AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PINNACLE SYSTEMS, INC.
▇▇▇▇▇▇▇▇ MERGER CORPORATION
▇▇▇▇▇ MERGER CORPORATION
AND
TRUEVISION, INC.
DATED AS OF DECEMBER 16, 1998
TABLE OF CONTENTS
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ARTICLE I THE MERGER............................................................................. 1
1.1 The Merger............................................................................. 1
1.2 Effective Time; Closing................................................................ 1
1.3 Effect of the Merger................................................................... 1
1.4 Certificate of Incorporation; Bylaws................................................... 2
1.5 Directors and Officers................................................................. 2
1.6 Effect on Capital Stock................................................................ 2
1.7 Surrender of Certificates.............................................................. 3
1.8 No Further Ownership Rights in Company Common Stock.................................... 4
1.9 Lost, Stolen or Destroyed Certificates................................................. 4
1.10 Tax and Accounting Consequences........................................................ 5
1.11 Taking of Necessary Action; Further Action............................................. 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY.............................................. 5
2.1 Organization and Qualification; Subsidiaries........................................... 5
2.2 Certificate of Incorporation and Bylaws................................................ 6
2.3 Capitalization......................................................................... 6
2.4 Authority Relative to this Agreement................................................... 7
2.5 No Conflict; Required Filings and Consents............................................. 7
2.6 Compliance; Permits; Restrictions...................................................... 8
2.7 SEC Filings; Company Financial Statements.............................................. 8
2.8 No Undisclosed Liabilities............................................................. 9
2.9 Absence of Certain Changes or Events................................................... 9
2.10 Absence of Litigation.................................................................. 9
2.11 Employee Benefit Plans................................................................. 10
2.12 Labor Matters.......................................................................... 12
2.13 S-4; Proxy Statement................................................................... 13
2.14 Restrictions on Business Activities.................................................... 13
2.15 Title to Property...................................................................... 13
2.16 Taxes.................................................................................. 13
2.17 Environmental Matters.................................................................. 15
2.18 Brokers................................................................................ 15
2.19 Intellectual Property.................................................................. 15
2.20 Agreements, Contracts and Commitments.................................................. 17
2.21 Insurance.............................................................................. 18
2.22 Opinion of Financial Advisor........................................................... 18
2.23 Board Approval......................................................................... 18
2.24 Vote Required.......................................................................... 18
2.25 State Takeover Statutes................................................................ 18
2.26 Year 2000 Compliance................................................................... 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBS............................... 19
3.1 Organization and Qualification; Subsidiaries........................................... 19
3.2 Articles and Certificates of Incorporation and Bylaws.................................. 19
3.3 Capitalization......................................................................... 19
3.4 Authority Relative to this Agreement................................................... 20
3.5 No Conflict; Required Filings and Consents............................................. 20
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3.6 SEC Filings; Parent Financial Statements............................................... 20
3.7 S-4; Proxy Statement................................................................... 21
3.8 Board Approval......................................................................... 21
3.9 Interim Operations of Merger Subs...................................................... 21
3.10 No Ownership of Company Common Stock................................................... 21
3.11 No Undisclosed Liabilities............................................................. 22
3.12 Absence of Certain Changes or Events................................................... 22
3.13 Absence of Litigation.................................................................. 22
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.................................................... 22
4.1 Conduct of Business by Company......................................................... 22
4.2 Conduct of Business by Parent.......................................................... 24
ARTICLE V ADDITIONAL AGREEMENTS.................................................................. 24
5.1 Proxy Statement/Prospectus; S-4; Other Filings......................................... 24
5.2 Meeting of Company Stockholders........................................................ 25
5.3 Confidentiality; Access to Information................................................. 26
5.4 No Solicitation........................................................................ 27
5.5 Public Disclosure...................................................................... 28
5.6 Reasonable Efforts; Notification....................................................... 28
5.7 Third Party Consents................................................................... 29
5.8 Stock Options and ESPP................................................................. 29
5.9 Form S-8............................................................................... 30
5.10 Indemnification........................................................................ 30
5.11 Nasdaq Listing......................................................................... 31
5.12 Company Affiliate Agreement............................................................ 31
5.13 Regulatory Filings; Reasonable Efforts................................................. 31
5.14 Noncompetition Agreements.............................................................. 31
5.15 Executive Employment Agreements........................................................ 31
5.16 Open Market Purchases by Level One Merger Sub.......................................... 32
5.17 Company 401(k) Plan.................................................................... 32
5.18 Options and Doctor Warrant............................................................. 32
5.19 Scitex Voting Agreement................................................................ 32
ARTICLE VI CONDITIONS TO THE MERGER............................................................... 32
6.1 Conditions to Obligations of Each Party to Effect the Merger........................... 32
6.2 Additional Conditions to Obligations of Company........................................ 33
6.3 Additional Conditions to the Obligations of Parent and Merger Subs..................... 33
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...................................................... 34
7.1 Termination............................................................................ 34
7.2 Notice of Termination; Effect of Termination........................................... 36
7.3 Fees and Expenses...................................................................... 36
7.4 Amendment.............................................................................. 36
7.5 Extension; Waiver...................................................................... 36
ARTICLE VIII GENERAL PROVISIONS..................................................................... 37
8.1 Non-Survival of Representations and Warranties......................................... 37
8.2 Notices................................................................................ 37
8.3 Interpretation; Knowledge.............................................................. 38
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8.4 Counterparts........................................................................... 38
8.5 Entire Agreement; Third Party Beneficiaries............................................ 38
8.6 Severability........................................................................... 38
8.7 Other Remedies; Specific Performance................................................... 38
8.8 Governing Law.......................................................................... 39
8.9 Rules of Construction.................................................................. 39
8.10 Assignment............................................................................. 39
8.11 Waiver of Jury Trial................................................................... 39
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INDEX OF EXHIBITS
Exhibit A Persons Entering Into Voting Agreements
Exhibit A-1 Form of Voting Agreement
Exhibit B Form of Affiliate Agreement
Exhibit C Form of Noncompetition Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of December 16, 1998, among Pinnacle Systems, Inc., a California
corporation ("PARENT"), ▇▇▇▇▇▇▇▇ Merger Corporation, a Delaware corporation and
a wholly-owned subsidiary of Parent ("LEVEL ONE MERGER SUB"), ▇▇▇▇▇ Merger
Corporation, a Delaware corporation and a wholly-owned subsidiary of Level One
Merger Sub ("MERGER SUB" and together with Level One Merger Sub, "MERGER SUBS")
and Truevision, Inc., a Delaware corporation ("COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the Delaware General
Corporation Law ("DELAWARE 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 1.1) 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 stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has determined to
recommend that the stockholders of Company adopt and approve this Agreement and
approve the Merger.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
affiliates of Company, who are identified on EXHIBIT A hereto, are entering into
Voting Agreements in substantially the form attached hereto as EXHIBIT A-1 (the
"COMPANY VOTING AGREEMENTS").
D. The parties intend that the Merger shall constitute a taxable transaction
and not a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
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:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, 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 (the "SURVIVING
CORPORATION").
1.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "CERTIFICATE 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 Certificate of Merger) being
the "EFFECTIVE TIME") as soon as practicable on or after the Closing Date (as
herein defined). Unless the context otherwise requires, the term "AGREEMENT" as
used herein refers collectively to this Agreement and Plan of Reorganization and
the Certificate of Merger. The closing of the Merger (the "CLOSING") shall take
place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional
Corporation, at a time and date to be specified by the parties, which shall be
no later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "CLOSING DATE").
1.3 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 Delaware
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.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; PROVIDED, HOWEVER, that at the Effective Time the
Certificate of Incorporation of the Surviving Corporation shall be amended
so that the name of the Surviving Corporation shall be "Truevision, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 DIRECTORS AND OFFICERS. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 EFFECT ON CAPITAL STOCK. 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:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Common Stock,
$0.001 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 1.6(b),
will be canceled and extinguished and automatically converted (subject to
Sections 1.6(f) and (g)) into the right to receive the number of shares of
Common Stock of Parent, together with the associated rights issued pursuant
to a Preferred Shares Rights Agreement between Parent and ChaseMellon
Shareholder Services, L.L.C., dated December 12, 1996, as amended (the
"PARENT COMMON STOCK") equal to 0.0313 (the "EXCHANGE RATIO") upon surrender
of the certificate representing such share of Company Common Stock in the
manner provided in Section 1.7 (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 1.9).
(b) CANCELLATION OF PARENT-OWNED AND COMPANY-HELD STOCK. Each share of
Company Common Stock held by Company or owned by Merger Sub, Level One
Merger Sub, Parent or any direct or indirect wholly-owned subsidiary of
Company or of Parent immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof.
(c) STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLANS. At the Effective
Time, all options to purchase Company Common Stock then outstanding under
Company's Amended and Restated 1991 Director Option Plan (the "DIRECTORS'
PLAN") and Company's 1997 Equity Incentive Plan (the "1997 OPTION PLAN"
shall be assumed by Parent in accordance with Section 5.8 hereof. At the
Effective Time, Parent, as sole stockholder of Company, shall execute a
stockholder's consent approving all amendments made by Company's Board of
Directors to the 1988 Incentive Stock Plan (the "1988 OPTION PLAN" and
together with the 1997 Option Plan and the Directors' Plan, the "COMPANY
STOCK OPTION PLANS") and to the options granted thereunder to Company's
directors and to ▇▇. ▇▇▇▇▇ ▇. Doctor and Mr. R. ▇▇▇▇ ▇▇▇▇▇▇, if any such
stock options are outstanding at that time. Immediately after Parent's
execution of the stockholder's consent referenced in the preceding sentence,
Parent shall assume all options to purchase Company Common Stock then
outstanding under the 1988 Option Plan, including those granted to Company's
directors and to ▇▇. ▇▇▇▇▇ ▇. Doctor and Mr. R. ▇▇▇▇ ▇▇▇▇▇▇, if any such
options are outstanding at that time, in accordance with Section 5.8 hereof.
Rights outstanding under Company's 1990 Employee Stock Purchase Plan (the
"1990 ESPP") and under the 1998 Employee
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Stock Purchase Plan (the "1998 ESPP" and together with the 1990 ESPP, the
"ESPP") shall be treated as set forth in Section 5.8.
(d) WARRANTS. At the Effective Time, warrants to purchase 500,000
shares of Common Stock, (the "FINANCING WARRANTS") and a warrant to purchase
400,000 shares of Common Stock (the "DOCTOR WARRANT" and together with the
Financing Warrants, the "COMPANY WARRANTS"), all of which are fully
exercisable, shall be assumed by Parent in accordance with the terms
thereof. In this regard, Company agrees to provide the holders of Company
Warrants with any and all notices required as a result of the Merger and the
transactions contemplated thereby.
(e) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, $0.001
par value per share, of Merger Sub (the "MERGER SUB COMMON STOCK") issued
and outstanding immediately prior to the Effective Time shall be converted
into one validly issued, fully paid and nonassessable share of Common Stock,
$0.001 par value per share, of the Surviving Corporation. Each certificate
evidencing ownership of shares of Merger Sub Common Stock shall evidence
ownership of such shares of capital stock of the Surviving Corporation.
(f) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse
stock split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to Parent Common Stock or Company Common Stock occurring on or after
the date hereof and prior to the Effective Time.
(g) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction
of a share of Parent Common Stock (after aggregating all fractional shares
of Parent Common Stock that otherwise would be received by such holder)
shall receive from Parent an amount of cash (rounded to the nearest whole
cent) equal to the product of (i) such fraction, multiplied by (ii) the
average closing price of one share of Parent Common Stock for the five (5)
most recent days that Parent Common Stock has traded ending on the trading
day immediately prior to the Effective Time, as reported on the Nasdaq
National Market ("NASDAQ") or, if Parent Common Stock is not authorized for
trading on Nasdaq at such time, then on the primary exchange or quotation
system on which Parent Common Stock is then quoted or traded.
