of the parties shall use its Best Efforts
to cause the Merger to qualify for pooling-of-interests accounting treatment for
financial reporting purposes. Neither the Company nor any Affiliate of the
Company shall knowingly take any action that would jeopardize the treatment of
the Merger as a "pooling-of-interests" for accounting purposes.
B. Tax-Deferred Treatment. Each of the parties shall use its reasonable
efforts to cause the Merger to constitute a tax-deferred "reorganization" under
Section 368(a) of the Code.
C. Confidentiality; Access to Information.
(i) The parties acknowledge that Company and Parent have previously
executed a Confidentiality Agreement, dated as of [__________], 1999 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
(ii) Each of the Company and Parent will afford the other and the other's
accountants, counsel and other representatives reasonable access to its
properties, books, records and personnel during the period prior to the
Effective Time to obtain all information concerning its business as such other
party may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 6.1. will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
48
D. Proxy Statement/ Registration Statement; Shareholder Approval.
Following the execution of this Agreement, Parent, Merger Sub and the Company
will mutually cooperate to prepare and file with the SEC a preliminary proxy
statement relating to the Merger (the "Proxy Statement") and Parent will prepare
and file with the SEC the Registration Statement in which the Proxy Statement
will be included as a prospectus. Each of Parent, Merger Sub and the Company
will respond to any comments of the SEC and will use its best efforts to have
the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing and when the Registration Statement is
declared effective by the SEC, the Company will thereafter promptly cause the
Proxy Statement to be mailed to its stockholders. In connection therewith,
Parent, Merger Sub and the Company will prepare and file any other filings
required under the Exchange Act, the Securities Act or any other Federal or blue
sky laws relating t o the Merger and the transactions contemplated by this
Agreement (the "Other Filings"). Each party will notify the other party promptly
upon the receipt of any comments from the SEC or its staff and of any
supplements to the Registration Statement, the Proxy Statement or any Other
Filing or for additional information and will supply the other party with copies
of all correspondence between such party or any of its representatives, on the
one hand, and the SEC, or its staff or other government officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any Other Filing. The Proxy Statement, the Registration Statement and
the Other Filings will comply in all material respects with all applicable
requirements of law and the rules and regulations promulgated thereunder. Each
party agrees to cooperate with the other to provide all materials, documents,
exhibits and other requested information necessary to assure such compliance.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement, the Registration Statement or any Other
Filing, Parent or the Company, as the case may be, will promptly inform the
other party of such occurrence and cooperate in filing with the SEC or its staff
or any other government officials, and/or mailing to stockholders of the
Company, such amendment or supplement. The Proxy Statement will also include the
approval of this Agreement and the Merger and the recommendation of the Board of
Directors of the Company to Company's shareholders that they vote in favor of
approval of this Agreement and the Merger, subject to the right of the Board of
Directors of the Company to withdraw its recommendation and recommend a Superior
Proposal determined to be such in compliance with Section 5.1. of this
Agreement; provided, however, that the Board of Directors of Company shall
submit this Agreement to Company's shareholders whether or not at any time
subsequent to the date hereof such board deter mines that it can no longer make
such recommendation. Promptly after the date hereof, the Company will take all
action necessary in accordance with Colorado law and its Certificate of
Incorporation and Bylaws to convene the Meeting to be held as promptly as
practicable, and in any event within (forty-five (45)) days after the
declaration of effectiveness of the Registration Statement, for the purpose of
voting upon this Agreement. Unless Company's Board of Directors has withdrawn
its recommendation of this Agreement and the Merger in compliance with Section
5.1., Company shall use all reasonable efforts to solicit from its shareholders
proxies in favor of the approval of this Agreement and the Merger pursuant to
the Proxy Statement and shall take all other action necessary or advisable to
secure the vote or consent of shareholders required by Colorado Law or
applicable stock exchange requirements to obtain such approval. Notwithstanding
any provision in this Agreement to the contrary, the Company acknowl edges and
agrees that Parent may, by notice to the Company, postpone the filing of the
Registration Statement, the request to accelerate the declaration of
effectiveness of the Registration Statement, or the mailing of the Proxy
Statement to the Company's shareholders
49
if at any time the Board of Directors of Parent, in good faith, determines that
it would be detrimental to the Parent or Company for such Registration Statement
to be filed or declared effective, or for such Proxy Statement to be mailed to
the shareholders of the Company; provided, that any such postponement shall not
exceed 90 days in duration.
