Exhibit 2(b)
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AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 19, 1996
AMONG
SIERRA ON-LINE, INC.
CUC INTERNATIONAL INC.
AND
▇▇▇▇▇ ACQUISITION CORP.
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TABLE OF CONTENTS
ARTICLE 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1. The Merger . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2. Effective Time . . . . . . . . . . . . . . . . . 2
SECTION 1.3. Closing of the Merger . . . . . . . . . . . . . . 2
SECTION 1.4. Effects of the Merger . . . . . . . . . . . . . . 2
SECTION 1.5. Certificate of Incorporation and Bylaws . . . . . 2
SECTION 1.6. Directors . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.7. Officers . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.8. Conversion of Shares . . . . . . . . . . . . . . 3
SECTION 1.9. Exchange of Certificates . . . . . . . . . . . . 3
SECTION 1.10. Stock Options . . . . . . . . . . . . . . . . . . 6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . 8
SECTION 2.1. Organization and Qualification; Subsidiaries . . 8
SECTION 2.2. Capitalization of the Company and its Subsidiaries 9
SECTION 2.3. Authority Relative to this Agreement; Consents and
Approvals . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.4. SEC Reports; Financial Statements . . . . . . . . 11
SECTION 2.5. Information Supplied . . . . . . . . . . . . . . 12
SECTION 2.6. Consents and Approvals; No Violations . . . . . . 13
SECTION 2.7. No Default . . . . . . . . . . . . . . . . . . . 14
SECTION 2.8. No Undisclosed Liabilities; Absence of Changes . 14
SECTION 2.9. Litigation . . . . . . . . . . . . . . . . . . . 15
SECTION 2.10. Compliance with Applicable Law . . . . . . . . . 15
SECTION 2.11. Employee Plans . . . . . . . . . . . . . . . . . 16
SECTION 2.12. Environmental Laws and Regulations . . . . . . . 16
SECTION 2.13. Tax Matters . . . . . . . . . . . . . . . . . . . 17
SECTION 2.14. Intangible Property . . . . . . . . . . . . . . . 17
SECTION 2.15. Opinion of Financial Advisor . . . . . . . . . . 18
SECTION 2.16. Brokers . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.17. Accounting Matters . . . . . . . . . . . . . . . 18
SECTION 2.18. Material Contracts . . . . . . . . . . . . . . . 18
SECTION 2.19. Disclosure . . . . . . . . . . . . . . . . . . . 19
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.20
SECTION 3.1. Organization . . . . . . . . . . . . . . . . . . 20
SECTION 3.2. Capitalization of Parent and its Subsidiaries . . 21
SECTION 3.3. Authority Relative to this Agreement . . . . . . 22
SECTION 3.4. SEC Reports; Financial Statements . . . . . . . . 22
SECTION 3.5. Information Supplied . . . . . . . . . . . . . . 23
SECTION 3.6. Consents and Approvals; No Violations . . . . . . 24
SECTION 3.7. No Default . . . . . . . . . . . . . . . . . . . 25
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes . 25
SECTION 3.9. Litigation . . . . . . . . . . . . . . . . . . . 25
SECTION 3.10. Compliance with Applicable Law . . . . . . . . . 26
SECTION 3.11. Employee Plans . . . . . . . . . . . . . . . . . 26
SECTION 3.12. Environmental Laws and Regulations . . . . . . . 27
SECTION 3.13. Tax Matters . . . . . . . . . . . . . . . . . . . 27
SECTION 3.14. No Prior Activities . . . . . . . . . . . . . . . 27
SECTION 3.15. Brokers . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.16. Accounting Matters . . . . . . . . . . . . . . . 28
SECTION 3.17. Disclosure . . . . . . . . . . . . . . . . . . . 28
ARTICLE 4 COVENANTS . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.1. Conduct of Business of the Company . . . . . . . 28
SECTION 4.2. Conduct of Business of Parent . . . . . . . . . . 32
SECTION 4.3. Preparation of S-4 and the Proxy Statement . . . 33
SECTION 4.4. Other Potential Acquirors . . . . . . . . . . . . 33
SECTION 4.5. Letter of the Company's Accountants . . . . . . . 35
SECTION 4.6. Meetings . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.7. Stock Exchange Listing . . . . . . . . . . . . . 36
SECTION 4.8. Access to Information . . . . . . . . . . . . . . 36
SECTION 4.9. Additional Agreements; Reasonable Best Efforts . 37
SECTION 4.10. Consents . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.11. Public Announcements . . . . . . . . . . . . . . 37
SECTION 4.12. Indemnification; Directors' and Officers' Insurance 38
SECTION 4.13. Notification of Certain Matters . . . . . . . . . 39
SECTION 4.14. Pooling . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.15. Tax-Free Reorganization Treatment . . . . . . . . 41
SECTION 4.16. Taxes . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.17. Employment and Other Agreements . . . . . . . . . 42
SECTION 4.18. Employee Matters . . . . . . . . . . . . . . . . 42
SECTION 4.19. Company Affiliates . . . . . . . . . . . . . . . 42
SECTION 4.20. Election to Parent Board . . . . . . . . . . . . 43
SECTION 4.21. SEC Filings . . . . . . . . . . . . . . . . . . . 43
SECTION 4.22. Guarantee of Performance . . . . . . . . . . . . 43
SECTION 4.23. Acquisition . . . . . . . . . . . . . . . . . . . 43
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . 44
SECTION 5.1. Conditions to Each Party's Obligations to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.2. Conditions to the Obligations of the Company . . 45
SECTION 5.3. Conditions to the Obligations of Parent and
Acquisition . . . . . . . . . . . . . . . . . . . 46
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER . . . . . . . . . . . . 47
SECTION 6.1. Termination . . . . . . . . . . . . . . . . . . . 47
SECTION 6.2. Effect of Termination . . . . . . . . . . . . . . 49
SECTION 6.3. Fees and Expenses . . . . . . . . . . . . . . . . 49
SECTION 6.4. Amendment . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.5. Extension; Waiver . . . . . . . . . . . . . . . . 51
ARTICLE 7 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.1. Nonsurvival of Representations and Warranties . . 52
SECTION 7.2. Entire Agreement; Assignment . . . . . . . . . . 52
SECTION 7.3. Validity . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.4. Notices . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.5. Governing Law . . . . . . . . . . . . . . . . . . 53
SECTION 7.6. Descriptive Headings . . . . . . . . . . . . . . 53
SECTION 7.7. Parties in Interest . . . . . . . . . . . . . . . 53
SECTION 7.8. Arbitration . . . . . . . . . . . . . . . . . . . 54
SECTION 7.9. Severability . . . . . . . . . . . . . . . . . . 54
SECTION 7.10. Specific Performance . . . . . . . . . . . . . . 54
SECTION 7.11. Recapitalization . . . . . . . . . . . . . . . . 55
SECTION 7.12. Subsidiaries . . . . . . . . . . . . . . . . . . 55
SECTION 7.13. Brokers . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.14. Counterparts . . . . . . . . . . . . . . . . . . 55
TABLE OF DEFINED TERMS
CROSS REFERENCE
TERM IN AGREEMENT PAGE
Acquisition . . . . . . . . . Preamble . . . . . . . . . 1
Affiliate Letter . . . . . . Recitals . . . . . . . . . 1
Certificates . . . . . . . . Section 1.9(b) . . . . . . 4
Closing . . . . . . . . . . . Section 1.3 . . . . . . . 2
Closing Date . . . . . . . . Section 1.3 . . . . . . . 2
Code . . . . . . . . . . . . Recitals . . . . . . . . 1
Company . . . . . . . . . . . Preamble . . . . . . . . 1
Company Affiliate . . . . . . Recitals . . . . . . . . 1
Company Board . . . . . . . . Section 2.3(a) . . . . . . 10
Company Disclosure Schedule . Section 2.2(a) . . . . . . 9
Company Plans . . . . . . . . Section 1.10(a) . . . . . 6
Company SEC Reports . . . . . Section 2.4(a) . . . . . . 1
Company Stock Option(s) . . . Section 1.10(a) . . . . . 6
DGCL . . . . . . . . . . . . Section 1.1 . . . . . . . 2
Effective Time . . . . . . . Section 1.2 . . . . . . . 2
Environmental Claim . . . . . Section 2.12(a) . . . . . 15
Environmental Laws . . . . . Section 2.12(a) . . . . . 15
ERISA . . . . . . . . . . . . Section 2.11 . . . . . . . 15
ESPP . . . . . . . . . . . . Section 2.2(d) . . . . . . 9
Exchange Act . . . . . . . . Section 2.2(c) . . . . . . 10
Exchange Agent . . . . . . . Section 1.9(a) . . . . . . 4
Financial Advisor . . . . . . Section 2.15 . . . . . . . 16
GAAP . . . . . . . . . . . . Section 2.4(a) . . . . . . 11
Governmental Entity . . . . . Section 2.6 . . . . . . . 12
HSR Act . . . . . . . . . . . Section 2.6 . . . . . . . 12
Lien . . . . . . . . . . . . Section 2.2(b) . . . . . . 10
Material Adverse Effect . . . Sections 2.1(a), 3.1(a) . 8,19
Merger . . . . . . . . . . . Section 1.1 . . . . . . . 2
Merger Consideration . . . . Section 1.8(a) . . . . . . 3
Notice of Superior Proposal . Section 4.4(b) . . . . . . 32
NYSE . . . . . . . . . . . . Section 1.9(f) . . . . . . 6
Parent . . . . . . . . . . . Preamble . . . . . . . . . 1
Parent Common Stock . . . . . Section 1.8(a) . . . . . . 3
Parent Disclosure Schedule . Section 1.11(a) . . . . . 20
Parent Option . . . . . . . . Section 1.10(a) . . . . . 6
Parent Permits . . . . . . . Section 3.10 . . . . . . . 24
Parent SEC Reports . . . . . Section 3.4(a) . . . . . . 21
Proxy Statement . . . . . . . Section 2.5 . . . . . . . 12
S-4 . . . . . . . . . . . . . Section 2.5 . . . . . . . 12
SEC . . . . . . . . . . . . . Section 2.4(a) . . . . . . 11
Securities Act . . . . . . . Recitals . . . . . . . . . 1
Shareholders Agreement . . . Recitals . . . . . . . . . 1
Share(s) . . . . . . . . . . Section 1.8(a) . . . . . . 3
Subsidiaries . . . . . . . . Section 7.12 . . . . . . . 52
Superior Proposal . . . . . . Section 4.4(b) . . . . . . 32
Surviving Corporation . . . . Section 1.1 . . . . . . . 2
Taxes . . . . . . . . . . . . Section 2.13 . . . . . . . 16
Third Party Acquisition . . . Section 6.1(d) . . . . . . 45
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 19,
1996, is among SIERRA ON-LINE, INC., a Delaware corporation (the
"Company"), CUC INTERNATIONAL INC., a Delaware corporation ("Parent"),
and ▇▇▇▇▇ ACQUISITION CORP., a Delaware corporation and a direct
wholly owned subsidiary of Parent ("Acquisition").
WHEREAS, the Boards of Directors of the Company, Parent and
Acquisition each have, in light of and subject to the terms and
conditions set forth herein, (i) determined that the Merger (as
defined in Section 1.1) is fair to their respective shareholders and
in the best interests of such shareholders and (ii) approved the
Merger in accordance with this Agreement;
WHEREAS, for federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code");
WHEREAS, concurrently with the execution hereof, certain
holders of Shares (as defined in Section 1.8(a)) are entering into the
Shareholders Agreement, a copy of which is attached hereto as Exhibit
A (the "Shareholders Agreement");
WHEREAS, it is intended that the Merger shall be recorded
for accounting purposes as a "pooling-of-interests"; and
WHEREAS, the Company has delivered to Parent a letter
identifying all persons (each, a "Company Affiliate") who are, at the
date hereof, "affiliates" of the Company for purposes of Rule 145
under the Securities Act of 1933, as amended (the "Securities Act"),
and each Company Affiliate has delivered to Parent a letter (each, an
"Affiliate Letter") relating to (i) the transfer, prior to the
Effective Time (as defined in Section 1.8(a)), of the Shares
beneficially owned by such Company Affiliate on the date hereof and
(ii) the transfer of the shares of Parent Common Stock (as defined in
Section 1.8(a)) to be received by such Company Affiliate in the
Merger.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein
contained, and intending to be legally bound hereby, the Company,
Parent and Acquisition hereby agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1. The Merger. At the Effective Time and upon
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the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"),
Acquisition shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving
corporation (the "Surviving Corporation") and the separate corporate
existence of Acquisition shall cease.
SECTION 1.2. Effective Time. Subject to the provisions of
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this Agreement, Parent, Acquisition and the Company shall cause the
Merger to be consummated by filing an appropriate Certificate of
Merger or other appropriate documents (the "Certificate of Merger")
with the Secretary of State of the State of Delaware in such form as
required by, and executed in accordance with, the relevant provisions
of the DGCL, as soon as practicable on or after the Closing Date (as
defined in Section 1.3). The Merger shall become effective upon such
filing or at such time thereafter as is provided in the Certificate of
Merger (the "Effective Time").
SECTION 1.3. Closing of the Merger. The closing of the
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Merger (the "Closing") will take place at a time and on a date to be
specified by the parties, which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth
in Article 5 (the "Closing Date"), at the offices of Weil, Gotshal &
▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another
time, date or place is agreed to in writing by the parties hereto.
