EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
AMONG
GTE CORPORATION
GTE MASSACHUSETTS INCORPORATED
AND
BBN CORPORATION
DATED AS OF MAY 5, 1997
TABLE OF CONTENTS
PAGE
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ARTICLE 1.
THE OFFER................................................................ 1
Section 1.1 The Offer............................................... 1
Section 1.2 Company Actions......................................... 2
Section 1.3 Stockholder Lists....................................... 3
Section 1.4 Composition of the Board of Directors; Section 14(f).... 3
Section 1.5 Action by Continuing Directors.......................... 3
ARTICLE 2.
THE MERGER............................................................... 3
Section 2.1 The Merger.............................................. 3
Section 2.2 Effective Time.......................................... 4
Section 2.3 Effects of the Merger................................... 4
Section 2.4 Articles of Organization and By-Laws.................... 4
Section 2.5 Directors............................................... 4
Section 2.6 Officers................................................ 4
Section 2.7 Conversion of Shares.................................... 4
Section 2.8 Conversion of Purchaser's Common Stock.................. 5
Section 2.9 Stock Options........................................... 5
Restricted Stock Conversion and Directors Defined
Section 2.10 Compensation............................................ 6
Section 2.11 Employee Stock Purchase Plan............................ 7
Section 2.12 Stockholders' Meeting................................... 7
Section 2.13 Closing................................................. 8
ARTICLE 3.
DISSENTING SHARES; EXCHANGE OF SHARES.................................... 8
Section 3.1 Dissenting Shares....................................... 8
Section 3.2 Exchange of Shares...................................... 8
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................ 9
Section 4.1 Organization............................................ 9
Section 4.2 Capitalization.......................................... 10
Section 4.3 Authority............................................... 10
Section 4.4 No Default; Effect of Agreement......................... 10
Section 4.5 Financial Statements; SEC Reports....................... 11
Section 4.6 Absence of Certain Changes or Events.................... 11
Section 4.7 Compliance with Law; Litigation......................... 12
Section 4.8 Environmental Matters................................... 12
Section 4.9 Governmental Authorizations and Regulations............. 12
Section 4.10 Schedule 14D-9, Offer Documents and Schedule 14D-1...... 12
Section 4.11 Brokers................................................. 12
Section 4.12 Employee Agreements and Benefits........................ 13
Section 4.13 Fairness Opinion........................................ 14
Section 4.14 Material Agreements..................................... 14
Section 4.15 Title to Properties; Encumbrances....................... 14
Section 4.16 Intellectual Property................................... 15
Section 4.17 Tax Matters............................................. 15
Section 4.18 Interested Party Transactions........................... 17
Section 4.19 Government Contracts.................................... 17
Section 4.20 Takeover Statutes....................................... 18
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ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER................... 18
Section 5.1 Organization............................................ 18
Section 5.2 Authority............................................... 18
Section 5.3 Schedule 14D-1, Offer Documents and Schedule 14D-9...... 18
Section 5.4 Effect of Agreement..................................... 18
Section 5.5 Financing............................................... 19
Section 5.6 Brokers................................................. 19
ARTICLE 6.
COVENANTS................................................................ 19
Section 6.1 No Solicitation......................................... 19
Section 6.2 Appraisal Rights........................................ 20
Section 6.3 Conduct of Business of the Company...................... 20
Section 6.4 Access and Information.................................. 22
Section 6.5 Certain Filings, Consents and Arrangements.............. 22
Section 6.6 State Takeover Statutes................................. 23
Section 6.7 Compliance with Antitrust Laws.......................... 23
Section 6.8 Press Releases.......................................... 23
Section 6.9 Indemnification; Insurance.............................. 23
Section 6.10 Notification of Certain Matters......................... 24
Section 6.11 Fees and Expenses....................................... 24
Section 6.12 Actions Regarding the Rights............................ 24
Section 6.13 Shareholder Litigation.................................. 24
ARTICLE 7.
CONDITIONS TO THE MERGER................................................. 25
Conditions to the Obligations of Parent, Purchaser and
Section 7.1 the Company............................................. 25
Section 7.2 Conditions to the Obligations of Parent and Purchaser... 25
Section 7.3 Condition to the Company's Obligation................... 25
Section 7.4 Exception............................................... 26
ARTICLE 8.
MISCELLANEOUS............................................................ 26
Section 8.1 Termination............................................. 26
Section 8.2 Effect of Termination................................... 27
Non-Survival of Representations, Warranties and
Section 8.3 Agreements.............................................. 28
Section 8.4 Waiver and Amendment.................................... 28
Section 8.5 Entire Agreement........................................ 28
Section 8.6 Applicable Law.......................................... 28
Section 8.7 Headings................................................ 28
Section 8.8 Notices................................................. 28
Section 8.9 Counterparts............................................ 29
Section 8.10 Parties in Interest; Assignment......................... 29
Section 8.11 Specific Performance.................................... 29
Section 8.12 Certain Undertakings of Parent.......................... 29
Section 8.13 Interpretation.......................................... 30
Section 8.14 Severability............................................ 30
Exhibit A Conditions of the Offer.................................. A-1
Exhibit B Form of Termination Option.............................. B-1
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 5, 1997 (this "AGREEMENT"),
among GTE CORPORATION, a New York corporation ("PARENT"), GTE MASSACHUSETTS
INCORPORATED, a Massachusetts corporation and a wholly owned subsidiary of
Parent ("Purchaser"), and BBN CORPORATION, a Massachusetts corporation (the
"COMPANY").
RECITALS
WHEREAS, the Boards of Directors of the Company, Parent and Purchaser deem
it advisable and in the best interests of their respective stockholders that
Parent acquire the Company pursuant to the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Parent, Purchaser and the Company hereby agree as
follows:
ARTICLE 1.
THE OFFER
SECTION 1.1 The Offer.
(a) Subject to this Agreement not having been terminated in accordance with
the provisions of Section 8.1 hereof, Purchaser shall, and Parent shall cause
Purchaser to, as promptly as practicable, but in no event later than five
business days from the date of the public announcement of the terms of this
Agreement or the Offer, commence an offer to purchase for cash (as it may be
amended in accordance with the terms of this Agreement, the "OFFER") all
shares of common stock, $1.00 par value, of the Company (including the common
stock purchase rights referred to in Section 6.12 hereof (collectively, the
"SHARES")) outstanding immediately prior to the consummation of the Offer,
subject to the conditions set forth in Exhibit A hereto (the "CONDITIONS"), at
a price of $29.00 per Share, net to the seller in cash. Subject to this
Agreement not having been terminated in accordance with the provisions of
Section 8.1 hereof and to the Conditions, Purchaser shall, and Parent shall
cause Purchaser to, accept for payment and pay for all Shares validly tendered
pursuant to the Offer, and not withdrawn prior to the expiration date of the
Offer, as promptly as practicable following the expiration date of the Offer.
If all of the Conditions are not satisfied on the initial expiration date of
the Offer, and the Agreement has not been terminated in accordance with the
provisions of Section 8.1, Parent shall, and shall cause Purchaser to, extend
(and re-extend) the Offer to provide time to satisfy such Conditions provided
that Purchaser or Parent may but in no event shall be obligated to extend the
period of time the Offer is open beyond August 15, 1997 or, if Purchaser has
elected, in its judgment, to extend the Offer beyond August 15, 1997 pursuant
to the last sentence of this Section 1.1(a), November 15, 1997 (such
applicable date being known as the "Final Termination Date"). Purchaser
expressly reserves the right to amend the terms and conditions of the Offer;
provided, that without the consent of the Company, no amendment may be made
which (i) decreases the price per Share or changes the form of consideration
payable in the Offer, (ii) decreases the number of Shares sought, or (iii)
imposes additional conditions to the Offer or amends any other term of the
Offer in any manner adverse to the holders of Shares (it being understood that
extensions of the Offer as contemplated by this Section 1.1(a) are not adverse
to the holders of Shares). Notwithstanding the foregoing, Purchaser shall, in
its judgment, have right to extend and re-extend the Offer, from time to time,
but in no event beyond November 15, 1997, if it believes that such extension
is advisable in order to facilitate the orderly transition of the business of
the Company and preserve and maintain the Company's business relationships.