6.2. Covenants of the Company.
A. Conduct of the Company's Operations. During the period from the date
of this Agreement to the Effective Time or the date of termination of this
Agreement, the Company and the Subsidiary shall use its reasonable efforts to
maintain and preserve their respective business organizations and to retain the
services of their respective officers and key employees and maintain
relationships with customers, suppliers and other third parties to the end that
their goodwill and ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time, neither the Company nor
Subsidiary shall, except as otherwise expressly contemplated by this Agreement
and the transactions contemplated hereby, without the prior written consent of
Parent, such consent not to be unreasonably withheld or delayed:
(i) Sell, transfer, lease, pledge, mortgage, encumber or otherwise dispose
of any of its personal property or assets other than sales or leases of
inventory or licensing of Intellectual Property Assets in the Ordinary Course of
Business.
(ii) Make or propose any changes in its Articles of Incorporation or
Bylaws.
(iii) Merge or consolidate with any other Person or acquire a material
amount of assets or capital stock of any other Person or enter into any
confidentiality agreement with any Person other than in the Ordinary Course of
Business.
(iv) Incur, create, assume or otherwise become liable for indebtedness for
borrowed money or assume, guarantee, endorse or otherwise as an accommodation
become responsible or liable for obligations of any other individual,
corporation or other entity, or enter into any arrangement having the economic
effect of any of the foregoing other than in connection with the financing of
ordinary course trade payables consistent with past practice other than its
Subsidiaries, except in the Ordinary Course of Business.
(v) Create any subsidiaries.
(vi) Enter into or modify any employment, severance, termination or similar
agreements or arrangements with, or grant any bonuses, salary increases,
severance or termination pay to, any officer, director, consultant or employee.
(vii) Change its method of doing business, in any material respect, or
change any material method or principle of accounting in a manner that is
inconsistent with past practice.
(viii) Settle any Proceeding, whether now pending or hereafter made or
brought involving an amount in excess of Twenty-Five Thousand and No/100 Dollars
($25,000.00).
50
(ix) Modify, amend or terminate, or waive, release or assign any material
rights or claims with respect to, any material Contract to which the Company or
Subsidiary is a party or any confidentiality agreement to which the Company or
Subsidiary is a party.
(x) Incur or commit to any capital expenditures, obligations or liabilities
in respect thereof which in the aggregate exceed or would exceed Fifty Thousand
and No/100 Dollars ($50,000.00) on a cumulative basis.
(xi) Issue, sell or grant options, warrants or rights to purchase or
subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of any securities of the Company or Subsidiary, or rights or
obligations convertible into or exchangeable for any securities of the Company
or Subsidiary, or alter the terms of any presently outstanding options or make
any changes, by split-up, combination, reorganization or otherwise in the
capital structure of the Company or Subsidiary.
(xii) Declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock.
(xiii) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or policies existing, on the
date hereof and as previously disclosed in writing or made available to Parent,
or adopt any new severance plan.
(xiv) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock.
(xv) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or Subsidiary, except repurchases of unvested
shares at cost in connection with the termination of the employment relationship
with any employee pursuant to stock option or purchase agreements in effect on
the date hereof.
(xvi) Engage in any action that could (1) cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code or (2) interfere
with Parent's ability to account for the Merger as a pooling of interests,
whether or not (in each case) otherwise permitted by the provisions of this
Section 6.2.
(xvii) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement.
(xviii) Make any tax election that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the tax liability
or tax attributes of Company or Subsidiary or settle or compromise any material
income tax liability.