SECTION 1.4. Effects of the Merger. The Merger shall have
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the effects set forth in the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of the Company
and Acquisition shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Acquisition shall
become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.5. Certificate of Incorporation and Bylaws. The
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Restated Certificate of Incorporation of the Company in effect at the
Effective Time shall be the articles of incorporation of the Surviving
Corporation until amended in accordance with applicable law. The
Bylaws of the Company in
effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
SECTION 1.6. Directors. The directors of the Company at
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the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation until such
director's successor is duly elected or appointed and qualified.
SECTION 1.7. Officers. The officers of the Company at the
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Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation until such
officer's successor is duly elected or appointed and qualified.
SECTION 1.8. Conversion of Shares.
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(a) At the Effective Time, each share of common stock, par
value $0.01 per share, of the Company ("Company Common Stock") issued
and outstanding immediately prior to the Effective Time (individually
a "Share" and collectively, the Shares") (other than (i) Shares held
by any subsidiary of the Company and (ii) Shares held by Parent,
Acquisition or any other subsidiary of Parent) shall, by virtue of the
Merger and without any action on the part of Acquisition, the Company
or the holder thereof, be converted into and shall become 1.225 fully
paid and nonassessable shares of common stock, par value $0.01 per
share, of Parent ("Parent Common Stock") (the "Merger Consideration").
(b) At the Effective Time, each outstanding share of the
common stock, par value $0.01 per share, of Acquisition shall be
converted into one share of common stock, par value $0.01 per share,
of the Surviving Corporation.
(c) At the Effective Time, each Share held by Parent,
Acquisition or any subsidiary of Parent, Acquisition or the Company
immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of Acquisition, the Company or the
holder thereof, be canceled, retired and cease to exist and no payment
shall be made with respect thereto.
SECTION 1.9. Exchange of Certificates.
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(a) As of the Effective Time, Parent shall make available
to The Bank of Boston or another bank or trust company designated by
Parent and reasonably acceptable to the Company
(the "Exchange Agent"), for the benefit of the holders of Shares, for
exchange in accordance with this Article I, through the Exchange
Agent: (i) certificates representing the appropriate number of shares
of Parent Common Stock and (ii) cash to be paid in lieu of fractional
shares of Parent Common Stock (such shares of Parent Common Stock and
such cash are hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 1.8 in exchange for outstanding Shares.
(b) As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective
Time represented outstanding Shares (the "Certificates") whose Shares
were converted into the right to receive shares of Parent Common Stock
pursuant to Section 1.8: (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other
provisions as Parent and the Company 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. Upon surrender of a Certificate for cancellation
to the Exchange Agent or to such other agent or agents as may be
appointed by Parent and Acquisition, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing
that number of whole shares of Parent Common Stock and, if applicable,
a check representing the cash consideration to which such holder may
be entitled on account of a fractional share of Parent Common Stock,
which such holder has the right to receive pursuant to the provisions
of this Article I, and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of Shares which
is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common
Stock may be issued to a transferee if the Certificate representing
such Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid.
Until surrendered as contemplated by this Section 1.9, each
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the
certificate representing shares of Parent Common Stock and cash in
lieu of any fractional shares of Parent Common Stock as contemplated
by this Section 1.9.
(c) No dividends or other distributions declared or made
after the Effective Time with respect to Parent Common Stock with a
record date after the Effective Time shall be paid to the holder of
any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to
Section 1.9(f) until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to
the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder
is entitled pursuant to Section 1.9(f) and the amount of dividends or
other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common
Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Parent Common
Stock.
(d) In the event that any Certificate for Shares shall have
been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange therefor, upon the making of an affidavit of that fact by the
holder thereof such shares of Parent Common Stock and cash in lieu of
fractional shares, if any, as may be required pursuant to this
Agreement; provided, however, that Parent may, in its discretion,
require the delivery of a suitable bond or indemnity.
(e) All shares of Parent Common Stock issued upon the
surrender for exchange of Shares in accordance with the terms hereof
(including any cash paid pursuant to Section 1.9(c) or 1.9(f)) shall
be deemed to have been issued in full satisfaction of all rights
pertaining to such Shares, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation
of the Shares 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.
(f) No fractions of a share of Parent Common Stock shall be
issued in the Merger, but in lieu thereof each holder of Shares
otherwise entitled to a fraction of a share of Parent Common Stock
shall, upon surrender of his or her Certificate or
Certificates, be entitled to receive an amount of cash (without
interest) determined by multiplying the closing price for Parent
Common Stock as reported on the New York Stock Exchange (the "NYSE")
Composite Transactions on the business day two days prior to the
Effective Date by the fractional share interest to which such holder
would otherwise be entitled. The parties acknowledge that payment of
the cash consideration in lieu of issuing fractional shares was not
separately bargained for consideration but merely represents a
mechanical rounding off for purposes of simplifying the corporate and
accounting problems which would otherwise be caused by the issuance of
fractional shares.
(g) Any portion of the Exchange Fund which remains
undistributed to the shareholders of the Company for six months after
the Effective Time shall be delivered to Parent, upon demand, and any
shareholders of the Company who have not theretofore complied with
this Article I shall thereafter look only to Parent for payment of
their claim for Parent Common Stock, as the case may be, any cash in
lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock.
(h) Neither Parent nor the Company shall be liable to any
holder of Shares, or Parent Common Stock, as the case may be, for such
shares (or dividends or distributions with respect thereto) or cash
from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
SECTION 1.10. Stock Options. (a) At the Effective Time,
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each outstanding option to purchase shares of Company Common Stock (a
"Company Stock Option" or collectively, "Company Stock Options")
issued pursuant to the (i) 1987 Stock Option Plan of the Company and
the 1995 Stock Option and Award Plan (the "1995 Plan") of the Company
and the Papyrus Design Group, Inc. 1992 Stock Option Plan
(collectively, the "Company Plans") and (ii) the Sierra On-Line, Inc.
1993 Stock Option Grant Agreement with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and the
Sierra On-Line, Inc., 1994 Stock Option Grant Agreement with ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (collectively, the "Non-Plan Option Agreements"), whether
vested or unvested, shall be cancelled and, in lieu thereof, Parent
shall issue to each holder of a Company Stock Option an option (each,
a "Parent Option"), to acquire, on substantially the same terms and
subject to substantially the same conditions as were applicable under
such Company Stock Option, including, without limitation term,
exercisability, vesting schedule, status as an "incentive stock
option" under section 422 of the Code (except as hereinafter
provided), acceleration and termination provisions, the same
number of shares of Parent Common Stock as the holder of such Company
Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such option in full immediately prior
to the Effective Time, at a price per share equal to (y) the aggregate
exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Company Stock Option divided by (z) the
number of full shares of Parent Common Stock deemed purchasable
pursuant to such Company Stock Option; provided, however, that the
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number of shares of Parent Common Stock that may be purchased upon
exercise of any such Parent Option shall not include any fractional
share and, upon exercise of the Parent Option, a cash payment shall be
made for any fractional share based upon the Closing Price (as
hereinafter defined) of a share of Parent Common Stock on the trading
day immediately preceding the date of exercise. "Closing Price" shall
mean, on any day, the last reported sale price of one share of Parent
Common Stock on the NYSE. Notwithstanding the foregoing, Parent has
advised the Company that Parent may need to obtain the approval of its
shareholders in order for the Company Stock Options that qualify under
section 422 of the Code to be converted to Parent Options having the
same status and Parent agrees to use all reasonable efforts to obtain
such approval (if required). If such approval is sought and not
obtained, any such Company Stock Options that are so converted shall
not qualify under section 422 of the Code. Employment with the
Company shall be credited to the optionees for purposes of determining
the number of vested shares of Parent Common Stock subject to exercise
under converted Company Options after the Effective Time. Parent
agrees that the Parent Options issued to a holder of Company Stock
Options under the 1995 Plan shall become 100% vested and fully
exercisable in the event that, within two years after the Effective
Time the holder's employment or services are terminated by Parent or
any of its affiliates without Cause or the holder voluntarily
terminates his or her employment or services with Good Reason.
"Cause" and "Good Reason" shall have the meanings set forth in the
1995 Plan. None of the Company Stock Options that are unvested at the
Effective Time shall become vested as a result of the execution and
delivery of this Agreement or the consummation of the Merger.
(b) As soon as practicable after the Effective Time, but no
later than 30 days thereafter, Parent shall deliver to the holders of
Company Stock Options appropriate notices setting forth such holders'
rights pursuant to the respective Company Plans and stating that the
holders will receive Parent Options exercisable for shares of Parent
Common Stock on substantially the same terms and conditions as their
Company Stock Options
(subject to the adjustments required by this Section 1.10 after giving
effect to the Merger).
(c) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery upon exercise of Parent Options in accordance with
this Section 1.10. As soon as practicable after the Effective Time,
but no later than 30 days thereafter, Parent shall file a registration
statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form
with respect to the shares of Parent Common Stock subject to the
Parent Options and shall use its best efforts to maintain the
effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as the Parent Options
remain outstanding.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent
and Acquisition as follows:
SECTION 2.1. Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) The Company and each of its subsidiaries (as defined in
Section 7.12), is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its businesses
as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority
would not have a Material Adverse Effect (as defined below) on the
Company. When used in connection with the Company or its
subsidiaries, the term "Material Adverse Effect" means any change or
effect (i) that is or is reasonably likely to be materially adverse to
the properties, business, results of operations or condition
(financial or otherwise) of the Company and its subsidiaries, taken as
whole, other than any change or effect arising out of general economic
conditions or conditions generally affecting the consumer software
market or the entertainment, education or personal productivity
sectors of that market or (ii) that may impair the ability of the
Company to consummate the transactions contemplated hereby.
(b) Except as set forth in Section 2.1(b) of the Disclosure
Schedule previously delivered by the Company to Parent (the "Company
Disclosure Schedule"), the Company has no subsidiaries and does not
own, directly or indirectly, beneficially or of record, any shares of
capital stock or other security of any other entity or any other
investment in any other entity.
(c) Each of the Company and its subsidiaries is duly
qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or
licensing necessary, except in such jurisdictions where the failure to
be so duly qualified or licensed and in good standing would not have a
Material Adverse Effect on the Company.
(d) The Company has heretofore delivered to Parent accurate
and complete copies of the certificate or articles of incorporation
and by-laws, as currently in effect, of each of the Company and each
of its subsidiaries.
SECTION 2.2. Capitalization of the Company and its
-------------------------------------
Subsidiaries.
------------
(a) The authorized capital stock of the Company consists
of: 40,000,000 Shares, of which, as of February 12, 1996,
approximately 20,014,182 shares were issued and outstanding, and
1,000,000 shares of preferred stock, par value $0.01 per share, no
shares of which are outstanding. All of the issued and outstanding
shares of Company Common Stock have been validly issued, and are fully
paid, nonassessable and free of preemptive rights. As of February 12,
1996, approximately 2,832,238 shares of Company Common Stock were
reserved for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding Company Stock Options
issued pursuant to the Company Plans and the Non-Plan Option
Agreements, 191,981 shares of Company Common Stock were reserved for
issuance under the Company's 1995 Employee Stock Purchase Plan (the
"ESPP") and 1,668,571 shares of Company Common Stock were reserved for
issuance pursuant to the conversion of the Company's 6 1/2 %
Convertible Subordinated Notes due 2001 (the "Convertible Notes").
The final purchase by participants under the ESPP will occur no later
than the business day immediately preceding the Effective Time. The
ESPP will terminate at the Effective Time. Except as described in the
Company SEC Reports (as defined in Section 2.4(a)) or in Section
2.2(a) of the Company Disclosure Schedule, as of the date hereof,
since February 12, 1996, no
shares of the Company's capital stock have been issued other than
pursuant to Company Stock Options already in existence on such date,
and, since February 12, 1996, no stock options have been granted.
Except as set forth above, as of the date hereof, there are
outstanding (i) no shares of capital stock or other voting securities
of the Company, (ii) no securities of the Company or its subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (iii) no options or other rights to acquire
from the Company or its subsidiaries, and no obligations of the
Company or its subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company, and (iv) no equity
equivalents, interests in the ownership or earnings of the Company or
its subsidiaries or other similar rights (including stock appreciation
rights) (collectively, "Company Securities"). There are no
outstanding obligations of the Company or its subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities. Except
as set forth in Section 2.2(a) of the Company Disclosure Schedule,
there are no stockholder agreements (other than the Shareholders
Agreement), voting trusts or other agreements or understandings to
which the Company is a party or to which it is bound relating to the
voting of any shares of capital stock of the Company.
(b) All of the outstanding capital stock of the Company's
subsidiaries is owned by the Company, directly or indirectly, free and
clear of any Lien (as defined below) or any other limitation or
restriction (including any restriction on the right to vote or sell
the same, except as may be provided as a matter of law). There are no
securities of the Company or its subsidiaries convertible into or
exchangeable for, no options or other rights to acquire from the
Company or its subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for
the issuance or sale, directly or indirectly, of any capital stock or
other ownership interests in, or any other securities of, any
subsidiary of the Company. There are no outstanding contractual
obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any subsidiary of the Company. For purposes of
this Agreement, "Lien" means, with respect to any asset (including,
without limitation, any security) any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset.