(b) The Company will not, nor will it permit any of its Subsidiaries (as
defined below) to, tender into the Offer any Shares beneficially owned by it.
For purposes of this Agreement, "SUBSIDIARY" means, as to any Person (as
defined below), any corporation, limited liability company, partnership or
joint venture, whether now existing or hereafter organized or acquired: (i) in
the case of a corporation, of which at least a majority of the outstanding
shares of stock having by the terms thereof ordinary voting power to elect a
majority of the board of directors of such corporation (other than stock
having such voting power solely by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by such Person
and/or one or more of its Subsidiaries or (ii) in the case of a limited
liability company, partnership or joint venture, in which such Person or a
Subsidiary of such Person is a managing member, general partner or joint
venturer or of which a majority of the partnership or other ownership
interests are at the time owned by such Person and/or one or more of its
Subsidiaries. For purposes of this Agreement, "PERSON" means any individual,
corporation, company, voluntary association, limited liability company,
partnership, joint venture, trust, unincorporated organization or other
entity.
(c) On the date of the commencement of the Offer, Purchaser shall file with
the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer which will contain an offer to
purchase and form of the related letter of transmittal (together with any
supplements or amendments thereto, the "OFFER DOCUMENTS"). The Company and its
counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents prior to the filing of such Offer Documents with the SEC.
Purchaser agrees to provide the Company and its counsel copies of any written
comments Purchaser and its counsel may receive from the SEC or its staff with
respect to the Offer Documents and a summary of any such comments received
orally promptly after the receipt thereof.
SECTION 1.2 Company Actions. The Company hereby consents to the Offer and
represents that its Board of Directors (the "BOARD" or "BOARD OF DIRECTORS")
(at a meeting duly called and held) has unanimously (i) approved the Offer and
the Merger (as defined in Section 2.1 hereof), as provided in Section 78 of
the Business Corporation Law of the Commonwealth of Massachusetts, as amended
(the "MASSACHUSETTS BCL"), (ii) determined that the Offer and the Merger are
fair to and in the best interests of the stockholders of the Company and (iii)
resolved to recommend acceptance of the Offer and approval and adoption of
this Agreement and the Merger by the stockholders of the Company. The Company
further represents that Alex. ▇▇▇▇▇ & Sons Incorporated (the "FINANCIAL
ADVISOR") has delivered to the Board its opinion to the effect that, as of the
date of this Agreement, the cash consideration to be received by the holders
of Shares (other than Parent and its affiliates) in the Offer and the Merger
is fair to such holders from a financial point of view. Subject to its
fiduciary duties under applicable Laws (as defined in Section 2.4) as advised
as to legal matters by outside counsel, the Company hereby agrees to file a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-9")
containing the recommendation referred to in clause (iii) above with the SEC
(and the information required by Section 14(f) of the Securities Exchange Act
of 1934, as amended (together with all rules and regulations thereunder, the
"EXCHANGE ACT"), so long as Parent shall have furnished such information to
the Company in a timely manner) and to mail such Schedule 14D-9 to the
stockholders of the Company. The Company will use its best efforts to cause
the Schedule 14D-9 to be filed on the same date as Purchaser's Schedule 14D-1
is filed and mailed together with the Offer Documents; provided, that in any
event the Schedule 14D-9 shall be filed and mailed no later than 10 business
days following the commencement of the Offer. Purchaser and its counsel shall
be given a reasonable opportunity to review and comment on the Schedule 14D-9
prior to the Company's filing of the Schedule 14D-9 with the SEC. The Company
agrees to provide Parent and its counsel copies of any written comments the
Company or its counsel may receive from the SEC or its staff with respect to
the Schedule 14D-9 and a summary of any such comments received orally promptly
after the receipt thereof. Parent, Purchaser and the Company each agree
promptly to correct any information provided by it for use in the Schedule
14D-9 if and to the extent that any such information shall have become
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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
filed with the SEC and to be disseminated to the stockholders of the Company,
in each case as and to the extent required by applicable securities laws.
SECTION 1.3 Stockholder Lists. In connection with the Offer, at the request
of Parent or Purchaser, from time to time after the date hereof, the Company
will promptly furnish Purchaser with mailing labels, security position
listings and any available listing or computer file maintained for or by the
Company containing the names and addresses of the record holders of the Shares
as of a recent date and shall furnish Purchaser with such additional
information reasonably available to the Company and assistance as Purchaser or
its agents may reasonably request in communicating the Offer to the record and
beneficial holders of Shares. Subject to the requirements of applicable Law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Merger, Parent, Purchaser
and its affiliates and associates shall hold in confidence the information
contained in any such labels, listings and files, will use such information
only in connection with the Offer and the Merger, and, if this Agreement shall
be terminated, will deliver to the Company all copies of such information in
their possession.
SECTION 1.4 Composition of the Board of Directors; Section 14(f). In the
event that Purchaser acquires at least a majority of the Shares outstanding
pursuant to the Offer, Parent shall be entitled to designate for appointment
or election to the Board, upon written notice to the Company, such number of
persons so that the designees of Parent constitute the same percentage (but in
no event less than a majority) of the Board (rounded up to the next whole
number) as the percentage of Shares acquired pursuant to the Offer. Effective
upon such purchase of at least a majority of the Shares pursuant to the Offer
(sometimes referred to herein as the "consummation" of the Offer), the Company
will increase the size of the Board or obtain the resignation of such number
of directors as is necessary to enable such number of Parent designees to be
so elected. In connection therewith, the Company will mail to the stockholders
of the Company the information required by Section 14(f) of the Exchange Act
and Rule 14f-1 thereunder unless such information has previously been provided
to such stockholders in the Schedule 14D-9. Parent and Purchaser shall provide
to the Company in writing, and will be solely responsible for, any information
with respect to such companies and their nominees, officers, directors and
affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder. Notwithstanding the provisions of this Section 1.4, the parties
hereto shall use their respective reasonable best efforts to ensure that at
least two of the members of the Board shall, at all times prior to the
Effective Time (as defined in Section 2.2 hereof) be, Continuing Directors (as
defined below). For purposes hereof, the term "CONTINUING DIRECTOR" shall mean
(i) any member of the Board as of the date hereof, (ii) any member of the
Board who is unaffiliated with, and not a designee or nominee of Parent or
Purchaser, or (iii) any successor of a Continuing Director who is (A)
unaffiliated with, and not a designee or nominee, of Parent or Purchaser, and
(B) recommended to succeed a Continuing Director by a majority of the
Continuing Directors then on the Board, and in each case under clause (iii)
who is not an employee of the Company.
SECTION 1.5 Action by Continuing Directors. Following the election or
appointment of Purchaser's designees pursuant to Section 1.4 and prior to the
Effective Time (as defined below), any amendment of this Agreement or any
amendment to the Articles of Organization or By-Laws of the Company
inconsistent with this Agreement, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any
of the obligations or other acts of Parent or Purchaser or any waiver of any
of the Company's rights hereunder will require the concurrence of a majority
of the Continuing Directors.
ARTICLE 2.
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the applicable provisions of the Massachusetts
BCL, Purchaser shall be merged (the
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"MERGER") with and into the Company as soon as practicable following the
satisfaction or waiver of the conditions set forth in Article 7 hereof or,
subject to Section 1.5, on such other date as the parties hereto may agree.
Following the Merger the Company shall continue as the surviving corporation
(the "SURVIVING CORPORATION") and the separate corporate existence of
Purchaser shall cease.
SECTION 2.2 Effective Time. The Merger shall become effective by filing with
the Secretary of State of Massachusetts of articles of merger in accordance
with the relevant provisions of the Massachusetts BCL in a form reasonably
acceptable to Parent and the Company (the "ARTICLES OF MERGER"). The time at
which the Merger becomes effective is referred to as the "EFFECTIVE TIME."
SECTION 2.3 Effects of the Merger. The Company will continue to be governed
by the laws of the Commonwealth of Massachusetts, and the separate corporate
existence of the Company and all of its rights, privileges, powers and
franchises as well of a public as of a private nature, and being subject to
all of the restrictions, disabilities and duties as a corporation organized
under the Massachusetts BCL, will continue unaffected by the Merger. The
Merger will have the effects specified in the Massachusetts BCL. As of the
Effective Time the Company shall be a wholly-owned Subsidiary of Parent.
