1
EXHIBIT 99.7
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 15, 1998 (the "Agreement"),
by and among ▇▇▇▇▇ plc, a United Kingdom public limited company (the "Parent"),
S Acquisition Corp., a Delaware corporation and an indirect wholly-owned
subsidiary of Parent (the "Purchaser"), S Sub Corp., a Delaware corporation and
a wholly-owned subsidiary of the Purchaser (the "Merger Sub"), and Simulation
Sciences Inc., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the Parent, the Purchaser, the Merger
Sub and the Company have each determined that it is in the best interests of
their respective stockholders for the Purchaser to acquire the Company on the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, it is proposed that the Purchaser shall
make a cash tender offer to acquire all of the issued and outstanding shares of
common stock, par value $.001 per share, of the Company (the "Company Common
Stock"), together with the associated Rights (as hereinafter defined) for $10.00
per share of Company Common Stock (all issued and outstanding shares of Company
Common Stock, together, except where the context otherwise requires, with the
associated Rights, being hereinafter collectively referred to as the "Shares"),
net to the seller in cash, in accordance with the terms and subject to the
conditions provided for herein and in the offering documents relating to the
Offer (as defined below); and
WHEREAS, the Board of Directors of the Company has unanimously (i)
determined that each of the Offer and the Merger (as defined below) is fair to
and in the best interests of the Company and its stockholders and (ii) resolved
to approve and adopt this Agreement and the transactions contemplated hereby and
to recommend acceptance of the Offer and approval and adoption by the
stockholders of the Company of this Agreement and the Merger on the terms and
conditions set forth herein of the Merger Sub with and into the Company
following the Offer.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, the Purchaser, the Merger Sub and the Company hereby agree as follows:
2
ARTICLE 1
THE OFFER
1.1 The Offer.
(a) Provided this Agreement shall not have been terminated in accordance
with Section 8.1, the Purchaser (or one or more other direct or indirect
wholly-owned subsidiaries of Parent) shall, not later than one business day
after execution of this Agreement, publicly announce the transactions
contemplated hereby, and not later than five business days after execution of
this Agreement, commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), an offer to purchase all
Shares at a price of $10.00 per Share (the "Per Share Price"), net to the seller
in cash (the "Offer," which term shall include any amendments to such Offer not
prohibited by this Agreement) and, subject to a minimum of not less than a
majority of the outstanding Shares (on a fully-diluted basis excluding Out of
the Money Options (as defined below)) being validly tendered and not withdrawn
prior to the expiration of the Offer (the "Minimum Condition") and the further
conditions set forth in this Agreement and Annex I of this Agreement, shall
accept for payment and pay for Shares purchased pursuant to the Offer. The
initial expiration date of the Offer shall be May 18, 1998. Parent shall provide
or cause to be provided to the Purchaser on a timely basis the funds necessary
to accept for payment and pay for any Shares that the Purchaser becomes
obligated to accept for payment, and pay for, pursuant to the Offer, and shall
cause the Purchaser and the Merger Sub to fulfill all of their respective other
obligations under this Agreement. The Offer shall be made by means of an offer
to purchase containing the Minimum Condition and the further conditions set
forth in this Agreement and Annex I. Simultaneously with the commencement of the
Offer, the Purchaser shall file with the Securities and Exchange Commission (the
"Commission") a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer (together with all amendments and supplements hereto, the "Schedule
14D-1"), which shall have been provided to the Company such that the Company
shall have a reasonable opportunity to promptly comment thereon. Parent, the
Purchaser and the Merger Sub agree to provide the Company and its counsel any
comments the Parent, the Purchaser or the Merger Sub or their counsel may
receive from the Commission or its staff with respect to the Schedule 14D-1
promptly after the receipt of such comments. For purposes of this Agreement,
"Out of the Money Options" shall mean any option, warrant or other contractual
right to purchase shares of the Common Stock of the Company which as of the date
hereof have an exercise price per Share of Common Stock equal to or greater than
the Per Share Price.
(b) The Purchaser expressly reserves the right to modify the terms and
conditions of the Offer from time to time, except that, without the prior
written approval of the Company, the Purchaser shall not amend the Offer (i) to
reduce the cash price per Share to be paid pursuant thereto, (ii) to reduce the
number of Shares to be purchased thereunder, (iii) to change the form of
consideration to be paid in the Offer, (iv) to increase the minimum number of
Shares which must be tendered as a condition to the
2
3
Offer, (v) to waive the Minimum Condition if such waiver would result in less
than a majority of the outstanding Shares (on a fully-diluted basis excluding
Out of the Money Options) being accepted for payment or paid for pursuant to the
Offer, (vi) to impose additional conditions to the Offer, (vii) to extend the
period of the Offer, except that the Offer may be extended (subject to the
Company's right of termination in Section 8.1 herein), without the prior written
approval of the Company (A) as required to comply with any rule, regulation or
interpretation of the Securities and Exchange Commission (the "Commission"), (B)
if at the scheduled or extended expiration date of the Offer any of the
conditions set forth in Annex I have not been satisfied or waived, until such
time as all such conditions are satisfied or waived or (C) provided that there
shall not have been tendered at least 90% of the outstanding Shares, for one or
more times for a total number of days in the aggregate for any extension
pursuant to this clause (C) not to exceed 10 business days for any reason other
than those specified in the immediately preceding clauses (A) and (B), or (viii)
otherwise to amend the terms of the Offer (including the conditions set forth in
the Agreement and Annex I) in a manner that is materially adverse to
stockholders of the Company.
(c) Notwithstanding the foregoing, the Parent, the Purchaser and the
Merger Sub agree that if all of the conditions set forth on Annex I hereto are
not satisfied on any scheduled expiration date of the Offer then, provided that
all such conditions are and continue to be reasonably probable of being
satisfied by the date which is 30 business days after the commencement of the
Offer, the Purchaser shall extend the Offer from time to time until such
conditions are satisfied or waived, provided that the Purchaser shall not be
required to extend the Offer beyond the date which is 30 business days after the
commencement of the Offer.
1.2 Company Action.
(a) The Company hereby consents to the Offer and represents that its Board
of Directors has unanimously (i) approved the Offer and the Merger (as defined
in Section 2.1), has determined that this Agreement and the Offer are fair to
and in the best interest of the Company and its stockholders and has resolved to
recommend acceptance of the Offer to the Company's stockholders, and that the
stockholders tender their Shares in the Offer and, if applicable, vote to
approve and adopt this Agreement and the Merger, (ii) taken all action necessary
to render (x) Section 203 of the Delaware General Corporation Law, and (y) the
Company's Stockholders Rights Agreement, dated as of August 13, 1997, between
the Company and ▇▇▇▇▇▇ Trust Company of California, as rights agent, (the
"Rights Agreement"), inapplicable to the Offer, the Merger, this Agreement, the
Stock Option Agreement (as defined herein) or any of the transactions
contemplated hereby or thereby and (iii) approved the Stock Option Agreement (as
defined in Section 6.12). The Company hereby consents to the inclusion in the
Offer Documents (as hereinafter defined) of the recommendation of the Board of
Directors described in the first sentence of this Section 1.2, except as such
consent may be withdrawn by the Board of Directors of the Company in the
exercise of its fiduciary duties after consultation with its counsel. The
Company represents that it has received
3
4
the opinion of ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a division of ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated
("DRW") to the effect that, as of the date of such opinion, the consideration
offered pursuant to the Offer and Merger is fair to stockholders of the Company
from a financial point of view.
(b) Simultaneously with, or as promptly as possible after, the
commencement of the Offer, subject to the terms hereof, the Company shall file
with the Commission and mail to the holders of Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9"), which shall reflect
the recommendation of the Board of Directors; provided that prior to the filing
of such Schedule 14D-9, the Company shall have provided the Purchaser's counsel
with a reasonable opportunity to review and make comments with respect to such
Schedule 14D-9. Such recommendation shall not be withdrawn or adversely modified
except by resolution of the Board of Directors adopted in the exercise of
applicable fiduciary duties after consultation with counsel.
(c) In the event that the Purchaser has not designated a majority of the
members of the Company's Board of Directors pursuant to the terms of Section 1.3
hereof and a stockholder vote is required, all information supplied by the
Company for inclusion in any proxy statement filed with the Commission and sent
or given to stockholders pursuant to Section 6.2 hereof shall, at the time such
proxy statement is first mailed to the Company's stockholders and at the time of
the related stockholders meeting, not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading at the time of filing with the
Commission, mailing to stockholders or any meeting of stockholders.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information which is supplied in writing by Parent, the
Purchaser or the Merger Sub specifically for inclusion and which is contained in
any of the foregoing documents. Each of the Company, the Parent and the
Purchaser agrees to correct promptly any information supplied by it for use in
the Schedule 14D-9 if and to the extent that the Schedule 14D-9 shall become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be
mailed to holders of the Shares. Any such Schedule 14D-9 and/or proxy statement,
or any amendment thereto, shall be provided to the Parent, the Purchaser and the
Merger Sub such that Parent, Purchaser and Merger Sub shall have an opportunity
to promptly comment thereon. The Company agrees to provide the Parent, the
Purchaser and the Merger Sub and their counsel any comments the Company or its
counsel may receive from the Commission or its staff with respect to any such
Schedule 14D-9 and/or proxy statement, or any amendment thereto, promptly after
receipt of such comments.
(d) The Company shall promptly furnish the Purchaser with mailing labels
containing the names and addresses of the record holders and, if available, of
non-objecting beneficial owners of Shares and lists of securities positions of
Shares held in stock depositories, each as of the most recent practicable date,
and shall from time to time
4
5
furnish the Purchaser with such additional information, including updated
or additional lists of stockholders, mailing labels and lists of
securities positions, and other assistance as the Purchaser may reasonably
request in order to be able to communicate the Offer to the stockholders
of the Company. Subject to the requirements of law, and except for such
steps as are necessary to disseminate the Offer and any other documents
necessary to consummate the Merger, Parent, the Purchaser and the Merger
Sub and each of their affiliates shall treat all information in such
labels, lists and additional information as "Evaluation Material" in
accordance with the letter agreement dated April 7, 1998 between Parent
and the Company (the "Confidentiality Agreement").