(c) The Company Common Stock constitutes the only class of
securities of the Company or its subsidiaries registered
or required to be registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
SECTION 2.3. Authority Relative to this Agreement; Consents
----------------------------------------------
and Approvals.
-------------
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of the
Company (the "Company Board") and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby (other than, with
respect to the Merger, the approval and adoption of this Agreement by
the holders of a majority of the then outstanding shares of Company
Common Stock). This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in
accordance with its terms.
(b) The Company Board has, by unanimous vote of those
present, duly and validly approved, and taken all corporate actions
required to be taken by the Company Board for the consummation of, the
transactions, including the Merger, contemplated hereby and resolved
to recommend that the shareholders of the Company approve and adopt
this Agreement; provided, however, that such approval and
recommendation may be withdrawn, modified or amended in the event that
the Company Board by majority vote determines in its good faith
judgment, after consultation with and based upon the advice of
independent legal counsel, that it is necessary to do so in order to
comply with its fiduciary duties to shareholders under applicable law.
No state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement or any of the
transactions contemplated hereby.
SECTION 2.4. SEC Reports; Financial Statements.
---------------------------------
(a) The Company has filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC")
since January 1, 1993, each of which has complied in all material
respects with all applicable requirements of the Securities Act and
the Exchange Act, each as in effect on the dates such forms, reports
and documents were filed. The Company has heretofore delivered to
Parent, in the form filed with the SEC (including any amendments
thereto), (i) its Annual Reports on
Form 10-K for each of the fiscal years ended March 31, 1993, 1994 and
1995, (ii) all definitive proxy statements relating to the Company's
meetings of shareholders (whether annual or special) held since April
1, 1993 and (iii) all other reports or registration statements filed
by the Company with the SEC since April 1, 1993 (the "Company SEC
Reports"). None of such forms, reports or documents, including,
without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue
statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
consolidated financial statements of the Company included in the
Company SEC Reports complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto and fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis ("GAAP") (except as may be indicated in the notes
thereto), the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position
for the periods then ended (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments and
except that, in the case of financial statements included therein
which were later restated to account for one or more business
combinations accounted for as poolings-of-interests, such original
financial statements do not reflect such restatements). Since March
31, 1995, except as set forth in the Company SEC Reports, there has
not been any change, or any application or request for any change, by
the Company or any of its subsidiaries in accounting principles,
methods or policies for financial accounting or tax purposes (subject,
in the case of the unaudited interim financial statements, to normal
year-end adjustments).
(b) The Company has heretofore made available to Parent a
complete and correct copy of any material amendments or modifications,
which have not yet been filed with the SEC, to agreements, documents
or other instruments which previously had been filed by the Company
with the SEC pursuant to the Exchange Act.
SECTION 2.5. Information Supplied. None of the information
--------------------
supplied or to be supplied by the 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 shares of Parent Common Stock in
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 to make the statements
therein not misleading, and (ii) the proxy statement relating to the
meeting of the Company's shareholders, and, if required, a meeting of
Parent's shareholders, to be held in connection with the Merger (the
"Proxy Statement") will, at the date mailed to shareholders and at the
times of the meeting or meetings of shareholders to be held in
connection with the Merger, 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. If at any
time prior to the Effective Time any event with respect to the
Company, its officers and directors or any of its subsidiaries should
occur which is required to be described in an amendment of, or a
supplement to, the S-4 or the Proxy Statement, the Company shall
promptly so advise Parent and such event shall be so described, and
such amendment or supplement (which Parent shall have a reasonable
opportunity to review) shall be promptly filed with the SEC and, as
required by law, disseminated to the shareholders of the Company. The
Proxy Statement, insofar as it relates to the meeting of the Company's
shareholders to vote on the Merger, will comply as to form in all
material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
SECTION 2.6. Consents and Approvals; No Violations. Except
-------------------------------------
for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the filing and recordation of the Certificate of Merger as
required by the DGCL, no filing with or notice to, and no permit,
authorization, consent or approval of, any court or tribunal or
administrative, governmental or regulatory body, agency or authority
(a "Governmental Entity") is necessary for the execution and delivery
by the Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby, except where the failure to
obtain such permits, authorizations, consents or approvals or to make
such filings or give such notice would not have a Material Adverse
Effect on the Company. Except as set forth in Section 2.6 to the
Company Disclosure Schedule, neither the execution, delivery and
performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the
respective certificate or articles of incorporation or bylaws (or
similar governing documents) of the Company or any of its
subsidiaries, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which any of them
or any of their respective properties or assets may be bound, or (iii)
violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to the Company or any of its subsidiaries or any
of their respective properties or assets, except in the case of (ii)
or (iii) for violations, breaches or defaults which would not have a
Material Adverse Effect on the Company.
SECTION 2.7. No Default. None of the Company or its
----------
subsidiaries is in default or violation (and no event has occurred
which with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of (i) its
certificate or articles of incorporation or bylaws (or similar
governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to
which the Company or either of its subsidiaries is now a party or by
which any of them or any of their respective properties or assets may
be bound or (iii) any order, writ, injunction, decree, law, statute,
rule or regulation applicable to the Company, its subsidiaries or any
of their respective properties or assets, except in the case of (ii)
or (iii) for violations, breaches or defaults that would not have a
Material Adverse Effect on the Company.
SECTION 2.8. No Undisclosed Liabilities; Absence of
--------------------------------------
Changes. Except as and to the extent publicly disclosed by the
-------
Company in the Company SEC Reports, as of December 31, 1995, none of
the Company or its subsidiaries had any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, and
whether due or to become due or asserted or unasserted, which would be
required by GAAP to be reflected in, reserved against or otherwise
described in the consolidated balance sheet of the Company (including
the notes thereto) as of such date or which could reasonably be
expected to have a Material Adverse Effect on the Company. Except as
publicly disclosed by the Company in the Company SEC Reports, since
December 31, 1995, the business of the Company and its subsidiaries
has been carried on only in the ordinary and usual
course, none of the Company or its subsidiaries has incurred any
liabilities of any nature, whether or not accrued, contingent or
otherwise, which could reasonably be expected to have, and there have
been no events, changes or effects with respect to the Company or its
subsidiaries having or which could reasonably be expected to have, a
Material Adverse Effect on the Company.
SECTION 2.9. Litigation. Except as publicly disclosed by
----------
the Company in the Company SEC Reports or disclosed in Section 2.9 of
the Company Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries or
any of their respective properties or assets which (a) could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or (b) as of the date hereof,
questions the validity of this Agreement or any action to be taken by
the Company in connection with the consummation of the transactions
contemplated hereby or could otherwise prevent or delay the
consummation of the transactions contemplated by this Agreement.
Except as publicly disclosed by the Company, none of the Company or
its subsidiaries is subject to any outstanding order, writ, injunction
or decree which, insofar as can be reasonably foreseen, could
reasonably be expected to have a Material Adverse Effect on the
Company or would prevent or delay the consummation of the transactions
contemplated hereby.
SECTION 2.10. Compliance with Applicable Law. Except as
------------------------------
publicly disclosed by the Company in the Company SEC Reports, the
Company and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the
"Company Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which could not
reasonably be expected to have a Material Adverse Effect on the
Company. Except as publicly disclosed by the Company in the Company
SEC Reports, the Company and its subsidiaries are in compliance with
the terms of the Company Permits, except where the failure so to
comply could not reasonably be expected to have a Material Adverse
Effect on the Company. Except as publicly disclosed by the Company in
the Company SEC Reports, the businesses of the Company and its
subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity except that no
representation or warranty is made in this Section 2.10 with respect
to Environmental Laws (as defined in Section 2.12(a)) and except for
violations or possible violations which do not, and, insofar as
reasonably can be foreseen, will not, have a Material
Adverse Effect on the Company. Except as publicly disclosed by the
Company in the Company SEC Reports or as disclosed in Section 2.10 of
the Company Disclosure Schedule, to the best knowledge of the Company
no investigation or review by any Governmental Entity with respect to
the Company or its subsidiaries is pending or threatened, nor, to the
best knowledge of the Company, has any Governmental Entity indicated
an intention to conduct the same, other than, in each case, those
which the Company reasonably believes will not have a Material Adverse
Effect on the Company.
SECTION 2.11. Employee Plans. Except as disclosed in
--------------
Section 2.11 of the Company Disclosure Schedule, there are no
"employee benefit plans" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained or contributed to by the Company or its subsidiaries
("Company ERISA Plans"). A complete and correct copy of each Company
ERISA Plan has been provided or made available to Parent. The Company
ERISA Plans are in compliance with the applicable provisions of ERISA,
the Code and other applicable law, except for instances of non-
compliance that could not reasonably be expected to have a Material
Adverse Effect on the Company.
SECTION 2.12. Environmental Laws and Regulations.
----------------------------------
(a) Except as publicly disclosed by the Company in the
Company SEC Reports, (i) each of the Company and its subsidiaries is
in compliance with all applicable federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), except for non-compliance that could not
reasonably be expected to have a Material Adverse Effect on the
Company, which compliance includes, but is not limited to, the
possession by the Company and its subsidiaries of all material permits
and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions
thereof; (ii) none of the Company or its subsidiaries has received
written notice of, or, to the best knowledge of the Company, is the
subject of, any action, cause of action, claim, investigation, demand
or notice by any person or entity alleging liability under or non-
compliance with any Environmental Law (an "Environmental Claim") that
could reasonably be expected to have a Material Adverse Effect on the
Company; and (iii) to the best knowledge of the Company, there are no
circumstances that are reasonably likely to prevent or interfere with
such material compliance in the future.
(b) Except as publicly disclosed by the Company in the
Company SEC Reports, there are no Environmental Claims which could
reasonably be expected to have a Material Adverse Effect on the
Company that are pending or, to the best knowledge of the Company,
threatened against the Company or its subsidiaries or, to the best
knowledge of the Company, against any person or entity whose liability
for any Environmental Claim the Company or any of its subsidiaries has
or may have retained or assumed either contractually or by operation
of law.
SECTION 2.13. Tax Matters. The Company and its
-----------
subsidiaries have accurately prepared in all material respects and
duly filed with the appropriate federal, state, local and foreign
taxing authorities all tax returns, information returns and reports
that are, individually and in the aggregate, material and are required
to be filed with respect to the Company and its subsidiaries and have
paid in full or made adequate provision for the payment of all
material Taxes (as defined below). Neither the Company nor any of its
subsidiaries is delinquent in the payment of any material Taxes. As
used herein, the term "Taxes" means all federal, state, local and
foreign taxes, including, without limitation, income, profits,
franchise, employment, transfer, withholding, property, excise, sales
and use taxes (including interest penalties thereon and additions
thereto).
SECTION 2.14. Intangible Property. The Company and its
-------------------
subsidiaries own or possess adequate licenses or other valid rights to
use all material patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, copyrights, service marks, trade
secrets, applications for trademarks and for service marks, know-how
and other proprietary rights and information used or held for use in
connection with the business of the Company and its subsidiaries as
currently conducted or as contemplated to be conducted, and the
Company is unaware of any assertion or claim challenging the validity
of any of the foregoing which, individually or in the aggregate, would
have a Material Adverse Effect on the Company. To the best knowledge
of the Company, the conduct of the business of the Company and its
subsidiaries as heretofore and currently conducted has not and does
not conflict in any way with any patent, patent right, license,
trademark, trademark right, trade name, trade name right, service ▇▇▇▇
or copyright of any third party that, individually or in the
aggregate, would have a Material Adverse Effect on the Company. To
the best knowledge of the Company, there are no infringements of any
proprietary rights owned by or licensed by or to the Company or any
subsidiary which, individually or in the aggregate, would have a
Material Adverse Effect on the Company.
SECTION 2.15. Opinion of Financial Advisor. ▇▇▇▇▇▇▇▇▇,
----------------------------
▇▇▇▇▇▇▇▇ & Company LLC (the "Financial Advisor") has delivered to the
Company Board its opinion, dated the date of this Agreement, to the
effect that, as of such date, the Merger Consideration is fair to the
holders of Shares from a financial point of view, and such opinion has
not been withdrawn or modified.
SECTION 2.16. Brokers. No broker, finder or investment
-------
banker (other than the Financial Advisor, a true and correct copy of
whose engagement agreement has been provided to Acquisition or Parent)
is entitled to any brokerage, finder's or other fee or commission or
expense reimbursement in connection with the transactions contemplated
by this Agreement based upon arrangements made by and on behalf of the
Company or any of its affiliates (including the Company Affiliates).
The Company shall be responsible for all such fees and expenses,
except as otherwise provided in Section 6.3.
SECTION 2.17. Accounting Matters. Neither the Company nor,
------------------
to the best of its knowledge, any of its affiliates or shareholders
(including the Company Affiliates), has taken or agreed to take any
action that would prevent Parent from accounting for the business
combination to be effected by the Merger as a "pooling-of-interests."
The Company has not failed to bring to the attention of Parent any
actions, or agreements or understandings, whether written or oral, to
act that would be reasonably likely to prevent Parent from accounting
for the Merger as a "pooling-of-interests."
SECTION 2.18. Material Contracts.