SECTION 2.4 Articles of Organization and By-Laws. The Articles of
Organization and By-laws of the Company as in effect at the Effective Time
(including such amendments to the Articles of Organization as are effected by
the Articles of Merger) shall be the Articles of Organization and By-laws of
the Surviving Corporation, until amended in accordance with applicable Law (as
defined below). For purposes of this Agreement, (i) "LAW" or "LAWS" means any
valid constitutional provision, statute, ordinance or other law (including
common law), rule, regulation, decree, injunction, judgment, order, ruling,
assessment or writ of any Governmental Entity (as defined below), as any of
these may be in effect from time to time, and (ii) "GOVERNMENTAL ENTITY" means
any government or any agency, bureau, board, commission, court, department,
official, political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
SECTION 2.5 Directors. The directors of Purchaser at the Effective Time
shall be the initial directors of the Surviving Corporation and will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Articles of
Organization and By-laws of the Surviving Corporation, or as otherwise
provided by Law.
SECTION 2.6 Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation and will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Articles of
Organization and By-laws of the Surviving Corporation, or as otherwise
provided by Law.
SECTION 2.7 Conversion of Shares.
(a) At the Effective Time, each Share issued and outstanding immediately
prior to the Effective Time (other than Shares held in the treasury of the
Company or held by any wholly-owned Subsidiary, and other than Dissenting
Shares (as defined in Section 3.1 hereof)) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive $29.00 in cash, or any higher price paid per Share in the
Offer (the "MERGER PRICE"), payable to the holder thereof, without interest
thereon, upon the surrender of the certificate formerly representing such
Share.
(b) At the Effective Time, each Share held in the treasury of the Company or
held by any wholly owned Subsidiary of the Company and each Share held by
Parent or any wholly-owned Subsidiary of Parent immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be canceled and retired and cease to exist.
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SECTION 2.8 Conversion of Purchaser's Common Stock. Each share of common
stock, $0.01 par value, of Purchaser issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and exchangeable for one
share of common stock of the Surviving Corporation.
SECTION 2.9 Stock Options. The Company shall not grant to any non-employees,
including non-employee members of the Board of Directors ("Directors"), and
former employees (collectively "NON-EMPLOYEES"), or to any current employees
any options to purchase Shares, stock appreciation rights, restricted stock,
restricted stock units or any other real or phantom stock or stock equivalents
on or after the date of this Agreement except as set forth in Attachment A to
Schedule 4.2(a). Options to acquire Shares which are outstanding as of the
date of this Agreement and which were granted to employees or Non-Employees
under any stock option plan, program or similar arrangement of the Company or
any Subsidiaries ("Options"), other than Options described in Sections 2.10
and 2.11, shall be treated as follows:
(i) Each current employee as of the date of this Agreement whose annual
base salary as of the date of this Agreement is $80,000 or more ("Key
Employee") and who is holding Options which have an exercise price
("Exercise Price") less than the Closing Price (as defined below) ("In the
Money Options") and which are vested as of the Closing Date shall be given
the opportunity by the Company to make an irrevocable election on a grant
by grant basis to be effective immediately following the Closing Date to
receive in exchange for cancellation of each such vested In the Money
Option either (A) a credit to an individual deferred compensation book
account equal to the excess of the Closing Price of a Share over the
Exercise Price of such In the Money Option times the number of Shares
subject to such In the Money Option, such deferred compensation book
account to have the terms described below, or (B) an option to purchase a
number of shares of Parent common stock (a "Parent Option") equal to 150%
of the number of Shares subject to the Key Employee's In the Money Option;
provided that (x) the Parent Option received in the exchange shall be fully
vested and have the same expiration date as the vested In the Money Option
exchanged therefor, (y) the Exercise Price of the Parent Option shall equal
the Fair Market Value (as defined below), and (z) the Parent Option shall
be governed by the provisions of the GTE Corporation 1997 Long-Term
Incentive Plan ("LTIP") and by applicable LTIP award agreements. For
purposes of this Section 2.9(i), the deferred compensation book account
shall be denominated in Parent phantom stock units, and dividend equivalent
payments shall be credited to such deferred compensation book account at
such time and in such manner as dividends are paid on Parent common stock.
Before the third anniversary of the day of the Closing Date, no
distribution may be made in respect of the deferred compensation book
account to a Key Employee who is employed by Parent or an affiliate of
Parent. The dividend equivalent payments on the deferred compensation book
account shall be subject to forfeiture in the event the Key Employee is not
employed by Parent or an affiliate of Parent on any date that precedes the
third anniversary of the day of the Closing Date. Parent shall determine
administrative procedures and provisions with regard to the deferred
compensation book account. In the event a Key Employee does not make an
irrevocable election described in this Section 2.9(i) before the Closing
Date, the Key Employee shall be deemed to have irrevocably elected the
deferred compensation book account credit as described in clause (A) above
and all In the Money Options shall be canceled. For purposes of this
Section 2.9, Section 2.10, and Section 2.11, (i) "Closing Price" shall mean
the purchase price per share of the Shares as set forth in Section 1.1(a),
(ii) "Fair Market Value" shall mean the average of the high and low sales
price of the Parent common stock on the composite tape of the New York
Stock Exchange issues as of the Closing Date, or, in the event that no
trading occurs on such day, then the applicable value shall be determined
on the last preceding day on which trading took place and (iii) "Closing
Date" shall mean the day of the consummation of the Offer.
(ii) Each current employee whose annual base salary as of the date of
this Agreement is less than $80,000 ("Employee") who is holding In the
Money Options which are vested as of the
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Closing Date shall be given the opportunity by the Company to make an
irrevocable election on a grant by grant basis to be effective immediately
following the Closing Date to receive in exchange for cancellation of each
such vested In the Money Option either (A) a cash payment equal, for each
such In the Money Option, to the excess of the Closing Price of a Share
over the Exercise Price of such In the Money Option times the number of
Shares subject to such In the Money Option, or (B) a Parent Option to
purchase a number of shares of Parent common stock equal to 150% of the
number of Shares subject to the Employee's In the Money Option; provided
that (x) the Parent Option received in the exchange shall be fully vested
and have the same expiration date as the vested In the Money Option
exchanged therefor, (y) the Exercise Price of the Parent Option shall equal
the Fair Market Value, and (z) the Parent Option shall be governed by the
provisions of the LTIP and by applicable LTIP award agreements. In the
event an Employee does not make an irrevocable election described in this
Section 2.9(ii) before the Closing Date, the Employee shall be deemed to
have irrevocably elected the cash payment described in clause (A) above,
and all In the Money Options shall be canceled.
(iii) Options of Key Employees or Employees which have an Exercise Price
equal to or in excess of the Closing Price ("Under-Water Options"),
regardless of whether such Under-Water Options are vested as of the Closing
Date, shall immediately following the Closing Date, be canceled and
exchanged for Parent Options to purchase a number of shares of Parent
common stock equal to 100% of the number of Shares subject to the Key
Employee's or Employee's Under-Water Options; provided that (x) the Parent
Options received in the exchange shall have the same vesting schedule and
expiration date as the Under-Water Options exchanged therefor, (y) the
Exercise Price of the Parent Options shall equal the Fair Market Value, and
(z) the Parent Options shall be governed by the provisions of the LTIP and
by applicable LTIP award agreements. Notwithstanding the foregoing, if, on
or after the date of this Agreement, a Key Employee exercises vested In the
Money Options that, on the date of this Agreement, represent 50% or more of
the dollar value of the Key Employee's vested In the Money Options, all of
such Key Employee's Under-Water Options shall be canceled immediately, the
exchange provisions of this Section 2.9(iii) shall not apply to such Key
Employee, and such Key Employee shall receive the sum of one dollar ($1.00)
as good and valuable consideration for all of such Key Employee's Under-
Water Options. For purposes of the immediately preceding sentence, the
dollar value of a vested In the Money Option shall be equal to the excess
of the Closing Price over the Exercise Price of such In the Money Option
times the number of Shares subject to the vested In the Money Option.