1.7 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Parent shall select a bank or trust company
reasonably acceptable to Company to act as the exchange agent (the "EXCHANGE
AGENT") in the Merger.
(b) PARENT TO PROVIDE COMMON STOCK. Promptly after the Effective Time,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I, the shares of Parent Common Stock issuable pursuant to
Section 1.6 in exchange for outstanding shares of Company Common Stock, and
cash in an amount sufficient for payment in lieu of fractional shares
pursuant to Section 1.6(g) and any dividends or distributions to which
holders of shares of Company Common Stock may be entitled pursuant to
Section 1.7(d).
(c) EXCHANGE PROCEDURES. Promptly 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 (the "CERTIFICATES"), which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into shares of Parent
Common Stock pursuant to Section 1.6, cash in lieu of any fractional shares
pursuant to Section 1.6(g) and any dividends or other distributions pursuant
to Section 1.7(d), (i) a letter of transmittal in customary form (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall contain such other provisions as Parent
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may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock, cash in lieu of any fractional shares
pursuant to Section 1.6(g) and any dividends or other distributions pursuant
to Section 1.7(d). Upon surrender of Certificates 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, the holders of such
Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Parent Common Stock into which
their shares of Company Common Stock were converted at the Effective Time,
payment in lieu of fractional shares which such holders have the right to
receive pursuant to Section 1.6(g) and any dividends or distributions
payable pursuant to Section 1.7(d), and the Certificates so surrendered
shall forthwith be canceled. Until so surrendered, outstanding Certificates
will be deemed from and after the Effective Time, for all corporate
purposes, subject to Section 1.7(d) as to 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 in accordance with Section 1.6(g) and any dividends
or distributions payable pursuant to Section 1.7(d).
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time
will be paid to the holders of any unsurrendered Certificates with respect
to the shares of Parent Common Stock represented thereby until the holders
of record of such Certificates shall surrender such Certificates. Subject to
applicable law, following surrender of any such Certificates, the Exchange
Agent shall deliver to the record holders thereof, without interest,
certificates representing whole shares of Parent Common Stock issued in
exchange therefor along with payment in lieu of fractional shares pursuant
to Section 1.6(g) hereof and the amount of any such dividends or other
distributions with a record date after the Effective Time payable with
respect to such whole shares of Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If certificates representing shares of
Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
persons requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance of certificates representing shares of Parent Common Stock in any
name other than that of the registered holder of the Certificates
surrendered, or established to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
1.8 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.6(g) and 1.7(d)) 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 canceled and exchanged as provided in this Article
I.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the
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shares of Parent Common Stock into which the shares of Company Common Stock
represented by such Certificates were converted pursuant to Section 1.6, cash
for fractional shares, if any, as may be required pursuant to Section 1.6(g) and
any dividends or distributions payable pursuant to Section 1.7(d); PROVIDED,
HOWEVER, that Parent may, in its discretion and as a condition precedent to the
issuance of such certificates representing shares of Parent Common Stock, cash
and other distributions, 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, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
1.10 TAX AND ACCOUNTING CONSEQUENCES.
(a) It is intended by the parties hereto that the Merger shall
constitute a taxable transaction for federal income tax purposes and not a
reorganization within the meaning of Section 368 of the Code.
(b) It is intended by the parties hereto that the Merger shall be
treated as a purchase for accounting purposes.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub will take all such lawful and necessary action. Parent shall
cause Merger Sub to perform all of its obligations relating to this Agreement
and the transactions contemplated thereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Subs, subject to such
exceptions as are specifically disclosed in writing in the disclosure letter
(referencing the appropriate section and paragraph numbers) delivered by Company
to Parent on or prior to the date of this Agreement and certified by a duly
authorized officer of Company (the "COMPANY DISCLOSURE LETTER"), as follows:
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Company
has delivered to Parent a complete and correct list of all of Company's direct
and indirect subsidiaries as of the date of this Agreement, indicating the
jurisdiction of organization of each subsidiary and Company's equity interest
therein. Each of Company and its subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("APPROVALS") necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to have such
Approvals would not, individually or in the aggregate, have a Material Adverse
Effect (as defined in Section 8.3(c)) on Company. Each of Company and its
subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that would not, either
individually or in the aggregate, have a Material Adverse Effect on Company.
Other than wholly-owned subsidiaries, Company does not directly or indirectly
own any equity or similar interest in, or any interest convertible or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business, association or
entity.
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2.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Company has previously
furnished to Parent a complete and correct copy of the Certificate of
Incorporation and Bylaws of Company and equivalent organizational documents of
each of its subsidiaries, as amended to date. Such Certificate of Incorporation,
Bylaws and equivalent organizational documents of each of its subsidiaries are
in full force and effect. Neither Company nor any of its subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent organizational documents.
2.3 CAPITALIZATION. The authorized capital stock of Company consists of
25,000,000 shares of Company Common Stock, $0.001 par value per share, and
2,000,000 shares of Preferred Stock, no par value per share ("COMPANY PREFERRED
STOCK"). At the close of business on November 21, 1998, (i) 13,104,398 shares of
Company Common Stock were issued and outstanding, (ii) no shares of Company
Common Stock were held in treasury by Company or by subsidiaries of Company,
(iii) 215,908 shares of Company Common Stock were available for future issuance
pursuant to the ESPP, (iv) 1,688,203 shares of Company Common Stock were
reserved for issuance upon the exercise of outstanding options to purchase
Company Common Stock under the 1988 Option Plan, (v) no shares of Company Common
Stock were available for future grant under the 1988 Option Plan, (vi) 529,400
shares of Company Common Stock were reserved for issuance upon exercise of
outstanding options to purchase Company Common Stock under the 1997 Option Plan,
(vii) 520,600 shares of Company Common Stock were available for future grant
under the 1997 Option Plan; (viii) 120,000 shares of Company Common Stock were
reserved for issuance upon the exercise of outstanding options to purchase
Company Common Stock under the Directors' Plan, (ix) 130,000 shares of Company
Common Stock were available for future grant under the Directors' Plan and (x)
900,000 shares of Company Common Stock were reserved for issuance upon
conversion of Company Warrants (as described in Section 1.6(d)). As of the date
hereof, no shares of Company Preferred Stock were issued or outstanding. No
change in such capitalization has occurred between November 21, 1998 and the
date hereof except (x) the issuance of shares of Company Common Stock pursuant
to the exercise of outstanding options or warrants or (y) the cancellation of
unvested options for Common Stock held by, or the repurchase of unvested shares
of Common Stock from, directors, employees, consultants or other service
providers of Company pursuant to the terms of their stock option, stock purchase
or stock restriction agreements. All outstanding shares of Company Common Stock
are duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Company or any agreement or document to which Company
is a party or by which it is bound. Except as set forth in this Section 2.3, as
of the date of this Agreement, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of Company or any of its subsidiaries that obligate
Company or any of its subsidiaries to issue or sell any shares of capital stock
of, or other equity interests in, Company or any of its subsidiaries or
obligating Company or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant or other right, agreement,
arrangement or commitment. All shares of Company Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or the capital
stock of any subsidiary, except the repurchase of unvested shares of Company
Common Stock from directors, employees, consultants or other service providers
of Company pursuant to the terms of their stock option, stock purchase or stock
restriction agreements, or to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any such subsidiary or any
other entity. All of the outstanding shares of capital stock (other than
directors' qualifying shares) of each of Company's subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and all such shares
(other than directors' qualifying shares) are owned by Company or another
subsidiary free and clear of all security interests, liens, claims, pledges,
agreements, limitations in Company's voting rights, charges or other
encumbrances of any nature whatsoever. The Company Disclosure Letter lists for
each person who held options or warrants to acquire shares of
6
Company Common Stock as of November 21, 1998, the name of the holder of such
option or warrant, the exercise price of such option or warrant, the number of
shares as to which such option or warrant had vested as of November 21, 1998 for
such option or warrant and whether the exercisability of such option or warrant
will be accelerated in any way by the transactions contemplated by this
Agreement, and indicates the extent of acceleration, if any. Except as
contemplated by this Agreement, there are no registration rights and, to the
knowledge of Company, there are no voting trusts, proxies, rights plans,
antitakeover plans or other agreements or understandings to which Company is a
party or by which it is bound with respect to any equity security of any class
of Company or with respect to any equity security, partnership interest or
similar ownership interest of any class of any of its subsidiaries. Stockholders
of Company will not be entitled to dissenters' rights under applicable state law
in connection with the Merger. The Doctor Warrant is treated by the Company as a
nonstatutory stock option for tax and accounting purposes.
2.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and, subject to obtaining the approval of the
stockholders of Company of the Merger, 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 authorized by all necessary corporate action on the part of
Company and no other corporate proceedings on the part of Company are necessary
to authorize this Agreement or to consummate the transactions so contemplated
(other than, with respect to the Merger, the approval and adoption of this
Agreement and the approval of the Merger by holders of a majority of the
outstanding shares of Company Common Stock in accordance with Delaware Law and
Company's Certificate of Incorporation and Bylaws). This Agreement has been duly
and validly executed and delivered by Company and, assuming the due
authorization, execution and delivery by Parent and Merger Subs, constitutes a
legal and binding obligation of Company, enforceable against Company in
accordance with its terms.
2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Company do not, and the
performance of this Agreement by Company will not, (i) conflict with or violate
the Certificate of Incorporation, Bylaws or equivalent organizational documents
of Company or any of its subsidiaries, (ii) subject to obtaining the approval
and adoption of Company's stockholders of this Agreement and the approval of
Company's stockholders of the Merger and compliance with the requirements set
forth in Section 2.5(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Company or any of its
subsidiaries or by which Company or any of its subsidiaries or any of their
respective properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Company's or any such subsidiaries'
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of Company or any of its subsidiaries pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Company or any of its
subsidiaries is a party or by which Company or any of its subsidiaries or its or
any of their respective properties are bound or affected, except in the case of
clauses (ii) and (iii) above as would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect on Company. The Company
Disclosure Letter lists all material consents, waivers and approvals under any
of Company's or any of its subsidiaries' material agreements, contracts,
licenses or leases required to be obtained in connection with the consummation
of the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by Company do not, and the
performance of this Agreement by Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory authority,
domestic or foreign (a "GOVERNMENTAL ENTITY"), except (A) for applicable
requirements, if any, of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), the Securities Exchange Act of 1934, as
7
amended (the "EXCHANGE ACT"), state securities laws ("BLUE SKY LAWS"), the
pre-merger notification requirements (the "HSR APPROVAL") of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR ACT")
and of foreign Governmental Entities and the rules and regulations thereunder,
the rules and regulations of Nasdaq, and the filing and recordation of the
Certificate of Merger as required by Delaware Law and (B) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, (i) would not prevent consummation of the Merger or
otherwise prevent Company from performing its obligations under this Agreement
or (ii) would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Company.
2.6 COMPLIANCE; PERMITS; RESTRICTIONS.
(a) Neither Company nor any of its subsidiaries is in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to Company or any of its subsidiaries or by which Company or
any of its subsidiaries or any of their respective properties is bound or
affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Company or any of its subsidiaries is a party or by which Company or any of its
subsidiaries or its or any of their respective properties is bound or affected,
except for any conflicts, defaults or violations which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company. To the knowledge of Company, no investigation or review by any
governmental or regulatory body or authority is pending or threatened against
Company or its subsidiaries, nor has any governmental or regulatory body or
authority indicated an intention to conduct the same.