------------------
(a) The Company has delivered or otherwise made available
to Parent true, correct and complete copies of all contracts and
agreements (and all amendments, modifications and supplements thereto
and all side letters to which the Company is a party affecting the
obligations of any party thereunder) to which the Company or any of
its subsidiaries is a party or by which any of its properties or
assets are bound that are, material to the business, properties or
assets of the Company and its subsidiaries taken as a whole,
including, without limitation, to the extent any of the following are,
individually or in the aggregate, material to the business, properties
or assets of the Company and its subsidiaries taken as a whole, all:
(i) employment, product design or development, personal services,
consulting, non-competition, severance, golden parachute or
indemnification contracts (including, without limitation, any contract
to which the Company is a party involving employees of the Company);
(ii) licensing, publishing, merchandising or
distribution agreements; (iii) contracts granting a right of first
refusal or first negotiation; (iv) partnership or joint venture
agreements; (v) agreements for the acquisition, sale or lease of
material properties or assets of the Company (by merger, purchase or
sale of assets or stock or otherwise) entered into since January 1,
1993; (vi) contracts or agreements with any Governmental Entity; and
(vii) all commitments and agreements to enter into any of the
foregoing (collectively, together with any such contracts entered into
in accordance with Section 4.1 hereof, the "Contracts"). Neither the
Company nor any of its subsidiaries is a party to or bound by any
severance, golden parachute or other agreement with any employee or
consultant pursuant to which such person would be entitled to receive
any additional compensation or an accelerated payment of compensation
as a result of the consummation of the transactions contemplated
hereby.
(b) Each of the Contracts is valid and enforceable in
accordance with its terms, and there is no default under any Contract
so listed either by the Company or, to the knowledge of the Company,
by any other party thereto, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a
default thereunder by the Company or, to the knowledge of the Company,
any other party, in any such case in which such default or event could
reasonably be expected to have a Material Adverse Effect on the
Company.
(c) No party to any such Contract has given notice to the
Company of or made a claim against the Company with respect to any
breach or default thereunder, in any such case in which such breach or
default could reasonably be expected to have a Material Adverse Effect
on the Company.
SECTION 2.19. Disclosure. No representation or warranty by
----------
the Company contained in this Agreement and no statement contained in
any certificate delivered by the Company to Acquisition or Parent
pursuant to this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading when taken
together in light of the circumstances in which they were made.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the
Company as follows:
SECTION 3.1. Organization.
------------
(a) 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 all requisite
corporate power and authority to own, lease and operate its properties
and to carry on its businesses as now being conducted, except where
the failure to be so organized, existing and in good standing or to
have such power and authority would not have a Material Adverse Effect
(as defined below) on Parent. When used in connection with Parent or
Acquisition, the term "Material Adverse Effect" means any change or
effect that is (i) materially adverse to the properties, business,
results of operations or condition (financial or otherwise) of Parent
and its subsidiaries, taken as a whole, other than any change or
effect arising out of general economic conditions unrelated to any
businesses in which Parent and its subsidiaries are engaged or
(ii) that may impair the ability of Parent and/or Acquisition to
consummate the transactions contemplated hereby.
(b) Parent has heretofore delivered to the Company accurate
and complete copies of the certificate of incorporation and bylaws, as
currently in effect, of Parent and Acquisition. Each of Parent and
its subsidiaries is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed
and in good standing would not have a Material Adverse Effect on
Parent.
(c) Each of Parent and its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of
the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not have a
Material Adverse Effect on Parent.
(d) Parent has heretofore delivered to the Company accurate
and complete copies of the certificate of incorporation and by-laws of
Parent as currently in effect.
SECTION 3.2. Capitalization of Parent and its Subsidiaries.
---------------------------------------------
(a) The authorized capital stock of Parent consists of
(i) 400,000,000 shares of Parent Common Stock, of which, as of January
31, 1996, approximately 189,000,000 shares of Parent Common Stock were
issued and outstanding, and 3,000,000 shares of Parent Common Stock
were held in treasury and (ii) 1,000,000 shares of preferred stock,
$.01 par value per share, none of which is issued or outstanding. All
of the shares of Parent Common Stock have been validly issued, and are
fully paid, nonassessable and free of preemptive rights. As of
January 31, 1996, approximately 29.7 million shares of Parent Common
Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding options.
Except as described in the Parent SEC Reports (as defined in Section
3.4(a)) and except as set forth in Section 3.2 of the Disclosure
Schedule previously delivered by Parent to the Company (the "Parent
Disclosure Schedule"), as of the date hereof, since January 31, 1996,
no shares of Parent's capital stock have been issued other than
pursuant to stock options already in existence on January 31, 1996,
and no stock options have been granted. Except (i) as described in
the Parent SEC Reports, and (ii) as set forth above, as of the date
hereof, there are outstanding (A) no shares of capital stock or other
voting securities of Parent, (B) no securities of Parent or its
subsidiaries convertible into or exchangeable for shares of capital
stock or voting securities of Parent, (C) except as provided in the
Davidson Agreement (as defined in Section 4.23), no options or other
rights to acquire from Parent or its subsidiaries, and no obligations
of Parent or its subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital
stock or voting securities of Parent, and (D) no equity equivalents,
interests in the ownership or earnings of Parent or its subsidiaries
or other similar rights (including stock appreciation rights)
(collectively, "Parent Securities"). There are no outstanding
obligations of Parent or any of its subsidiaries to repurchase, redeem
or otherwise acquire any Parent Securities. Except as set forth in
the Parent SEC Reports, there are no stockholder agreements, voting
trusts or other agreements or understandings to which Parent is a
party or to which it is bound relating to the voting of any shares of
capital stock of Parent.
(b) All of the outstanding capital stock of Parent's
subsidiaries (including Acquisition) is owned by Parent, directly or
indirectly, free and clear of any Lien or any other limitation or
restriction (including any restriction on the right to vote or sell
the same, except as may be provided as a matter of law). There are no
securities of Parent or its subsidiaries convertible into or
exchangeable for, no options or other rights to acquire from Parent or
its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or
sale, directly or indirectly, of any capital stock or other ownership
interests in, or any other securities of, any subsidiary of Parent.
There are no outstanding contractual obligations of Parent or its
subsidiaries to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other ownership interests in
any subsidiary of Parent.
(c) The Parent Common Stock constitutes the only class of
equity securities of Parent or its subsidiaries registered or required
to be registered under the Exchange Act.
SECTION 3.3. Authority Relative to this Agreement. Each of
------------------------------------
Parent and Acquisition has all necessary corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the boards of directors of
Parent and Acquisition and by Parent as the sole shareholder of
Acquisition, and no other corporate proceedings on the part of Parent
or Acquisition are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by each of Parent and
Acquisition and constitutes a valid, legal and binding agreement of
each of Parent and Acquisition, enforceable against each of Parent and
Acquisition in accordance with its terms.
SECTION 3.4. SEC Reports; Financial Statements.
---------------------------------
(a) Parent has filed all required forms, reports and
documents with the SEC since February 1, 1993, each of which has
complied in all material respects with all applicable requirements of
the Securities Act and the Exchange Act, each as in effect on the
dates such forms, reports and documents were filed. Parent has
heretofore delivered to the Company, in the form filed with the SEC
(including any amendments thereto), (i) its Annual Reports on Form 10-
K for each of the fiscal years ended January 31, 1993, 1994 and 1995,
(ii) all definitive proxy
statements relating to Parent's meetings of shareholders (whether
annual or special) held since February 1, 1993 and (iii) all other
reports or registration statements filed by Parent with the SEC since
February 1, 1993 (the "Parent SEC Reports"). None of such forms,
reports or documents, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Parent included
in the Parent SEC Reports complied as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto and fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of Parent and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and changes in financial position for the periods then
ended (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and except that, in the
case of financial statements included therein which were later
restated to account for one or more business combinations accounted
for as poolings-of-interests, such original financial statements do
not reflect such restatements). Since January 31, 1995, there has not
been any change, or any application or request for any change, by
Parent or any of its subsidiaries in accounting principles, methods or
policies for financial accounting or tax purposes.
(b) Parent has heretofore made available to the Company a
complete and correct copy of any material amendments or modifications,
which have not yet been filed with the SEC, to agreements, documents
or other instruments which previously had been filed by Parent with
the SEC pursuant to the Exchange Act.
SECTION 3.5. Information Supplied. None of the information
--------------------
supplied or to be supplied by Parent or Acquisition 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
necessary to make the statements therein not misleading and (ii) the
Proxy Statement will, at the date mailed to shareholders and at the
times of the meeting of shareholders of the Company to be held in
connection with the
Merger, 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. If at any time prior to
the Effective Time any event with respect to Parent, its officers and
directors or any of its subsidiaries should occur which is required to
be described in an amendment of, or a supplement to, the S-4 or the
Proxy Statement, Parent shall promptly so advise the Company and such
event shall be so described, and such amendment or supplement (which
the Company shall have a reasonable opportunity to review) shall be
promptly filed with the SEC. The S-4 will comply as to form in all
material respects with the provisions of the Securities Act and the
rules and regulations thereunder.
SECTION 3.6. Consents and Approvals; No Violations. Except
-------------------------------------
for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the HSR Act,
and the filing and recordation of the Certificate of Merger as
required by the DGCL, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery by Parent or Acquisition of
this Agreement or the consummation by Parent or Acquisition of the
transactions contemplated hereby, except where the failure to obtain
such permits, authorizations, consents or approvals or to make such
filings or give such notice would not have a Material Adverse Effect
on Parent. Except as set forth in Section 3.6 of the Parent
Disclosure Schedule, neither the execution, delivery and performance
of this Agreement by Parent or Acquisition nor the consummation by
Parent or Acquisition of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the
respective certificate of incorporation or bylaws (or similar
governing documents) of Parent or Acquisition or any of Parent's
subsidiaries, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Parent
or Acquisition or any of Parent's subsidiaries is a party or by which
any of them or any of their respective properties or assets may be
bound or (iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to Parent or Acquisition or any
of Parent's subsidiaries or any of their respective properties or
assets,
except in the case of (ii) or (iii) for violations, breaches or
defaults which would not have a Material Adverse Effect on Parent.
SECTION 3.7. No Default. None of Parent or any of its
----------
subsidiaries is in default or violation (and no event has occurred
which with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of (i) its
Articles of Incorporation or Bylaws (or similar governing documents),
(ii) any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Parent or any of
its subsidiaries is now a party or by which any of them or any of
their respective properties or assets may be bound or (iii) any order,
writ, injunction, decree, law, statute, rule or regulation applicable
to Parent, its subsidiaries or any of their respective properties or
assets, except in the case of (ii) or (iii) for violations, breaches
or defaults that would not have a Material Adverse Effect on Parent.
SECTION 3.8. No Undisclosed Liabilities; Absence of
--------------------------------------
Changes. Except as and to the extent publicly disclosed by Parent, as
-------
of October 31, 1995, none of Parent or its subsidiaries had any
liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, and whether due or to become due or asserted
or unasserted, which would be required by GAAP to be reflected in,
reserved against or otherwise described in the consolidated balance
sheet of Parent and its consolidated subsidiaries (including the notes
thereto) as of such date or which could reasonably be expected to have
a Material Adverse Effect on Parent. Except as publicly disclosed by
Parent in the Parent SEC Reports, since October 31, 1995, the business
of Parent and its subsidiaries has been carried on only in the
ordinary and usual course, none of Parent or its subsidiaries has
incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, and whether due or to become due or asserted
or unasserted, which could reasonably be expected to have, and there
have been no events, changes or effects with respect to Parent or its
subsidiaries having or which could reasonably be expected to have, a
Material Adverse Effect on Parent.
SECTION 3.9. Litigation. Except as publicly disclosed by
----------
Parent in the Parent SEC Reports, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of Parent,
threatened against Parent or any of its subsidiaries or any of their
respective properties or assets which (a) if adversely determined,
could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent
or (b) as of the date hereof, questions the validity of this Agreement
or any action to be taken by Parent in connection with the
consummation of the transactions contemplated hereby or could
otherwise prevent or delay the consummation of the transactions
contemplated by this Agreement. Except as publicly disclosed by
Parent in the Parent SEC Reports, none of Parent or its subsidiaries
is subject to any outstanding order, writ, injunction or decree which,
insofar as can be reasonably foreseen, could reasonably be expected to
have a Material Adverse Effect on Parent or would prevent or delay the
consummation of the transactions contemplated hereby.
SECTION 3.10. Compliance with Applicable Law. Except as
------------------------------
publicly disclosed by Parent in the Parent SEC Reports, Parent and its
subsidiaries hold all permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Parent Permits"), except
for failures to hold such permits, licenses, variances, exemptions,
orders and approvals which could not reasonably be expected to have a
Material Adverse Effect on Parent. Except as publicly disclosed by
Parent in the Parent SEC Reports, Parent and its subsidiaries are in
compliance with the terms of the Parent Permits, except where the
failure so to comply could not reasonably be expected to have a
Material Adverse Effect on Parent. Except as publicly disclosed by
Parent in the Parent SEC Reports, the businesses of Parent and its
subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity except that no
representation or warranty is made in this Section 3.10 with respect
to Environmental Laws and except for violations or possible violations
which do not, and, insofar as reasonably can be foreseen, will not,
have a Material Adverse Effect on Parent. Except as publicly
disclosed by Parent in the Parent SEC Reports, to the best knowledge
of Parent, no investigation or review by any Governmental Entity with
respect to Parent or its subsidiaries is pending or threatened, nor,
to the best knowledge of Parent, has any Governmental Entity indicated
an intention to conduct the same, other than, in each case, those
which Parent reasonably believes will not have a Material Adverse
Effect on Parent.