1.3 Directors. Promptly upon the payment by the Purchaser or any of
Parent's direct or indirect subsidiaries pursuant to the Offer for such number
of Shares which represent at least a majority of the outstanding Shares and from
time to time thereafter, the Company shall increase the size of its Board of
Directors to seven (7) members and the Purchaser shall be entitled to designate
members of the Company's Board of Directors such that the Purchaser, subject to
compliance with Section 14(f) of the Exchange Act, will have a number of
representatives on the Board of Directors, rounded up to the next whole number,
equal to the product obtained by multiplying seven (7) by the percentage of
Shares beneficially owned by Parent and any of its subsidiaries. The Company
shall, upon request by the Purchaser, promptly increase the size of the Board of
Directors to the extent permitted by its Certificate of Incorporation and/or use
its reasonable efforts to secure the resignations of such number of directors as
is necessary to enable the Purchaser's designees to be elected to the Board of
Directors and shall use its best efforts to cause the Purchaser's designees to
be so elected, provided, however, that in the event that Purchaser's designees
are elected to, and constitute a majority of, the Board of Directors of the
Company, until the Effective Time, such Board of Directors shall have at least
two directors who are directors of the Company on the date of this Agreement
(the "Continuing Directors") and, provided further that, in such event, if the
number of Continuing Directors shall be reduced below two for any reason
whatsoever, the remaining Continuing Director(s) shall designate a person to
fill such vacancy who shall be deemed to be a Continuing Director for purposes
of this Agreement, or, if no Continuing Director then remain, the other
directors of the Company on the date hereof shall designate three persons to
fill such vacancies, and such persons shall be deemed to be Continuing Directors
for purposes of this Agreement. The Company shall take, at its expense, all
action necessary to fulfill its obligations under this Section 1.3, including
the mailing to the Company's stockholders of the information required by Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, in form and
substance reasonably satisfactory to the Purchaser and its counsel. The
Purchaser shall supply to the Company and be solely responsible for any
information furnished in writing to the Company specifically with respect to the
Purchaser and its nominees, officers, directors and affiliates for use in
connection with and required by, such Section 14(f) and Rule 14f-1
Notwithstanding the foregoing, (i) the affirmative vote of a majority of
the Continuing Directors shall be required to terminate, amend, modify or waive
any provision of this Agreement on behalf of the Company, or to approve any
other action by the Company with respect to the Offer or the other transactions
contemplated hereby, or the Certificate of Incorporation or Bylaws of the
Company which adversely affects the interests of the
5
6
stockholders of the Company (other than the Parent, the Purchaser or the Merger
Sub) with respect to such transactions and (ii) none of the Purchaser, the
Merger Sub or Parent shall, directly or indirectly, cause the Company to breach
its obligations hereunder.
6
7
ARTICLE 2
THE MERGER
2.1 The Merger. At the Effective Time (as defined in Section 2.3), in
accordance with this Agreement and the Delaware General Corporation Law, as
amended (the "Delaware Law"), the Merger Sub (or another direct or indirect
Delaware subsidiary of Parent) shall be merged with and into the Company (the
"Merger"), the separate existence of the Merger Sub (except as may be continued
by operation of law) shall cease, and the Company shall continue as the
surviving corporation under the corporate name it possesses immediately prior to
the Effective Time. The Company, in its capacity as the corporation surviving
the Merger, sometimes is referred to herein as the "Surviving Corporation."
Notwithstanding the foregoing, the Purchaser may revise the structure of the
Merger (including merging the Company into the Merger Sub or merging the Company
with or into another direct or indirect wholly-owned subsidiary of Parent)
provided that any such restructuring does not (i) cause a failure of a condition
to the Offer or the Merger, (ii) adversely affect the stockholders of the
Company and (iii) cause the Company to breach its representations and warranties
hereunder.
2.2 Effect of the Merger. The Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, both public and private, of the
Merger Sub and the Company (collectively, the "Constituent Corporations"); shall
be vested with all property, whether real, personal, or mixed, and all debts due
on whatever account, including subscriptions to shares, and all other choses in
action, and all and every other interest belonging to or due to each of the
Constituent Corporations; and shall be responsible and liable for all the
obligations and liabilities of each of the Constituent Corporations, all with
the effect set forth in the Delaware Law.
2.3 Consummation of the Merger. As soon as is practicable after the
satisfaction or waiver, if possible, of the conditions set forth in Article 7,
and in no event later than five business days after such satisfaction or waiver,
the parties hereto will cause an Agreement or Certificate of Merger to be filed
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 applicable law
using the procedures permitted in Section 253 (if possible) or Section 251 of
the Delaware Law. The Merger shall be effective at the time of the filing of the
Agreement or Certificate of Merger with the Secretary of State of the State of
Delaware or at such other time specified in the Certificate of Merger as the
Merger Sub and the Company shall agree (the time the Merger becomes effective
being hereinafter referred to as the "Effective Time").
2.4 Certificate of Incorporation and By-Laws; Directors and Officers. The
Certificate of Incorporation and By-Laws of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation immediately after the
Effective Time and shall thereafter continue to be its Certificate of
Incorporation and By-Laws until amended, subject to Section 6.10 below, as
provided therein and under the Delaware Law. The directors of the Merger Sub
holding office immediately prior
7
8
to the Effective Time shall be the directors of the Surviving Corporation
immediately after the Effective Time.
2.5 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of the Merger Sub, the Company or the
holder of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time, other than Shares to be cancelled pursuant to Section
2.5(b) hereof, shall automatically be cancelled and extinguished and,
other than Shares with respect to which appraisal rights are properly
exercised ("Dissenting Shares"), be converted into and become a right to
receive in cash the highest price per share paid pursuant to the Offer
(the "Merger Consideration").
(b) Each Share issued and outstanding immediately prior to the
Effective Time and held in the treasury of the Company or owned by Parent,
the Purchaser or any subsidiary thereof shall automatically be cancelled
and retired and no payment shall be made with respect thereto.
(c) Each share of the Merger Sub's Common Stock, par value $.01 per
share, issued and outstanding immediately prior to the Effective Time
shall automatically be converted into and become one validly issued, fully
paid and nonassessable share of Common Stock, par value $.001 per share,
of the Surviving Corporation.
(d) The holders of such Dissenting Shares, if any, shall be entitled
to payment for such shares only to the extent permitted by and in
accordance with the provisions of Section 262 of the Delaware Law;
provided, however, that if, in accordance with such Section of the
Delaware Law, any holder of Dissenting Shares shall (i) subsequently
withdraw his demand for payment for such shares, or (ii) fail to maintain
a petition for appraisal as provided in such Section; or if neither any
holder of Dissenting Shares nor the Surviving Corporation has filed suit
as provided in Section 262 of the Delaware Law, such holder or holders (as
the case may be) shall forfeit such right to payment of such Shares, and
such Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration.
2.6 Company Stock Options. The Parent, the Purchaser, the Merger Sub and
the Company hereby acknowledge and agree that the Surviving Corporation shall
not assume or continue any outstanding stock options or warrants under any of
the Company's 1994 Stock Option Plan, 1996 Stock Option Plan or 1996 Director
Option Plan or any other agreement or arrangement (collectively, as amended, the
"Stock Plans"), or substitute any additional options or warrants for such
outstanding options or warrants. Following the purchase of Shares pursuant to
the Offer, the unvested portions of all outstanding stock options, warrants or
other rights to acquire shares issued under the Stock Plans shall automatically
accelerate in accordance with the terms of the Stock Plans(the "Accelerated
Options"). In lieu of exercising such Accelerated
8
9
Options, each holder thereof shall, upon surrender for cancellation of the same
to the Company on or before the Effective Time, be entitled to receive from the
Company, subject to applicable withholding requirements, an amount in cash equal
to the excess of (a) the product of the number of Shares covered by such
Accelerated Options multiplied by the Merger Consideration, over (b) the product
of the number of Shares covered by such Accelerated Options multiplied by the
per-Share exercise, purchase or conversion price payable upon exercise, purchase
or conversion of the same. Any outstanding stock options or warrants that shall
not have been exercised or surrendered for payment in accordance with the
preceding sentence shall terminate at the Effective Time in accordance with the
terms of the Stock Plans.
2.7 Employee Stock Purchase Plans. The Company shall terminate its 1996
Employee Stock Purchase Plan for U.S. Employees and its 1996 Employee Stock
Purchase Plan for non-U.S. employees (together, the "Employee Stock Purchase
Plans") by having its Board of Directors amend each of the Employee Stock
Purchase Plans as necessary to provide that: (a) any shares of the Company's
Common Stock shall be purchased under the Employee Stock Purchase Plans on a new
"Exercise Date" (as such term is defined in the Employee Stock Purchase Plans)
set by the Board of Directors, which Exercise Date shall be on the last trading
day immediately prior to the consummation of the Offer, or such earlier time as
the Board shall specify, and (b) immediately following such purchase of shares
of the Company's Common Stock, each of the Employee Stock Purchase Plans shall
terminate.
2.8 Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, the Purchaser shall designate a
bank or trust company reasonably satisfactory to the Company to act as
agent for the holders of Shares (the "Exchange Agent") to receive the
Merger Consideration, and at or immediately following the Effective Time,
Parent shall take all steps necessary to cause the Purchaser to have
sufficient funds to be able to provide the Exchange Agent with the funds
necessary to make the payments contemplated by this Article II.
(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each person who was, at the Effective Time, a holder of record of
Shares entitled to receive the Merger Consideration pursuant to Section
2.5(a) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates previously
representing Shares to be exchanged pursuant to the Merger (the
"Certificates") shall pass, only upon proper delivery of such Certificates
to the Exchange Agent) and instructions for use thereof in effecting the
surrender of the Certificates. Upon surrender to the Exchange Agent of the
Certificates, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such
other documents as may be requested, the Exchange Agent shall promptly
deliver to the persons entitled thereto the Merger Consideration payable
in respect of the Shares represented by the Certificates, and the
Certificates shall forthwith be cancelled. Until so surrendered and
exchanged, each such Certificate (other than Certificates representing
Shares held in the treasury of the Company, by the Purchaser or any
subsidiary of the Purchaser and Dissenting Shares) evidencing Shares
shall, after the
9
10
Effective Time, be deemed to evidence only the right to receive the Merger
Consideration.
(c) If delivery of the Merger Consideration in respect of cancelled
Shares is to be made to a person other than the person in whose name a
surrendered Certificate or instrument is registered, it shall be a
condition to such delivery or payment that the Certificate or instrument
so surrendered shall be properly endorsed or shall be otherwise in proper
form for transfer and that the person requesting such delivery or payment
shall have paid any transfer and other taxes required by reason of such
delivery or payment in a name other than that of the registered holder of
the Certificate or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation or the Exchange Agent that such
tax either has been paid or is not payable.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no further registration of transfers of
Shares thereafter on the records of the Company. From and after the
Effective Time, holders of Certificates evidencing ownership of Shares
outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Shares except as otherwise provided herein
or by law. No interest shall be paid or accrue on any portion of the
Merger Consideration.
(e) Notwithstanding anything to the contrary in this Section 2.7,
none of the Exchange Agent, the Surviving Corporation or any party hereto
shall be liable to a holder of Shares for any amount properly paid to a
public official pursuant to any applicable property, escheat or similar
law.