(b) Company and its subsidiaries hold all permits, licenses, variances,
exemp-tions, orders and approvals from governmental authorities which are
necessary for the operation of the business of Company and its subsidiaries
taken as a whole (collectively, the "COMPANY PERMITS"), except for those Company
Permits, the absence of which would not, individually or in the aggregate, have
a Material Adverse Effect on Company. Company and its subsidiaries are in
compliance with the terms of the Company Permits, except where the failure to be
in compliance with the terms of the Company Permits would not, individually or
in the aggregate, have a Material Adverse Effect on Company.
2.7 SEC FILINGS; COMPANY FINANCIAL STATEMENTS.
(a) Company has made available to Parent a correct and complete copy of each
material form, report, schedule, registration statement and definitive proxy
statement filed by Company with the Securities and Exchange Commission ("SEC")
since January 1, 1995 (the "COMPANY SEC REPORTS"), which are all the material
forms, reports and documents required to be filed by Company with the SEC since
January 1, 1995 and prior to the date of this Agreement. The Company SEC Reports
(A) were prepared in accordance with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports, and (B) 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 Company's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports, including each
Company SEC Report filed after the date hereof until the Closing, (i) complied
as to form in all material respects with the published rules and regulations of
the SEC with respect thereto, (ii) was prepared in accordance with United States
generally accepted accounting principles ("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 interim financial statements, as may be permitted
by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly presented the
consolidated financial position of Company and its subsidiaries as of the
respective dates thereof and the consolidated results of Company's operations
and cash flows for the periods indicated, except that the unaudited interim
8
financial statements may not contain footnotes and were or are subject to normal
and recurring year-end adjustments. The balance sheet of Company contained in
Company SEC Reports as of September 26, 1998 is hereinafter referred to as the
"COMPANY BALANCE SHEET."
(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.
2.8 NO UNDISCLOSED LIABILITIES. Neither Company nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed on a balance sheet or in the related notes to
the consolidated financial statements prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business, results of
operations or financial condition of Company and its subsidiaries taken as a
whole, except (i) liabilities provided for in Company Balance Sheet, (ii)
liabilities incurred since September 26, 1998 in the ordinary course of business
consistent with past practices or (iii) banking, accounting, legal and printing
fees and expenses associated with the Merger.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 26, 1998, there
has not been: (i) any Material Adverse Effect on Company, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of Company's or any of its
subsidiaries' capital stock, or any purchase, redemption or other acquisition by
Company of any of Company's capital stock or any other securities of Company or
its subsidiaries or issuances of any options, warrants, calls or rights to
acquire any such shares or other securities except for repurchases from
employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any split, combination
or reclassification of any of Company's or any of its subsidiaries' capital
stock, (iv) any granting by Company or any of its subsidiaries of any increase
in compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Company or any of its subsidiaries of any bonus, except for
bonuses made in the ordinary course of business consistent with past practice,
or any granting by Company or any of its subsidiaries of any increase in
severance or termination pay or any entry by Company or any of its subsidiaries
into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Company of the nature contemplated hereby, (v) entry by
Company or any of its subsidiaries into any licensing or other agreement with
regard to the acquisition or disposition of any material Intellectual Property
(as defined in Section 2.19) other than licenses in the ordinary course of
business consistent with past practice or any amendment or consent with respect
to any licensing agreement filed or required to be filed by Company with the
SEC, (vi) any material change by Company in its accounting methods, principles
or practices, except as required by concurrent changes in GAAP, or (vii) any
revaluation by Company of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable other than in the ordinary course of business.
2.10 ABSENCE OF LITIGATION. There are no claims, actions, suits or
proceedings pending or, to the knowledge of Company, threatened against Company
or any of its subsidiaries or any properties or rights of Company or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign. No Governmental Entity has at
any time since January 1, 1997 challenged or questioned in a writing delivered
to Company the legal right of Company to design, manufacture, offer or sell any
of its products in the present manner or style thereof.
9
2.11 EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of "AFFILIATE" set
forth in Section 2.11(a)(i) below (which definition shall apply only to this
Section 2.11), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under common
control with Company within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "COMPANY EMPLOYEE PLAN" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "EMPLOYEE BENEFIT
PLAN," within the meaning of Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be contributed to, by Company
or any Affiliate for the benefit of any Employee;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current, former, or retired employee,
officer, or director of Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas,
work permit or similar written agreement or contract between Company or
any Affiliate and any Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each Company Employee
Plan that has been adopted or maintained by Company, whether informally
or formally, for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xii) "PENSION PLAN" shall mean each Company Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) DISCLOSURE LETTER. The Company Disclosure Letter contains an accurate
and complete list of each Company Employee Plan and each Employee Agreement.
Company does not have any plan or commitment to establish any new Company
Employee Plan, to materially modify any Company Employee Plan or Employee
Agree-ment (except to the extent required by law or to conform any such Company
Employee Plan or Employee Agreement to the requirements of any applicable law,
in each case as previously disclosed to Parent in writing, or as required by
this Agreement), or to enter into any Company Employee Plan or material Employee
Agreement, nor does it have any intention or commitment to do any of the
foregoing.
(c) DOCUMENTS. Company has provided or made reasonably available to
Parent: (i) correct and complete copies of all documents embodying or relating
to each Company Employee Plan and each
10
written Employee Agreement including all amendments thereto which are currently
effective and written interpretations thereof; (ii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Company Employee Plan or related trust; (iii) if the Company Employee Plan
is funded, the most recent annual and periodic accounting of Company Employee
Plan assets; (iv) the most recent summary plan description together with the
summary of material modifications thereto, if any, required under ERISA with
respect to each Company Employee Plan; (v) all IRS determination, opinion,
notification and advisory letters, and rulings relating to Company Employee
Plans and copies of all applications and correspondence to or from the IRS or
the DOL with respect to any Company Employee Plan; (vi) all material written
agreements and contracts relating to each currently effective Company Employee
Plan, including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (vii) all communications
material to any Employee or Employees relating to any Company Employee Plan and
any proposed Company Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability to Company; (viii) all standard COBRA forms and related
notices; and (ix) all registration statements prepared in connection with each
Company Employee Plan and all documents comprising a prospectus prepared since
January 1, 1995 in connection with each Company Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. (i) Company has performed in all material
respects all obligations required to be performed by it under, is not in
material default or material violation of, and has no knowledge of any material
default or material violation by any other party to each Company Employee Plan,
and each Company Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) each Company Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either received a favorable determination
letter, or comparable letter, from the IRS with respect to each such Company
Employee Plan as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for or receive such a
determination letter, or comparable letter, and make any amendments necessary to
obtain a favorable determination; (iii) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Company Employee Plan; (iv) there are no material actions, suits or claims
pending, or, to the knowledge of Company, threatened or reasonably anticipated
(other than routine claims for benefits) against any Company Employee Plan or
against the assets of any Company Employee Plan; (v) each Company Employee Plan
can be amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent, Company or any of its
Affiliates (other than ordinary administration expenses typically incurred in a
termination event); (vi) there are no audits, inquiries or proceedings pending
or, to the knowledge of Company or any Affiliates, threatened by the IRS or DOL
with respect to any Company Employee Plan; and (vii) neither Company nor any
Affiliate is subject to any material penalty or material tax with respect to any
Company Employee Plan under Section 402(i) of ERISA or Sections 4975 through
4980 of the Code.
(e) PENSION PLANS. Company does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has Company contributed to or been
requested to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. No Company Employee Plan provides, or
has any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any person for
11
any reason, except as may be required by COBRA or other applicable statute, and
Company has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
or any other person that such Employee(s) or other person would be provided with
retiree life insurance, retiree health or other retiree employee welfare
benefit, except to the extent required by statute.
(h) Neither Company nor any Affiliate has, prior to the Effective Time, and
in any material respect, violated any of the health care continuation
requirements of COBRA, the requirements of FMLA or any similar provisions of
state law applicable to its Employees.
(i) EFFECT OF TRANSACTION
(i) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under
any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase
in benefits or obligation to fund benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made by Company or its
Affiliates with respect to any Employee as a result of the transactions
contemplated by this Agreement will be characterized as an "excess parachute
payment," within the meaning of Section 280G(b)(1) of the Code.
(j) EMPLOYMENT MATTERS. Company: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Employees, except for amounts that are not
material individually or in the aggregate; (iii) is not liable for any arrears
of wages or any taxes or any penalty for failure to comply with any of the
foregoing; and (iv) is not liable for any material payment to any trust or other
fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending, or
to Company's knowledge threatened or reasonably anticipated claims or actions
against Company under any worker's compensation policy or long-term disability
policy. To Company's knowledge, no employee of Company has violated any
employment contract, nondisclosure agreement or noncompetition agreement by
which such employee is bound due to such employee being employed by Company and
disclosing to Company or using trade secrets or proprietary information of any
other person or entity.
(k) INTERNATIONAL EMPLOYEE PLAN. Each International Employee Plan has been
established, maintained and administered in material compliance with its terms
and conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has unfunded liabilities, that as of
the Effective Time, will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent Company or Parent from
terminating or amending any International Employee Plan at any time for any
reason.
2.12 LABOR MATTERS. (i) There is no litigation pending or, to the
knowledge of each of Company and its respective subsidiaries, threatened,
between Company or any of its subsidiaries and any of their respective
employees; (ii) as of the date of this Agreement, neither Company nor any of
subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by Company or its subsidiaries nor
does Company or its subsidiaries know of any activities or proceedings of any
labor union to organize any such employees; and (iii) as of the date of this
Agreement, neither Company nor any of its subsidiaries has any knowledge of any
strikes, slowdowns, work stoppages or
12
lockouts, or threats thereof, by or with respect to any employees of Company or
any of its subsidiaries. Neither Company nor any of its subsidiaries has engaged
in any unfair labor practices within the meaning of the National Labor Relations
Act.
2.13 S-4; PROXY STATEMENT. None of the information supplied or to be
supplied by Company for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of the Parent Common Stock in or as a result of the
Merger (the "S-4") will, at the time the S-4 is filed with the SEC and at the
time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; and (ii) the Proxy
Statement/Prospectus (the "PROXY STATEMENT/PROSPECTUS") to be filed with the SEC
by Company pursuant to Section 5.1 hereof will, at the dates mailed to the
stockholders of Company, at the times of the stockholder meeting of Company (the
"COMPANY STOCKHOLDERS' MEETING") in connection with the transactions
contemplated hereby 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 Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act, Exchange Act and the rules and regulations
promulgated by the SEC thereunder. If at any time prior to the Effective Time
any event relating to Company or any of its affiliates, officers or directors
should be discovered by Company which is required to be set forth in an
amendment to the S-4 or a supplement to the Proxy Statement/Prospectus, Company
shall promptly inform Parent. Notwithstanding the foregoing, Company makes no
representation or warranty with respect to any information supplied by Parent or
Merger Subs which is contained in any of the foregoing documents.
2.14 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material agreement,
judgment, injunction, order or decree binding upon Company or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of Company or any of
its subsidiaries, any acquisition of property by Company or any of its
subsidiaries or the conduct of business by Company or any of its subsidiaries as
currently conducted.
2.15 TITLE TO PROPERTY. Company owns no material real property. Company
and each of its subsidiaries have good and defensible title to all of their
material properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby. The
Company Disclosure Letter lists all material real property leases to which
Company or any of its subsidiaries is a party as of the date of this Agreement
and each amendment thereto that is in effect as of the date of this Agreement.
All material real or personal property leases pursuant to which Company or any
of its subsidiaries lease from others are in good standing, valid and effective
in accordance with their respective terms, and there is not, under any of such
leases, any existing material default or event of default (or any event which
with notice or lapse of time, or both, would constitute a material default). All
the plants, structures and equipment of Company and its subsidiaries, except
such as may be under construction, are in good operating condition and repair,
in all material respects.
2.16 TAXES.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "TAX" or
"TAXES"refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
13
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS.