SECTION 3.11. Employee Plans. All "employee benefit plans"
--------------
as defined in Section 3(3) of ERISA, maintained or contributed to by
Parent and its subsidiaries are in compliance with the applicable
provisions of ERISA, the Code and other applicable law, except for
instances of non-compliance that could
not reasonably be expected to have a Material Adverse Effect on
Parent.
SECTION 3.12. Environmental Laws and Regulations.
----------------------------------
(a) Except as publicly disclosed by Parent in the Parent
SEC Reports, (i) each of Parent and its subsidiaries is in compliance
with all Environmental Laws, except for non-compliance that could not
reasonably be expected to have a Material Adverse Effect on Parent,
which compliance includes, but is not limited to, the possession by
Parent and its subsidiaries of all material permits and other
governmental authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof; (ii) none
of Parent or its subsidiaries has received written notice of, or, to
the best knowledge of Parent, is the subject of, any Environmental
Claim that could reasonably be expected to have a Material Adverse
Effect on Parent; and (iii) to the best knowledge of Parent, there are
no circumstances that are reasonably likely to prevent or interfere
with such material compliance in the future.
(b) Except as publicly disclosed by Parent in the Parent
SEC Reports, there are no Environmental Claims which could reasonably
be expected to have a Material Adverse Effect on Parent that are
pending or, to the best knowledge of Parent, threatened against Parent
or any of its subsidiaries or, to the best knowledge of Parent,
against any person or entity whose liability for any Environmental
Claim Parent or its subsidiaries has or may have retained or assumed
either contractually or by operation of law.
SECTION 3.13. Tax Matters. Parent and its subsidiaries
-----------
have accurately prepared in all material respects and duly filed with
the appropriate federal, state, local and foreign taxing authorities
all tax returns, information returns and reports that are,
individually or in the aggregate, material and are required to be
filed with respect to Parent and its subsidiaries and have paid in
full or made adequate provision for the payment of all material Taxes.
Neither Parent nor any of its subsidiaries is delinquent in the
payment of any material Taxes.
SECTION 3.14. No Prior Activities. Except for obligations
-------------------
incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions
contemplated hereby, Acquisition
has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind whatsoever or
entered into any agreement or arrangement with any person or entity.
SECTION 3.15. Brokers. No broker, finder or investment
-------
banker (other than ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.) 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 and on behalf of Parent or Acquisition or any of their
affiliates.
SECTION 3.16. Accounting Matters. Neither Parent nor, to
------------------
the best of its knowledge, any of its affiliates, has taken or agreed
to take any action that would prevent Parent from accounting for the
business combination to be effected by the Merger as a "pooling-of-
interests." Parent has not failed to bring to the attention of the
Company any actions, or agreements or understandings, whether written
or oral, to act that would be reasonably likely to prevent Parent from
accounting for the Merger as a "pooling-of-interests."
SECTION 3.17. Disclosure. No representation or warranty by
----------
Parent contained in this Agreement and no statement contained in any
certificate delivered by Acquisition or Parent to the Company pursuant
to this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading when taken together in
light of the circumstances in which they were made.
ARTICLE 4
COVENANTS
SECTION 4.1. Conduct of Business of the Company. Except as
----------------------------------
contemplated by this Agreement, during the period from the date hereof
to the Effective Time, the Company will, and will cause each of its
subsidiaries to, conduct its operations in the ordinary course of
business consistent with past practice and, to the extent consistent
therewith, with no less diligence and effort than would be applied in
the absence of this Agreement, seek to preserve intact its current
business organizations, seek to keep available the service of its
current officers and employees and seek to preserve its relationships
with customers, suppliers and others having business dealings with it
to the end that goodwill and ongoing businesses shall be unimpaired at
the Effective Time. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in this Agreement, prior to
the Effective Time, neither the Company nor
any of its subsidiaries will, without the prior written consent of
Parent, which consent shall not be unreasonably withheld:
(a) amend its certificate or articles of incorporation or
bylaws (or other similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree
or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other securities
or equity equivalents (including, without limitation, any stock
options or stock appreciation rights), except for the grant of options
to purchase up to 500,000 shares of Company Common Stock to employees
under the Company Plans, the sale of up to 191,981 shares of Company
Common Stock to employees under the ESPP, the issuance of up to
1,668,571 shares of Company Common Stock pursuant to the conversion of
the Convertible Notes in accordance with the terms thereof and the
issuance or sale of shares of Company Common Stock pursuant to options
granted under the Company Plans or the Non-Plan Option Agreements (in
each case, in the ordinary course of business and consistent with past
practice);
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, make any other actual, constructive or
deemed distribution in respect of any shares of its capital stock or
otherwise make any payments to stockholders in their capacity as such,
or redeem or otherwise acquire any of its securities or any securities
of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its subsidiaries (other
than the Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or
ownership of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt
or issue any debt securities except for borrowings under existing
lines of credit in the ordinary course of business and in amounts not
material to the Company and its subsidiaries taken as a whole; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or
otherwise) for the obligations of any other person except in the
ordinary course of business consistent with past practice and in
amounts not material to the Company and its subsidiaries, taken as a
whole, and except for obligations of the wholly owned subsidiaries of
the Company; (iii) make any loans, advances or capital contributions
to, or investments in, any other person (other than to the wholly
owned subsidiaries of the Company or customary loans or advances to
employees in the ordinary course of business consistent with past
practice and in amounts not material to the maker of such loan or
advance); (iv) pledge or otherwise encumber shares of capital stock of
the Company or its subsidiaries; or (v) mortgage or pledge any of its
material assets, tangible or intangible, or create or suffer to exist
any material Lien thereupon;
(g) except as may be required by law or as contemplated by
this Agreement, enter into, adopt or amend or terminate any bonus,
profit sharing, compensation, severance, termination, stock option
(except for normal grants to newly hired or current employees,
consistent with past practice), stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation, employment, severance or
other employee benefit agreement, trust, plan, fund, award or other
arrangement for the benefit or welfare of any director, officer or
employee in any manner, or (except as set forth in Section 4.1(g) of
the Company Disclosure Schedule and except for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to the Company, and as required under existing
agreements or in the ordinary course of business generally consistent
with past practice) increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date
hereof (including, without limitation, the granting of stock
appreciation rights or performance units);
(h) acquire, sell, lease or dispose of any assets outside
the ordinary course of business or any assets which in the aggregate
are material to the Company and its subsidiaries taken as a whole,
enter into any commitment or transaction outside the ordinary course
of business or grant any exclusive distribution rights;
(i) except as may be required as a result of a change in
law or in generally accepted accounting principles, change any of the
accounting principles or practices used by it;
(j) revalue in any material respect any of its assets,
including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary
course of business or as required by generally accepted accounting
principles;
(k) (i) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein; (ii)
enter into any contract or agreement, other than in the ordinary
course of business or amend in any material respect any of the
Contracts or the agreements referred to in Section 2.18; (iii)
authorize any new capital expenditure or expenditures which,
individually, is in excess of $500,000 or, in the aggregate, are in
excess of $5 million; provided, that none of the foregoing shall limit
any capital expenditure already included in the Company's fiscal 1997
capital expenditure budget provided to Parent prior to the date
hereof; or (iv) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that
would be prohibited hereunder;
(l) make or revoke any tax election or settle or compromise
any tax liability material to the Company and its subsidiaries taken
as a whole or change (or make a request to any taxing authority to
change) any material aspect of its method of accounting for tax
purposes;
(m) pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities
reflected or reserved against in, or contemplated by, the consolidated
financial statements (or the notes thereto) of the Company and its
subsidiaries or incurred in the ordinary course of business consistent
with past practice;
(n) settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated hereby; or
(o) take (other than to Parent in seeking its consent to
the taking of any such action), propose to take, or agree in writing
or otherwise to take, any of the actions described in Sections 4.1(a)
through 4.1(n) or any action which would make any of the
representations or warranties of the Company contained in this
Agreement untrue or incorrect in any material respect.
SECTION 4.2. Conduct of Business of Parent. Except as
-----------------------------
contemplated by this Agreement, during the period from the date hereof
to the Effective Time, Parent will, and will cause each of its
subsidiaries to, conduct its operations in the ordinary course of
business consistent with past practice and, to the extent consistent
therewith, with no less diligence and effort than would be applied in
the absence of this Agreement, seek to preserve intact its current
business organizations, seek to keep available the service of its
current officers and employees and seek to preserve its relationships
with customers, suppliers and others having business dealings with it
to the end that goodwill and ongoing businesses shall be unimpaired at
the Effective Time. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in this Agreement, prior to
the Effective Time, Parent will not, without the prior written consent
of the Company, which consent shall not be unreasonably withheld:
(a) amend its certificate of incorporation (other than to
increase the number of authorized shares of Parent Common Stock) or
bylaws;
(b) split, combine or reclassify any shares of its capital
stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock; make any other actual, constructive or
deemed distribution in respect of any shares of its capital stock or
otherwise make any payments to stockholders in their capacity as such;
or redeem or otherwise acquire any of its securities;
(c) adopt a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other reorganization
of Parent;
(d) grant options to purchase, or make restricted stock
grants with respect to, in excess of 1,000,000 shares of Parent Common
Stock under Parent's employee stock option plans or stock purchase
plans, except in connection with any acquisition (by merger,
consolidation, or acquisition of stock or assets) of any corporation,
partnership or other business organization or division thereof or any
equity interest therein (including, without limitation, in connection
with the transactions contemplated by the Davidson Agreement);
(e) except as set forth in Section 4.2(e) of the Parent
Disclosure Schedule, incur or assume any long-term or short-term debt
or issue any debt securities except for
borrowings under existing lines of credit in the ordinary course of
business and in amounts not material to Parent and its subsidiaries
taken as a whole and except for other indebtedness not exceeding
$100,000,000 in the aggregate; or
(f) take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.2(a) through 4.2(e).
SECTION 4.3. Preparation of S-4 and the Proxy Statement.
------------------------------------------
Parent will, as promptly as practicable, prepare, following receipt of
notification from the SEC that it has no further comments on the Proxy
Statement, and file with the SEC the S-4, containing a proxy
statement/prospectus and a form of proxy, in connection with the
registration under the Securities Act of the shares of Parent Common
Stock issuable upon conversion of the Shares and the other
transactions contemplated hereby. The Company will, as promptly as
practicable, prepare and file with the SEC the Proxy Statement that
will be the same proxy statement/prospectus contained in the S-4 and a
form of proxy, in connection with the vote of the Company's
stockholders with respect to the Merger. Parent and the Company will,
and will cause their accountants and lawyers to, use all reasonable
best efforts to have or cause the S-4 declared effective as promptly
as practicable, including, without limitation, causing their
accountants to deliver necessary or required instruments such as
opinions, consents and certificates, and will take any other action
required or necessary to be taken under federal or state securities
laws or otherwise in connection with the registration process. The
Company will use all reasonable best efforts to cause the Proxy
Statement to be mailed to its shareholders at the earliest practicable
date.
SECTION 4.4. Other Potential Acquirors. (a) The Company,
-------------------------
its affiliates and their respective officers, directors, employees,
representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted
heretofore with respect to any acquisition of all or any material
portion of the assets of, or any equity interest in, the Company or
its subsidiaries or any business combination with the Company or its
subsidiaries. The Company may, directly or indirectly, furnish
information and access, in each case only in response to unsolicited
requests therefor, to any corporation, partnership, person or other
entity or group pursuant to confidentiality agreements, and may
participate in discussions and negotiate with such entity or group
concerning any merger, sale of assets, sale of shares of capital stock
or similar transaction involving the Company or any subsidiary or
division of the Company, if such entity or group has submitted a
proposal
to the Company (whether or not in writing) relating to any such
transaction and the Company Board by a majority vote determines in its
good faith judgment, after consultation with and based upon the advice
of independent legal counsel, that it is necessary to do so to comply
with its fiduciary duties to shareholders under applicable law. The
Company Board shall provide a copy of any such written proposal and a
summary of any oral proposal to Parent or Acquisition within 24 hours
after receipt thereof and thereafter keep Parent and Acquisition
promptly advised of any material development with respect thereto.
Except as set forth above, neither the Company nor any of its
affiliates shall, nor shall the Company authorize or permit any of its
or their respective officers, directors, employees, representatives or
agents to directly or indirectly, encourage, solicit, participate in
or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity
or group (other than Parent and Acquisition, any affiliate or
associate of Parent and Acquisition or any designees of Parent and
Acquisition) concerning any merger, sale of assets, sale of shares of
capital stock or similar transaction involving the Company or any
subsidiary or division of the Company; provided, however, that nothing
herein shall prevent the Company Board from taking, and disclosing to
the Company's shareholders, a position contemplated by Rules 14d-9 and
14e-2 promulgated under the Exchange Act with regard to any tender
offer; provided, further, that nothing herein shall prevent the
Company Board from making such disclosure to the Company's
shareholders as, in the good faith judgment of the Company Board,
after consultation with and based upon the advice of independent legal
counsel, is necessary to comply with its fiduciary duties to
shareholders under applicable law.