2.9 Taking of Necessary Action; Further Action. Subject to the terms and
conditions hereof, Parent, the Purchaser, the Merger Sub and the Company,
respectively, shall use all reasonable efforts to take all such action as may be
necessary or appropriate in order to effectuate the Offer and the Merger as
promptly as possible and to carry out the transactions provided for herein or
contemplated hereby. If at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement and to
vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, immunities, powers and franchises of
either of the Constituent Corporations, the officers and directors of the
Surviving Corporation are fully authorized in the name of either of the
Constituent Corporations or otherwise to take, and shall take, all such action.
2.10 Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing Shares shall have been lost, stolen or destroyed, the paying agent
shall pay to such holder the Merger Consideration required pursuant to Section
2.5, in exchange for such lost, stolen or destroyed certificates, upon (i) the
making of an affidavit of that fact by the holder thereof with such assurances
as the paying agent (upon prior consultation with Parent) in its discretion and
as a condition precedent to the payment of the Merger Consideration as the
paying agent, may reasonably require of the holder of such lost, stolen or
destroyed certificates, and (ii) upon written agreement by such holder to
indemnify the Company, Parent, Merger Sub and the
10
11
Surviving Corporation for any and all losses or damages suffered by such
entities as a result of payment of the Merger Consideration (upon prior
consultation with Parent) in its discretion and as a condition precedent to the
payment of the Merger Consideration as the paying agent, may reasonably require
of the holder of such lost, stolen or destroyed certificates.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARENT,
THE PURCHASER AND THE MERGER SUB
The Parent, the Purchaser and the Merger Sub hereby agree and represent
and warrant to the Company as follows:
3.1 Organization and Qualification. Each of the Parent, the Purchaser and
the Merger Sub has been duly incorporated and is validly existing as a
corporation and in good standing under the laws of the United Kingdom in the
case of Parent and the laws of Delaware in the case of the Purchaser and Merger
Sub and has the requisite corporate power to carry on its respective business as
now conducted. Each of the Parent, the Purchaser and the Merger Sub is duly
qualified as a foreign corporation in good standing in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the business, assets,
revenues, operations or financial condition of the Parent and its subsidiaries,
taken as a whole. As of the date of this Agreement, the Parent, the Purchaser
and the Merger Sub have no obligations or liabilities, and none of such parties
are parties to any pending or, to the knowledge of such parties, threatened,
litigation, which in any case if paid or adversely determined would have a
material effect on their ability to consummate the transactions contemplated by
this Agreement. The Purchaser is an indirect wholly-owned subsidiary of the
Parent and the Merger Sub is a wholly-owned subsidiary of the Purchaser. The
Certificate or Articles of Incorporation and By-Laws of the Purchaser and the
Merger Sub contain no provisions which would have a material adverse effect on
the ability of either of such entities to consummate the transactions
contemplated by this Agreement.
3.2 Authority Relative to this Agreement. Each of the Parent, the
Purchaser and the Merger Sub has the requisite corporate power and authority to
enter into this Agreement and the Option Agreement, as applicable, and to carry
out its respective obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Option Agreement, as applicable, by the
Parent, the Purchaser and the Merger Sub, as applicable, and the consummation by
the Parent, the Purchaser and the Merger Sub, as applicable, of the transactions
contemplated hereby and thereby have been duly authorized by the respective
Boards of Directors of the Parent, the Purchaser and the Merger Sub, as
applicable, by the Parent as the sole stockholder of the Purchaser, and by the
Purchaser as the sole stockholder of the Merger Sub, and no other corporate
proceedings on the part of the Parent, the Purchaser or the Merger Sub are
necessary to authorize this Agreement or the Option Agreement, as applicable,
and the
11
12
transactions contemplated hereby and thereby. This Agreement and the Option
Agreement, as applicable, have been duly executed and delivered by the Parent,
the Purchaser and the Merger Sub and constitute a valid and binding obligation
of each such company, enforceable in accordance with its terms. None of the
Parent, the Purchaser or the Merger Sub is subject to or obligated under any
provision of (a) its Certificate or Articles of Incorporation or By-Laws, or (b)
any contract, indenture, instrument, or other agreement, or (c) any license,
franchise or permit, or (d) any law, regulation, order, judgment or decree,
which would be breached, violated or defaulted or in respect of which a right of
termination or acceleration or any encumbrance on any of its assets would be
created by its execution, delivery and performance of this Agreement or the
Stock Option Agreement, as applicable, and the consummation by it of the
transactions contemplated hereby and thereby, other than any such breaches,
violations, defaults, rights of termination or acceleration, or encumbrances,
which will not, individually or in the aggregate, have a material adverse effect
on the ability of the Purchaser or the Merger Sub to consummate the Offer or the
Merger. Other than in connection with or in compliance with the provisions of
the Delaware Law, the Exchange Act, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act"), no authorization, consent
or approval of, or filing with, any public body, court or authority of competent
jurisdiction (each a "Government Entity") is necessary on the part of the
Parent, the Purchaser or the Merger Sub for the consummation by the Parent, the
Purchaser and the Merger Sub of the transactions contemplated by this Agreement
or the Stock Option Agreement, as applicable, other than filings with such
foreign jurisdictions in which subsidiaries of the Company are organized which
may require filings to be made in connection with the transfer of control of
such subsidiaries, and Parent, the Purchaser and the Merger Sub each agrees to
make any and all such filings on or prior to the Effective Time if any of such
parties are required to make such filings under applicable law.
3.3 Offer Documents. The Offer to Purchase and related Letter of
Transmittal and Schedule 14D-1 (and any amendments or supplements to the
foregoing) (which together constitute the "Offer Documents") shall in all
material respects conform with the requirements of the Exchange Act and the
rules and regulations thereunder (except that the foregoing representation shall
not apply with respect to the accuracy of information relating to the Company
which has been excerpted or derived from public sources or furnished in writing
by the Company specifically for inclusion in the Offer Documents). As of their
respective dates, and on the date they are first published, sent or given to
holders of Shares, the Offer Documents, taken as a whole, shall not contain any
misstatement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances in which they were made, not misleading. Each of the
Parent, Purchaser and the Company agrees to correct promptly any information
provided by it for use in the Schedule 14D-1 and the other Offer Documents if
and to the extent that any of them shall become false or misleading in any
material respect, and Parent and the Purchaser further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be disseminated to
holders of Shares, in each case as and to the extent required by applicable law.
The information supplied by Parent for inclusion in the proxy statement to be
sent to the stockholders of the Company in connection with the meeting of the
Company's stockholders to consider the Merger, or the information statement to
be sent to such stockholders, as appropriate, shall not, on the date the proxy
statement or information statement is first mailed to stockholders, at the time
of such
12
13
stockholders' meeting, if any, or at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it shall be
made, is false or misleading with respect to any material fact, or shall omit to
state any material fact necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for such stockholders'
meeting which has become false or misleading.
3.4 Financing. At the expiration of the Offer and the Effective Time,
Parent and the Purchaser will have available all funds necessary for the
acquisition of all Shares pursuant to the Offer and to perform their respective
obligations under this Agreement, including without limitation, payment in full
for all shares of Common Stock validly tendered into the Offer or outstanding at
the Effective Time and all obligations to make payment with respect to the
Options pursuant to Section 2.6.
3.5 No Violation of the Margin Rules. None of the transactions
contemplated by this Agreement will violate or result in the violation of
Section 7 of the Exchange Act or any regulation promulgated pursuant thereto,
including, without limitation, Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
3.6 Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby and has engaged in
no other business activities.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent, the Purchaser
and the Merger Sub, except as set forth in the Disclosure Schedule which was
dated and delivered to the Parent, the Purchaser and the Merger Sub on or prior
to the date hereof, as follows:
4.1 Organization and Qualification. The Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
Delaware. The Company is duly qualified as a foreign corporation in good
standing in each jurisdiction in which the character of its properties owned or
leased or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the business, revenues, assets, operations or financial conditions of
the Company and its subsidiaries, taken as a whole (a "Material Adverse Effect
on the Company" (it being understood that (i) any adverse effect that is caused
by conditions affecting the economy or security markets generally shall not be
taken into account in determining whether there has been a Material Adverse
Effect on the Company, (ii) any adverse effect that is caused by conditions
affecting the primary industry in which the Company currently competes shall not
be taken into account in determining whether there has been a Material Adverse
Effect on the Company (provided that such affect does not adversely effect the
Company in a disproportionate manner) and (iii) any adverse effect resulting
from litigation brought or threatened against the Company or any
13
14
member of its Board of Directors in respect of the Offer, the Merger, or any of
the transactions contemplated hereby shall not be taken into account in
determining whether there has been a Material Adverse Effect on the Company)).
The Company has full corporate power and authority to own its properties and
conduct its business as presently owned and conducted. The copies of the
Certificate of Incorporation and By-Laws of the Company previously delivered or
made available to the Purchaser are true, correct and complete as of the date
hereof.
4.2 Subsidiaries. Each subsidiary of the Company, all of which are listed
in either Exhibit 21.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (the "Form 10-K Report") or the Disclosure
Schedule, has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation, is duly
qualified as a foreign corporation in good standing in each jurisdiction in the
United States in which the character of its properties owned or leased or the
nature of its activities make such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect on the
Company, and has full power and authority to own its properties and conduct its
business as presently owned and conducted. Except as set forth on Schedule 4.2,
the Company owns, directly or indirectly, all of the outstanding shares of
capital stock of each such subsidiary free and clear of all liens, claims.
charges or encumbrances; there are no irrevocable proxies with respect to such
shares; and all such shares are validly issued, fully paid and nonassessable.
Except for the capital stock of such subsidiaries or otherwise as disclosed in
the Form 10-K Report, the Company does not own, directly or indirectly, any
investment (other than for ordinary cash management purposes) in (a) any general
partnership or joint venture or (b) any equity or debt investment having either
a fair market or face value or cost in excess of $100,000. Except as disclosed
in the Disclosure Schedule, neither the Company nor any of its subsidiaries is
obligated to make any payments in the form of earn-outs, deferred purchase price
or other consideration in respect of the purchase price payable in connection
with the acquisition of any subsidiary or business.