(i) Company and each of its subsidiaries have timely filed (taking into
account applicable extensions) all federal and state, local and foreign
returns, estimates, information statements and reports ("RETURNS") relating
to Taxes required to be filed by Company and each of its subsidiaries with
any Tax authority and are true and correct in all material respects on such
Returns.
(ii) Company and each of its subsidiaries as of the Effective Time will
have withheld with respect to its employees all federal and state income
taxes, Taxes pursuant to the Federal Insurance Contribution Act ("FICA"),
Taxes pursuant to the Federal Unemployment Tax Act ("FUTA") and other Taxes
required to be withheld.
(iii) There is no Tax deficiency outstanding which has been proposed or
assessed in writing against Company or any of its subsidiaries, nor has
Company or any of its subsidiaries executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax other than the automatic extension arising from the
filing of a Return after its due date.
(iv) No audit or other examination of any Return of Company or any of
its subsidiaries by any Tax authority is presently in progress, nor has
Company or any of its subsidiaries been notified of any request for such an
audit or other examination.
(v) No adjustment relating to any Returns filed by Company or any of its
subsidiaries has been proposed in writing formally or informally by any Tax
authority to Company or any of its subsidiaries or any representative
thereof.
(vi) Neither Company nor any of its subsidiaries has any liability for
unpaid Taxes which has not been accrued for or reserved on the Company
Balance Sheet, whether asserted or unasserted, contingent or otherwise,
which is material to Company, other than any liability for unpaid Taxes that
may have accrued since the date of the Company Balance Sheet in connection
with the operation of the business of Company and its subsidiaries in the
ordinary course of business.
(vii) There is no contract, agreement, plan or arrangement to which
Company is a party as of the date of this Agreement, including but not
limited to the provisions of this Agreement, covering any employee or former
employee of Company or any of its subsidiaries that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
(viii) Neither Company nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by Company.
(ix) Except for any such agreement or arrangement solely between Company
and its subsidiaries, neither Company nor any of its subsidiaries is party
to or has any obligation under any tax-sharing, tax indemnity or tax
allocation agreement or arrangement.
(x) Company and its subsidiaries have not been and will not be required
to include any material adjustment in Taxable income for any Tax period (or
portion thereof) pursuant to Section 481 or Section 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Closing.
(xi) None of Company's or its subsidiaries' assets are tax exempt use
property within the meaning of Section 168(h) of the Code.
14
(xii) The Company Disclosure Letter lists (A) any foreign Tax holidays,
(B) any intercompany transfer pricing agreements, or other arrangements that
have been established by Company or any of its subsidiaries with any Tax
authority and (C) any expatriate programs or policies affecting Company or
any of its subsidiaries.
2.17 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Except as would not be reasonably expected to have
a Material Adverse Effect on Company (in any individual case or in the
aggregate), no underground storage tanks and no amount of any substance that has
been designated by any Governmental Entity or by applicable federal, state or
local law to be radioactive, toxic, hazardous or otherwise a danger to health or
the environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies,
(a "HAZARDOUS MATERIAL") are present, as a result of the actions of Company or
any of its subsidiaries or any affiliate of Company, or, to Company's knowledge,
as a result of any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that Company or any of its subsidiaries has at any time owned,
operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Except as would not be reasonably
expected to have a Material Adverse Effect on Company (in any individual case or
in the aggregate) (i) neither Company nor any of its subsidiaries has
transported, stored, used, manufactured, disposed of, released or exposed its
Employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, and (ii) neither Company nor any of its subsidiaries
has disposed of, transported, sold, used, released, exposed its employees or
others to or manufactured any product containing a Hazardous Material
(collectively "HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule,
regulation, treaty or statute promulgated by any Governmental Entity in effect
prior to or as of the date hereof to prohibit, regulate or control Hazardous
Materials or any Hazardous Material Activity.
(c) PERMITS. Company and its subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents (the "COMPANY
ENVIRONMENTAL PERMITS") necessary for the conduct of Company's and its
subsidiaries' Hazardous Material Activities and other businesses of Company and
its subsidiaries as such activities and businesses are currently being
conducted, except for those Company Environmental Permits the absence of which
would not have, individually or in the aggregate, a Material Adverse Effect on
Company.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to Company's
knowledge, no action, proceeding, revocation proceeding, amendment procedure,
writ or injunction has been threatened by any Governmental Entity against
Company or any of its subsidiaries in a writing delivered to Company concerning
any Company Environmental Permit Hazardous Material or any Hazardous Materials
Activity of Company or any of its subsidiaries. Company is not aware of any fact
or circumstance which could involve Company or any of its subsidiaries in any
environmental litigation or impose upon Company any material environmental
liability.
2.18 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Company.
2.19 INTELLECTUAL PROPERTY.
(a) Each of Company and its subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, and any applications for such patents,
trademarks, trade names, service marks and copyrights, and all patent rights,
15
trade secrets, schematics, technology, know-how, computer software and tangible
or intangible proprietary information or material or other intellectual property
or proprietary rights that are used to conduct its business as currently
conducted (collectively, "INTELLECTUAL PROPERTY") except where the failure to
own, license or possess legally enforceable rights to use such Intellectual
Property would not, individually or in the aggregate, be expected to result in a
material loss of benefits or material loss to Company's business. Each of
Company and its subsidiaries has taken reasonable measures to protect the
proprietary nature of each material item of Intellectual Property that it
considers confidential, and to maintain in confidence all material trade secrets
and confidential information that it presently owns or uses.
(b) With respect to each material item of Intellectual Property that Company
or any of its subsidiaries owns: (i) other than common law trademarks, and
subject to such rights as have been granted by Company or any of its
subsidiaries under non-exclusive license agreements and joint development
agreements entered into by Company or any of its subsidiaries (copies of which
have previously been made available or disclosed in writing to Parent), Company
or its subsidiaries possesses all right, title, interest in and to such item;
and (ii) such item is not subject to any outstanding judgment, order, decree,
stipulation or injunction that materially interferes with the conduct of
Company's or any of its subsidiaries' business as currently conducted. With
respect to each item of third party Intellectual Property used by Company or any
of its subsidiaries or incorporated in any existing product or service of
Company or any of its subsidiaries ("THIRD PARTY INTELLECTUAL PROPERTY RIGHTS")
that is material to the business of Company or any of its subsidiaries: (i) the
license, sublicense or other agreement covering such item is legal, valid,
binding, enforceable and in full force and effect with respect to Company or its
subsidiaries, and, to Company's knowledge, is legal, valid, binding, enforceable
and in full force and effect with respect to each other party thereto; (ii)
neither Company nor any of its subsidiaries is in material breach or default
thereunder, and to Company's knowledge no other party to such license,
sublicense or other agreement is in material breach or default thereunder, and
no event has occurred which with notice or lapse of time would constitute a
material breach or default by Company or any of its subsidiaries or permit
termination, modification or acceleration thereunder by the other party thereto;
and (iii) the underlying item of Third Party Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation or injunction to
which Company or any of its subsidiaries is a party or has been specifically
named that materially interferes with the conduct of Company's or any of its
subsidiaries' business as currently conducted.
(c) Neither Company nor any of its subsidiaries (i) has received notice that
it has been named in any suit, action or proceeding which involves a claim of
infringement or misappropriation of any Intellectual Property right of any third
party or (ii) has received any written notice alleging any such claim of
infringement or misappropriation. To Company's knowledge, the manufacturing,
marketing, licensing or sale of the products or performance of the service
offerings of Company and its subsidiaries do not currently infringe, and have
not infringed, any Intellectual Property right of any third party or to
Company's knowledge any patent rights of third parties; and to the knowledge of
Company, the Intellectual Property rights of Company and its subsidiaries are
not being infringed by activities, products or services of any third party.
(d) The execution and delivery of this Agreement by Company, and the
consummation of the transactions contemplated hereby, will neither cause Company
nor any of its subsidiaries to be in violation or default under any material
license, sublicense or agreement, nor terminate nor modify nor entitle any other
party to any such license, sublicense or agreement to terminate or modify such
license, sublicense or agreement, nor limit in any way Company's or any of its
subsidiaries' ability to conduct its business or use or provide the use of the
Intellectual Property or Third Party Intellectual Property Rights.
(e) All officers, employees and consultants of Company or any of its
subsidiaries who have access to Intellectual Property have executed and
delivered to Company or any of its subsidiaries an agreement regarding the
protection of Intellectual Property and the assignment to Company or any of its
subsidiaries of all Intellectual Property arising from the services performed
for Company or any of its subsidiaries by
16
such persons. To the knowledge of Company, no current or prior officers,
employees or consultants of Company or any of its subsidiaries claim any
ownership interest in any Intellectual Property as a result of having been
involved in the development of such property while employed by or consulting to
Company or any of its subsidiaries, or otherwise. All of the Intellectual
Property developed by Company employees has been developed by such employees of
Company or any of its subsidiaries within the scope of their employment.
2.20 AGREEMENTS, CONTRACTS AND COMMITMENTS. Neither Company nor any of its
subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer, director or member of Company's Board of Directors, other than
those that are terminable by Company or any of its subsidiaries on no more
than thirty days notice and which do so with no express (whether by contract
or by policy) liability or financial obligation to Company;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(c) any agreement of indemnification or any guaranty currently in force
other than any agreement of indemnification entered into in connection with
the sale or license or distribution or marketing of products or services in
the ordinary course of business;
(d) any agreement, contract or commitment containing any covenant
limiting in any respect the right of Company or any of its subsidiaries to
engage in any line of business or to compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition by Company or any of its subsidiaries after
the date of this Agreement of a material amount of assets not in the
ordinary course of business or pursuant to which Company has any material
ownership interest in any corporation, partnership, joint venture or other
business enterprise other than Company's subsidiaries;
(f) any material joint marketing or development agreement currently in
force under which Company or any of its subsidiaries have continuing
material obligations to jointly market any product, technology or service
and which may not be canceled without penalty upon notice of 90 days or
less, or any material agreement pursuant to which Company or any of its
subsidiaries have continuing material obligations to jointly develop any
intellectual property that will not be owned, in whole or in part, by
Company or any of its subsidiaries and which may not be canceled without
penalty upon notice of 90 days or less;
(g) any agreement, contract or commitment currently in force to provide
source code to any third party for any product or technology that is
material to Company and its subsidiaries taken as a whole; or
(h) any agreement, contract or commitment currently in force to license
any third party to manufacture or reproduce any Company product, service or
technology except as a distributor in the normal course of business.
Neither Company nor any of its subsidiaries, nor to Company's knowledge any
other party to a Company Contract (as defined below), is in breach, violation or
default under, and neither Company nor any of its subsidiaries has received
written notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which Company or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Company
17
Disclosure Letter pursuant to this Section 2.20 (any such agreement, contract or
commitment, a "COMPANY CONTRACT") in such a manner as would permit any other
party to cancel or terminate any such Company Contract, or would permit any
other party to seek material damages or other remedies (for any or all of such
breaches, violations or defaults, in the aggregate).
2.21 INSURANCE. Company maintains insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of Company and its subsidiaries (collectively, the
"INSURANCE POLICIES") which are of the type and in amounts customarily carried
by persons conducting businesses similar to those of Company and its
subsidiaries. There is no material claim by Company or any of its subsidiaries
pending under any of the Insurance Policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
2.22 OPINION OF FINANCIAL ADVISOR. Company has been advised in writing by
its financial advisor, BancBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, that in its opinion, as of
the date of this Agreement, the aggregate merger consideration is fair to the
stockholders of Company from a financial point of view.
2.23 BOARD APPROVAL. The Board of Directors of Company has, as of the date
of this Agreement, (i) approved this Agreement and the transactions contemplated
hereby, (ii) determined that the Merger is in the best interests of the
stockholders of Company and is on terms that are fair to such stockholders and
(iii) recommended that the stockholders of Company approve this Agreement and
the Merger.
2.24 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
thereon 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 contem-
plated hereby.