(b) Except as set forth in this Section 4.4, the Company
Board shall not approve or recommend, or cause the Company to enter
into any agreement with respect to, any Third Party Acquisition (as
defined below). Notwithstanding the foregoing, if the Board of
Directors of the Company, after consultation with and based upon the
advice of independent legal counsel, determines in good faith that it
is necessary to do so in order to comply with its fiduciary duties to
shareholders under applicable law, the Company Board may approve or
recommend a Superior Proposal (as defined below) or cause the Company
to enter into an agreement with respect to a Superior Proposal, but in
each case only (i) after providing reasonable written notice to Parent
(a "Notice of Superior Proposal") advising Parent that the Company
Board has received a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal and
identifying the person making such Superior Proposal and (ii) if
Parent does not make within five days of Parent's receipt of the
Notice of Superior Proposal, an offer which the Company Board, after
consultation with its financial advisors, determines is superior to
such Superior Proposal. For purposes of this Agreement, a "Superior
Proposal" means any bona fide proposal to acquire, directly or
indirectly, for consideration consisting of cash and/or securities,
more than 50% of the shares of Company Common Stock then outstanding
or all or substantially all the assets of the Company and otherwise on
terms which the Company Board determines in its good faith judgment
(based on the advice of a financial advisor of nationally recognized
reputation) to be more favorable to the Company's shareholders than
the Merger.
SECTION 4.5. Letter of the Company's Accountants. The
-----------------------------------
Company shall use all reasonable best efforts to cause to be delivered
to Parent a letter of Deloitte & Touche LLP, the Company's independent
auditors, dated a date within two business days before the date on
which the S-4 shall become effective and addressed to Parent, in form
and substance reasonably satisfactory to Parent and customary in scope
and substance for letters delivered by independent public accountants
in connection with registration statements similar to the S-4.
SECTION 4.6. Meetings. The Company shall call a meeting of
--------
its shareholders to be held as promptly as practicable for the purpose
of voting upon this Agreement and related matters. The Company and
Acquisition will, through their respective Boards of Directors
recommend to their respective shareholders approval of such matters;
provided, however, that the Company Board may withdraw its
recommendation if the Company Board by a majority vote determines in
its good faith judgment, after consultation with and based upon the
advice of independent legal counsel, that it is necessary to do so to
comply with its fiduciary duties to shareholders under applicable law.
Notwithstanding the foregoing (but without limiting the provisions of
Section 6.1(c)(vi)), the Company Board may not withdraw its
recommendation because of the trading price of Parent Common Stock
between the date hereof and the date of the Company's shareholder's
meeting. The Company and Parent shall coordinate and cooperate with
respect to the timing of such meeting and, subject to Section 4.23(c),
the Company shall use its best efforts to hold such meeting as soon as
practicable after the date hereof; provided, however, that the Company
may postpone a previously-scheduled meeting of Company shareholders in
the event that the Company Board by majority vote determines in its
good faith judgment, after consultation with and based upon the advice
of independent legal counsel, that it is
necessary to do so in order to comply with its fiduciary duties to
shareholders under applicable law and, at the time of such
determination, the Company has received a bona fide proposal to effect
a Third Party Acquisition that is a Superior Proposal and that has not
been withdrawn.
SECTION 4.7. Stock Exchange Listing. Parent shall use all
----------------------
reasonable efforts to cause the shares of Parent Common Stock to be
issued in the Merger and the shares of Parent Common Stock to be
reserved for issuance upon exercise of Company Stock Options to be
approved for listing on the NYSE, subject to official notice of
issuance, prior to the Effective Time.
SECTION 4.8. Access to Information.
---------------------
(a) Between the date hereof and the Effective Time, the
Company will give Parent and Acquisition and their authorized
representatives reasonable access to all employees, plants, offices,
warehouses and other facilities and to all books and records of the
Company and its subsidiaries, will permit Parent and Acquisition to
make such inspections as Parent and Acquisition may reasonably require
and will cause the Company's officers and those of its subsidiaries to
furnish Parent and Acquisition with such financial and operating data
and other information with respect to the business, properties and
personnel of the Company and its subsidiaries as Parent or Acquisition
may from time to time reasonably request, provided that no
investigation pursuant to this Section 4.8(a) shall affect or be
deemed to modify any of the representations or warranties made by the
Company.
(b) Between the date hereof and the Effective Time, the
Company shall furnish to Parent and Acquisition (i) within five
business days after the delivery thereof to management, such monthly
financial statements and data as are regularly prepared for
distribution to Company management and (ii) at the earliest time they
are available, such quarterly and annual financial statements as are
prepared for the Company's SEC filings, which (in the case of this
clause (ii)), shall be in accordance with the books and records of the
Company.
(c) Each of Parent and Acquisition will hold and will cause
its consultants and advisors to hold in confidence all documents and
information concerning the Company and its subsidiaries furnished to
Parent or Acquisition in connection with the transactions contemplated
by this Agreement pursuant to the terms of that certain
Confidentiality Agreement entered into between the Company and Parent
dated February 17, 1996.
SECTION 4.9. Additional Agreements; Reasonable Best
--------------------------------------
Efforts. Subject to the terms and conditions herein provided, each of
-------
the parties hereto agrees to use its reasonable best efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all
things reasonably necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, (i)
cooperation in the preparation and filing of the Proxy Statement and
the S-4, any filings that may be required under the HSR Act, and any
amendments to any thereof; (ii) the taking of all action reasonably
necessary, proper or advisable to secure any necessary consents under
existing debt obligations of the Company and its subsidiaries or amend
the notes, indentures or agreements relating thereto to the extent
required by such notes, indentures or agreements or redeem or
repurchase such debt obligations; (iii) contesting any legal
proceeding relating to the Merger; and (iv) the execution of any
additional instruments, including the Certificate of Merger, necessary
to consummate the transactions contemplated hereby; provided, however,
that the Company may postpone a previously-scheduled meeting of
Company shareholders in the event that the Company Board by majority
vote determines in its good faith judgment, after consultation with
and based upon the advice of independent legal counsel, that it is
necessary to do so in order to comply with its fiduciary duties to
shareholders under applicable law and, at the time of such
determination, the Company has received a bona fide proposal to effect
a Third Party Acquisition that is a Superior Proposal and that has not
been withdrawn. Subject to the terms and conditions of this
Agreement, Parent and Acquisition agree to use all reasonable efforts
to cause the Effective Time to occur as soon as practicable after the
shareholder vote with respect to the Merger. In case at any time
after the Effective Time any further action is necessary to carry out
the purposes of this Agreement, the proper officers and directors of
each party hereto shall take all such necessary action.
SECTION 4.10. Consents. Parent, Acquisition and the
--------
Company each will use all reasonable efforts to obtain consents of all
third parties and Governmental Entities necessary, proper or advisable
for the consummation of the transactions contemplated by this
Agreement.
SECTION 4.11. Public Announcements. Each of Parent,
--------------------
Acquisition and the Company will consult with one another before
issuing any press release or otherwise making any public statements
with respect to the transactions contemplated by this Agreement,
including, without limitation, the Merger, and shall
not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable
law or by obligations pursuant to any listing agreement with the NYSE
or the Nasdaq Stock Market, as determined by Parent, Acquisition or
the Company, as the case may be.
SECTION 4.12. Indemnification; Directors' and Officers'
-----------------------------------------
Insurance.
---------
(a) Indemnification. To the extent, if any, not provided
---------------
by an existing right under one of the parties' directors and officers
liability insurance policies, from and after the Effective Time,
Parent shall, to the fullest extent permitted by applicable law,
indemnify, defend and hold harmless each person who is now, or has
been at any time prior to the date hereof, or who becomes prior to the
Effective Time, a director, officer or employee of the parties hereto
or any subsidiary thereof (each an "Indemnified Party" and,
collectively, the "Indemnified Parties") against all losses, expenses
(including reasonable attorneys' fees and expenses), claims, damages
or liabilities or, subject to the proviso of the next succeeding
sentence, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time and whether
asserted or claimed prior to, at or after the Effective Time) that are
in whole or in part (i) based on, or arising out of the fact that such
person is or was a director, officer or employee of such party or a
subsidiary of such party or (ii) based on, arising out of or
pertaining to the transactions contemplated by this Agreement. In the
event of any such loss, expense, claim, damage or liability (whether
or not arising before the Effective Time), (i) Parent shall pay the
reasonable fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to Parent,
promptly after statements therefor are received and otherwise advance
to such Indemnified Party upon request reimbursement of documented
expenses reasonably incurred, in either case to the extent not
prohibited by the DGCL and upon receipt of any affirmation and
undertaking required by the DGCL, (ii) Parent will cooperate in the
defense of any such matter and (iii) any determination required to be
made with respect to whether an Indemnified Party's conduct complies
with the standards set forth under the DGCL and Parent's certificate
of incorporation or bylaws shall be made by independent counsel
mutually acceptable to Parent and the Indemnified Party; provided,
however, that Parent shall not be liable for any settlement effected
without its written consent (which consent shall not be reasonably
withheld). The Indemnified Parties as a group may retain only one law
firm with respect to each related matter except to the extent there
is, in the opinion of counsel
to an Indemnified Party, under applicable standards of professional
conduct, a conflict on any significant issue between positions of any
two or more Indemnified Parties.
(b) Insurance. For a period of three years after the
---------
Effective Time, Parent shall cause to be maintained in effect the
policies of directors' and officers' liability insurance maintained by
the Company for the benefit of those persons who are covered by such
policies at the Effective Time (or Parent may substitute therefor
policies of at least the same coverage with respect to matters
occurring prior to the Effective Time), to the extent that such
liability insurance can be maintained annually at a cost to Parent not
greater than 150 percent of the premium for the current Company
directors' and officers' liability insurance; provided that if such
insurance cannot be so maintained or obtained at such costs, Parent
shall maintain or obtain as much of such insurance as can be so
maintained or obtained at a cost equal to 150 percent of the current
annual premiums of the Company for such insurance.
(c) Successors. In the event Parent or any of its
----------
successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or
entity or such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and
in either such case, proper provision shall be made so that the
successors and assigns of Parent shall assume the obligations set for
in this Section 4.12.
(d) Survival of Indemnification. To the fullest extent
---------------------------
permitted by law, from and after the Effective Time, all rights to
indemnification now existing in favor of the employees, agents,
directors or officers of the Company and its subsidiaries with respect
to their activities as such prior to the Effective Time, as provided
in the Company's certificate of incorporation or bylaws, in effect on
the date thereof or otherwise in effect on the date hereof, shall
survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
(e) Benefit. The provisions of this Section 4.12 are
-------
intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party, his or her heirs and his or her representatives.
SECTION 4.13. Notification of Certain Matters. The Company
-------------------------------
shall give prompt notice to Parent and Acquisition, and Parent and
Acquisition shall give prompt notice to the Company,
of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time, (ii) any material
failure of the Company, Parent or Acquisition, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, (iii) any notice of, or
other communication relating to, a default or event which, with notice
or lapse of time or both, would become a default, received by it or
any of its subsidiaries subsequent to the date of this Agreement and
prior to the Effective Time, under any contract or agreement material
to the financial condition, properties, businesses or results of
operations of it and its subsidiaries taken as a whole to which it or
any of its subsidiaries is a party or is subject, (iv) any notice or
other communication from any third party alleging that the consent of
such third party is or may be required in connection with the
transactions contemplated by this Agreement, or (v) any material
adverse change in their respective financial condition, properties,
businesses, results of operations or prospects, taken as a whole,
other than changes resulting from general economic conditions;
provided, however, that the delivery of any notice pursuant to this
Section 4.13 shall not cure such breach or non-compliance or limit or
otherwise affect the remedies available hereunder to the party
receiving such notice.
SECTION 4.14. Pooling. The Company and Parent each agrees
-------
that it will not take any action which could prevent the Merger from
being accounted for as a "pooling-of-interests" for accounting
purposes and the Company will bring to the attention of Parent, and
Parent will bring to the attention of the Company, any actions, or
agreements or understandings, whether written or oral, that could be
reasonably likely to prevent Parent from accounting for the Merger as
a "pooling-of-interests." Parent shall use commercially reasonable
efforts to cause Ernst & Young LLP ("E&Y") to deliver to Parent a
letter to the effect that pooling-of-interests accounting is
appropriate for the Merger if it is closed and consummated in
accordance with the terms of this Agreement, and the Company shall use
commercially reasonable efforts to cause Deloitte & Touche LLP to
cooperate fully with E&Y (including, without limitation, sharing
information, analysis and work product, engaging in active discussions
and delivering to the Company a letter substantially similar to E&Y's
letter to Parent) in connection with E&Y's delivery of such letter.
The Company will cause Deloitte & Touche LLP to inform all Company
Affiliates and other relevant employees as to those actions that
should or should not be taken by such persons so that the Merger
will be accounted for as a "pooling-of-interests" and will use its
best efforts to cause such Company Affiliates and employees to take or
not take such actions as Parent may be informed by any Governmental
Entity are necessary to be taken or not to be taken so that the Merger
will be accounted for as a "pooling-of-interests."