4.3 Capitalization. The authorized capital stock of the Company consists
of 30,000,000 Shares and 5,000,000 shares of preferred stock, $.001 par value
("Preferred Stock"), of which 100,000 shares have been designated Series A
Participating Preferred Stock (the "Series A Preferred Stock"). As of the date
hereof, 14,146,608 Shares (plus any Shares issued upon exercise of stock options
outstanding on March 31, 1998), and no shares of Preferred Stock, are issued and
outstanding. All issued and outstanding Shares are duly authorized and issued,
and are fully paid and nonassessable. As of the date hereof, (a) 2,086,249
Shares (less the number of Shares issued upon the exercise of stock options
outstanding on March 31, 1998) are reserved for issuance pursuant to outstanding
stock options, (b) 1,320,001 shares are reserved for future grants pursuant to
the Stock Plans, and (c) 100,000 shares of Series A Preferred Stock are reserved
for issuance pursuant to preferred stock purchase rights (the "Rights") issued
under the Rights Agreement. Section 4.3 of the Disclosure Schedule sets forth a
complete and correct list of the Company's outstanding stock options, including
for each the name of the option holder, the date of grant, the expiration date,
the plan under which the option (or any portion thereof) was granted, and the
dates and the number of Shares as to which any portion of the option becomes
exercisable. Except as otherwise described in the Disclosure Schedule and for
Stock issuable upon exercise of outstanding options on the date hereof or upon
issuance of Stock
14
15
pursuant to the Employee Stock Purchase Plans, there are no options, warrants,
conversion privileges or other rights, agreements, arrangements or commitments
obligating the Company or any of its subsidiaries to issue or sell any shares
of, or make any payments based on the value or appreciation of any, capital
stock of the Company or any of its subsidiaries or securities or obligations of
any kind convertible into or exchangeable for any shares of capital stock of the
Company, any of its subsidiaries or any other person. The holders of outstanding
Shares are not entitled to any contractual or statutory preemptive or other
similar rights. Upon consummation of the Merger in accordance with the terms of
this Agreement, the Purchaser will own the entire equity interest in the
Company, and there will be no options, warrants, conversion privileges or other
rights, agreements, arrangements or commitments obligating the Surviving
Corporation or any of its subsidiaries to issue or sell any shares of capital
stock of the Surviving Corporation or of any of its subsidiaries.
4.4 Authority Relative to this Agreement. The Company has the requisite
corporate power and authority to enter into this Agreement and the Option
Agreement and to perform its obligations hereunder and thereunder. The execution
and delivery of this Agreement and the Option Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and unanimously authorized by the Board of Directors of the
Company and, except for the approval of its stockholders (if required) as set
forth in Section 6.1, no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or the Option Agreement and the
transactions contemplated hereby and thereby. This Agreement and Option
Agreement have been duly executed and delivered by the Company and the Agreement
constitutes valid and binding obligations of the Company, enforceable in
accordance with their terms. Except as set forth on the Disclosure Schedule 4.4,
neither the Company nor any of its subsidiaries is subject to or obligated under
any provision of (a) its Certificate or Articles of Incorporation or By-Laws,
(b) except as set forth in the Disclosure Schedule, any contract, (c) any
license, franchise or permit, or (d) any law, regulation, order, judgment or
decree, which would be breached or violated or in respect of which a right of
termination or acceleration or any encumbrance on any of its or any of its
subsidiaries' assets would be created by the Company's execution, delivery and
performance of this Agreement or the Option Agreement and the consummation by
the Company of the transactions contemplated hereby, other than any such
breaches, violations, rights or encumbrances which will not, individually or in
the aggregate, have a Material Adverse Effect on the Company. Other than in
connection with or in compliance with the provisions of the Delaware Law, the
Exchange Act and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, no authorization, consent or
approval of, or filing with, any public body, court or authority is necessary
for the consummation by the Company of the transactions contemplated by this
Agreement or the Option Agreement other than (i) filings with such foreign
jurisdictions in which subsidiaries of the Company are organized which may
require filings to be made in connection with the transfer of control of such
subsidiaries, and (ii) such authorizations, consents, approvals or filings with
respect to which the failure to obtain would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or the ability of the
parties to consummate the transactions contemplated hereby. The Company agrees
to make any and all such filings on or prior to the Effective Time if the
Company is required to make such filings under applicable law.
15
16
4.5 Commission Filings. The Company has heretofore delivered or made
available to the Purchaser copies of the Company's (a) Form 10-K Report and (b)
all proxy statements relating to the Company's meetings of stockholders (whether
annual or special) during 1997 and 1998, in each case as filed with the
Commission. The Company has heretofore made available to the Purchaser all other
reports, registration statements and other documents filed by the Company with
the Commission under the Exchange Act and the Securities Act. All such documents
described in the first two sentences of this section are collectively referred
to herein as the "Commission Filings." Except as set forth on the Disclosure
Schedule, the Company has not filed any Form 8-K Reports with the Commission
since January 1, 1998. The Company has timely filed all reports, registration
statements and other documents required to be filed with the Commission under
the rules and regulations of the Commission, and all Commission Filings complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be. As of their respective dates, the Commission
Filings (including in all cases any exhibits or schedules thereto or documents
incorporated therein by reference) did not contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except to the extent corrected or
superseded by subsequent filings.
4.6 Financial Statements and Related Data. The audited consolidated
financial statements of the Company included in the Form 10-K Report have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto, and fairly presented the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended.
4.7 Absence of Certain Changes or Events. Except as contemplated by this
Agreement, or reflected in any financial statement or note thereto referred to
in Section 4.6 or reflected in the Disclosure Schedule, or reflected in any
Commission Filing filed prior to date hereof, since December 31, 1997 until the
date hereof, there has not been (a) any Material Adverse Effect on the Company;
(b) any damage, destruction or loss, whether covered by insurance or not, having
a Material Adverse Effect on the Company; (c) any entry by the Company or any
subsidiary into any commitment or transaction material to the Company and its
subsidiaries taken as a whole, which is not in the ordinary course of business;
(d) any change by the Company in accounting principles or methods except insofar
as may be required by a change in generally accepted accounting principles; (e)
any declaration, payment or setting aside for payment of any dividends or
purchase or redemption of any securities of the Company or (f) any entering into
or modification of any employment or severance contract with any executive
officer of the Company or any of its subsidiaries or any increase in
compensation payable by the Company or any of its subsidiaries to any of their
executive officers or any material increase under any bonus, pension or benefit
plan.
4.8 Litigation. As of the date hereof, except as set forth on Schedule
4.8, no action, suit, claim, proceeding, or to the Company's knowledge as of the
date hereof, investigation,
16
17
compliance review, or other legal or administrative proceeding is pending or to
the Company's knowledge as of the date hereof, is threatened at law, in equity
or otherwise, before any court, board, commission, agency or instrumentality of
any federal, state, or local government or of any agency or subdivision thereof,
or before any arbitrator or panel of arbitrators (a "Claim") which is against
(i) the Company, (ii) or any of its subsidiaries or (iii) against any of the
officers or directors of the Company or any of its subsidiaries with respect to
the Company or its subsidiaries or the business or property of the Company or
its subsidiaries.
4.9 Liabilities. Except as disclosed in the Form 10-K Report neither the
Company nor any of its subsidiaries has any obligation or liability (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known
to the Company, whether due or to become due) of a nature that would be required
under GAAP to be disclosed on a balance sheet of the Company other than (i)
obligations and liabilities incurred since December 31, 1997 in the ordinary
course of business consistent with past practice, which in the aggregate have
not had nor are reasonably expected to have a Material Adverse Effect on the
Company and its subsidiaries, taken as a whole, and (ii) obligations and
liabilities to be incurred from and after the date of this Agreement relating to
the transactions contemplated hereby.
4.10 Environmental Matters. The Company and its subsidiaries have obtained
all material permits, licenses and other authorizations which are required under
applicable federal, state, local and foreign laws relating to public health and
safety, worker health and safety, pollution or protection of the environment,
including those relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials or wastes, except where its failure to obtain
the same would not have a Material Adverse Effect on the Company. The Company
and its subsidiaries have complied and are in compliance with all terms and
conditions of any and all required permits, licenses, and authorizations, and
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
federal, state, local or foreign law or any regulation, code, plan, order,
decree or judgment relating to public health and safety, worker health and
safety, and pollution or protection of the environment, or any notice or demand
letter issued, entered, promulgated or approved thereunder by any Governmental
Entity, except where the failure to comply would not have a Material Adverse
Effect on the Company. To the knowledge of the Company as of the date hereof, no
facts, events or conditions relating to the Company's or any of its
subsidiaries' past or present operations, facilities or properties interfere in
any material respect with or prevent continued compliance by the Company in all
material respects with, or give rise to any material present or potential legal,
common law or statutory liability of the Company under, any applicable law or
regulation related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or related to the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste.
17
18
4.11 Employee Benefit Plans.
(a) Section 4.11(a) of the Disclosure Schedule hereto sets forth a
list of all material "employee benefit plans," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all other material employee benefit or compensation
arrangements, including, without limitation, any such material
arrangements providing severance pay, sick leave, vacation pay, salary
continuation for disability, retirement benefits, deferred compensation,
bonus pay, incentive pay, stock options (including those held by
directors, employees, and consultants), hospitalization insurance, medical
insurance, life insurance, scholarships or tuition reimbursements, that
are maintained by the Company, any subsidiary of the Company or any
Company ERISA Affiliate (as defined in this Section 4.11) or with respect
to which the Company, any subsidiary of the Company or any Company ERISA
Affiliate has or may have any material liability (the "Company Employee
Benefit Plans").
(b) None of the Company Employee Benefit Plans is a "multiemployer
plan," as defined in Section 4001(a)(3) of ERISA (a "Multiemployer Plan"),
and neither the Company nor any subsidiary of the Company or Company ERISA
Affiliate presently maintains or has maintained such a plan.
(c) Except as provided in Part 6 of Title I of ERISA, the Company
and the subsidiary of the Company do not maintain or contribute to any
plan or arrangement which provides or has any liability to provide life
insurance or medical or other employee welfare benefits to any employee or
former employee upon his retirement or termination of employment, and the
Company and the subsidiaries of the Company have never represented,
promised to or contracted with any employee or former employee that such
benefits would be provided.
(d) Except for the Options set forth in Section 4.3 of the
Disclosure Schedule and the rights of participants under the Company's
Employee Stock Purchase Plans, the execution of, and performance of the
transactions contemplated in, this Agreement will not, either alone or
upon the occurrence of subsequent events, result in any payment (whether
of severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any individual. The only severance agreements or severance
policies applicable to the Company or the subsidiary of the Company in the
event of a change of control of the Company are the agreements and
policies specifically referred to in Section 4.11(d) of the Disclosure
Schedule. No payment or benefit which will or may be made by the Company,
Parent or any of their subsidiaries or affiliates with respect to any
employee of the Company or any subsidiary of the Company will be
characterized as an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended.
(e) Each Company Employee Benefit Plan that is intended to qualify
under Section 401 of the Code, and each trust maintained pursuant thereto,
has been determined
18
19
to be exempt from federal income taxation under Section 501 of the Code by
the IRS, and, to the Company's knowledge, nothing has occurred with
respect to the operation or organization of any such Company Employee
Benefit Plan that would cause the loss of such qualification or exemption
or the imposition of any material liability, penalty or tax under ERISA or
the Code. No Company Employee Benefit Plan is a "defined benefit plan"
within the meaning of Section 3(35) of ERISA, and neither the Company nor
any subsidiary of the Company or any Company ERISA Affiliate maintains or
has ever maintained such a plan.