(xix) Agree in writing or otherwise to take any of the foregoing actions.
51
B. Intellectual Property Matters. The Company shall use its reasonable
efforts to preserve its ownership rights to all of the intellectual property
("Intellectual Property") described in Section 3.22. free and clear of any
Encumbrances and shall use its reasonable efforts to assert, contest and
prosecute any infringement of any issued foreign or domestic patent, trademark,
service ▇▇▇▇, trade name or copyright that forms a part of the Intellectual
Property or any misappropriation or disclosure of any trade secret, confidential
information or know-how that forms a part of the Intellectual Property.
C. Shareholder Agreements. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement, from
each of the Principal Shareholders, an executed Shareholder Agreement (the
"Shareholder Agreements") in the form attached hereto as Exhibit A, agreeing,
among other things, to vote in favor of the Merger.
6.3. Form S-8. Parent agrees to file, if available, for use by Parent, a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Options no later than twenty (20) business days
after the Closing Date.
6.4. Stock Options and Warrants.
A. At the Effective Time, the Company's obligations with respect to each
outstanding Option or Warrant, whether vested or unvested, will be assumed by
Parent. Each Option so assumed by Parent under this Agreement shall continue to
have, and be subject to, the same terms and conditions set forth in the Company
Stock Option Plans, the agreement or Warrant pursuant to which such security was
issued as in effect immediately prior to the Effective Time, except that (i)
such security will be exercisable for that number of whole shares of Parent
Common Stock equal to the product of the number of shares of Company Common
Stock that were purchasable under such security immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded up to the nearest whole
number of shares of Parent Common Stock and (ii) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
security will be equal to the quotient determined by dividing the exercise price
per share of Company Common Stock at which such security was exercisable
immediately prior to the Effective Time by the Exchange Ratio and rounding the
resulting exercise price up to the nearest whole cent.
B. It is the intention of the parties that Options assumed by Parent
qualify following the Effective Time as incentive stock options as defined in
the Code ("ISO's") to the extent such Options qualified as ISO's immediately
prior to the Effective Time.
C. After the Effective Time, Parent will issue to each holder of an
outstanding Option or Warrant a document evidencing the foregoing assumption by
Parent.
D. Parent will reserve sufficient shares of Parent Common Stock for
issuance under this Section 6.4. hereof.
7. CONDITIONS.
7.1. Mutual Conditions. The obligations of the parties hereto to
consummate the Merger shall be subject to the satisfaction at or prior to the
Closing Date of the following conditions:
52
A. No temporary restraining order, preliminary or permanent injunction or
other order or decree which prevents the consummation of the Merger shall have
been issued and remain in effect, and no statute, rule or regulation shall have
been enacted by any Governmental Body which prevents the consummation of the
Merger.
B. [Intentionally left blank.]
C. No Proceeding shall be instituted by any Governmental Body which seeks
to prevent consummation of the Merger or seeking material damages in connection
with the transactions contemplated hereby which continues to be outstanding.
D. The Registration Statement shall have been declared effective by the
SEC under the Securities Act. No stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued by the SEC and
no proceedings for that purpose and no similar proceeding in respect of the
Proxy Statement shall have been initiated or, to the knowledge of Parent, Merger
Sub or the Company, threatened in writing by the SEC.
E. The shares of Parent Common Stock issuable to the shareholders of
Company pursuant to this Agreement and such other shares required to be reserved
for issuance in connection with the Merger shall have been authorized for
listing on Nasdaq upon official notice of issuance.
F. All waiting periods, if any, under the HSR Act relating to the Merger
will have expired or terminated early.