(iv) In the Money Options of individuals who are Non-Employees as of the
date of this Agreement, including Directors, which are vested as of the
Closing Date shall, immediately following the Closing Date, be canceled and
exchanged for a cash payment equal, for each vested In the Money Option, to
the excess of the Closing Price of a Share over the Exercise Price of such
In the Money Option times the number of Shares subject to such In the Money
Option. All other Options of Non-Employees, including Directors, shall be
canceled immediately as of the Closing Date and each such Non-Employee
shall receive the sum of one dollar ($1.00) as good and valuable
consideration for all such Options.
(v) With respect to In the Money Options of Key Employees, Employees, and
Non-Employees, including Directors, the Board of Directors or an
appropriate committee thereof, shall provide for the full and immediate
vesting of such In the Money Options as of the Closing Date. Except as
provided in the immediately preceding sentence on or after the date of this
Agreement, the Board of Directors shall not make any other changes to the
terms and conditions of any outstanding Options, stock appreciation rights,
restricted stock, restricted stock units or any other real or phantom stock
or stock equivalents.
SECTION 2.10 Restricted Stock Conversion and Directors Deferred
Compensation.
(a) Notwithstanding anything herein to the contrary other than Section
2.10(b) below, on the Closing Date, employees of the Company who hold Shares
subject to a risk of forfeiture within the
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meaning of Section 83(a) of the Internal Revenue Code of 1986, as amended,
(the "CODE"), or Options with an exercise price of zero dollars ($0.00)
("Restricted Stock") shall receive in exchange for such Restricted Stock a
right to receive a number of Parent phantom stock units pursuant to a phantom
stock plan ("Phantom Stock Units") determined by dividing (A) the product of
(i) the number of shares of Restricted Stock held by such employee on the
Closing Date, and (ii) the Closing Price, by (B) the Fair Market Value. Such
Phantom Stock Units shall be credited with dividend equivalent units at such
time and in such manner as dividends are normally paid on Parent common stock,
and the Phantom Stock Units and dividend equivalent units shall be subject to
the same vesting schedule as the Restricted Stock which was exchanged for the
Phantom Stock Units. Upon the Phantom Stock Units vesting, the employee shall
receive payment of the vested amounts in cash (less applicable withholding
taxes). Parent shall determine administrative procedures and provisions with
regard to Phantom Stock Units.
(b) Immediately following the Closing Date, Restricted Stock purchased by
two Key Employees and three Directors pursuant to the Company's 1996
Restricted Stock Plan shall no longer be subject to a risk of forfeiture
within the meaning of Section 83(a) of the Code and shall be tendered to
Purchaser in exchange for cash equal to the Closing Price times the number of
Shares so tendered.
(c) At the Closing Date, Company stock units in the deferred compensation
account of each Director who participates in the Company's Deferred
Compensation Plan for Directors (the "DCP") will be converted into a number of
Parent Phantom Stock Units determined by dividing (A) the product of (i) the
number of Company stock units credited to the Director's deferred compensation
account under the DCP as of the Closing Date, and (ii) the Closing Price, by
(B) the Fair Market Value. Such Phantom Stock Units shall be credited with
dividend equivalent units at such time and in such manner as dividends are
paid on Parent common stock. A cash payment equal to the Phantom Stock Units
shall be made to the Directors as soon as practicable after January 1, 1998.
Parent shall determine administrative procedures and provisions with regard to
Phantom Stock Units.
SECTION 2.11 Employee Stock Purchase Plan. Prior to the Closing Date, the
Board of Directors, or an appropriate committee thereof, shall cause written
notice of this Agreement to be given to persons holding "options" (as defined
in the Company's Employee Stock Purchase Plan ("ESPP")) to purchase Shares
("Purchase Rights") under the ESPP. Immediately following the Closing Date,
all Purchase Rights shall be accelerated as if the day of the Closing Date was
the last day of the "option period" (as defined in the ESPP), such Purchase
Rights shall be automatically canceled and terminated on such day and the
contributions to the ESPP during such option period shall be refunded to the
holder of the Purchase Right (the "Refund Amount"), and each holder of a
Purchase Right shall be entitled to receive as soon as practicable thereafter
from the Company in consideration for such cancellation an amount in cash
(less applicable withholding taxes, but without interest) equal to (a) the
product of (i) the number of Shares (and fractions thereof) subject to such
Purchase Right of such holder as of the Closing Date, multiplied by (ii) the
Closing Price, less (b) the Refund Amount of such holder. The foregoing is
subject to the right of an ESPP participant to terminate the participant's
payroll deduction authorization under the ESPP and to cancel the participant's
option and withdraw from the ESPP at any time prior to the day of the Closing
Date.
SECTION 2.12 Stockholders' Meeting. If required by applicable Law in order
to consummate the Merger, the Company, acting through the Board, shall, in
accordance with applicable Law, its Articles of Organization and its By-laws,
as soon as practicable:
(i) duly call, give notice of, convene and hold a special meeting of its
stockholders as soon as practicable following the consummation of the Offer
for the purpose of considering and taking action upon this Agreement (the
"STOCKHOLDERS' MEETING");
7
(ii) subject to its fiduciary duties under applicable Laws as advised as to
legal matters by counsel, include in the proxy statement or information
statement prepared by the Company for distribution to stockholders of the
Company in advance of the Stockholders' Meeting in accordance with Regulation
14A or Regulation 14C promulgated under the Exchange Act (the "PROXY
STATEMENT") the recommendation of the Board referred to in Section 1.2 hereof;
and
(iii) use its reasonable efforts to (A) obtain and furnish the information
required to be included by it in the Proxy Statement and, after consultation
with Parent, respond promptly to any comments made by the SEC with respect to
the Proxy Statement and any preliminary version thereof and cause the Proxy
Statement to be mailed to its stockholders following the consummation of the
Offer and (B) obtain the necessary approvals of this Agreement and the Merger
by its stockholders.
Parent will provide the Company with the information concerning Parent and
Purchaser required to be included in the Proxy Statement and will vote, or
cause to be voted, all Shares owned by it or its Subsidiaries in favor of
approval and adoption of this Agreement and the transactions contemplated
hereby.
SECTION 2.13 Closing. Prior to the filings referred to in Section 2.2, a
closing will be held at the offices of O'Melveny & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (or such other place as the parties may agree), for
the purpose of confirming all of the foregoing. The closing will take place
one business day after the later of (i) the business day immediately following
the receipt of approval or adoption of this Agreement by the Company's
stockholders and (ii) the business day on which the last of the conditions set
forth in Article 7 is satisfied or duly waived, or at such other time as the
parties may agree.
ARTICLE 3.
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 3.1 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, Shares which are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who have perfected any
dissenters' rights provided under the Massachusetts BCL, if applicable (the
"DISSENTING SHARES"), shall not be converted into or be exchangeable for the
right to receive the consideration provided in Section 2.7(a) of this
Agreement, unless and until such holder shall have failed to perfect or shall
have effectively withdrawn or lost such holder's right to appraisal and
payment under the Massachusetts BCL. If such holder shall have so failed to
perfect or shall have effectively withdrawn or lost such right, such holder's
Shares shall thereupon be deemed to have been converted into and to have
become exchangeable for, at the Effective Time, the right to receive the
consideration provided for in Section 2.7(a) of this Agreement, without any
interest thereon.
SECTION 3.2 Exchange of Shares.
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company to act as exchange agent in the Merger (the "EXCHANGE AGENT").
Immediately prior to the Effective Time, Parent will take all steps necessary
to enable and cause the Company to deposit with the Exchange Agent the funds
necessary to make the payments contemplated by Section 2.7(a) on a timely
basis.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to each
record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "CERTIFICATES") a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the Certificates
for payment therefor, in each case customary for transactions such as the
Merger.