2.25 STATE TAKEOVER STATUTES. The Board of Directors of Company has
approved the Merger, this Agreement, the Company Affiliate Agreements (as
defined in Section 5.12) and the Company Voting Agreements, and such approval is
sufficient to render inapplicable to the Merger, this Agreement, the Company
Affiliate Agreements and the Company Voting Agreements and the transactions
contemplated hereby and thereby, the provisions of Section 203 of Delaware Law
to the extent, if any, such Section is applicable to the Merger, this Agreement,
the Company Affiliate Agreements and the Company Voting Agreements and the
transactions contemplated hereby and thereby. No other state takeover statute or
similar statute or regulation applies to or purports to apply to the Merger,
this Agreement, the Company Affiliate Agreements and the Company Voting
Agreements or the transactions contemplated hereby and thereby.
2.26 YEAR 2000 COMPLIANCE. All of Company's products (including products
currently under development) (i) will record, store, process, calculate and
present calendar dates falling on and after (and if applicable, spans of time
including) January 1, 2000, and will calculate any information dependent on or
relating to such dates in the same manner, and with the same functionality, data
integrity and performance, as the products record, store, process, calculate and
present calendar dates on or before December 31, 1999, or calculate any
information dependent on or relating to such dates (collectively, "YEAR 2000
COMPLIANT"), (ii) will lose no functionality with respect to the introduction of
records containing dates falling on or after January 1, 2000, and (iii) will be
interoperable with other products used and distributed by Parent (as long as
such products are Year 2000 Compliant) that may reasonably deliver records to
Company's products or receive records from Company's products, or interact with
Company's products, including but not limited to back-up and archived data.
Except as would not reasonably be expected to have a Material Adverse Effect on
Company, all of Company's Information Technology (as defined below) is Year 2000
Compliant, and will not cause an interruption in the ongoing operations of
Company's business on or after January 1, 2000. For purposes of the foregoing,
the term "INFORMATION TECHNOLOGY" shall mean and include all software, hardware,
firmware, telecommunications systems, network systems, embedded systems and
other systems, components and/or services that are owned or used by Company in
the conduct of its business, or purchased by Company from third party suppliers.
18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBS
Parent and Merger Subs jointly and severally represent and warrant to
Company, subject to such exceptions as are specifically disclosed in writing in
the disclosure letter (referencing the appropriate section and paragraph number)
delivered by Parent and Merger Subs to Company on or prior to the date of this
Agreement and certified by a duly authorized officer of Parent and Merger Subs
(the "PARENT DISCLOSURE LETTER"), as follows:
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Parent and its subsidiaries is in possession of all Approvals necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted, except where the failure to
have such Approvals would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. Each of Parent and its subsidiaries is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not, either individually or in the
aggregate, have a Material Adverse Effect on Parent.
3.2 ARTICLES AND CERTIFICATES OF INCORPORATION AND BYLAWS. Parent has
previously furnished to Company a complete and correct copy of its Articles of
Incorporation and Bylaws as amended to date and each of Merger Subs has
previously furnished to Company a complete and correct copy of its Certificate
of Incorporation and Bylaws as amended to date. Such Articles of Incorporation
and Bylaws are in full force and effect. Neither Parent nor any of its
subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents.
3.3 CAPITALIZATION. The authorized capital stock of Parent consists of (i)
15,000,000 shares of Parent Common Stock , no par value, and of (ii) 5,000,000
shares of Preferred Stock, no par value per share ("PARENT PREFERRED STOCK"),
25,000 of which have been designated as Series A Participating Preferred Stock.
At the close of business on November 30, 1998, (i) 10,565,332 shares of Parent
Common Stock were issued and outstanding, (ii) no shares of Parent Common Stock
were held in treasury by Parent or by subsidiaries of Parent, (iii) 354,098
shares of Parent Common Stock were reserved for future issuance pursuant to
Parent's employee stock purchase plan, (iv) 2,251,929 shares of Parent Common
Stock were reserved for issuance upon the exercise of outstanding options ("
PARENT OPTIONS") to purchase Parent Common Stock and (v) 576,553 shares of
Parent Common Stock were available for future grant under Parent's stock option
plans. As of the date hereof, no shares of Parent Preferred Stock were issued or
outstanding. The Parent Common Stock has certain associated rights issued
pursuant to a Preferred Shares Rights Agreement between Parent and ChaseMellon
Shareholder Services, L.L.C., dated December 12, 1996, as amended, which rights
will not become detached from the Parent Common Stock or exercisable or
otherwise be affected by the Merger, this Agreement or the other transactions
contemplated by this Agreement. The authorized capital stock of each Level One
Merger Sub and Merger Sub consists of 1,000 shares of common stock, par value
$0.001 per share, all of which, as of the date hereof, are issued and
outstanding. All of the outstanding shares of Parent's and Merger Subs'
respective capital stock have been duly authorized and validly issued and are
fully paid and nonassessable. All shares of Parent Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall, and the shares of
Parent Common Stock to be issued pursuant to the Merger will be, duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock (other than directors' qualifying shares) of each of
Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than
19
directors' qualifying shares) are owned by Parent or another of Parent's
subsidiary free and clear of all security interests, liens, claims, pledges,
agreements, limitations in Parent's voting rights, charges or other encumbrances
of any nature whatsoever. Except as set forth above, there are no other options,
warrants or other rights to purchase any of the Parent's authorized and unissued
capital stock.
3.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Merger Subs
has all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Merger Subs and the consummation by Parent and Merger Subs of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Subs and no other
corporate proceedings on the part of Parent or Merger Subs are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Parent and Merger
Subs and, assuming the due authorization, execution and delivery by Company,
constitutes a legal and binding obligation of Parent and Merger Subs,
enforceable against Parent and Merger Subs in accordance with its terms.
3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and Merger Subs
do not, and the performance of this Agreement by Parent and Merger Subs will
not, (i) conflict with or violate the Articles of Incorporation, Bylaws or
equivalent organizational documents of Parent or any of its subsidiaries, (ii)
subject to compliance with the requirements set forth in Section 3.5(b) below,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent or any of its subsidiaries or by which Parent or any of its
subsidiaries or any of their respective properties are bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair
Parent's or any such subsidiary's rights or alter the rights or obligations of
any third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Parent or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or its or any of their respective properties
are bound or affected, except in the case of clauses (ii) and (iii) above as
would not individually or in the aggregate reasonably be expected to have a
Material Adverse Effect on Parent.
(b) The execution and delivery of this Agreement by Parent and Merger Subs
do not, and the performance of this Agreement by Parent and Merger Subs will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Entity except (A) for applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws,
the pre-merger notification requirements of the HSR Act and of foreign
Governmental Entities and the rules and regulations thereunder, the rules and
regulations of Nasdaq, and the filing and recordation of the Certificate or
Merger as required by Delaware Law and (B) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, (i) would not prevent consummation of the Merger or otherwise
prevent Parent or Merger Subs from performing their respective obligations under
this Agreement or (ii) could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Parent.
3.6 SEC FILINGS; PARENT FINANCIAL STATEMENTS.
(a) Parent has made available to Company a correct and complete copy of each
material form, report, schedule, registration statement and definitive proxy
statement filed by Parent with the SEC on or after January 1, 1997 (the "PARENT
SEC REPORTS"), which are all the material forms, reports and documents required
to be filed by Parent with the SEC since January 1, 1997 and prior to the date
of this Agreement. The Parent SEC Reports (A) were prepared in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to
20
such Parent SEC Reports, and (B) 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
forms, 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, including each
Parent SEC Report filed after the date hereof until the Closing, (i) complied as
to form in all material respects with the published rules and regulations of the
SEC with respect thereto, (ii) 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 interim financial statements, as
may be permitted by the SEC on Form 10-Q under the Exchange Act) and (iii)
fairly presented the consolidated financial position of Parent and its
subsidiaries as of the respective dates thereof and the consolidated results of
Parent's operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain footnotes and were or are
subject to normal and recurring year-end adjustments. The balance sheet
contained in the Parent SEC Reports as of September 30, 1998 is hereinafter
referred to as the "Parent Balance Sheet."
(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.
3.7 S-4; 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 is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
neces-sary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; and (ii) the Proxy
Statement/Prospectus will, at the dates mailed to the stockholders of Company,
at the time of the Company Stockholders' 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. If at any time prior to the Effective Time any event
relating to Parent or any of its affiliates, officers or directors should be
discovered by Parent which is required to be set forth in an amendment to the
S-4 or a supplement to the Proxy Statement/Prospectus, Parent shall promptly
inform Company. Notwithstanding the foregoing, Parent makes no representation or
warranty with respect to any information supplied by Company which is contained
in any of the foregoing documents.
3.8 BOARD APPROVAL. The Board of Directors of Parent has, as of the date
hereof, (i) approved this Agreement and the transactions contemplated hereby and
(ii) determined that the Merger is in the best interests of the stockholders of
Parent and is on terms that are fair to such stockholders.
3.9 INTERIM OPERATIONS OF MERGER SUBS. Merger Subs were formed solely for
the purpose of engaging in the transactions contemplated hereby, have engaged in
no other business activities and have conducted their respective operations only
as contemplated hereby.
3.10 NO OWNERSHIP OF COMPANY COMMON STOCK. As of the date hereof, Parent
does not own, beneficially or of record, any shares of Company Common Stock.
21
3.11 NO UNDISCLOSED LIABILITIES. As of the date hereof, neither Parent nor
any of its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise) of a nature required to be disclosed on a balance sheet or in the
related notes to the consolidated financial statements prepared in accordance
with GAAP which are, individually or in the aggregate, material to the business,
results of operations or financial condition of Company and its subsidiaries
taken as a whole, except (i) liabilities provided for in Parent Balance Sheet,
(ii) liabilities incurred since September 30, 1998 in the ordinary course of
business consistent with past practices or (iii) banking, accounting, legal and
printing fees and expenses associated with the Merger.
3.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1998, there
has not been any Material Adverse Effect on Parent.
3.13 ABSENCE OF LITIGATION. As of the date hereof, there are no material
claims, actions, suits or proceedings pending or, to the knowledge of Parent,
threatened against Parent or any of its subsidiaries or any properties or rights
of Parent or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS BY COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business, in all material respects, in the usual, regular
and ordinary course, in substantially the same manner as heretofore conducted
and in compliance with all applicable laws and regulations, pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and employees and (iii) preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others with which it has
business dealings. In addition, unless otherwise required by law or contract,
Company will promptly notify Parent of any material event involving its business
or operations.