G. The Shareholder Approval shall have been obtained.
H. Parent and Company shall each have received written opinions from their
respective tax counsel in the form and substance reasonably satisfactory to
them, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and such opinions shall not have been
withdrawn; provided, however, that if the counsel to either Parent or Company
does not render such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to such party if counsel to the other party renders such
opinion to such party. The parties to this Agreement agree to make such
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
7.2. Conditions to Obligations of Merger Sub and Parent. The obligations
of Merger Sub and Parent to consummate and effect the Merger shall be subject to
the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Parent:
A. Representations and Warranties. Each representation and warranty of
Company contained in this Agreement (i) shall have been true and correct as of
the date of this Agreement and (ii) shall be true and correct on and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date except (1) for such failures to be true and correct that do not in the
aggregate constitute a Company Material Adverse Effect provided, however, such
Company Material Adverse Effect qualifier shall be inapplicable with respect to
representations and warranties contained in Sections 3.2.A., 3.3., 3.29., 3.30.
and 3.31. and (2) for those representations and warranties which address matters
only as of a particular date (which
53
representations shall have been true and correct (subject to the qualifications
set forth in the preceding clause (1)) as of such particular date) (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Company Material Adverse Effect"
qualifications and other qualifications based on the word "material" or similar
phrases contained in such representations and warranties shall be disregarded
and (ii) any update of or modification to the Company Disclosure Schedule made
or purported to have been made after the date of this Agreement shall be
disregarded).
B. The Company shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects with
each covenant to be performed and complied with by such parties hereunder prior
to the Effective Time.
C. Since the date of this Agreement, there shall not have been any Company
Material Adverse Effect or any material adverse effect on the ability of the
Company to consummate the transactions contemplated hereby.
D. The Company shall have furnished Merger Sub and Parent with a
certificate dated the Closing Date signed on behalf of it by its President to
the effect that the conditions set forth in Sections 7.2.A., B. and C. have been
satisfied.
E. Each of the Company Affiliates shall have executed a Company Affiliate
Agreement in the form attached hereto as Exhibit C-1.
F. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇ shall each have executed an
Employment Agreement, in the forms of which are attached hereto as Exhibit D-1
and Exhibit D-2, respectively.
G. Merger Sub and Parent shall have received the legal opinion, dated the
Closing Date, of Norton ▇▇▇▇▇▇▇▇, P.C., counsel to the Company, in substantially
the form attached hereto as Exhibit E.
I. The Company shall have obtained all material consents, waivers,
approvals, authorizations or orders, including the consents set forth on
Schedule 3.2, and made all filings in connection with the authorization,
execution and delivery of this Agreement by the Company and the consummation by
each of the transactions contemplated hereby.
7.3. Conditions to Obligations of the Company. The obligations of the
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by the Company:
A. Each representation and warranty of Merger Sub and Parent set forth in
Section 4. (i) shall have been true and correct as of the date of this Agreement
and (ii) shall be true and correct on and as of the Closing Date as though made
on and as of the Closing Date except (1) for such failures to be true and
correct that do not in the aggregate constitute a Parent Material Adverse Effect
and (2) for those representations and warranties which address matters only as
of a specified date, which need be true and correct (which representations and
warranties shall have been true and correct (subject to the qualifications set
forth in the preceding clause (1)) as of such particular date (it being
understood that, for purposes of determining the accuracy of
54
such representations and warranties, (i) all "Parent Material Adverse Effect"
qualifications and other qualifications based on the word "material" or similar
phrases contained in such representations and warranties shall be disregarded
and (ii) any update of or modification to the Parent Disclosure Schedule made or
purported to have been made after the date of this Agreement shall be
disregarded).
B. Each of Merger Sub and Parent shall have performed in all material
respects each obligation and agreement and shall have complied in all material
respects with each covenant to be performed and complied with by it hereunder at
or prior to the Effective Time.
C. Since the date of this Agreement, there shall not have been any
material adverse change in the assets, liabilities, results of operations,
business or financial condition of Merger Sub and Parent or any material adverse
effect on the ability of Merger Sub and Parent to consummate the transactions
contemplated hereby.
D. Each of Merger Sub and Parent shall have furnished the Company with a
certificate dated the Closing Date signed on its behalf by its Chairman,
President or any Vice President to the effect that the conditions set forth in
Sections 7.3.A., B. and C. have been satisfied.