8
Upon surrender to the Exchange Agent of a Certificate, together with such
letter of transmittal duly executed, and any other required documents, the
holder of such Certificate shall be entitled to receive in exchange therefor
the consideration set forth in Section 2.7(a) hereof, and such Certificate
shall forthwith be canceled. No interest will be paid or accrued on the cash
payable upon the surrender of the Certificates. If payment is to be made to a
Person other than the Person in whose name the Certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for
transfer and that the Person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a Person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered in accordance with the provisions of this
Section 3.2, each Certificate (other than Certificates representing Shares
held by Parent or any wholly owned Subsidiary of Parent, Shares held in the
treasury of the Company or held by any wholly owned Subsidiary of the Company
and Dissenting Shares) shall represent for all purposes only the right to
receive the consideration set forth in Section 2.7(a) hereof, without any
interest thereon.
(c) After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided in Section 2.7(a) hereof
in accordance with the procedures set forth in this Article 3.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Parent and Purchaser in a schedule
delivered to them at or prior to the execution hereof (the "DISCLOSURE
SCHEDULE") with respect to matters specifically set forth in this Article 4,
the Company represents and warrants to each of Parent and Purchaser as
follows:
SECTION 4.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts. Section 4.1 of the Disclosure Schedule lists all Subsidiaries
of the Company. Each Subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization except where the failure to be so organized,
existing and in good standing would not in the aggregate be reasonably
expected to have a Material Adverse Effect. The Company and its Subsidiaries
have all necessary corporate power and authority to own their respective
properties and assets and to carry on their respective businesses as now
conducted and are duly qualified or licensed to do business as foreign
corporations in good standing in all jurisdictions in which the character or
the location of the assets owned or leased by any of them or the nature of the
business conducted by any of them requires licensing or qualification except
where the failure to be so qualified would not in the aggregate be reasonably
expected to have a Material Adverse Effect. For purposes of this Agreement,
the term "Material Adverse Effect" shall mean any change, effect, matter or
circumstance that has or would reasonably be expected to have a material
adverse effect on the business, assets or properties (including intangible
assets or properties), liabilities, results of operations or financial
condition of the Company and its Subsidiaries taken as a whole, other than any
such changes, effects or circumstances (i) specifically referred to in the
Disclosure Schedule, (ii) generally affecting the United States economy or
(iii) resulting from both (x) the proposed acquisition of Company and (y) the
fact that the acquiror is Parent. Section 4.1 of the Disclosure Schedule lists
the current directors and executive officers of the Company. True, correct and
complete copies of the articles of organization and bylaws of the Company as
in effect on the date hereof have been delivered to Parent.
9
SECTION 4.2 Capitalization.
(a) On the date hereof, the authorized capital stock of the Company consists
solely of 100,000,000 Shares. As of the opening of business on the date
hereof, (i) 21,230,097 Shares were validly issued and outstanding, fully paid
and nonassessable and not subject to preemptive rights, (ii) 3,733,729 Shares
would be issuable upon exercise of outstanding Options (both vested and
unvested), (iii) 2,823,000 Shares would be issuable upon exercise of the
Company's 6% Convertible Subordinated Notes due 2012 (the "SUBORDINATED
NOTES"), and (iv) 4,225,000 Shares were reserved for issuance upon exercise of
the Termination Option as defined in Section 8.2. Except for the Stock
Options, Subordinated Notes, the Rights (as defined in Section 6.12 hereof)
and the Termination Option, and except as set forth in Section 4.2(a) of the
Disclosure Schedule, Shares issued pursuant thereto and as set forth above in
this Section 4.2(a), there are no shares of capital stock of the Company
issued or outstanding or any subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
obligating the Company to issue, transfer or sell any of its securities.
(b) Except as set forth in Section 4.2(b) of the Disclosure Schedule, the
Company or one of its Subsidiaries owns all of the outstanding shares of
capital stock of each Subsidiary of the Company. Section 4.2(b) of the
Disclosure Schedule sets forth each other Person whose equity securities are
held by the Company or any of its Subsidiaries (the "MINORITY OWNED ENTITIES")
and the percentage interest held by the Company or such Subsidiary. Except as
set forth in Section 4.2(b) of the Disclosure Schedule, there are not now, and
there will not be as a result of the transactions contemplated by this
Agreement (including the Offer and the Merger), any outstanding subscriptions,
options, warrants, calls, rights, convertible securities or other agreements
or commitments of any character relating to the issued or unissued capital
stock or other securities of any of the Company's Subsidiaries or otherwise
obligating the Company or any such Subsidiary to issue, transfer or sell any
such securities.
(c) Except as set forth in Section 4.2(c) of the Disclosure Schedule, there
are no voting trusts or shareholder agreements or agreements providing for the
issuance of capital stock to which the Company or any of its Subsidiaries is a
party with respect to the voting of the capital stock of the Company, any of
its Subsidiaries or any of the Minority Owned Entities.
SECTION 4.3 Authority. The Company has the requisite corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company, subject only to
approval of the Merger, if necessary, by the stockholders of the Company as
provided in Section 2.12. This Agreement and the Merger have been unanimously
approved by the Board of Directors. This Agreement has been duly executed and
delivered by, and is a valid and binding obligation of, the Company
enforceable against the Company in accordance with its terms, except as (i)
such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the courts before which any
proceedings thereafter may be brought. The Board has unanimously determined
that the Offer and the Merger are fair and in the best interests of the
Company and its stockholders and has unanimously resolved to recommend
acceptance of the Offer and approval of the Merger by the Company's
stockholders.
SECTION 4.4 No Default; Effect of Agreement. Except as set forth in Section
4.4 of the Disclosure Schedule, the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby,
including the making and consummation of the Offer, will not constitute a
breach or violation of or default under, nor is the Company or any of its
10
Subsidiaries otherwise in breach or violation of or default under, (i) the
charter or the bylaws of the Company or such Subsidiary, as the case may be,
(ii) any applicable Laws, (iii) any Permit (as defined in Section 4.9 hereof)
issued by any Governmental Entity or otherwise, or (iv) any Material Contract,
other than, in the case of (i) through (iv) above, such breaches, violations
and defaults that would not in the aggregate have a Material Adverse Effect.
Except for compliance with the HSR Act (as defined below), the Exchange Act,
the securities laws of the various states, stockholder approval of the Merger,
and the filing of articles of merger pursuant to the Massachusetts BCL, the
consummation of the transactions contemplated hereby by the Company will not
require the consent or approval of or filing with any Governmental Entity or
other third party, other than consents and approvals the failure of which to
be obtained would not in the aggregate reasonably be expected to have a
Material Adverse Effect.
SECTION 4.5 Financial Statements; SEC Reports.
(a) Since June 30, 1993, the Company has filed with the SEC all Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, proxy materials, registration statements and other materials required to
be filed by it pursuant to the federal securities laws and has made all other
filings with the SEC required to be made (collectively, the "SEC FILINGS").
Except as set forth in Section 4.5(a) of the Disclosure Schedule, the SEC
Filings did not (as of their respective filing dates, mailing dates or
effective dates, as the case may be) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(b) The audited and unaudited consolidated financial statements of the
Company included in the SEC Filings present fairly, in all material respects,
the financial position of the Company and its consolidated Subsidiaries as of
the respective dates thereof and the consolidated results of their operations
and changes in financial position for the respective periods then ended in
conformity with generally accepted accounting principles applied on a
consistent basis (except as stated in such financial statements or notes
thereto). The foregoing sentence is subject, in the case of the unaudited
financial statements, to normal year-end audit adjustments. Except as set
forth in Section 4.5(b) of the Disclosure Schedule or as disclosed in the
Annual Report on Form 10-K for the fiscal year ended June 30, 1996, or in
subsequent SEC Filings made prior to the date hereof, the Company and its
Subsidiaries have no liabilities, contingent or otherwise, that would be
required to be reflected or reserved against in a consolidated balance sheet
of the Company and its consolidated Subsidiaries prepared in accordance with
generally accepted accounting principles as applied in preparing the
consolidated balance sheet of the Company and its consolidated Subsidiaries as
at June 30, 1996 (the "BALANCE SHEET"). None of the Company's Subsidiaries is
required to file any statements or reports with the SEC.