SECTION 4.15. Tax-Free Reorganization Treatment. The
---------------------------------
Company, Parent and Acquisition shall execute and deliver to ▇▇▇▇▇▇▇
Coie, counsel to the Company, a certificate substantially in the form
agreed to by the parties on or prior to the date hereof (with such
changes as reasonably requested by such law firm) at such time or
times as reasonably requested by such law firm in connection with its
delivery of an opinion with respect to the transactions contemplated
hereby, and shall provide a copy thereof to Parent and the Company.
Prior to the Effective Time, none of the Company, Parent or
Acquisition shall take or cause to be taken any action which would
cause to be untrue (or fail to take or cause not to be taken any
action which would cause to be untrue) any of the representations in
such previously-agreed certificate.
SECTION 4.16. Taxes. In respect of income tax returns of
-----
the Company or any subsidiary not required to be filed prior to the
date hereof, the Company shall, to the extent permitted by law without
any penalty, extend (and cause its subsidiaries to extend) the filing
of any such Tax returns until after the Effective Time; provided,
however, that the Company shall notify Parent of its intention to file
an extension (or cause any subsidiary to file an extension) any such
filing and shall not file an extension for a Tax return if Parent and
the Company agree that so extending the filing of such Tax return is
not in the best interests of either the Company or Parent. If any
income Tax return that has not yet been filed is required to be filed
on or prior to the Effective Time, the Company or its subsidiaries, as
the case may be, shall prepare and timely file such Tax return in a
manner consistent with prior years and all applicable laws and
regulations; provided, however, that Parent shall be notified and
given an opportunity to review and to comment, prior to the filing
thereof, on any such Tax return (a) which relates to a Tax which is
based upon or measured by income, (b) which is not regularly filed by
the Company or a subsidiary thereof in connection with the conduct of
its business in the ordinary course, or (c) for which Parent requests
such opportunity, although neither Parent's approval nor consent shall
be required prior to the filing of any such Tax return.
SECTION 4.17. Employment and Other Agreements. Parent
-------------------------------
shall, as of or prior to the Effective Time, enter into an employment
agreement (the "Employment Agreement") with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
non-competition agreements (the "Non-Competition Agreements") with
each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, in each case in
the form agreed to by the parties thereto on or prior to the date
hereof. On the date hereof, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is entering into a
personal services agreement with Parent.
SECTION 4.18. Employee Matters.
----------------
(a) Employees of the Company and its subsidiaries shall be
treated after the Merger no less favorably under the compensation and
benefits programs of Parent than other similarly situated employees of
Parent and its subsidiaries.
(b) For a period of one year following the Merger, Parent
shall and shall cause its subsidiaries to maintain with respect to
their employees who had been employed by the Company or any of its
subsidiaries (i) base salary or regular hourly wage rates for each
such employee at not less than the rate applicable immediately prior
to the Merger to such employee, and (ii) employee benefits (as defined
for purposes of Section 3(3) of ERISA), other than employee benefits
as to which the employees' interests are based upon the Shares) which
are substantially comparable in the aggregate to such employee
benefits provided by the Company and its subsidiaries immediately
prior to the Merger.
(c) Parent and its subsidiaries shall credit employees of
the Company and its subsidiaries with their service prior to the
Merger with Company and its subsidiaries to the same extent such
service was counted under the Company ERISA Plans for purposes of
determining eligibility to participate or vesting under similar
benefit plans provided by Parent after the Merger.
(d) Nothing contained herein shall be construed as
requiring Parent or the Surviving Corporation to continue any specific
plans or to continue the employment of any specific person.
SECTION 4.19. Company Affiliates. The Company has
------------------
identified to Parent each Company Affiliate and each Company Affiliate
has delivered to Parent on or prior to the date hereof, a written
agreement (i) that such Company Affiliate will not sell, pledge,
transfer or otherwise dispose of any shares of Parent Common Stock
issued to such Company Affiliate pursuant to the Merger, except in
compliance with Rule 145 promulgated under
the Securities Act or an exemption from the registration requirements
of the Securities Act and (ii) that on or prior to the earlier of (x)
the mailing of the Proxy Statement/Prospectus or (y) the thirtieth day
prior to the Effective Time such Company Affiliate will not thereafter
sell or in any other way reduce such Company Affiliate's risk relative
to any shares of Parent Common Stock received in the Merger (within
the meaning of the SEC's Financial Reporting Release No. 1,
"Codification of Financing Reporting Policies," Section 201.01 47 F.R.
21028 (April 15, 1982)), until such time as financial results (including
combined sales and net income) covering at least 30 days of post-
merger operations have been published, except as permitted by Staff
Accounting Bulletin No. 76 issued by the SEC.
SECTION 4.20. Election to Parent Board. Effective as of
------------------------
the Closing Date, Parent shall increase the size of its Board of
Directors (the "Parent Board") by one director and shall cause ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ to be appointed to the Parent Board to fill the vacancy
created for an initial term expiring on the third anniversary of the
date of Parent's first annual meeting of shareholders held following
the date hereof.
SECTION 4.21. SEC Filings. Each of Parent and the Company
-----------
shall promptly provide the other party (or its counsel) with copies of
all filings made by the other party or any of its subsidiaries with
the SEC or any other state or federal Governmental Entity in
connection with this Agreement and the transactions contemplated
hereby.
SECTION 4.22. Guarantee of Performance. Parent hereby
------------------------
guarantees the performance by Acquisition of its obligations under
this Agreement.
SECTION 4.23. Acquisition. (a) The Company hereby
-----------
acknowledges that it has been advised by Parent that Parent is,
substantially simultaneously with the execution and delivery of this
Agreement, entering into an Agreement and Plan of Merger (the
"Davidson Agreement"), dated as of the date hereof, among Parent,
Stealth Acquisition II Corp. ("Merger Sub") and Davidson & Associates,
Inc. ("Davidson") pursuant to which Merger Sub will merge with and
into Davidson and Davidson will become a wholly-owned subsidiary of
Parent (the "Davidson Merger") and the shareholders and stock option
holders of Davidson will receive, respectively, shares of Parent
Common Stock and options to purchase shares of Parent Common Stock in
the Davidson Merger.
(b) The parties hereto expressly acknowledge and agree that
it shall not be a condition to the respective obligations of
any party hereto to effect the Merger that the transactions
contemplated by the Davidson Agreement shall have been approved by the
shareholders of Parent or Davidson or that such transactions shall
have been consummated.
(c) Notwithstanding anything to the contrary contained
herein (including, without limitation, in Sections 4.3, 4.6 and 4.9
hereof), the Company will cooperate with all reasonable requests of
Parent to coordinate the timing of the shareholders meetings with
respect to the transactions contemplated by this Agreement and the
Davidson Agreement; provided, however, that the Company may postpone a
previously-scheduled meeting of Company shareholders in the event that
the Company Board by majority vote determines in its good faith
judgment, after consultation with and based upon the advice of
independent legal counsel, that it is necessary to do so in order to
comply with its fiduciary duties to shareholders under applicable law
and, at the time of such determination, the Company has received a
bona fide proposal to effect a Third Party Acquisition that is a
Superior Proposal and that has not been withdrawn. In addition, the
Company will provide Parent with all financial and other data
regarding the Company as may be requested by Parent in connection with
the preparation of the proxy statement and Form S-4 relating to the
Davidson Merger.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 5.1. Conditions to Each Party's Obligations to
-----------------------------------------
Effect the Merger. The respective obligations of each party hereto to
-----------------
effect the Merger are subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) this Agreement shall have been approved and adopted by
the requisite vote of the shareholders of the Company;
(b) no statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
enforced by any United States court or United States governmental
authority which prohibits, restrains, enjoins or restricts the
consummation of the Merger;
(c) any waiting period applicable to the Merger under the
HSR Act shall have terminated or expired, and any other governmental
or regulatory notices or approvals required with respect to the
transactions contemplated hereby shall have been either filed or
received;
(d) the S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order and Parent shall have received all
state securities laws or "blue sky" permits and authorizations
necessary to issue shares of Parent Common Stock in exchange for the
Shares in the Merger; and
(e) Parent shall have received a letter from E&Y stating
that the Merger will be accounted for under GAAP as a "pooling-of-
interests," and such opinion shall not have been withdrawn or modified
in any material respect.
SECTION 5.2. Conditions to the Obligations of the Company.
--------------------------------------------
The obligation of the Company to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations of Parent and Acquisition contained
in this Agreement or in any other document delivered pursuant hereto
shall be true and correct in all material respects at and as of the
Effective Time with the same effect as if made at and as of the
Effective Time, and at the Closing Parent and Acquisition shall have
delivered to the Company a certificate to that effect;
(b) each of the obligations of Parent and Acquisition to be
performed at or before the Effective Time pursuant to the terms of
this Agreement shall have been duly performed in all material respects
at or before the Effective Time and at the Closing Parent and
Acquisition shall have delivered to the Company a certificate to that
effect;
(c) the shares of Parent Common Stock issuable to the
Company shareholders 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 the NYSE upon official
notice of issuance;
(d) the opinion of ▇▇▇▇▇▇▇ Coie, counsel to the Company,
addressed to the Company and its shareholders to the effect that (i)
the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code;
(ii) each of Parent, Acquisition, the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code; and
(iii) no gain or loss will be recognized by a shareholder of the
Company as a result of the Merger with respect to Shares converted
into shares of Parent Common Stock (other than with respect to cash
received in lieu of fractional
shares of Parent Common Stock), dated the Closing Date and, if
required in connection with the Proxy Statement, dated on or about the
date that is two business days prior to the date the Proxy Statement
is first mailed to shareholders of the Company shall have been
delivered and such opinion shall not have been withdrawn or modified
in any material respect;
(e) Parent shall have obtained the consent or approval of
each person whose consent or approval shall be required in connection
with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement or
instrument, except those for which failure to obtain such consents and
approvals would not, individually or in the aggregate, have a Material
Adverse Effect on Parent; and
(f) there shall have been no events, changes or effects
with respect to Parent or its subsidiaries having or which could
reasonably be expected to have a Material Adverse Effect on Parent.
SECTION 5.3. Conditions to the Obligations of Parent and
-------------------------------------------
Acquisition. The respective obligations of Parent and Acquisition to
-----------
effect the Merger are subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) the representations of the Company contained in this
Agreement or in any other document delivered pursuant hereto shall be
true and correct in all material respects at and as of the Effective
Time with the same effect as if made at and as of the Effective Time,
and at the Closing the Company shall have delivered to Parent and
Acquisition a certificate to that effect;
(b) each of the obligations of the Company to be performed
at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at
or before the Effective Time and at the Closing the Company shall have
delivered to Parent and Acquisition a certificate to that effect;
(c) each Company Affiliate and each shareholder which is a
party to the Shareholders Agreement shall have performed his or its
respective obligations under the applicable Affiliate Letter and/or
the Shareholders Agreement (if applicable), and Parent shall have
received a certificate signed by each of them to such effect;
(d) the Company shall have obtained the consent or approval
of each person whose consent or approval shall be required in order to
permit the succession by the Surviving Corporation pursuant to the
Merger to any obligation, right or interest of the Company or any
subsidiary of the Company under any loan or credit agreement, note,
mortgage, indenture, lease or other agreement or instrument, except
for those for which failure to obtain such consents and approvals
would not, individually or in the aggregate, have a Material Adverse
Effect on the Company;
(e) there shall have been no events, changes or effects
with respect to the Company or its subsidiaries having or which could
reasonably be expected to have, a Material Adverse Effect on the
Company;
(f) the Employment Agreement and the Services Agreement
each shall be in full force and effect; and
(g) the Non-Competition Agreements shall be in full force
and effect.