(f) (i) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under
any of the Company Employee Benefit Plans to any funds or trusts
established thereunder or in connection therewith have been made by the
due date thereof, (ii) the Company and the subsidiary of the Company have
complied in all material respects with any notice, reporting and
documentation requirements of ERISA and the Code, (iii) as of the date
hereof there are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the Company's knowledge, threatened, in
connection with the Company Employee Benefit Plans, and (iv) the Company
Employee Benefit Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA and the Code
(including rules and regulations thereunder) and other applicable federal
and state laws and regulations.
(g) Section 4.11(g) of the Disclosure Schedule sets forth a complete
list of all amounts outstanding relating to bonuses payable to employees
and any obligation to pay bonuses to employees relating to the Company's
performance, the employee's performance or the transactions contemplated
hereby.
(h) All compensation attributable to outstanding options to acquire
Shares constitute "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder.
(i) The Company has provided, or concurrently herewith shall
provide, all notices to holders of options required under any Stock Plan
or otherwise in connection with the Offer and the other transactions
contemplated hereby.
For purposes of this Agreement, "Company ERISA Affiliate" means any
business or entity which is a member of the same "controlled group of
corporations," under "common control" or a member of an "affiliated service
group" with the Company within the meanings of Sections 414(b), (c) or (m) of
the Code, or required to be aggregated with the Company under Section 414(o) of
the Code, or is under "common control" with the Company, within the meaning of
Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed under
any of the foregoing Sections.
4.12 Labor Matters. As the date hereof, there are no controversies pending
or, to the knowledge of the Company, threatened, between the Company or any of
its subsidiaries and any
19
20
group of their respective employees; (ii) neither the Company nor, to the
knowledge of the Company, any of its subsidiaries, is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or its subsidiaries nor does the Company know of any
activities or proceedings of any labor union to organize any such employees;
(iii) neither the Company nor any of its subsidiaries has materially breached or
otherwise materially failed to comply with any provision of any such agreement
or contract and there are no material grievances outstanding against any such
parties under any such agreement or contract; (iv) there are no unfair labor
practice complaints pending against the Company or any of its subsidiaries
before the National Labor Relations Board or any current union representation
questions involving employees of the Company or any of its subsidiaries; and (v)
the Company has no knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of the Company
or any of its subsidiaries. No consent of any union which is a party to any
collective bargaining agreement with the Company is required to consummate the
transactions contemplated by this Agreement.
4.13 Offer Documents. Neither the Schedule 14D-9 nor any of the
information supplied by the Company for inclusion in the Offer Documents shall,
at the respective times the Schedule 14D-9, the Offer Documents or any such
amendments or supplements are filed with the SEC or are first published, sent or
given to stockholders, as the case may be, 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 the light of the
circumstances under which they were made, not misleading.
4.14 Trademarks, Patents and Copyrights.
(a) The Company and its subsidiaries own, or are licensed to use,
all trademarks, trade names, service marks, copyrights and patents,
together with any applications for the registrations of such trademarks,
trade names, services marks, copyrights and patents, and all processes,
formulae, methods, schematics, technology, know-how, software programs or
applications and tangible or intangible proprietary information or
materials that are necessary to conduct the business of the Company and
its subsidiaries as currently conducted, the absence of which rights would
reasonably be expected to have a Material Adverse Effect on the Company
(the foregoing collectively referred to as the "Company IP Rights").
(b) Schedule 4.14(b) of the Disclosure Schedule sets forth a
complete list of all patents, registered copyrights, registered
trademarks, trade names and service marks and any applications for all of
the foregoing, included in Company IP Rights, and specifies, where
applicable, the jurisdictions in which each such Company IP Right has been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners.
(c) Schedule 4.14(c) of the Disclosure Schedule sets forth a list of
all material licenses, sublicenses and other agreements to which the
Company or any of its
20
21
subsidiaries is a party and pursuant to which the Company or any other
person is licensed or otherwise has rights under any Company IP Right,
including agreements pursuant to which any party is granted any rights to
access source code or to use source code to create derivative works of any
products of the Company, but excluding object code licenses granted by the
Company to end-users in the ordinary course of business that permit use of
software products without a right to distribute or sublicense the same or
otherwise that are on customary end-user terms, and excluding standard
licenses granted to the Company by software vendors covering software
which is broadly distributed by such licensors. The Company and its
subsidiaries are not subject to any agreement which restricts in any
material respect the use, transfer, or licensing by the Company and its
subsidiaries of the Company IP Rights and the products of the Company.
(d) The execution and delivery of this Agreement by the Company, and
the consummation of the transactions contemplated hereby, will neither
cause the Company to be in violation of or default under any such license,
sublicense or other agreement set forth or required to be set forth on
Schedule 4.14(c), nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement, except in each case or in the aggregate where such violation,
default, termination or modification would not have a Material Adverse
Effect on the Company. Except as set forth in Schedule 4.14 of the
Disclosure Schedule, the Company (i) is the sole and exclusive owner of,
with all right, title and interest in and to (free and clear of any liens
or encumbrances), Company IP Rights, or (ii) is a licensee under or
otherwise possesses legally enforceable rights under the Company IP Rights
under valid and binding agreements listed in Schedule 4.14(c) of the
Disclosure Schedule or excluded therefrom as permitted by this Section
4.14.
(e) No claims against the Company, or to the Company's knowledge,
its licensors or licensees with respect to Company IP Rights, have been
asserted or are, to the Company's knowledge, threatened by any person, nor
to the Company's knowledge, are there any valid grounds for any claims,
(i) to the effect that the manufacture, sale, use, offer for sale,
importation, reproduction, distribution or preparation of derivative works
of any of the products of the Company infringes on any copyright, patent,
trademark, service ▇▇▇▇, trade secret or other proprietary rights, (ii)
against the manufacture, sale, use, offer for sale, importation,
reproduction, distribution or preparation of derivative works by the
Company of any computer software programs and applications and tangible or
intangible proprietary information or material used in the Company's
business as currently conducted or as currently proposed to be conducted,
or (iii) challenging the ownership by the Company, or the validity or
effectiveness of any, of the Company IP Rights, except in the case of
clauses (i), (ii) and (iii) with respect to claims brought after the date
hereof as would not have a Material Adverse Effect on the Company. To the
Company's knowledge, there is no material unauthorized use, infringement
or misappropriation under any Company IP Rights by any third party,
including any employee or former employee of the Company. To the knowledge
of the Company, no Company IP Right or product of the Company is subject
to any outstanding decree, order, judgment, or stipulation restricting in
any manner the licensing thereof by or to the Company.
21
22
(f) It is the Company's policy to have each employee, consultant or
contractor of the Company execute a proprietary information and
confidentiality agreement substantially in the form of the Company's
standard forms of such agreement, and substantially all of the Company's
employees, consultants and contractors have executed such an agreement.
4.15 Taxes. Each of the Company and its subsidiaries has filed all federal
and state tax returns and reports, and all material local and foreign tax
returns and reports, that it was required to file. All such tax returns and
reports were correct and complete in all material respects. All taxes owed by
any of the Company and its subsidiaries have been paid except for taxes in an
immaterial amount or as to which the Company is contesting in good faith (with
the basis for such contested Taxes set forth on Schedule 4.15). Each of the
Company and its subsidiaries has withheld and paid all taxes required to have
been withheld and paid in connection with amounts paid to any employee,
independent contractor, creditor, stockholder, or other third party. Neither the
Internal Revenue Service (the "IRS") nor any other taxing authority or agency is
now asserting or, to the best of the Company's knowledge, threatening to assert
against the Company or any of its subsidiaries any deficiency or claim for
material additional taxes or interest thereon or penalties in connection
therewith. Neither the Company nor any of its subsidiaries has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any federal, state, local or foreign income tax.
The accruals and reserves for taxes reflected in the balance sheet of the
Company as of December 31, 1997 are adequate to cover all taxes accruable
through such date (including interest and penalties, if any, thereon) in
accordance with generally accepted accounting principles. Neither the Company
nor any of its subsidiaries has made an election under Section 341(f) of the
Code. The Company is not, and has not been during the period specified in
Section 897(c)(1)(A)(ii) of the Code, a United States real property holding
corporation within the meaning of Section 897(c) of the Code.
4.16 Brokers, Advisors. No broker, finder or investment banker
(other than DRW)
(a) 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 the Company.
The Company has heretofore furnished to the Purchaser and the Merger Sub a
complete and correct copy of all agreements between the Company and DRW
pursuant to which such firm would be entitled to any payment relating to
the transactions contemplated hereunder.
(b) As long as the transactions contemplated hereunder are
consummated without any related litigation, and excluding any fees and
expenses related to antitrust matters other than fees and expenses
associated with the Company's initial filing under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act, the aggregate fees and expenses payable by the Company and its
subsidiaries in respect of this Agreement and the transactions
contemplated hereby to any of its advisors (including investment bankers,
counsel, accountants and other consultants) will not exceed $3,000,000.00.
22
23
4.17 Product Liabilities. Except as set forth in the Disclosure Schedule,
as of the date hereof there are no product warranty, product liability or
similar claims pending, or to the knowledge of the Company, as of the date
hereof, threatened, against the Company or any of its subsidiaries.
4.18 Related Party Transactions. Except as set forth in the Disclosure
Schedule, or the SEC Reports for the year ended December 31, 1997, no current or
former director, officer or, to the knowledge of the Company as of the date
hereof, key employee of the Company or any of its subsidiaries nor any
"Associate" (as defined in Rule 405 promulgated under the Securities Act) of any
such person, is presently, directly or indirectly through his affiliation with
any other person or entity, a party to any transaction with the Company or any
of its subsidiaries providing for the furnishing of services (except as an
employee) by or to, or rental of real or personal property from or to, or
otherwise requiring cash payments by or to any such person. In addition, except
as set forth in the Disclosure Schedule or SEC Reports, during such periods
there was no relationship or transaction involving the Company or any of its
subsidiaries which is described in Item 404 of Regulation S-K promulgated under
the Securities Act.
4.19 Rights Agreement. The Board of the Directors of the Company has
approved an amendment to the Rights Agreement, and within 3 business days
hereof, the Company will amend the Rights Agreement, so that the Rights
Agreement will not be applicable to Parent, Purchaser or Merger Sub solely by
virtue of this Agreement, the Option Agreement, the Offer, the announcement of
the Offer, the purchase of Shares or Option Shares by Parent, the Purchaser or
the Merger Sub pursuant to the Offer or the Merger, or any other action
contemplated hereby.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business by the Company Pending the Merger. The Company
covenants and agrees that, prior to the Effective Time, unless the Purchaser
shall otherwise agree in writing or as otherwise expressly contemplated or
permitted by this Agreement or as set forth in Schedule 6.1:
(a) The business of the Company and its subsidiaries shall be
conducted only in, and the Company and its subsidiaries shall maintain
their facilities in, the ordinary course of business and consistent with
past practice.