SECTION 4.6 Absence of Certain Changes or Events. Except as disclosed in the
SEC Filings made prior to the date hereof or in Section 4.6 of the Disclosure
Schedule, since June 30, 1996, there has not been (i) any Material Adverse
Effect; (ii) any damage, destruction or loss, whether covered by insurance or
not, materially and adversely affecting the Company and its Subsidiaries;
(iii) any declaration, setting aside or payment of any dividend (whether in
cash, stock or property) with respect to the capital stock of the Company;
(iv) any split-up, combination or reclassification of the Shares or the
capital stock of any such Subsidiary; (v) any entry into an employment
agreement or consulting agreement with former employees calling for annual
compensation in excess of $200,000; or (vi) any amendment to the articles or
certificate of incorporation or charter, as applicable, or bylaws of the
Company or any such Subsidiary which has not been filed with the state in
which such entity is organized. No existing or, to the knowledge of the
Company, threatened strike, slowdown, work stoppage, lockout or other
collective labor action affecting the Company or any of its Subsidiaries or
efforts to unionize the Company's or any of its Subsidiaries' employees exists
on the date hereof.
11
SECTION 4.7 Compliance with Law; Litigation. The businesses of the Company
and its Subsidiaries are not being, and have never been, conducted in
violation of any Laws, except for violations which in the aggregate do not
constitute a Material Adverse Effect. Except as described in the SEC Filings
made prior to the date hereof or as reflected in the Company's financial
statements (including the notes thereto) referred to in Section 4.5 or in
Section 4.7 of the Disclosure Schedule, there is no suit, action or proceeding
pending or, to the knowledge of the Company, threatened against or affecting
the Company or any of its Subsidiaries which, if adversely determined, could
reasonably be expected to result in liability to the Company or any of its
Subsidiaries in an amount in excess of $250,000, or restrain or prohibit
consummation of the transactions contemplated hereby; nor is there any decree,
injunction, judgment, order, ruling, assessment or writ ("ORDER") outstanding
against the Company or any of its Subsidiaries which constitutes in the
aggregate a Material Adverse Effect or would restrain or prohibit consummation
of the transactions contemplated hereby.
SECTION 4.8 Environmental Matters. (i) The Company and its Subsidiaries are
and have always been in compliance with all applicable Environmental Laws (as
hereinafter defined), except where the failure to comply would not reasonably
be expected in the aggregate to have a Material Adverse Effect, (ii) except as
set forth in Section 4.8(ii) of the Disclosure Schedule there is no civil,
criminal or administrative judgment, action, suit, demand, claim, hearing,
notice of violation, investigation, proceeding, notice or demand letter
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries pursuant to Environmental Laws, and (iii) except as
set forth in Section 4.8(iii) to the Disclosure Schedule there are no past or
present events which reasonably would be expected to prevent compliance with,
or have given rise to or will give rise to liability on the part of the
Company or any of its Subsidiaries under, Environmental Laws where the failure
to comply would not reasonably be expected, in the aggregate, to have a
Material Adverse Effect. As used herein the term "ENVIRONMENTAL LAWS" shall
mean Laws relating to pollution, waste control, the generation, presence or
disposal of asbestos, hazardous or toxic wastes or substances, the protection
of the environment, environmental activity or public health and safety.
SECTION 4.9 Governmental Authorizations and Regulations. Except as set forth
in Section 4.9 of the Disclosure Schedule, the Company and its Subsidiaries
hold all licenses, permits, franchises, authorizations, consents, certificates
of authority, or orders, or any waivers of the foregoing (collectively,
"PERMITS") that are required by any Governmental Entity to permit each of them
to conduct their respective businesses as now conducted, and all Permits are
valid and in full force and effect and will remain so upon consummation of the
transactions contemplated by this Agreement, except where the failure to hold
or maintain such Permits would not in the aggregate be reasonably expected to
have a Material Adverse Effect. No suspension, cancellation or termination of
any of such Permits is threatened or imminent that would in the aggregate
reasonably be expected to constitute a Material Adverse Effect.
SECTION 4.10 Schedule 14D-9, Offer Documents and Schedule 14D-1. The
Schedule 14D-9 and any amendments and supplements thereto will, when filed
with the SEC, comply in all material respects with the Exchange Act, except
that no representation is made by the Company with respect to information
supplied by Parent or Purchaser in writing for inclusion therein. None of the
information supplied by the Company for inclusion in the Offer Documents or
the Schedule 14D-1, and any amendments thereof, or supplements thereto, will,
on the respective dates such materials are filed with the SEC, 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
made therein, in light of the circumstances under which they were made, not
misleading.
SECTION 4.11 Brokers. No agent, broker, finder, or investment or commercial
banker, or other Person or firm engaged by or acting on behalf of the Company
or its Subsidiaries or any of their respective affiliates in connection with
the negotiation, execution or performance of this Agreement, the Merger or the
other transactions contemplated by this Agreement, is or will be entitled to
any brokerage or finder's or similar fee or other commission as a result of
this Agreement, the Merger or
12
such transactions, except that the Financial Advisor has been employed as
financial advisor to the Company, pursuant to arrangements that have been
disclosed in writing to Parent and Purchaser, and as to whose fees,
commissions, expenses and other charges the Company shall have full
responsibility.
SECTION 4.12 Employee Agreements and Benefits.
(a) Except for those matters set forth in Section 4.12 of the Disclosure
Schedule, (i) each "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
all other employee benefit, bonus, incentive, stock option (or other equity-
based), severance, change in control, welfare (including post-retirement
medical and life insurance) and fringe benefit plans (whether or not subject
to ERISA) maintained or sponsored by the Company or any of its Subsidiaries or
by any entity that would be deemed a member of a controlled group of
corporations with the Company under Section 414(b) of the Code or a trade or
business under common control with the Company under Section 414(c) of the
Code (any such entity, an "ERISA AFFILIATE"), for the benefit of any employee
or former employee of the Company, any Subsidiary of the Company or any ERISA
Affiliate (the "PLANS") is, and has been, operated in all material respects in
accordance with its terms and in substantial compliance (including the making
of governmental filings) with all applicable Laws, including ERISA and
applicable provisions of the Code; (ii) each of the Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") in a written
determination letter to be so qualified, and to the knowledge of the Company,
none of said determinations has been revoked by the IRS, nor has the IRS given
any indication to the Company, any Subsidiary of the Company or any ERISA
Affiliate that it intends to revoke any such determination, nor has any such
Plan been operated in a manner that could reasonably be expected to cause the
Plan to lose its tax-qualified status; (iii) neither the Company, nor any
Subsidiary of the Company nor any ERISA Affiliate contributes or is obligated
to contribute, or at any time within the last six years contributed or was
obligated to contribute, to any "multiemployer plan" (as defined in Section
3(37) of ERISA); and (iv) there are no pending or, to the knowledge of the
executive officers of the Company (including, but not limited to, the vice
president for human resources of the Company), threatened claims by, on behalf
of or against any of the Plans or any trusts related thereto, other than
routine claims for benefits.
(b) Neither the Company, nor any Subsidiary of the Company nor any ERISA
Affiliate sponsors, maintains or contributes to, or at any time within the
past six years has sponsored, maintained or been obligated to contribute to,
any Plan subject to Title IV of ERISA.
(c) Except as set forth in Section 4.12 of the Disclosure Schedule, the
Company has provided to Purchaser (i) a copy of the plan document and summary
description for each Plan and of any related insurance contracts, insurance
policies and trust agreements, and (ii) with respect to each Plan that is
subject to ERISA, a copy of the most recent annual report (Form 5500 series)
filed for such Plan.
(d) Neither the Company, nor any Subsidiary of the Company nor any ERISA
Affiliate has failed to make any contribution or payment to any Plan which has
resulted or could result in the imposition of a material Lien (as defined in
Section 4.15) or the posting of a material bond or other material security
under ERISA or the Code.
(e) Except as otherwise set forth in Section 4.12 of the Disclosure Schedule
or as expressly provided for in this Agreement, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current
or former employee, officer or director of the Company, any Subsidiary of the
Company or any ERISA Affiliate to severance pay, unemployment compensation or
any other payment, (ii) entitle any current or former employee or officer of
the Company or any ERISA Affiliate to any severance benefit provided for under
Section 183 of Chapter 149 of the General Laws of the Commonwealth of
Massachusetts, or (iii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee, officer or director.