In addition, except as permitted by the terms of this Agreement, and except
as provided in Section 4.1 of the Company Disclosure Letter, without the prior
written consent of Parent, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Company shall not do any of the following and
shall not permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of
such plans, except for completion of the option repricing program authorized
by the Board of Directors of Company prior to the date hereof;
(b) 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;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company
Intellectual Property, or enter into grants to transfer or license to any
person future patent rights, other than non-exclusive licenses in the
ordinary course of business and consistent with past practice;
22
(d) 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;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the service
relationship with any employee or consultant pursuant to stock option or
purchase agreements in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing of, any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions,
rights, warrants or options to acquire any shares of capital stock or any
securities convertible into shares of capital stock, or enter into other
agreements or commitments of any character obligating it to issue any such
shares or convertible securities, other than (x) the issuance, delivery
and/or sale of (i) shares of Company Common Stock pursuant to the exercise
of stock options or warrants therefor outstanding as of the date of this
Agreement, and (ii) shares of Company Common Stock issuable to participants
in the ESPP consistent with the terms thereof and (y) the granting of stock
options (and the issuance of Common Stock upon exercise thereof), in the
ordinary course and consistent with past practices, in an amount not to
exceed options to purchase (and the issuance of Common Stock upon exercise
thereof) 50,000 shares in the aggregate;
(g) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of Company or enter into any material joint
ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate,
to the business of Company, except sales or licenses of product or inventory
in the ordinary course of business consistent with past practice;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Company, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing other than (i) in connection with
the financing of ordinary course trade payables consistent with past
practice or (ii) pursuant to existing credit facilities in the ordinary
course of business;
(k) Adopt or amend any employee benefit plan or employee stock purchase
or employee stock option plan, or enter into any employment contract or
collective bargaining agreement (other than offer letters and letter
agreements entered into in the ordinary course of business consistent with
past practice with employees who are terminable "at will,"), pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants other
than in the ordinary course of business, consistent with past practice, or
change in any material respect any management policies or procedures;
(l) Make any individual or series of related payments outside of the
ordinary course of business in excess of $100,000;
23
(m) except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which Company or any
subsidiary thereof is a party or waive, release or assign any material
rights or claims thereunder;
(n) enter into any contracts, agreements or obligations relating to the
distribution, sale, license or marketing by third parties of Company's
products or products licensed by Company other than non-exclusive contracts,
agreements or obligations entered into in the ordinary course of business
consistent with past practice;
(o) materially revalue any of its assets or, except as required by GAAP,
make any change in accounting methods, principles or practices;
(p) Subject to Section 5.2(c) and Section 5.4, engage in any action with
the intent to directly or indirectly adversely impact any of the
transactions contemplated by this Agreement; or
(q) Agree in writing or otherwise to take any of the actions described
in Section 4.1 (a) through (p) above.
4.2 CONDUCT OF BUSINESS BY PARENT. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, except as permitted by the terms of
this Agreement and except as provided in Section 4.2 of the Parent Disclosure
Letter, without the prior written consent of Company, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Effective Time, Parent shall not do
any of the following:
(a) 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;
(b) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement;
(c) Except as contemplated by this Agreement (including Section 5.16
hereof), make, effect, initiate, cause or participate in (i) any acquisition
of beneficial ownership of any securities of Company or any of its
subsidiaries, (ii) any acquisition of any assets of Company or any of its
subsidiaries, (iii) any tender offer, exchange offer, merger, business
combination, recapitalization, restructuring, liquidation, dissolution or
other extraordinary transaction involving Company or any of its securities,
assets or subsidiaries, or (iv) any "solicitation" of "proxies" (as those
terms are used in the proxy rules of the SEC) with respect to any securities
of Company; or
(d) Agree in writing or otherwise to take any of the actions described
in Section 4.2 (a) through 4.2 (c) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PROXY STATEMENT/PROSPECTUS; S-4; OTHER FILINGS. As promptly as
practicable after the execution of this Agreement, Company and Parent will
prepare and file with the SEC the Proxy Statement/Prospectus and Parent will
prepare and file with the SEC the S-4 in which the Proxy Statement/Prospectus
will be included as a prospectus. Each of Company and Parent will respond to any
comments of the SEC, will use its respective commercially reasonable efforts to
have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing and Company will cause the Proxy
Statement/Prospectus to be mailed to its stockholders at the earliest
practicable time after the S-4 is declared effective by the SEC. As promptly as
practicable after the date of this Agreement, each of Company and Parent will
prepare and file
24
any other filings required to be filed by it under the Exchange Act, the
Securities Act or any other Federal, foreign or Blue Sky or related laws
relating to the Merger and the transactions contemplated by this Agreement (the
"OTHER FILINGS"). Each of Company and Parent will notify the other promptly upon
the receipt of any comments from the SEC or its staff or any other government
officials and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the S-4, the Proxy
Statement/Prospectus or any Other Filing or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the S-4, the Proxy
Statement/Prospectus, the Merger or any Other Filing. Each of Company and Parent
will cause all documents that it is responsible for filing with the SEC or other
regulatory authorities under this Section 5.1 to comply in all material respects
with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement/Prospectus, the S-4
or any Other Filing, Company or Parent, as the case may be, will promptly inform
the other of such occurrence and cooperate in filing with the SEC or its staff
or any other government officials, and/or mailing to stockholders of Company,
such amendment or supplement.
5.2 MEETING OF COMPANY STOCKHOLDERS.
(a) Promptly after the date hereof, Company will take all action necessary
in accordance with Delaware Law and its Certificate of Incorporation and Bylaws
to convene the Company Stockholders' Meeting to be held as promptly as
practicable, and in any event (to the extent permissible under applicable law
and Company's Certificate of Incorporation and Bylaws) within 45 days after the
declaration of effectiveness of the S-4, for the purpose of voting upon this
Agreement and the Merger. Subject to Section 5.2(c), Company will use its
commercially reasonable efforts to solicit from its stockholders proxies in
favor of the adoption and approval of this Agreement and the approval of the
Merger and will take all other action necessary or advisable to secure the vote
or consent of its stockholders required by the rules of Nasdaq or Delaware Law
to obtain such approvals ("COMPANY STOCKHOLDER VOTE"). Notwithstanding the
anything to the contrary contained in this Agreement, Company may adjourn or
postpone the Company Stockholders' Meeting to the extent necessary to ensure
that any necessary supplement or amendment to the Prospectus/Proxy Statement is
provided to Company's stockholders in advance of a vote on the Merger and this
Agreement or, if as of the time for which Company Stockholders' Meeting is
originally scheduled (as set forth in the Prospectus/Proxy Statement) there are
insufficient shares of Company Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of the Company's
Stockholders' Meeting. Company shall ensure that the Company Stockholders'
Meeting is called, noticed, convened, held and conducted, and subject to Section
5.2(c) that all proxies solicited by Company in connection with the Company
Stockholders' Meeting are solicited, in compliance with Delaware Law, its
Certificate of Incorporation and Bylaws, the rules of Nasdaq and all other
applicable legal requirements. Company's obligation to call, give notice of,
convene and hold the Company Stockholders' Meeting in accordance with this
Section 5.2(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Company of any
Acquisition Proposal, or by any withdrawal, amendment or modification of the
recommendation of the Board of Directors of Company with respect to the Merger.
(b) Subject to Section 5.2(c): (i) the Board of Directors of Company shall
unanimously recommend that Company's stockholders vote in favor of and adopt and
approve this Agreement and the Merger at the Company Stockholders' Meeting; (ii)
the Prospectus/Proxy Statement shall include a statement to the effect that the
Board of Directors of Company has unanimously recommended that Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger at the Company Stockholders' Meeting; and (iii) neither the Board of
Directors of Company nor any committee thereof shall withdraw, amend or modify,
or propose or resolve to withdraw, amend or modify in a manner adverse to
Parent, the unanimous recommendation of the Board of Directors of Company that
Company's stockholders vote in
25
favor of and adopt and approve this Agreement and the Merger. For purposes of
this Agreement, said recommendation of the Board of Directors shall be deemed to
have been modified in a manner adverse to Parent if said recommendation shall no
longer be unanimous.
(c) Nothing in this Agreement shall prevent the Board of Directors of
Company from withholding, withdrawing, amending or modifying its unanimous
recommendation in favor of the Merger, ceasing to solicit from its stockholders
proxies in favor of the adoption and approval of this Agreement and the approval
of the Merger, or from endorsing or recommending to its stockholders a Superior
Offer (as defined below) if (i) a Superior Offer is made to Company and is not
withdrawn, (ii) neither Company nor any of its representatives shall have
violated any of the restrictions set forth in Section 5.4 with respect to such
Superior Offer or the party making such offer (or any affiliate or associate of
such party), and (iii) the Board of Directors of Company or any committee
thereof concludes in good faith, after consultation with its outside counsel,
that, in light of such Superior Offer, the withholding, withdrawal, amendment or
modification of such recommendation, the ceasing to solicit from its
stockholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger, and the endorsement or recommendation of such
Superior Offer, is required in order for the Board of Directors of Company or
any committee thereof to comply with its fiduciary obligations to Company's
stockholders under applicable law; PROVIDED, that the Board of Directors of
Company may withhold, withdraw, amend or modify its recommendation in favor of
the Merger or cease to solicit from its stockholders proxies in favor of
adoption and approval of this Agreement and the approval of the Merger if
failure to do so would violate applicable Delaware law. Subject to applicable
laws, nothing contained in this Section 5.2 shall limit Company's obligation to
hold and convene the Company Stockholders' Meeting (regardless of whether the
unanimous recommendation of the Board of Directors of Company shall have been
withdrawn, amended or modified). For purposes of this Agreement " SUPERIOR
OFFER" shall mean an unsolicited, bona fide written offer made by a third party
to consummate any of the following transactions: (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Company pursuant to which the stockholders of Company
immediately preceding such transaction hold less than 50% of the equity interest
in the surviving or resulting entity of such transaction; (ii) a sale or other
disposition by Company of assets (excluding inventory and used equipment sold in
the ordinary course of business) representing in excess of 50% of the fair
market value of Company's business immediately prior to such sale, or (iii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by Company), directly or indirectly, of beneficial
ownership or a
right to acquire beneficial ownership of shares representing in excess of 50% of
the voting power of the then outstanding shares of capital stock of Company, on
terms that the Board of Directors of Company determines, in its reasonable
judgment, after consultation with its financial advisor, to be more favorable to
Company stockholders than the terms of the Merger; PROVIDED, HOWEVER, that any
such offer shall not be deemed to be a "Superior Offer" if any financing
required to consummate the transaction contemplated by such offer is not
committed or is not likely in the judgment of Company's Board of Directors to be
obtained by such third party on a timely basis.
5.3 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) The parties acknowledge that Company and Parent have previously executed
a Confidentiality Agreement, dated as of June 9, 1998 (the "Confidentiality
Agreement"), which Confidentiality Agreement will continue in full force and
effect in accordance with its terms.
(b) ACCESS TO INFORMATION. Company will afford Parent and its accountants,
counsel and other representatives reasonable access during normal business hours
to the properties, books, records and personnel of Company during the period
prior to the Effective Time to obtain all information concerning the business,
including the status of product development efforts, properties, results of
operations and personnel of Company, as Parent may reasonably request. No
information or knowledge obtained by
26
Parent in any investigation pursuant to this Section 5.3 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.
5.4 NO SOLICITATION.
(a) From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Article VII, Company and its
subsidiaries 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 hereinafter defined), (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal, (iii) subject to
Section 5.2(c), approve, endorse or recommend any Acquisition Proposal or (iv)
enter into any letter of intent or similar document or any contract, agreement
or commitment contemplating or otherwise relating to any Acquisition
Transaction; PROVIDED, HOWEVER, that prior to the approval of this Agreement by
the required Company Stockholder Vote, this Agreement shall not prohibit Company
from (A) furnishing nonpublic information regarding Company and its subsidiaries
to, entering into a confidentiality agreement with or entering into discussions
or negotiations with, any person or group in response to a Superior Offer
submitted by such person or group (and not withdrawn) if (1) neither Company nor
any representative of Company and its subsidiaries shall have violated any of
the restrictions set forth in this Section 5.4 with respect to such person or
group making such Superior Offer (or any affiliate or associate of such person
or group), (2) the Board of Directors of Company concludes in good faith, after
consultation with its outside legal counsel, that such action is required in
order for the Board of Directors of Company to comply with its fiduciary
obligations to Company's stockholders under applicable law, (3) prior to
furnishing any such nonpublic information to, or entering into discussions or
negotiations with, such person or group, Company gives Parent written notice of
the identity of such person or group and of Company's intention to furnish
nonpublic information to, or enter into discussions or negotiations with, such
person or group and Company receives from such person or group an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished to such
person or group by or on behalf of Company, and (4) contemporaneously with
furnishing any such nonpublic information to such person or group, Company
furnishes such nonpublic information to Parent (to the extent such nonpublic
information has not been previously furnished by Company to Parent) or (B)
complying with Rules 14d-9 and 14e-2 promulgated under the Exchange Act or other
applicable law with regard to an Acquisition Proposal. Company and its
subsidiaries will immediately cease any and all existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer or director of Company or any of its subsidiaries or any investment
banker, attorney or other advisor or representative (excluding non-officer
employees) of Company or any of its subsidiaries shall be deemed to be a breach
of this Section 5.4 by Company. In addition to the foregoing, Company shall
provide Parent with at least 24 hours prior notice (or such lesser prior notice
as provided to the members of Company's Board of Directors but in no event less
than eight 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.