E. The Company shall have received the legal opinion, dated the Closing
Date, of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel to Merger Sub and Parent,
substantially in the form attached hereto as Exhibit F.
8. TERMINATION.
8.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the requisite approval of the
shareholders of Company:
A. By mutual written consent duly authorized by the Boards of Directors of
Parent and Company;
B. By either Company or Parent if the Merger shall not have been
consummated by May 31, 2000 for any reason; provided, however, that the right to
terminate this Agreement under this Section 8.1.B. shall not be available to any
party whose action or failure to act has been a principal cause of or resulted
in the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement;
C. By either Company or Parent if a Governmental Body shall have issued an
order, decree or ruling or taken any other action, in any case having the effect
of permanently restraining, enjoining or otherwise prohibiting the Merger, which
order, decree, ruling or other action is final and nonappealable;
D. By either Company or Parent if the required approval of the
shareholders of Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
Company shareholders duly convened therefor or at any adjournment therefor;
E. By Company, upon a breach of any representation, warranty, covenant or
agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty
55
of Parent shall have become untrue, in either case such that the conditions set
forth in Section 7.3.A., B. or C. would not be satisfied as of the time of such
breach or as of the time such representation or warranty shall have become
untrue, provided, that if such inaccuracy in Parent's representations and
warranties or breach by Parent is curable by Parent, then Company may not
terminate this Agreement under this Section 8.1.E. for thirty (30) days after
delivery of written notice from Company to Parent of such breach, provided
Parent continues to exercise best efforts to cure such breach (it being
understood that Company may not terminate this Agreement pursuant to this
paragraph E. if such breach by Parent is cured during such thirty (30) day
period);
F. By Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become untrue, in either case
such that the conditions set forth in Section 7.2.A., B. or C. would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided, that if such inaccuracy in
Company's representations and warranties or breach by Company is curable by
Company, then Parent may not terminate this Agreement under this Section 8.1.F.
for thirty (30) days after delivery of written notice from Parent to Company of
such breach, provided Company continues to exercise best efforts to cure such
breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph F. if such breach by Company is cured during such
thirty (30) day period); or
G. By Parent, if (i) the Board of Directors of Company withdraws, modifies
or changes its recommendation of this Agreement or the Merger in a manner
adverse to Parent or its stockholders; (ii) the Board of Directors of Company
shall have recommended to the shareholders of Company an Acquisition Proposal;
(iii) the Company fails to comply with Section 5.1. or any provision of the
Stock Option Agreement; (iv) an Acquisition Proposal shall have been announced
or otherwise become publicly known and the Board of Directors of Company shall
have (1) failed to recommend against acceptance of such by its shareholders
(including by taking no position, or indicating its inability to take a
position, with respect to the acceptance by its shareholders of an Acquisition
Proposal involving a tender offer or exchange offer) or (2) failed to reconfirm
its approval and recommendation of this Agreement and the transactions
contemplated hereby within five (5) business days thereafter; (v) any of the
Principal Shareholders fail to comply with the Shareholder Agreement or (vi) the
Board of Directors of Company resolves to take any of the actions described
above.
8.2. Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 8.1. above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto
(or such later time as may be required by Section 8.1.). In the event of the
termination of this agreement as provided in Section 8.2., this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 8.2.,
Section 6.1.C.(i), Section 8.3. and Section 9., each of which shall survive the
termination of this Agreement and (ii) nothing herein shall relieve any party
from liability for fraud in connection with, or any willful breach of, this
Agreement.
8.3. Fees and Expenses.
A. General. Except as set forth in this Section 8.3., all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be
56
paid by the party incurring such expenses whether or not the Merger is
consummated; provided, however, that Parent and Company shall share equally all
fees and expenses, other than attorneys' and accountants fees and expenses,
incurred (i) in relation to the printing and filing of the Proxy Statement
(including any preliminary materials related thereto) and the S-4 (including
financial statements and exhibits) and any amendments or supplements thereto or
(ii) for the premerger notification and report forms under the HSR Act.