(b) The Company shall not directly or indirectly, or permit any of
its subsidiaries, do any of the following: (i) issue, sell, pledge,
dispose of or encumber (or permit any of its subsidiaries to issue, sell,
pledge, dispose of or encumber) any shares of, or any options, warrants,
conversion privileges or rights of any kind to acquire any shares of, any
capital stock of the Company or any of its subsidiaries (other than shares
issuable upon exercise of the outstanding (as of the date hereof) options
or rights under the Employee Stock Purchase Plans to acquire Shares in
accordance with their terms in effect on the date hereof); (ii) amend or
propose to amend the Certificate or Articles of
23
24
Incorporation or By-Laws of it or any of its subsidiaries; (iii) split,
combine or reclassify any outstanding Shares, or declare, set aside or pay
any dividend or other distribution payable in cash, stock, property or
otherwise with respect to the Shares other than pursuant to the Rights
Plan; (iv) other than pursuant to the Rights Plan redeem, purchase or
acquire or offer to acquire (or permit any of its subsidiaries to redeem,
purchase or acquire or offer to acquire) any Shares or other securities of
the Company or any of its subsidiaries other than as contemplated by
Section 2.5 hereof and other than for the repurchase by the Company,
pursuant to existing agreements, of any outstanding Shares upon
termination of an employment, director or consulting relationship with the
Company; or (v) enter into or materially modify any agreement, commitment
or arrangement with respect to any of the foregoing.
(c) Neither the Company nor any of its subsidiaries shall (i) sell,
pledge, lease, dispose of or encumber any material assets other than in
the ordinary course of business consistent with past practice; (ii)
acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization or
enterprise or material assets thereof; (iii) incur any indebtedness for
borrowed money or issue any debt securities for borrowings except in the
ordinary course of business and consistent with past practice; (iv)
guarantee, endorse or otherwise became liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person (other than a subsidiary of the Company or the Company) except in
the ordinary course of business consistent with past practice and in
amounts immaterial to the Company; or (v) enter into or materially modify
any contract, agreement, commitment or arrangement with respect to any of
the foregoing.
(d) Neither the Company nor any of its subsidiaries shall (i) enter
into or modify any employment, severance or similar agreements or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officers or directors; or (ii) in the case of
employees who are not officers or directors, take any action other than in
the ordinary course of business consistent with past practice (none of
which actions shall be unreasonable or unusual) with respect to the grant
of any bonuses, salary increases, severance or termination pay or with
respect to any increase of benefits in effect on the date of this
Agreement.
(e) Except as may be required by applicable law, neither the Company
nor any of its subsidiaries shall adopt or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust
fund or arrangement for the benefit or welfare of any employee.
(f) Except as is necessary after consultation with counsel to comply
with the fiduciary duties of the Board of Directors of the Company, the
Company will not (i) call any meeting (other than any meeting contemplated
by Section 6.1) of its stockholders or (ii) waive or modify any provision
of, or terminate any, confidentiality or standstill agreement entered into
by the Company with any person.
24
25
(g) The Company shall use its reasonable efforts to cause its
current insurance (or reinsurance) policies not to be cancelled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under
the cancelled, terminated or lapsed policies for substantially similar
premiums are in full force and effect.
(h) The Company (i) shall use its reasonable efforts, and cause each
of its subsidiaries to use reasonable efforts, to preserve intact their
respective business organizations and goodwill, keep available the
services of its officers and employees as a group and maintain
satisfactory relationships with suppliers, distributors, customers and
others having business relationships with it or its subsidiaries; (ii) as
requested by the Purchaser and the Merger Sub shall confer on a regular
and frequent basis with representatives of the Purchaser and the Merger
Sub to report operational matters and the general status of ongoing
operations; (iii) shall not take any action, and shall not permit any of
its subsidiaries to take any action, which would cause, or which
reasonably may be expected to cause, a failure to satisfy the condition
set forth in paragraph (e)(x) of Annex I; and (iv) shall notify the
Purchaser and the Merger Sub of any emergency or other change in the
normal course of its or any of its subsidiaries' business or in the
operation of its or any of its subsidiaries' properties and of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such
emergency, change, complaint, investigation or hearing would, individually
or in the aggregate, have a Material Adverse Effect on the Company or
would reasonably be expected to impair any party's ability to consummate
the transactions contemplated by this Agreement; and
(i) Neither the Company nor any of its subsidiaries shall adopt a
plan of liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, or reorganization;
(j) Neither the Company nor any of its subsidiaries shall make any
material tax election or settle or compromise any material federal, state,
local, or foreign tax liability, except in the ordinary course of business
and consistent with past practice;
(k) Except as contemplated by Sections 2.6, 2.7 and 6.3, the Company
shall not modify or accelerate the exercisability of any stock options,
rights or warrants presently outstanding, and shall not amend, change or
waive (or exempt any person from the effect of) the Rights Agreement,
except in the exercise of its fiduciary duties by the Board of Directors
after consultation with counsel.
(i) The Company shall postpone the holding of its Annual Meeting of
Stockholders (the "Company Annual Meeting") indefinitely pending
consummation of the Merger unless the Company is otherwise required to
hold the Company Annual Meeting by Delaware Law.
25
26
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Action of Stockholders. The Company shall take all action necessary in
accordance with the Delaware Law and its Certificate of Incorporation and
By-Laws to convene a meeting of its stockholders promptly following consummation
of the Offer to consider and vote upon the Merger, if a stockholder vote is
required. If a stockholders' meeting is convened, the Board of Directors shall
recommend that the stockholders of the Company vote to approve the Merger. Such
recommendation shall not be withdrawn or adversely modified except by resolution
of the Continuing Directors adopted in the exercise of applicable fiduciary
duties after consultation with counsel. In the event that proxies are to be
solicited from the Company's stockholders, the Company shall, if and to the
extent requested by the Purchaser, use its best efforts to solicit from
stockholders of the Company proxies in favor of such approval and shall take all
other reasonable action necessary or, in the opinion of the Purchaser, helpful
to secure a vote or consent of stockholders in favor of the Merger. At any such
meeting, the Parent shall vote or cause to be voted all of the Shares then owned
by the Parent, Purchaser or any subsidiary of the Parent in favor of the Merger
and the Company shall vote all Shares in favor of the Merger for which proxies
in the form distributed by the Company shall have been given and with respect to
which no contrary direction shall have been made. Following the purchase of
Shares, if any, pursuant to the Offer, Parent shall ensure that all Shares
purchased pursuant to the Offer continue to be held by Parent, Purchaser, and/or
a direct or indirect wholly-owned subsidiary of Parent until such time as the
Merger is consummated.
6.2 Proxy Statement. If a stockholder vote is required, the Company and
the Purchaser shall cooperate with each other and use all reasonable efforts to
prepare, and the Company and the Purchaser shall file with the Commission as
soon as reasonably practicable following consummation of the Offer and use their
best efforts to have cleared by the Commission, a proxy statement or information
statement, as appropriate, with respect to the approval of the Merger by the
Company's stockholders. The information provided and to be provided by the
Purchaser, the Merger Sub and the Company, respectively, for use in the proxy
statement or information statement shall be true and correct in all material
respects and shall not omit to state any material fact required to be stated
therein or necessary in order to make such information not misleading.
6.3 Employee Agreements and Severance Agreements. Parent shall cause the
Company (or any successor to the Company after the purchase of shares pursuant
to the Offer) to honor without modification all employment agreements and
severance agreements and policies in effect prior to the date hereof between the
Company and any employee of the Company, all of which, the Company hereby
represents and warrants, have been disclosed in writing to Parent prior to the
date hereof.
26
27
6.4 Expenses. If (a) this Agreement is terminated by the Company pursuant
to Section 8.1(e)(iii) or Section 6.6(b), or (b) this Agreement is terminated by
the Purchaser pursuant to Section 8.1(c) or (c) this Agreement is terminated for
any reason other than a material breach of this Agreement by the Parent, the
Purchaser or the Merger Sub, and in case of this clause (c) reasonably
concurrently therewith or within four months thereafter (x) a definitive
agreement is entered into between the Company and any person other than the
Purchaser or any affiliate of the Purchaser for the acquisition or disposition
of a material amount of assets or securities of the Company, or for a merger,
consolidation or other reorganization of the Company at a price equivalent to a
price per Share in excess of $10.00 and the transactions contemplated thereby
are subsequently consummated at any time or (y) any person or "group" (as that
term is used in Section 13(d)(3) of the Exchange Act) other than the Purchaser
or any affiliate of the Purchaser shall have acquired beneficial ownership of
50% or more of the outstanding Shares at a price per Share in excess of $10.00,
or offered by way of a public tender offer to acquire beneficial ownership of
50% or more of the outstanding Shares at a price per Share in excess of $10.00
and the transactions contemplated thereby are consummated at any time, the
Company shall pay to Parent upon demand (by wire transfer of immediately
available federal funds to an account designated by Parent for such purpose) the
amount of $7,250,000 (the "Termination Fee") to compensate Parent, the Purchaser
and the Merger Sub for taking actions to consummate this Agreement, to reimburse
them for the time and expense relating thereto and for other direct and indirect
costs (including lost opportunity costs) in connection with the transactions
contemplated herein. The Company acknowledges that the provisions set forth in
this section are an integral part of this Agreement that have been negotiated in
order to induce Parent, the Purchaser and the Merger Sub to enter into this
Agreement; accordingly, if the Company fails to promptly pay the amounts
referred to above, the Company shall in addition pay Parent all reasonable
out-of-pocket costs and expenses (including reasonable attorneys' fees and
expenses) incurred in collecting such fees together with interest on the amount
of such fees from the date such payment was required to be made until such time
as payment is received by Parent at the rate of the lesser of (i) 10% per annum
or (ii) the maximum rate permitted by law. Payment of such amount by the Company
along with any interest, costs and expenses as may be required under this
Section 6.4 shall constitute a full and complete discharge of all obligations or
liabilities of the Company under this Paragraph.
In addition to any damages caused by conduct which constitutes a breach by
any of Parent, the Purchaser, the Merger Sub or the Company of any of their
obligations under this Agreement, the breaching party agrees, jointly and
severally, to pay to the nonbreaching party all reasonable out-of-pocket costs
and expenses (including reasonable attorneys' fees and expenses) incurred by the
nonbreaching party in connection with the enforcement by the nonbreaching party
of its rights hereunder, together with interest on the amount of such damages
from the date such damages are incurred until such time as payment is received
by the nonbreaching party at the rate of the lesser of (i) 10% per annum or (ii)
the maximum rate permitted by law.