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
SECTION 6.1. Termination. This Agreement may be terminated
-----------
and the Merger may be abandoned at any time, but prior to the
Effective Time:
(a) by mutual written consent of Parent, Acquisition and
the Company;
(b) by Parent and Acquisition or the Company if (i) any
court of competent jurisdiction in the United States or other United
States governmental authority shall have issued a final order, decree
or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or
other action is or shall have become nonappealable or (ii) the Merger
has not been consummated by September 30, 1996; provided that no party
may terminate this Agreement pursuant to this clause (ii) if such
party's failure to fulfill any of its obligations under this Agreement
shall have been the reason that the Effective Time shall not have
occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of
any representation or warranty on the part of Parent or Acquisition
set forth in this Agreement, or if any representation
or warranty of Parent or Acquisition shall have become untrue, in
either case such that the conditions set forth in Section 5.2(a) would
be incapable of being satisfied by September 30, 1996 (or as otherwise
extended), (ii) there shall have been a breach by Parent or
Acquisition of any of their respective covenants or agreements
hereunder having a Material Adverse Effect on the Parent or materially
adversely affecting (or materially delaying) the consummation of the
Merger, and Parent or Acquisition, as the case may be, has not cured
such breach within twenty business days after notice by the Company
thereof, (iii) the Company enters into a definitive agreement relating
to a Superior Proposal in accordance with Section 4.4(b) (provided
that such termination shall not be effective until payment of the
amount required under Section 6.3(a)), (iv) the Company shall have
convened a meeting of its shareholders to vote upon the Merger and
shall have failed to obtain the requisite vote of its shareholders,
(v) the Company Board by a majority vote determines in its good faith
judgment, after consultation with and based upon the advice of
independent legal counsel, that it is necessary to do so to comply
with its fiduciary duties to shareholders, provided that such
termination under this clause (v) shall not effective unless at the
time of such determination the Company has received a bona fide
proposal to effect a Third Party Acquisition that is a Superior
Proposal and that has not been withdrawn as of the time of such
termination (provided that such termination shall not be effective
until payment of the amount required under Section 6.3(a)), or (vi)
prior to the meeting of shareholders the Company, the Average Stock
Price (as defined below) is less than $29.00. The term "Average Stock
Price" means a fraction, the numerator of which is the sum of the
Closing Price (as hereinafter defined) for each trading day during the
15 consecutive trading days ending on the first trading day that is at
least 10 calendar days prior to the scheduled date of such meeting of
shareholders of the Company and the denominator of which is 15. For
purposes hereof, with respect to any trading day, the Closing Price
shall be equal to the per share closing price on the NYSE of Parent
Common Stock on such day, as reported in the New York Stock Exchange
Composite Transactions; or
(d) by Parent and Acquisition if (i) there shall have been
a breach of any representation or warranty on the part of the Company
set forth in this Agreement, or if any representation or warranty of
the Company shall have become untrue, in either case such that the
conditions set forth in Section 5.3(a) would be incapable of being
satisfied by September 30, 1996 (or as otherwise extended), (ii) there
shall have been a breach by the Company of its covenants or agreements
hereunder having a
Material Adverse Effect on the Company or materially adversely
affecting (or materially delaying) the consummation of the Merger, and
the Company has not cured such breach within twenty business days
after notice by Parent or Acquisition thereof, (iii) the Company Board
shall have withdrawn, modified or changed its approval or
recommendation of this Agreement or the Merger, shall have recommended
to the Company's shareholders a Third Party Acquisition or shall have
failed to call, give notice of, convene or hold a shareholders'
meeting to vote upon the Merger, or shall have adopted any resolution
to effect any of the foregoing, or (iv) the Company shall have
convened a meeting of its shareholders to vote upon the Merger and
shall have failed to obtain the requisite vote of its shareholders.
"Third Party Acquisition" means the occurrence of any of the
following events (i) the acquisition of the Company by merger or
otherwise by any person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) or entity other than
Parent, Acquisition or any affiliate thereof (a "Third Party"); (ii)
the acquisition by a Third Party of more than 30% of the total assets
of the Company and its subsidiaries, taken as a whole; or (iii) the
acquisition by a Third Party of 30% or more of the outstanding shares
of Company Common Stock.
SECTION 6.2. Effect of Termination. In the event of the
---------------------
termination and abandonment of this Agreement pursuant to Section 6.1,
this Agreement shall forthwith become void and have no effect, without
any liability on the part of any party hereto or its affiliates,
directors, officers or shareholders, other than the provisions of this
Section 6.2 and Sections 4.8(c), 6.3, 7.5, 7.8, 7.10 and 7.13 hereof.
Nothing contained in this Section 6.2 shall relieve any party from
liability for any breach of this Agreement.
SECTION 6.3. Fees and Expenses.
-----------------
(a) In the event that this Agreement shall be terminated
pursuant to:
(i) Section 6.1(d)(i) (in the case of a willful breach
of representation or warranty) or (ii) and, within twelve months
thereafter, the Company enters into an agreement with respect to a
Third Party Acquisition (which is consummated within twelve months
after such termination), or a Third Party Acquisition occurs,
involving any party (or any affiliate thereof) (x) with whom the
Company (or its agents) had negotiations with a view to a Third Party
Acquisition, (y) to whom the Company (or its agents) furnished
information with a
view to a Third Party Acquisition or (z) who had submitted a proposal
or expressed an interest in a Third Party Acquisition, in the case of
each of clauses (x), (y) and (z) after the date hereof and prior to
such termination; or
(ii) Section 6.1(c)(iii) or (v) or 6.1(d)(iii);
Parent and Acquisition would suffer direct and substantial damages,
which damages cannot be determined with reasonable certainty. To
compensate Parent and Acquisition for such damages, the Company shall
pay to Parent the amount of $25 million as liquidated damages, as
follows: (i) in the case of a termination under Section 6.1(d)(i) or
(ii), $12.5 million shall be paid on the date the Company enters into
an agreement with respect to a Third Party Acquisition and $12.5
million shall be paid on the date of consummation of a Third Party
Acquisition under the circumstances described in Section 6.3(a)(i)
above and (ii) in the case of a termination under Section 6.1(c)(iii)
or (v) or Section 6.1(d)(iii), $12.5 million shall be paid on the date
of such termination (except, in the case of a termination under
Section 6.1(d)(iii), in which case such $12.5 million shall be paid
within 20 days following such termination) and $12.5 million shall be
paid upon consummation of a Third Party Acquisition involving any
party (or any affiliate thereof) (x) with whom the Company (or its
agents) had negotiations with a view to a Third Party Acquisition, (y)
to whom the Company (or its agents) furnished information with a view
to a Third Party Acquisition or (z) who had submitted a proposal or
expressed an interest in a Third Party Acquisition, in the case of
each of clauses (x), (y) and (z) after the date hereof and prior to
such termination. It is specifically agreed that the amount to be
paid pursuant to this Section 6.3(a) represents liquidated damages and
not a penalty.
(b) Upon the termination of this Agreement pursuant to
Sections 6.1(c)(iii) or (v) or 6.1(d)(i), (ii) or (iii), the Company
shall reimburse Parent, Acquisition and their affiliates (not later
than ten business days after submission of statements therefor) for
all actual documented out-of-pocket fees and expenses, not to exceed
$3,000,000, actually and reasonably incurred by any of them or on
their behalf in connection with the Merger and the consummation of all
transactions contemplated by this Agreement (including, without
limitation, fees payable to investment bankers, counsel to any of the
foregoing, and accountants). If Parent or Acquisition shall submit a
request for reimbursement hereunder, Parent or Acquisition will
provide the Company in due course with invoices or other reasonable
evidence of such expenses upon request. The Company shall in any
event pay the amount requested (not to exceed $3,000,000) within ten
business days of such request, subject to the Company's right to
demand a return of any portion as to which invoices are not received
in due course.
(c) Upon the termination of this Agreement pursuant to
Sections 6.1(c)(i) or (ii), Parent shall reimburse the Company and
their affiliates (not later than ten business days after submission of
statements therefor) for all actual documented out-of-pocket fees and
expenses, not to exceed $3,000,000, actually and reasonably incurred
by any of them or on their behalf in connection with the Merger and
the consummation of all transactions contemplated by this Agreement
(including, without limitation, fees payable to investment bankers,
counsel to any of the foregoing, and accountants). If the Company
shall submit a request for reimbursement hereunder, the Company will
provide Parent in due course with invoices or other reasonable
evidence of such expenses upon request. Parent shall in any event pay
the amount requested (not to exceed $3,000,000) within ten business
days of such request, subject to Parent's right to demand a return of
any portion as to which invoices are not received in due course.
(d) Except as specifically provided in this Section 6.3,
each party shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby. The cost of
printing the S-4 and the Proxy Statement shall be borne equally by the
Company and Parent.
SECTION 6.4. Amendment. This Agreement may be amended by
---------
action taken by the Company, Parent and Acquisition at any time before
or after approval of the Merger by the shareholders of the Company (if
required by applicable law) but, after any such approval, no amendment
shall be made which requires the approval of such shareholders under
applicable law without such approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of the
parties hereto.
SECTION 6.5. Extension; Waiver. At any time prior to the
-----------------
Effective Time, each party hereto (for these purposes, Parent and
Acquisition shall together be deemed one party and the Company shall
be deemed the other party) may (i) extend the time for the performance
of any of the obligations or other acts of the other party, (ii) waive
any inaccuracies in the representations and warranties of the other
party contained herein or in any document, certificate or writing
delivered pursuant hereto or (iii) waive compliance by the other party
with any of the agreements or conditions contained herein. Any
agreement on the part of either 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. The failure of either party hereto to
assert any of its rights hereunder shall not constitute a waiver of
such rights.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Nonsurvival of Representations and Warranties.
---------------------------------------------
The representations and warranties made herein shall not survive
beyond the Effective Time or a termination of this Agreement.
SECTION 7.2. Entire Agreement; Assignment. This Agreement
----------------------------
(a) constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof and (b) shall not be
assigned by operation of law or otherwise; provided, however, that
Acquisition may assign any or all of its rights and obligations under
this Agreement to any subsidiary of Parent, but no such assignment
shall relieve Acquisition of its obligations hereunder if such
assignee does not perform such obligations.
SECTION 7.3. Validity. If any provision of this Agreement,
--------
or the application thereof to any person or circumstance, is held
invalid or unenforceable, the remainder of this Agreement, and the
application of such provision to other persons or circumstances, shall
not be affected thereby, and to such end, the provisions of this
Agreement are agreed to be severable.
SECTION 7.4. Notices. All notices, requests, claims,
-------
demands and other communications hereunder shall be in writing and
shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by cable, telegram, facsimile or
telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
if to Parent
or Acquisition: CUC International Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company to: Sierra On-Line, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇. ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ Coie
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom notice is given may
have previously furnished to the other in writing in the manner set
forth above.
SECTION 7.5. Governing Law. This Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of Delaware,
without regard to the principles of conflicts of law thereof.
SECTION 7.6. Descriptive Headings. The descriptive headings
--------------------
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of
this Agreement.
SECTION 7.7. Parties in Interest. This Agreement shall be
-------------------
binding upon and inure solely to the benefit of each party hereto and
its successors and permitted assigns, and except as provided in
Sections 4.12 and 7.2 and except that ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
shall be a third party beneficiary of the provisions of Section 4.20,
nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
SECTION 7.8. Arbitration. Any controversy, dispute or claim
-----------
arising out of or relating to this Agreement or the breach hereof
which cannot be settled by mutual agreement (except for actions by
Parent or the Company seeking equitable, injunctive or other relief
under Section 7.10) shall be finally settled by arbitration as
follows: Any party who is aggrieved shall deliver a notice to other
party setting forth the specific points in dispute. Any points
remaining in dispute twenty (20) days after the giving of such notice
shall be submitted to arbitration in New York, New York, to Endispute,
before a single arbitrator appointed in accordance with Endispute's
Arbitration Rules, modified only as herein expressly provided. The
arbitrator may enter a default decision against any party who fails to
participate in the arbitration proceedings. The decision of the
arbitrator on the points in dispute will be final, unappealable and
binding and judgment on the award may be entered in any court having
jurisdiction thereof. The arbitrator will be authorized to apportion
its fees and expenses and the reasonable attorney's fees and expenses
of Parent and the Company as the arbitrator deems appropriate. In the
absence of any such apportionment, the fees and expense of the
arbitrator will be borne equally by each party, and each party will
bear the fees and expenses of its own attorney. The parties agree
that this clause has been included to rapidly and inexpensively
resolve any disputes between them with respect to this Agreement, and
that this clause shall be grounds for dismissal of any court action
commenced by either party with respect to this Agreement, other than
post-arbitration actions seeking to enforce an arbitration award. The
parties shall keep confidential, and shall not disclose to any person,
except as may be required by law, the existence of any controversy
hereunder, the referral of any such controversy to arbitration or the
status or resolution thereof.
SECTION 7.9. Severability. If any term or other provision of
------------
this Agreement is invalid, illegal or unenforceable, all other
provisions of this Agreement shall remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse
to any party.
SECTION 7.10. Specific Performance. The parties hereto
--------------------
acknowledge that irreparable damage would result if this
Agreement were not specifically enforced, and they therefore consent
that the rights and obligations of the parties under this Agreement
may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall, however, not be
exclusive and, subject to Section 7.8, shall be in addition to any
other remedies, including arbitration, which any party may have under
this Agreement or otherwise.
SECTION 7.11. Recapitalization. Whenever (a) the number of
----------------
outstanding shares of Parent Common Stock is changed by reason of a
subdivision or combination of shares, whether effected by a
recapitalization, reclassification of shares or otherwise or
(b) Parent pays a cash or stock dividend or makes a similar
distribution, each specified number of shares referred to in this
Agreement (including the Merger Consideration) and each specified per
share amount (other than par values) shall be adjusted accordingly.
SECTION 7.12. Subsidiaries. The term "subsidiary" shall mean,
------------
when used with reference to any entity, any entity more than fifty
percent (50%) of the outstanding voting securities or interests
(including membership interests) of which are owned directly or
indirectly by such former entity.
SECTION 7.13. Brokers. Except as otherwise provided in Section
-------
6.3, the Company agrees to indemnify and hold harmless Parent and
Acquisition, and Parent and Acquisition agree to indemnify and hold
harmless the Company, from and against any and all liability to which
Parent and Acquisition, on the one hand, or the Company, on the other
hand, may be subjected by reason of any brokers, finders or similar
fees or expenses with respect to the transactions contemplated by this
Agreement to the extent such similar fees and expenses are
attributable to any action undertaken by or on behalf of the Company,
or Parent or Acquisition, as the case may be.
SECTION 7.14. Counterparts. This Agreement may be executed in
------------
one or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed on its behalf as of the day and year
first above written.
SIERRA ON-LINE, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and
Chief Executive Officer
CUC INTERNATIONAL INC.
By:/s/ E. ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Name: E. ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇ ACQUISITION CORP.
By:/s/ E. ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Name: E. ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President