B. Termination Fee.
(i) In the event that (1) Parent shall terminate this Agreement pursuant to
Section 8.1.G. or (2) this Agreement shall be terminated (x) pursuant to Section
8.1.B. or (y) pursuant to Section 8.1.D. and, in the case of either (x) or (y),
(a) at or prior to such termination, there shall exist or have been proposed an
Acquisition Proposal and (b) within nine (9) months after such termination,
Company shall enter into a definitive agreement with respect to any Company
Acquisition or any Company Acquisition shall be consummated, then, in the case
of (1), promptly after such termination, or in the case of (2), concurrently
with the execution of a definitive agreement with respect to, or the
consummation of, as applicable, such Company Acquisition, Company shall pay to
Parent an amount in cash equal to One Million Three Hundred Thousand and No/100
Dollars ($1,300,000.00) (the "Termination Fee").
(ii) In the event that Parent shall terminate this Agreement pursuant to
Section 8.1.F., then Company shall promptly reimburse Parent for Parent's costs
and expenses in connection with this Agreement and the transactions contemplated
hereby ("Parent's Expenses"), and if, within nine (9) months of such termination
of this Agreement, Company shall enter into a definitive agreement with respect
to any Company Acquisition or any Company Acquisition involving Company shall be
consummated, then concurrently with the execution of a definitive agreement with
respect to, or the consummation of, as applicable, such Company Acquisition,
then Company shall pay to Parent an amount in cash equal to the amount by which
the Termination Fee exceeds the amount of Parent's Expenses previously
reimbursed by Company pursuant hereto.
(iii) The Company acknowledges that the agreements contained in this
Section 8.3.B. are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails to pay in a timely manner the
amounts due pursuant to this Section 8.3.B. and, in order to obtain such
payment, Parent makes a claim that results in a judgment against the Company for
the amounts set forth in this Section 8.3.B., the Company shall pay to Parent
its costs and expenses (including attorneys' fees and expenses) in connection
with such suit, together with interest on the amounts set forth in this Section
8.3.B. at the prime rate of interest as reported by SunTrust Bank, N.A. in
effect on the date such payment was required to be made. Payment of the fees
described in this Section 8.3.B. shall not be in lieu of damages incurred in the
event of breach of this Agreement. For the purposes of this Agreement, "Company
Acquisition" shall mean any of the following transactions (other than the
transactions contemplated by this Agreement): (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company pursuant to which the shareholders of the
Company immediately preceding such transaction hold less than fifty percent
(50%) of the aggregate equity interests in the surviving or resulting entity of
such
57
transaction; (ii) a sale or other disposition by the Company of assets
representing in excess of fifty percent (50%) of the aggregate fair market value
of the Company's business immediately prior to such sale or (iii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by the Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of fifty percent (50%) of the voting power of the then
outstanding shares of capital stock of the Company.
8.4. Amendment. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Parent, Merger Sub and Company.
8.5. Extension; Waiver. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
8.6. Special Parent Payment.
In the event that Company shall terminate this Agreement pursuant to
Section 8.1.E., the Parent shall pay to Company an amount in cash equal to one
hundred fifty thousand and no/100 dollars ($150,000.00).
9. MISCELLANEOUS.
9.1. Survival of Representations and Warranties. The representations and
warranties of Company, Parent and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
9.1. Notices. Except as otherwise set forth herein, all notices given in
connection with this Agreement shall be in writing and shall be delivered either
by personal delivery, by telecopy or similar facsimile means, by certified or
registered mail, return receipt requested, or by express courier or delivery
service, addressed to the parties hereto at the following addresses:
A. Company: Medical Dynamics, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇, President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Norton ▇▇▇▇▇▇▇▇, P.C.