6.5 Additional Agreements. Subject to the terms and conditions provided
herein, each of the parties agrees to use its best efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, including using best
27
28
efforts to obtain all necessary waivers, consents and approvals and to effect
all necessary registrations and filings, including but not limited to filings
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and submissions of information requested by
governmental authorities. The Company shall, and shall cause its officers,
directors, affiliates and agents to, immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any acquisition of or sale of any equity
interest in or substantial assets of the Company or any of its subsidiaries.
6.6 No Solicitation.
(a) Except as provided in Section 6.6(b) below, the Company agrees
that from the date hereof until the Effective Time or the termination of
this Agreement, the Company will not, directly or indirectly, through any
officer, director, affiliate or agent of the Company, or otherwise,
solicit, initiate, entertain, or encourage any proposals or offers from
any person other than Parent or its affiliates (a "third party") relating
to any possible acquisition of the Company or any of its subsidiaries
(whether by way of merger, purchase of capital stock, purchase of assets
or otherwise) (an "Alternative Acquisition"), or engage in any
recapitalization or sale of any equity interest in or sale or assignment
of substantial assets of the Company or any of its subsidiaries (other
than pursuant to the exercise of options and Rights outstanding on the
date hereof or granted following the date hereof with Parent's written
permission) to a third party (an "Equity Transaction"); nor will the
Company participate in any negotiations regarding, or furnish to any third
party any information with respect to, or otherwise cooperate with,
facilitate or encourage any effort or attempt by any third party person to
do or seek, any Alternative Acquisition or Equity Transaction (it being
understood that the Company may make available copies of this Section 6.6
to third parties who are not solicited by Company or any officer,
director, affiliate or agent of the Company).
(b) Notwithstanding the foregoing, this Section 6.6 will not be
violated and the Company shall be permitted to negotiate and provide
information to any third party that provides a Bona Fide Offer, provided
that the Company shall have first notified the Parent in writing of its
receipt of such proposal and the material terms thereof. For purposes of
this Agreement, a "Bona Fide Offer" means any bona fide proposal made by a
third party with respect to an Alternative Acquisition on terms which the
Board of Directors of the Company determines in its good faith judgment
(after consultation with its outside financial advisors) to be more
favorable to the Company's stockholders than the Offer and the Merger and
for which financing, to the extent required, is then committed or which,
in the good faith judgment of the Board of Directors of the Company (after
consultation with its outside financial advisors) is highly probable of
being obtained by such third party. In addition, the Company may terminate
this Agreement and accept such Bona Fide Offer upon the payment to Parent
of the fee provided in Section 6.4.
(c) Notwithstanding the provisions of paragraph 13 of the
Confidentiality Agreement and clause (b) of Section 8.4 of this Agreement
(the "Standstill Provisions") if
28
29
any third party commences an Alternative Acquisition involving a change of
control in the Company or its business then, provided this Agreement has
been terminated, Parent and its affiliates shall be entitled to propose or
present any offer or offers or take other action it deems appropriate in
response thereto and the Standstill Provisions shall not be applicable
thereto.
6.7 Notification of Certain Matters. Each party shall give prompt notice
to the others of (a) the occurrence or failure to occur of any event, which
occurrence or failure would be likely to cause any representation or warranty on
its part contained in this Agreement or the Option Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof through the
purchase of Shares pursuant to the Offer, and (b) any material failure of such
party, or any officer, director, employee or agent thereof, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
6.8 Access to Information. From the date hereof to the Effective Time, the
Company shall, and shall cause its subsidiaries, officers, directors, employees
and agents (including lenders, attorneys and accountants) to afford the Parent
and the Purchaser complete access at all reasonable times to its officers,
employees, agents, properties, books and records, and shall furnish Parent and
the Purchaser all financial, operating, personnel, compensation, tax and other
data and information as the Purchaser, through its officers, employees or
agents, may reasonably request. All of such information shall be treated as
"Evaluation Material" pursuant to the terms of the Confidentiality Agreement.
6.9 Stockholder Claims. The Company shall not settle or compromise any
claim brought by any present, former or purported holder of any securities of
the Company in connection with the Merger prior to the Effective Time without
the prior written consent of the Purchaser.
6.10 Indemnification.
(a) The By-Laws of the Company as the Surviving Corporation shall
contain the provisions with respect to indemnification set forth in
Article VI of the By-Laws of the Company. Such provisions in the By-Laws
of the Company and the Surviving Corporation shall not be amended,
repealed or otherwise modified for a period of three years from the date
Parent, the Purchaser or the Merger Sub acquires a majority of the Shares
in any manner that would adversely affect the rights thereunder of
individuals who at or prior to the Effective Time were directors,
officers, employees or agents of the Company, unless such modification is
required by law. In addition, Parent shall use its reasonable efforts to
cause the Company, as the Surviving Corporation, to maintain in full force
and effect for a period of at least three years following the Effective
Time, directors and officers liability insurance with limits of at least
those currently in place containing terms and provisions comparable to the
terms and provisions of the current policy maintained by the Company for
the benefit of existing and former officers, directors, employees and
agents of the Company but the Surviving Corporation shall only be liable
for annual premiums of no more than 30% greater than that presently
incurred by the
29
30
Company on the date hereof for such coverage. From and after the
consummation of the Offer, Parent will, and will cause the Company to,
fulfill and honor in all respects the obligations of the Company pursuant
to each indemnification agreement in effect at such time between the
Company and each person who is or was a director, officer, employee or
agent of the Company at or prior to such time.
(b) In the event Parent or the Company as the Surviving Corporation
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 of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and in
each such case, proper provisions shall be made so that the successors and
assigns of Parent or the Surviving Corporation, shall assume the
obligations set forth in this Section 6.10. Parent further agrees to
assume the obligations set forth in this Section 6.10 and the obligations
of the Surviving Corporation under the indemnification obligations of the
Company referenced in paragraph (a) of this Section 6.10 during any period
of time in which the Surviving Corporation fails to or is unable to
perform its obligations hereunder.
(c) This Section 6.10 shall survive the Effective Time, is intended
to benefit the Company, the Surviving Corporation and each of the persons
referred to in paragraph (a) of this Section and shall be binding on all
successors and assigns of Parent and the Company.
6.11 Consents and Amendments. The Company shall use its commercially
reasonable efforts to obtain, without the payment of any fee or compensation,
consents to the Offer, the Merger, and the transactions contemplated by this
Agreement from the parties to the agreements listed on Section 6.11 of the
Disclosure Schedule. The Company shall use its best efforts to enter into an
agreement with Shell Oil Products Company, with Shell acting for itself and
Shell Oil Company (collectively "Shell"), whereby the Company and Shell amend
the Software License Agreement (the "Shell License Agreement") dated September
15, 1997 by and between the Company and Shell (the "Shell Amendment") on terms
reasonably satisfactory to Parent.
6.12 Option Agreement. The Company hereby covenants that it will not take
any action whatsoever challenging or seeking to invalidate the effectiveness or
validity of the Option Agreement.
30
31
ARTICLE 7
CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) The Merger shall have been approved and adopted by the vote of
the stockholders of the Company to the extent required by the Delaware
Law;
(b) All waiting, review and investigation periods (and any extension
thereof) applicable to the consummation of the Merger under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or been terminated;
(c) There shall have been no law, statute, rule or order, domestic
or foreign, enacted or promulgated which would make consummation of the
Merger illegal;
(d) No injunction or other order entered by a United States (state
or federal) court of competent jurisdiction shall have been issued and
remain in effect which would prohibit consummation of the Merger;
(e) This Agreement shall not have been terminated pursuant to
Section 8.1 hereof; and
(f) The Purchaser shall have been required hereunder to purchase
Shares pursuant to the Offer.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether prior to or after approval by the stockholders of the
Company (provided, however, that if Shares are purchased pursuant to the Offer,
neither Parent nor the Purchaser may in any event terminate this Agreement):
(a) By mutual consent of the Boards of Directors of Parent and the
Company;
(b) By either the Purchaser or the Company if the Offer shall not
have been consummated on or before October 31, 1998, provided, however,
that a party shall not be entitled to terminate this Agreement pursuant to
this Section 8.1(b) if it is in material breach of its obligations under
this Agreement;
31
32
(c) By the Purchaser if (i) the Company or any subsidiary of the
Company shall have authorized, recommended or proposed, or shall have
announced an intention to authorize, recommend or propose, or shall have
entered into an agreement or agreement in principle with respect to, any
Alternative Acquisition or Equity Transaction or the Company's board of
directors shall have withdrawn or adversely modified (including by
amendment to the Schedule 14D-9) its favorable recommendations with
respect to the Offer and the Merger, or any corporation, entity, "group"
or "person" (as defined in the Exchange Act) other than Parent, the
Purchaser or the Merger Sub, shall have acquired beneficial ownership of
more than 50% of the outstanding Shares, or (ii) the Rights Amendment
shall not have been adopted by April 20, 1998 and remained in full force
and effect thereafter;
(d) By the Purchaser prior to the purchase of Shares pursuant to the
Offer in the event of any failure of any of the conditions to the Offer
set forth in Annex I; provided that if any and all such conditions as to
which there is a failure are and continue to be reasonably probable of
being satisfied by the date which is 30 business days after commencement
of the Offer, the Purchaser shall not terminate this Agreement as a result
of such failures until the date which is 30 business days after
commencement of the Offer.
(e) By the Company if (i) the Offer shall not have been commenced
substantially in accordance with Section 1.1; or (ii) the Offer shall have
expired or been terminated without any Shares having been purchased
thereunder; or (iii) if a tender offer for Shares is commenced by a person
or entity, or the Company receives an offer with respect to a merger, sale
of assets or other business combination with a person, any of which the
Board of Directors determines, in the exercise of its fiduciary duties and
subject to compliance with Section 6.6(b), makes necessary or advisable
the termination of this Agreement; provided that the provisions of Section
6.4 shall survive termination of the Agreement pursuant to this clause
(iii); or (iv) there shall have occurred a material breach or failure to
perform in any material respect by Parent, the Purchaser or Merger Sub of
any representation, warranty, covenant or other agreement contained in
this Agreement which cannot be or has not been cured within thirty days
after the giving of written notice to such breaching party; or
(f) By the Purchaser or if any Governmental Entity shall have issued
an order, decree or ruling or taken other action permanently enjoining,
restraining or otherwise prohibiting acceptance or payment for, Shares
pursuant to the Offer or the Merger, which such order, decree, ruling or
other action shall have become final and nonappealable provided that the
provisions of Section 6.4 shall survive termination of the Agreement
pursuant to this clause (f);
8.2 Amendment. This Agreement may not be amended except by an instrument
in writing approved by the parties to this Agreement and signed on behalf of
each of the parties hereto; provided, however, that after approval of the Merger
by the stockholders of the Company
32
33
(if such approval is required), no amendment may be made which changes the
amount into which each Share will be converted or effects any change which would
materially and adversely affect the stockholders of the Company without the
further approval of the stockholders of the Company.