13
(f) Section 4.12 of the Disclosure Schedule lists any employment, material
consulting, bonus, profit sharing, compensation, severance, termination, stock
option, pension, retirement, deferred compensation, or other employee benefit
arrangements, trusts, plans, funds, or other arrangements for the benefit or
welfare of any director, officer, or employee of the Company or any of its
Subsidiaries, copies of which have been delivered to Parent.
(g) Except as set forth in Section 4.12 of the Disclosure Schedule, none of
the employees of the Company or any of its Subsidiaries has been or currently
is represented by an "employee organization" within the meaning of Section
3(4) of ERISA.
SECTION 4.13 Fairness Opinion. The Company has received from the Financial
Advisor, and provided to Parent, an executed copy of the opinion (the
"FAIRNESS OPINION"). The Company has been authorized by the Financial Advisor
to include the Fairness Opinion in the Offer Documents and the Proxy Statement
and has not been notified by the Financial Advisor that the Fairness Opinion
has been withdrawn or modified.
SECTION 4.14 Material Agreements. Except as set forth in Section 4.14 of the
Disclosure Schedule and except as described in, or filed as an exhibit to, the
SEC Filings made prior to the date hereof, none of the Company or any of its
Subsidiaries is a party to any Material Contract (as defined below). True
copies of the Material Contracts, including all amendments and supplements,
have been made available to Parent. Except for any of the following the
failure of which to be true has not and would not in the aggregate be
reasonably expected to have a Material Adverse Effect, (i) each Material
Contract is valid and subsisting; (ii) the Company or the applicable
Subsidiary has duly performed all its material obligations thereunder to the
extent that such obligations to perform have accrued; and (iii) no breaches or
defaults, alleged breach or default, or event which would (with the passage of
time, notice or both) constitute a breach or default thereunder by the
Company, any of its Subsidiaries or, to the best knowledge of the Company, any
other party or obligor with respect thereto, has occurred or as a result of
this Agreement or performance thereof will occur. Except as described in
Section 4.14 of the Disclosure Schedule, consummation of the transactions
contemplated by this Agreement will not (and will not give any Person a right
to) terminate or modify any rights of, or accelerate or augment any obligation
of, the Company or any of its Subsidiaries under any Material Contract or any
other contract to which the Company or any of its Subsidiaries is a party or
by which any of their assets are bound except where such terminations,
modifications or accelerations would not in the aggregate be reasonably
expected to have a Material Adverse Effect. For purposes of this Agreement,
"MATERIAL CONTRACT" means any agreement, arrangement, bond, commitment,
contract, franchise, indemnity, indenture, instrument, lease, license,
understanding or undertaking, whether or not in writing, that (i) after June
30, 1996 obligates the Company or any of its Subsidiaries to pay, or entitles
the Company or any of its Subsidiaries to receive, an amount of $2,500,000 or
more annually, (ii) involves an extension of credit other than consistent with
normal credit terms, (iii) contains non-competition, no solicitation or no
hire provisions or (iv) is otherwise required to be described in or filed as
an exhibit to the SEC filings.
SECTION 4.15 Title to Properties; Encumbrances. Except as set forth in
Section 4.15 of the Disclosure Schedule, each of the Company and its
Subsidiaries has good and marketable title to or other legal right to use all
material properties and assets (real, personal and mixed, and tangible, but
specifically excluding Intellectual Property which is covered in Section
4.16), including all such properties and assets that it or they purport to own
or have a legal right to use as reflected on the Balance Sheet or acquired
after the date thereof, except for properties and assets disposed of since
June 30, 1996 in the ordinary course of business and consistent with past
practice. Except as set forth in Section 4.15 of the Disclosure Schedule, none
of such properties or assets reflected on the Balance Sheet or acquired after
the date of the Balance Sheet are subject to any Lien except (i) statutory
Liens not yet delinquent, (ii) Liens with respect to the properties or assets
of the Company and its Subsidiaries taken as a whole that do not materially
impair or materially interfere with the present use of the properties or
assets subject thereto or affected thereby, or otherwise materially impair
present business operations at such properties, (iii) Liens for taxes not yet
delinquent or the validity of which
14
are being contested in good faith by appropriate actions, (iv) Liens
identified in the SEC Filings made prior to the date hereof, and (v) other
Liens which would not be reasonably expected to have in the aggregate a
Material Adverse Effect. For purposes of this Agreement, "LIEN" means, with
respect to any asset, any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind whatsoever in respect of such asset.
SECTION 4.16 Intellectual Property.
(a) Section 4.16 of the Disclosure Schedule lists all of the Intellectual
Property (as hereinafter defined) in which the Company or any of its
Subsidiaries have an ownership interest for which a governmental registration
has been issued or applied. The Company and its Subsidiaries own or have the
right to use all Intellectual Property utilized in connection with their
businesses, as presently conducted, except for such Intellectual Property the
absence of which would not in the aggregate be reasonably expected to have a
Material Adverse Effect. Except as disclosed in Section 4.16 of the Disclosure
Schedule, the Company and its Subsidiaries have not received any written
notice to the effect that, or based on the circumstances have no reason to
know that, the use of the Intellectual Property by the Company or its
Subsidiaries in their business as presently conducted conflicts with any
rights of any Person, including any Intellectual Property of any Person,
except for any such conflicts would not in the aggregate be reasonably
expected to have a Material Adverse Effect.
(b) Except as set forth on Section 4.16 of the Disclosure Schedule: (i)
neither the Company nor its Subsidiaries have granted any exclusive license or
other exclusive rights to any Person to the Intellectual Property listed on
Section 4.16 of the Disclosure Schedule; and (ii) the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not breach, violate or conflict with or adversely
affect the Intellectual Property, except such breaches, violations, conflicts
or adverse affects which would not in the aggregate be reasonably expected to
have a Material Adverse Effect.
As used in this Agreement, the following terms shall have the meanings set
forth below: (i) "INTELLECTUAL PROPERTY" means any Intellectual Property
Rights, unpublished works, inventions, research and development findings,
inventories, computer firmware and software (existing in any form), marketing
rights, contractual rights, licenses and all related agreements and
documentation, other industrial and intellectual property rights, and all
Marks; (ii) "INTELLECTUAL PROPERTY RIGHTS" means any and all industrial and
intellectual property rights, including patents, patent applications, patent
rights, trademarks, trademark applications, service marks, service ▇▇▇▇
applications, copyrights, Know-How, Trade Secrets, and proprietary processes,
formulae and other information; (iii) "KNOW-HOW" means any information,
including invention records, research and development records and reports,
experimental and engineering reports, pilot designs, production designs,
production specifications, raw material specifications, quality control
reports and specifications, drawings, photographs, models, tools, parts,
algorithms, processes, methods, market and competitive analysis, computer
software (in any form) and related documentation and other information
possessed by the Company or its Subsidiaries, whether or not considered
proprietary or a Trade Secret; (iv) "▇▇▇▇" means any brand name, service ▇▇▇▇,
trademark, trade name, logo, and all registrations or applications for
registration of any of the foregoing; and (v) "TRADE SECRETS" means any Know-
How, formulae, patterns, devices, methods, processes, compilations of
information, software or any other information, business or technical, (in any
form) which is used in connection with the business of the Company or its
Subsidiaries, as presently conducted, and which gives an opportunity to obtain
an advantage over competitors who do not know or use it.
SECTION 4.17 Tax Matters.
(a) Except as set forth in Section 4.17 of the Disclosure Schedule, the
Company has paid, or the Balance Sheet contains adequate provision for, all
material Company Taxes (as defined herein) for the taxable period ended on the
date of the Balance Sheet and all fiscal periods of the Company
15
and its Subsidiaries prior thereto. The Company Taxes paid and/or incurred
from the date of the Balance Sheet until the Effective Date include only the
Company Taxes incurred in the ordinary course of business determined in the
same manner as in the taxable period ending on the date of the Balance Sheet.