The Quadrant
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
58
B. Merger Sub and Parent: InfoCure Corporation and CADI Acquisition
Corporation
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
1600 Atlanta Financial Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notices shall be deemed given (i) when received, if sent by telecopy
or similar facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by telecopy or other
facsimile means) and (ii) when delivered and receipted for (or upon the date of
attempted delivery where delivery is refused), if hand-delivered, sent by
express courier or delivery service, or sent by certified or registered mail,
return receipt requested.
9.3. Further Assurances. The parties hereto agree to furnish upon request
to each other such further information, to execute and deliver to each other
such other documents, and to do such other acts and things, all as the other
party hereto may at any time reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to herein.
9.4. Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay on the part of
any party in exercising any right, power or privilege under this Agreement or
the documents referred to herein shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. To the maximum extent permitted by applicable law, no claim or
right arising out of this Agreement or the documents referred to herein can be
discharged by one party hereto, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other party hereto; no
waiver which may be given by a party hereto shall be applicable except in the
specific instance for which it is given; and no notice to or demand on one party
hereto shall be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to
herein.
9.5. Entire Agreement and Modification. This Agreement, including all
exhibits and schedules hereto, are intended by the parties to this Agreement as
a final expression of their agreement with respect to the subject matter hereof,
and are intended as a complete and exclusive statement of the terms and
conditions of that agreement. This Agreement may not be modified, rescinded or
terminated orally, and no modification, rescission, termination or attempted
waiver of any of the provisions hereof (including this Section) shall be valid
unless in writing and signed by the party against whom the same is sought to be
enforced.
9.6. Assignments, Successors and No Third-Party Rights. This Agreement
shall apply to and be binding in all respect upon, and shall inure to the
benefit of, the successors and assigns of the parties hereto. Nothing expressed
or referred to in this Agreement is intended or shall be construed to give any
person or entity other than the parties to this Agreement any legal or
59
equitable right, remedy or claim under or with respect to this Agreement, or any
provision hereof, it being the intention of the parties hereto that this
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement, their successors and
assigns, and for the benefit of no other person or entity; provided, however,
that the parties hereto consent to the assignment of interests in this
Agreement, including all exhibits and schedules hereto, as collateral security
for the obligations of Parent and Merger Sub following the Closing to Finova
Capital Corporation.
9.7. Pooling-of-Interests. Except for the transaction described in
Section 5.8, if any provision of this Agreement or the application of any such
provision to any person or circumstance precludes the use of "pooling-of-
interests" accounting treatment in connection with the transactions contemplated
by this Agreement, then such provision shall be of no force and effect to the
extent, and solely to the extent necessary to preserve such accounting treatment
and in the event, the remainder of this Agreement shall not be affected, and in
lieu of such provision there shall be added as part of this Agreement a
provision as similar in terms as may be possible for the transactions
contemplated by this Agreement to be treated as a "pooling-of-interests" for
accounting purposes.
9.8. Section Headings, Construction. The headings of articles and sections
contained in this Agreement are provided for convenience only. They form no part
of this Agreement and shall not affect its construction or interpretation. All
references to articles and sections in this Agreement refer to the corresponding
articles and sections of this Agreement. All words used herein shall be
construed to be of such gender or number as the circumstances require. Unless
otherwise specifically noted, the words "herein," "hereof," "hereby,"
"hereinabove," "hereinbelow," "hereunder," and words of similar import, refer to
this Agreement as a whole and not to any particular section, subsection,
paragraph, clause or other subdivision hereof.
9.9. Time of Essence. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
9.10. Governing Law. Except to the extent mandatorily governed by Colorado
Law, this Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law thereof.
9.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute,
but one and the same agreement.
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IN WITNESS WHEREOF, the Company, Merger Sub and Parent, by their duly authorized
officers, have each caused this Agreement to be executed as of the date first
written above.
PARENT:
InfoCure Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman
MERGER SUB:
CADI Acquisition Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman
COMPANY:
Medical Dynamics, Inc.
By: /s/ Van ▇. ▇▇▇▇▇▇▇
Name: Van ▇. ▇▇▇▇▇▇▇
Title: President & CEO
63