8.3 Waiver. Subject to applicable law and the provisions of this
Agreement, at any time prior to the Effective Time, any party hereto may (a)
extend the time for the performance of any of the obligations or other acts of
any other party hereto, or (b) waive compliance with any of the agreements of
any other party or with any conditions to its own obligations, in each case only
to the extent such obligations, agreements and conditions are intended for its
benefit. For the purposes of this Section 8, Parent, the Purchaser and the
Merger Sub shall be considered to be a single party.
8.4 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, (a) this Agreement shall become void and there shall
be no liability or further obligation on the part of the Parent, the Purchaser,
the Merger Sub or the Company or their respective stockholders, officers or
directors, except as set forth in Section 6.4, in the last sentence of Section
1.2(d) hereof and in the confidentiality obligations of Section 6.8 hereof and
(b) the Purchaser and the Merger Sub shall terminate the Offer, if still
pending, without purchasing any Shares thereunder and shall not, subject to the
proviso set forth in Section 13(c) of the Confidentiality Agreement, for a
period of two years following termination, commence a tender or exchange offer
for any capital stock of the Company without prior written consent of the
Company.
ARTICLE 9
GENERAL PROVISIONS
9.l Public Statements. Except as required by applicable law, including the
rules and regulations of NASDAQ, neither Parent, the Purchaser or the Merger
Sub, on the one hand, nor the Company, on the other hand, shall make any public
announcement or statement with respect to the Offer, the Merger, this Agreement
or the transactions contemplated hereby, without the approval of the Company or
the Purchaser, respectively. The parties hereto agree to consult with each
other, to the extent practicable, prior to issuing each public announcement or
statement with respect to the Offer, the Merger, this Agreement or the
transactions contemplated hereby.
9.2 Notices. All notices and other communications hereunder shall be in
writing and sent by hand delivery, facsimile transmission (with confirmation of
receipt), or nationally recognized overnight courier service (with proof of
delivery), to the parties at the addresses set forth below (or at such other
address for a party as shall be specified by like notice):
33
34
(a) if to Parent, the Purchaser or the Merger Sub:
▇▇▇▇▇ plc
Saxon House
▇-▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇-▇▇▇▇-▇▇▇-▇▇▇
Facsimile: 011-44-1753-831-176
with copies to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company:
Simulation Sciences Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 714-579-0175
with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.3 Interpretation. When a reference is made in this Agreement to
subsidiaries of the Purchaser or the Company, the word "subsidiaries" means any
"majority-owned subsidiary" (as defined in Rule 12b-2 under the Exchange Act) of
the Purchaser or the Company, as the case may be; provided, however, that the
Company shall in no event and at no time be considered a subsidiary of the
Purchaser for purposes of this Agreement. As used herein, the term "person"
means an individual, a partnership, a corporation, an association, a joint stock
company, a trust, a
34
35
joint venture, an unincorporated organization or other entity. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. References to
Sections and Articles refer to sections and articles of this Agreement unless
otherwise stated.
9.4 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
enforceable, the remainder of the terms, provisions, covenants, and restrictions
of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated and the parties shall negotiate in good faith
to modify the Agreement to preserve each party's anticipated benefits under the
Agreement.
9.5 Miscellaneous. This Agreement (together with all other documents and
instruments referred to herein including the Confidentiality Agreement and the
Option Agreement), except as expressly provided in Section 6.6(c) hereof,: (a)
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof; (b) except as set forth herein, is not intended to confer
upon any other person any rights or remedies hereunder; (c) shall not be
assigned by operation of law or otherwise, except that the Purchaser and the
Merger Sub may assign all or any portion of their rights under this Agreement to
any direct or indirect wholly-owned subsidiary of Parent, and except that this
Agreement may be assigned by operation of law to any corporation with or into
which the Purchaser may be merged; but no such assignment shall relieve Parent,
the Purchaser and the Merger Sub of their obligations hereunder, and (d) shall
be governed in all respects, including validity, interpretation and effect, by
the internal laws of the State of Delaware, without giving effect to the
principles of conflict of laws thereof. This Agreement may be executed in two or
more counterparts which together shall constitute a single agreement.
9.6 Survival of Representations and Warranties. The representations and
warranties of the parties set forth herein shall be deemed to be continuing as
if made as of the date of any determination hereunder; provided, however, that
such representations and warranties shall terminate as of the time Parent, the
Purchaser or the Merger Sub acquires Shares pursuant to the Offer, or upon the
termination of this Agreement pursuant to Section 8.1.
35
36
IN WITNESS WHEREOF, Parent, the Purchaser, the Merger Sub and the Company
have caused this Agreement and Plan of Merger to be executed as of the date
first written above by their respective officers thereunder duly authorized.
▇▇▇▇▇ PLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Director
S ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Its: President
S SUB CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Its: President
SIMULATION SCIENCES INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Its: Executive Vice President
Chief Financial Officer
37
38
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Agreement and Plan of Merger
(the "Agreement") or the Offer but subject to Section 1.1(c) of the Agreement,
the Purchaser shall not be required to accept for payment, purchase or pay for
any Shares tendered, or may postpone the acceptance, purchase or payment for
Shares, or may amend (to the extent permitted by the Agreement) or terminate (to
the extent permitted by the Agreement) the Offer (1) if the Minimum Condition is
not satisfied as of the expiration of the Offer; (2) any applicable waiting
period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act in respect of the Offer shall not have
expired or been terminated prior to the expiration of the Offer; or (3) if, upon
the scheduled expiration date of the Offer and before acceptance of such Shares
for payment (or, in respect of paragraph (g), the latest date permitted in
accordance with Rule 14d-1(c) of the Securities Exchange Act of 1934, as
amended), any of the following conditions exists or is continuing (each of
paragraphs (a) through (g) providing a separate and independent condition to the
Purchaser's obligations pursuant to the Offer):
(a) there shall be any statute, rule, injunction or other order
promulgated, enacted, entered or enforced by any court or governmental
agency or other regulatory or administrative agency or commission,
domestic or foreign of competent jurisdiction (other than the routine
application to the Offer, the Merger or other subsequent business
combination of waiting, review and investigation periods under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and similar foreign antitrust laws and published
rules, and routine application of federal securities laws and published
rules), (i) making the purchase of some or all of the Shares pursuant to
the Offer or the Merger illegal, or resulting in a material delay in the
ability of the Purchaser or the Merger Sub to purchase some or all of the
Shares, (ii) invalidating or rendering unenforceable any material
provision of the Agreement, (iii) imposing material limitations on the
ability of the Purchaser or the Merger Sub effectively to acquire or hold
or to exercise full rights of ownership of the Shares acquired by it,
including but not limited to, the right to vote the Shares purchased by it
on all matters properly presented to the stockholders of the Company, (iv)
imposing material limitations on the ability of any of Parent, the
Purchaser, or the Company to continue to own or operate effectively all or
any material portion of its respective business as heretofore conducted or
to continue to own or operate effectively all or any material portion of
its respective assets as heretofore owned or operated, (v) imposing
material limitations on the ability of the Purchaser to continue
effectively all or any material portion of the Company's business as
heretofore conducted or to own or operate effectively all or any material
portion of the Company's assets as heretofore operated, or (vi) to the
effect that the Offer or the Merger is violative of any applicable law
which would reasonably be expected to result in any of the consequences
described in clauses (i) through (v) above;
(b) there shall be any law, statute, rule or regulation, domestic or
foreign, enacted or promulgated that, directly or indirectly, results or
would reasonably be expected to result in any of the consequences referred
to in paragraph (a) above, or any
39
action, suit or proceeding shall have been commenced by a governmental or
regulatory authority or body seeking to restrain, enjoin or otherwise
prohibit the Offer, the Merger, or the completion of the transactions
contemplated by the Agreement;
(c) there shall be (i) any general suspension of, or limitation on
prices for, trading in securities on any national securities exchange or
in the over the counter market in the United States or on the London Stock
Exchange, (ii) the declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or the United
Kingdom, (iii) any limitation by any governmental authority which would
reasonably be expected to materially adversely affect, the extension of
credit by banks or other lending institutions in the United States or the
United Kingdom, (v) from the date of this Agreement through the close of
business on the business day immediately prior to the date of termination
or scheduled expiration of the Offer, a decline of at least 25% in the
Standard & Poor's 500 Index, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(d) except as set forth in the SEC Reports or the Disclosure
Schedule, any change shall since the date of the Agreement have occurred
or be threatened which individually or in the aggregate has had or is
continuing to have or would reasonably be expected to have a Material
Adverse Effect on the Company (as defined in the Agreement) and its
subsidiaries, taken as a whole;
(e) (x) any of the representations and warranties of the Company in
the Agreement shall not be true and correct (i) in all material respects
on the date of the Agreement or (ii) in all respects as if made on the
date of any scheduled expiration of the Offer, except in the case of
clause (ii), in the case of any one or the aggregate of all inaccuracies,
as would not have a Material Adverse Effect on the Company, and except for
those representations and warranties that address matters only as of a
particular date (which representations and warranties shall have been true
and correct except as would not have a Material Adverse Effect on the
Company as of such particular date), it being understood that, for
purposes of determining whether inaccurate representations and warranties
would have a Material Adverse Effect on the Company, "Material Adverse
Effect" and "materiality" qualifications and limitations in the
representations and warranties shall not be given effect; or (y) the
Company shall have breached in any material respect or shall not have
performed in all material respects each covenant and complied with each
agreement to be performed and complied with by it under the Agreement; or
(f) the Agreement shall have been terminated pursuant to its terms.
which, in the good faith judgment of the Purchaser, in any such case, and
regardless of the circumstances giving rise to any such condition (except in the
case any such condition is not satisfied as the direct result of a breach by
Parent or Purchaser of obligations under the Agreement), make it inadvisable to
proceed with acceptance for payment or purchase of or payment for the Shares.
40
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may be asserted by the Purchaser and Parent regardless of the
circumstances (except in the case any such condition is not satisfied as the
direct result of a breach by Parent or Purchaser of obligations under the
Agreement) giving rise to such conditions, or may be waived (except for the
Minimum Condition) by the Purchaser or the Merger Sub in whole at any time or in
part from time to time in their sole discretion. The failure by the Purchaser or
the Parent at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right and may be asserted at any time and from time to time.