For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean any
inquiry, offer or proposal (other than an inquiry, offer or proposal by Parent)
relating to any Acquisition Transaction. For the purposes of this Agreement,
"ACQUISITION TRANSACTION" shall mean any transaction or series of related
transactions other than the transactions contemplated by this Agreement
involving: (A) any acquisition or purchase from 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 15% interest in the total outstanding
voting
27
securities of 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 15% or more of the total outstanding voting
securities of Company or any of its subsidiaries or any merger, consolidation,
business combination or similar transaction involving Company pursuant to which
the stockholders of Company immediately preceding such transaction hold less
than 85% of the equity interests in the surviving or resulting entity of such
transaction; (B) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 50% of the assets of Company;
or (C) any liquidation or dissolution of Company.
(b) In addition to the obligations of Company set forth in paragraph (a) of
this Section 5.4, Company as promptly as practicable shall advise Parent orally
and in writing of any request for non-public 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) of any such
request, Acquisition Proposal or inquiry.
5.5 PUBLIC DISCLOSURE. Parent and Company will consult with each other,
and to the extent practicable, 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 consultation, except as may be required by
law or any listing agreement with a national securities exchange or Nasdaq. The
parties have agreed to the text of the joint press release announcing the
signing of this Agreement.
5.6 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 Article VI to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, 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 Entity, (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 Entity 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 transactions 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
28
property, or the imposition of any material limitation on the ability of any of
them to conduct their businesses or to own or exercise control of such assets,
properties and stock.
(b) Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate in
any material respect, 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 6.3(a) or 6.3(b) could 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 Subs contained in this Agreement becoming untrue
or inaccurate in any material respect, or any failure of Parent or Merger Subs
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 6.2(a) or 6.2(b) could 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.
5.7 THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, Parent and Company will each use all 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 or necessary to
enable the surviving corporation to conduct and operate the business of Company
and its subsidiaries substantially as presently conducted and as contemplated to
be conducted.
5.8 STOCK OPTIONS AND ESPP.
(a) At the Effective Time, Parent, as sole stockholder of Company, shall
execute a stockholder's consent approving all amendments made by Company's Board
of Directors to the 1988 Option Plan and options granted thereunder to Company's
directors and to ▇▇. ▇▇▇▇▇ ▇. Doctor and Mr. R. ▇▇▇▇ ▇▇▇▇▇▇, if any such stock
options are then outstanding. At the Effective Time, each outstanding option to
purchase shares of Company Common Stock under Company's Directors' Plan and 1997
Option Plan, whether or not exercisable and whether or not vested, shall by
virtue of the Merger and without any further action on the part of Company or
the holder thereof, be assumed by Parent, and immediately after Parent's
execution of the stockholder's consent, all options under the 1988 Option Plan
(together with the options under the Directors' Plan and 1997 Option Plan each,
a "Company Stock Option"), whether or not exercisable and whether or not vested,
shall by virtue of the execution of the stockholder's consent by Parent, and
without any further action on the part of the Company or the holder thereof, be
assumed by Parent, in such manner (with respect to all such option assumptions)
that Parent (i) is "assuming a stock option in a transaction to which Section
424(a) applied" within the meaning of Section 424 of the Code, or (ii) to the
extent that Section 424 of the Code does not apply to any such Company Stock
Options, would be a transaction within Section 424 of the Code. Each Company
Stock Option so assumed by Parent under this Agreement will continue to have,
and be subject to, the same terms and conditions set forth in the applicable
Company Stock Option Plan immediately prior to the Effective Time (including,
without limitation, any repurchase rights or vesting provisions), except that
(1) each Company Stock Option will be exercisable (or will become exercisable in
accordance with its terms) for the number of whole shares of Parent Common Stock
equal to the product of the number of shares of Company Common Stock that were
issuable upon exercise of such Company Stock Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock, (2) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Company Stock Option will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company Stock
Option was exercisable immediately prior
29
to the Effective Time by the Exchange Ratio, rounded up to the nearest whole
cent, and (3) except as necessary to give effect to amendments made to the 1988
Option Plan prior to the Effective Time, but approved by Company's stockholders
at the Effective Time. In addition, each Restricted Stock Purchase Agreement
between Company or an Affiliate and an employee of such entity shall be assumed
by Parent, and the number of shares subject to such Restricted Stock Purchase
Agreement will be adjusted as described above.
(b) It is intended that Company Stock Options assumed by Parent shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent such Company Stock Options qualified as
incentive stock options immediately prior to the Effective Time and the
provisions of this Section 5.8 shall be applied consistent with such intent.
(c) Company shall take actions as are necessary to cause the "Purchase Date"
(as such term is used in the ESPP) applicable to the then current Offering (as
such term is used in the ESPP) to be the last trading day on which the Company
Common Stock is traded on Nasdaq immediately prior to the Effective Time (the
"FINAL COMPANY PURCHASE DATE"); provided, that such change in the Purchase Date
shall be conditioned upon the consummation of the Merger. On the Final Company
Purchase Date, Company shall apply the funds credited as of such date under the
ESPP within each participant's payroll withholdings account to the purchase of
whole shares of Company Common Stock in accordance with the terms of the ESPP.
Any such shares purchased under the ESPP shall be automatically converted on the
same basis as all other shares of Company Common Stock (other than shares
canceled pursuant to Section 1.6 (b), except that such shares shall be converted
automatically into shares of Parent Common Stock without the issuance of
certificates representing issued and outstanding shares of Company Common Stock
to ESPP participants.
(d) Notwithstanding anything to the contrary contained herein, Company shall
not incur any obligations under the 1990 ESPP after February 1, 1999.
5.9 FORM S-8. Parent agrees to file a registration statement on Form S-8
for the shares of Parent Common Stock issuable with respect to assumed Company
Stock Options and Doctor Warrant within five (5) business days of the Effective
Time and to maintain the effectiveness of such registration statement thereafter
for so long as any of such options or other rights remain outstanding.
5.10 INDEMNIFICATION.
(a) 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 present and
former directors and officers in effect immediately prior to the Effective Time
(the "INDEMNIFIED PARTIES") and any indemnification provisions under Company's
Certificate of Incorporation or Bylaws 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 as those contained in the
Certificate of Incorporation and Bylaws of Company as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise modified for
a period of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the
Effective Time, were directors, officers, employees or agents of Company, unless
such modification is required by law.
(b) For a period of six years after the Effective Time, Parent will cause
the Surviving Corporation to use all commercially reasonable efforts to maintain
in effect, if available, directors' and officers' liability insurance covering
those persons who are currently covered by Company's directors' and officers'
liability insurance policy on terms substantially similar to those applicable to
the current directors and officers of Company; PROVIDED, HOWEVER, that in no
event will Parent or the Surviving Corporation be required to expend in excess
of 150% of the annual premium currently paid by Company for such coverage (or
such coverage as is available for such 150% of such annual premium).
30
(c) The provisions of this Section 5.10 are intended to be in addition to
the rights otherwise available to the Indemnified Parties by law, charter,
statute, bylaw, resolution of the Board of Directors of Company or agreement,
and shall operate for the benefit of, and shall be enforceable by, each of the
Indemnified Parties, their heirs and their representatives.
5.11 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.
5.12 COMPANY AFFILIATE AGREEMENT. Set forth in the Company Disclosure
Letter 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 (each a "COMPANY AFFILIATE"). Company will
provide Parent with such information and documents as Parent reasonably requests
for purposes of reviewing and validating 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 the date hereof, from each Company
Affiliate an executed affiliate agreement in substantially the form attached
hereto as EXHIBIT B (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 pursuant to the terms of this Agreement,
and to issue appropriate stop transfer instructions to the transfer agent for
the Parent Common Stock, consistent with the terms of the Company Affiliate
Agreement.
5.13 REGULATORY FILINGS; REASONABLE EFFORTS. As soon as may be reasonably
practicable, Company and Parent each shall file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report Forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. Company and Parent each shall promptly (a) supply the other with any
information which may be required in order to effectuate such filings and (b)
supply any additional information which reasonably may be required by the FTC,
the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate.
5.14 NONCOMPETITION AGREEMENTS. Company will use all reasonable efforts to
ensure that Louis Doctor enters into a Noncompetition Agreement substantially in
the form attached hereto as EXHIBIT C.
5.15 EXECUTIVE EMPLOYMENT AGREEMENTS. Pursuant to those certain Employment
Agreements between Company and ▇▇. ▇▇▇▇▇ ▇. Doctor and between Company and Mr.
R. ▇▇▇▇ ▇▇▇▇▇▇, both dated July 28, 1998 and effective August 4, 1998 (the
"EXECUTIVE EMPLOYMENT AGREEMENTS") and on the Closing Date, Company shall
provide written notice of termination of employment to ▇▇. ▇▇▇▇▇ ▇. Doctor and
Mr. R. ▇▇▇▇ ▇▇▇▇▇▇, that is not for Cause or Disability (as those terms are
defined in the Executive Employment Agreements), and that is effective on the
Closing Date. Commencing on the day after the last day of full-time employment
with Company of ▇▇. ▇▇▇▇▇ ▇. Doctor and Mr. R. ▇▇▇▇ ▇▇▇▇▇▇, respectively,
Company shall retain each as a part-time employee of Company, and shall make the
required payments of Base Compensation (as defined in the Executive Employment
Agreements) for the required period, continue vesting of options for the
required period, continue in effect for the required period one hundred percent
Company-paid coverage under Company's health insurance and group term life
insurance policies (including coverage of dependents already covered), and cause
the last day of such Company-paid health insurance coverage to be a "qualifying
event" under Section 4980B of the Code for purposes of commencing the
continuation health insurance coverage election period, all as provided under
the terms of the respective Executive Employment Agreements of ▇▇. ▇▇▇▇▇ ▇.
Doctor and Mr. R. ▇▇▇▇ ▇▇▇▇▇▇. At the Closing, Company or Parent shall also pay,
in cash (including by check), to ▇▇. ▇▇▇▇▇ ▇. Doctor and to Mr. R. ▇▇▇▇ ▇▇▇▇▇▇,
the respective amounts of bonus provided for under the applicable provisions of
the Executive Employment Agreements. Parent and Company shall take such
additional steps (after giving
31
effect to Section 1.3) as may be necessary to bind themselves under the
Executive Employment Agreements.
5.16 OPEN MARKET PURCHASES BY LEVEL ONE MERGER SUB. Between the date of
execution of this Agreement and the Effective Time, Level One Merger Sub will
purchase at least an aggregate of $10,000 but not more that $25,000 worth of
shares of Company Common Stock in the open market.
5.17 COMPANY 401(K) PLAN. At the request of Parent, Company shall take all
necessary corporate action to terminate, or cause its subsidiaries to terminate,
as the case may be, all 401(k) plans maintained by Company and any of its
subsidiaries.
5.18 OPTIONS AND DOCTOR WARRANT. In the event that holders of options to
purchase Company Common Stock or the Doctor Warrant are required to pay federal
income taxes as a result of the consummation of the Merger being treated as a
taxable transaction for federal income tax purposes, Parent shall indemnify such
holders for the amount of such tax; PROVIDED, HOWEVER, that Parent shall only be
liable for the difference between the amount of the tax paid and the amount of
tax that would have been payable if the Merger had been a tax-free
reorganization within the meaning of Section 368 of the Code; and PROVIDED,
FURTHER, that the indemnity contained in this section shall only apply to the
extent that such options and Doctor Warrant are unexercised as of the Effective
Time and are assumed by Parent as a result of and in connection with the Merger
5.19 SCITEX VOTING AGREEMENT. Company shall use best efforts to have
Scitex Corporation Ltd. enter into a Company Voting Agreement prior to the
mailing of the Proxy Statement/Prospectus.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) COMPANY STOCKHOLDER APPROVAL. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of Company.
(b) S-4 EFFECTIVE; PROXY STATEMENT. The SEC shall have declared the
S-4 effective. No stop order suspending the effectiveness of the S-4 or any
part thereof shall have been issued and no proceeding for that purpose, and
no similar proceeding in respect of the Proxy Statement/Prospectus, shall
have been initiated or threatened in writing by the SEC.
(c) NO ORDER; HSR ACT. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the
Merger. All waiting periods, if any, under the HSR Act relating to the
transactions contemplated hereby will have expired or terminated early and
all material foreign antitrust approvals required to be obtained prior to
the Merger in connection with the transactions contemplated hereby shall
have been obtained.
(d) NASDAQ LISTING. The shares of Parent Common Stock issuable to
stockholders 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.
32
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligation of
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 Company:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and warranty
of Parent and Merger Subs 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 the Closing Date except, (A) in each case, or in the aggregate, as
does not constitute a Material Adverse Effect on Parent and Merger Subs, (B)
for changes contemplated by this Agreement and (C) for those representations
and warranties which address matters only as of a particular date (which
representations shall have been true and correct except as does not
constitute a Material Adverse Effect on Parent and Merger Subs as of such
particular date) (it being understood that, for purposes of determining the
accuracy of such representations and warranties, (i) all "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
Letter made or purported to have been made after the date of this Agreement
shall be disregarded). Company shall have received a certificate with
respect to the foregoing signed on behalf of Parent by an authorized officer
of Parent.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Subs shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing Date, and Company shall have received a
certificate to such effect signed on behalf of Parent by an authorized
officer of Parent.
(c) MATERIAL ADVERSE EFFECT. No Material Adverse Effect with respect
to Parent shall have occurred since the date of this Agreement.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER
SUBS. The obligations of Parent and Merger Subs 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 (A) in each case, or in the aggregate, as does
not constitute a Material Adverse Effect on Company (B) for changes
contemplated by this Agreement and (C) for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and correct except as does not
constitute a Material Adverse Effect on Company as of such particular date)
(it being understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "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
Letter made or purported to have been made after the date of this Agreement
shall be disregarded). Parent shall have received a certificate with respect
to the foregoing signed on behalf of Company by an authorized officer of
Company.
(b) AGREEMENTS AND COVENANTS. Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer and the Chief Financial
Officer of Company.
33
(c) MATERIAL ADVERSE EFFECT. No Material Adverse Effect with respect
to Company and its subsidiaries shall have occurred since the date of this
Agreement.
(d) AFFILIATE AGREEMENTS. Each of the Company Affiliates shall have
entered into the Company Affiliate Agreement and each of such agreements
will be in full force and effect as of the Effective Time.
(e) NONCOMPETITION AGREEMENTS. Louis Doctor shall have entered into a
Noncompetition Agreement substantially in the form attached hereto as
EXHIBIT C and such agreement shall be in full force and effect.
(f) CONSENTS. Company shall have obtained all consents, waivers and
approvals contemplated by this Agreement or the Company Disclosure Letter in
connection with the material agreements, contracts, licenses or leases of
Company or its subsidiaries.
(g) FEE LIMITATION. Company and its subsidiaries shall not have
incurred in connection with the Merger or this Agreement expenses of more
than $850,000 for fees and expenses of any investment banker, broker or
finder.
(h) TERMINATION OF AGREEMENT. Company and Scitex Corporation Ltd.
shall have amended or terminated that certain Private Placement Agreement
between RasterOps and Scitex Corporation Ltd. dated as of June 7, 1993;
provided, that any amendment shall be reasonably satisfactory to Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approval of the
stockholders 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, 1999 for any reason; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 7.1(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 Entity 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
stockholders 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 stockholders duly convened therefor or at any adjournment thereof
(PROVIDED that the right to terminate this Agreement under this Section
7.1(d) shall not be available to Company where the failure to obtain Company
stockholder approval shall have been caused by the action or failure to act
of Company and such action or failure to act constitutes a breach by Company
of this Agreement);
(e) by Parent if a Triggering Event (as defined below) shall have
occurred;
34
(f) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of
Company) if a Termination Event (as defined below) shall have occurred;
(g) 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 of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
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 through the exercise of its commercially reasonable
efforts, then Company may not terminate this Agreement under this Section
7.1(g) for thirty days after delivery of written notice from Company to
Parent of such breach, provided Parent continues to exercise commercially
reasonable efforts to cure such breach (it being understood that Company may
not terminate this Agreement pursuant to this paragraph (g) if it shall have
materially breached this Agreement or if such breach by Parent is cured
during such thirty day period); or
(h) 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 6.3(a) or Section 6.3(b)
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 through the exercise of its commercially reasonable
efforts, then Parent may not terminate this Agreement under this Section
7.1(h) for thirty days after delivery of written notice from Parent to
Company of such breach, provided Company continues to exercise commercially
reasonable efforts to cure such breach (it being understood that Parent may
not terminate this Agreement pursuant to this paragraph (h) if it shall have
materially breached this Agreement or if such breach by Company is cured
during such thirty day period).
For the purposes of this Agreement, a "TERMINATION EVENT" shall be deemed to
occur if Company shall not have used commercially reasonable efforts to hold the
Company Stockholders' Meeting as promptly as practicable and in any event within
sixty (60) days after the S-4 is declared effective under the Securities Act.
For the purposes of this Agreement, a "TRIGGERING EVENT" shall be deemed to
have occurred if: (i) the Board of Directors of Company or any committee thereof
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its unanimous recommendation in favor of, the adoption
and approval of the Agreement or the approval of the Merger; (ii) Company shall
have failed to include in the Proxy Statement/Prospectus the unanimous
recommendation of the Board of Directors of Company in favor of the adoption and
approval of the Agreement and the approval of the Merger; (iii) Board of
Directors of Company fails to reaffirm its unanimous recommendation in favor of
the adoption and approval of the Agreement and the approval of the Merger within
five (5) business days after Parent requests in writing that such recommendation
be reaffirmed; (iv) the Board of Directors of Company or any committee thereof
shall have approved or recommended any Acquisition Proposal; (v) Company or any
of its officers, directors, or employees or any investment banker, attorney or
other advisor or representative retained by any of them shall participate in any
discussions or negotiations in breach of Section 5.4; (vi) Company shall have
entered into any letter of intent or similar document or any agreement, contract
or commitment accepting any Acquisition Proposal; or (vii) a tender or exchange
offer relating to securities of Company shall have been commenced by a Person
unaffiliated with Parent and Company shall not have sent to its security holders
pursuant to Rule 14e-2 promulgated under the Securities Act, within ten (10)
business days after such tender or exchange offer is first published sent or
given, a statement disclosing that Company recommends rejection of such tender
or exchange offer.
35
7.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any willful breach of this Agreement. No termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
7.3 FEES AND EXPENSES.
(a) GENERAL. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; PROVIDED, HOWEVER, that Parent and Company
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred in relation to the printing and filing (with the
SEC) of the Proxy Statement/Prospectus (including any preliminary materials
related thereto) and the S-4 (including financial statements and exhibits) and
any amendments or supplements thereto.
(b) COMPANY PAYMENTS. Company shall pay Parent a cash termination fee of
$500,000 (the "TERMINATION FEE") upon the earlier to occur of the following
events:
(i) the termination of this Agreement by Parent pursuant to Section
7.1(e);
(ii) the termination of this Agreement by Parent pursuant to Section
7.1(d) as a result of the failure to receive the requisite vote for the
approval of this Agreement and the Merger by the stockholders of Company at
the Company Stockholders Meeting if, at the time of such failure, there
shall have been announced or commenced an Acquisition Proposal or Company
shall have executed an agreement to engage in the same and the Company Board
of Directors shall not have affirmatively recommended against such
Acquisition Proposal or, if the Company Board of Directors has recommended
against such Acquisition Proposal, the Company Board of Directors shall have
withdrawn such recommendation against such Acquisition Proposal or modified
such recommendation in a manner adverse to Parent.
(c) The Termination Fee shall be paid no later than three business days
after the date of such termination. Company acknowledges that the agreements
contained in this Section 7.3(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 Company fails promptly to pay the
amounts due pursuant to this Section 7.3(b), and, in order to obtain such
payment, Parent commences a suit which results in a judgment against Company for
the amounts set forth in this Section 7.3(b), Company shall pay to Parent its
reasonable costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amounts set forth in
this Section 7.3(b) at the prime rate of ▇▇▇▇▇ Fargo Bank N.A. in effect on the
date such payment was required to be made.
(d) Payment of the fee described in Section 7.3(b) shall not be in lieu of
damages incurred in the event of breach of this Agreement.
7.4 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 and Company.
7.5 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
36
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.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Company, Parent and Merger Subs 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.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Subs, to:
Pinnacle Systems, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq./▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Company, to:
Truevision, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Cooley Godward LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, Esq./▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
37
8.3 INTERPRETATION; KNOWLEDGE.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement. Unless otherwise
indicated the words "INCLUDE," "INCLUDES" and " INCLUDING" when used herein
shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. When reference is made herein to "THE
BUSINESS OF" an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference
to the subsidiaries of an entity shall be deemed to include all direct and
indirect subsidiaries of such entity.
(b) For purposes of this Agreement the term "KNOWLEDGE" means with
respect to a party hereto, with respect to any matter in question, that any
of the Chief Executive Officer, Chief Financial Officer, General Counsel or
Controller of such party, has actual knowledge of such matter.
(c) For purposes of this Agreement, the term "MATERIAL ADVERSE EFFECT"
when used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect that is materially adverse to the
business, assets (including intangible assets), capitalization, financial
condition, results of operations or prospects of such entity and its parent
(if applicable) or subsidiaries taken as a whole (provided, however, that
none of the following shall be deemed, in and of itself, to be a Material
Adverse Effect: (A) a change that results from conditions affecting the U.S.
economy or the world economy; (B) a change that results from conditions
affecting the digital video editing industry; and (C) a delay in customer
orders directly related to the announcement of the transactions contemplated
by this Agreement).
(d) For purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental Entity.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Letter
and the Parent Disclosure Letter (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 5.10 and 5.15.
8.6 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
8.7 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other
38
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other remedy.
The parties hereto agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the Northern District of California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, other than issues involving the corporate
governance of any of the parties hereto, agrees that process may be served upon
them in any manner authorized by the laws of the State of California for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, COMPANY AND MERGER SUBS HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUBS IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
*****
39
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
PINNACLE SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
▇▇▇▇▇▇▇▇ MERGER CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
▇▇▇▇▇ MERGER CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
TRUEVISION, INC.
By: /s/ ▇▇▇▇▇ ▇. DOCTOR
--------------------------------------------
Name: ▇▇▇▇▇ ▇. Doctor
Title: President and Chief Executive Officer
**** MERGER AGREEMENT ****
40
EXHIBIT A
Persons Entering Into Voting Agreements
DIRECTORS
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. Doctor
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
EXECUTIVE OFFICERS
R. ▇▇▇▇ ▇▇▇▇▇▇
OTHER AFFILIATES
Scitex Corporation Ltd. (subject to Section 5.19)
EXHIBIT A-1
FORM OF VOTING AGREEMENT
EXHIBIT B
FORM OF AFFILIATE AGREEMENT
EXHIBIT C
FORM OF NONCOMPETITION AGREEMENT