All Tax Returns (as defined herein) required to be filed with respect to
Company Taxes under federal, state, local or foreign Laws by the Company or
any Subsidiary have been timely filed (taking into account any extensions of
time for filing such Tax Returns), (ii) at the time filed, such Tax Returns
were (and, as to Tax Returns not filed as of the date hereof, will be) true,
correct and complete in all material respects and each of the Company and each
of its Subsidiaries has timely paid all Company Taxes due and payable, (iii)
there are no material Liens for Company Taxes upon the assets of the Company
or any Subsidiary which are not provided for in the financial statements
included in the SEC Filings made prior to the date hereof, except Liens for
Company Taxes not yet due, and (iv) there are no material outstanding
deficiencies for any Company Taxes proposed, asserted or assessed against the
Company or any of its Subsidiaries which are not provided for in the financial
statements included in the SEC Filings made prior to the date hereof (other
than those which are being contested in good faith and either for which
adequate reserves have been established or the amounts are immaterial). In
addition, except in each case where the failure to do any of the following
would not reasonably be expected in the aggregate to have a Material Adverse
Effect, the Company and each of its Subsidiaries has properly accrued in all
material respects all Company Taxes for periods subsequent to the periods
covered by the Tax Returns filed by the Company or any such Subsidiary. The
Company has made available copies of all such Tax Returns to Parent. Except as
set forth in Section 4.17 of the Disclosure Schedule, neither the Company nor
any of its Subsidiaries has filed or entered into, or is otherwise bound by,
any election, consent or extension agreement that extends any applicable
statute of limitations with respect to taxable periods of the Company. Except
as set forth in Section 4.17 of the Disclosure Schedule, no action, audit,
examination, suit or other proceeding is pending or, to the Company's
knowledge, threatened by any Governmental Entity for assessment or collection
from the Company or any of its Subsidiaries of any Company Taxes, no
unresolved claim for assessment or collection of any Company Taxes has been
asserted against the Company or any of its Subsidiaries (other than those for
which adequate reserves have been established, which are being contested in
good faith or are immaterial), and all resolved assessments of the Company
Taxes have been paid or are reflected in the Balance Sheet.
(b) Except as disclosed in Section 4.17 of the Disclosure Schedule, there
are no outstanding written requests, agreements, consents or waivers to extend
the statutory period of limitations applicable to the assessment of any
material Company Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by either the Company or any of
its Subsidiaries with respect to any Company Taxes is currently in force.
Except as disclosed in Section 4.17 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to any agreement providing for
the allocation or sharing of Taxes. Except as disclosed in Section 4.17 of the
Disclosure Schedule, no claim has ever been made or, to the best knowledge of
the Company, could be made by an authority in a jurisdiction where any of the
Company or its Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. Except as set forth in Section 4.17
of the Disclosure Schedule none of the Company or its Subsidiaries has made
any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code (S) 280G. None of the Company
or its Subsidiaries (i) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the common parent
of which was the Company) or (ii) has any liability for the Taxes of any other
person or entity (other than any of the Company and its Subsidiaries) under
Treas. Reg. (S) 1.1502-6 (or any similar provision of state, local or foreign
Law), as a transferee or successor, by contract or otherwise. The unexpired
net operating losses of the Company for federal income tax purposes, as of
June 30, 1996, is set forth in Section 4.17 of the Disclosure Schedule.
(c) As used in this Agreement, (i) "COMPANY TAXES" shall mean any and all
taxes, charges, fees, levies or other assessments, including income, gross
receipts, excise, real or personal property,
16
sales, withholding, social security, occupation, use, service, service use,
value added, license, net worth, payroll, franchise, transfer and recording
taxes, fees and charges, imposed by the IRS or any taxing authority (whether
domestic or foreign including any state, local or foreign government or any
subdivision or taxing agency thereof (including a United States possession))
on the Company or any Subsidiary, whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall
include any interest, penalties or additional amounts attributable to, or
imposed upon, or with respect to, any such taxes, charges, fees, levies or
other assessments, and (ii) "TAX RETURN" shall mean any report, return,
document, declaration or other information or filing required to be supplied
to any taxing authority or jurisdiction (foreign or domestic) with respect to
Company Taxes.
SECTION 4.18 Interested Party Transactions. Except as set forth in the SEC
Filings made prior to the date hereof, since the date of the Company's last
proxy statement to its stockholders, no event has occurred that would be
required to be reported by the Company as a "Certain Relationship" or "Related
Transaction," pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 4.19 Government Contracts.
(a) Except as set forth in Section 4.19 of the Disclosure Schedule and
except as would not in the aggregate reasonably be expected to have a Material
Adverse Effect, with respect to each and every government contract and
subcontract under a government contract, (collectively "GOVERNMENT CONTRACT")
of the Company and its Subsidiaries: (i) the Company and its Subsidiaries have
complied in all respects with all material terms, conditions, representations
and certifications of each government contract and proposal submitted for any
such government contract; (ii) the Company and its Subsidiaries have complied
in all respects with all requirements of all applicable Laws or agreements,
including but not limited to, the cost accounting standards and cost
principles, pertaining to each government contract and proposal submitted for
any such government contract; (iii) no termination for convenience,
termination for default, cure notice or show cause notice is currently in
effect or threatened pertaining to any government contract and proposal
submitted for any such agreement contract; and (iv) no Governmental Entity has
provided the Company or its Subsidiaries with written notice of any cost
incurred by the Company and its Subsidiaries pertaining to such government
contract which has been questioned, challenged or disallowed or has been the
subject of any investigation.
(b) Except as set forth in Section 4.19 of the Disclosure Schedule, (i)
neither the Company or its Subsidiaries nor, to the best knowledge of the
Company, any of their directors, officers, employees, consultants or agents
engaged in the business of the Company or its Subsidiaries is (or during the
last six years has been) under administrative, civil or criminal
investigation, notice of proposed debarment or suspension, indictment or
information or equivalent official governmental charge or allegation by any
Governmental Entity or other Person with respect to any alleged irregularity,
misstatement or omission or other matter arising under or relating to any
government contract or proposal submitted for any such government contract and
(ii) except as would not in the aggregate reasonably be expected to have a
Material Adverse Effect, there is no irregularity, misstatement or omission or
other matter arising under or relating to any government contract or proposal
therefore that has led or could reasonably be expected to lead, either before
or after the Effective Time, to any of the consequences set forth in clause
(i) of this sentence.
(c) Except as set forth in Section 4.19 of the Disclosure Schedule and
except as would not in the aggregate reasonably be expected to have a Material
Adverse Effect on the Company, there exist (i) no outstanding claims, requests
for equitable adjustment, audits, disputes or other contractual action for
relief against the Company and its Subsidiaries, either by the U.S. Government
or by any prime contractor, subcontractor, vendor or other person, arising
under or relating to any government contract, performance of any government
contract or otherwise, and (ii) no settlement, compromise or similar
agreements waiving, releasing or abandoning any claim, entitlement, right or
defense of the Company or its Subsidiaries relating to the U.S. Government,
any prime contractor, subcontractor, vendor or other person.
17
(d) Except as set forth in Section 4.19 of the Disclosure Schedule and
except as in the aggregate would not reasonably be expected to have a Material
Adverse Effect, no government contract contains Organization Conflict of
Interest ("OCI") clauses or other similar provisions that might restrict or
preclude Parent or any of its affiliates from supplying products or services
to any Governmental Entity or supplier thereto.
SECTION 4.20 Takeover Statutes. No "fair price," "moratorium," "control
share acquisition" or other similar antitakeover statue or regulation enacted
under state or federal laws in the United States (each a "TAKEOVER STATUTE")
including Chapters 110C-110F of the Massachusetts General Laws, applicable to
the Company or any of the its Subsidiaries is applicable to the execution,
delivery and performance of this Agreement or the consummation of the Offer or
the Merger or the other transactions contemplated by this Agreement.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Each of Parent and Purchaser represents and warrants to the Company as
follows:
SECTION 5.1 Organization. Parent is a corporation duly organized and validly
existing and in good standing under the laws of the State of New York.
Purchaser is a corporation duly organized and validly existing and in good
standing under the laws of the Commonwealth of Massachusetts. Parent and
Purchaser have all necessary corporate power and authority to own their
respective properties and assets and to carry on their respective businesses
as now conducted and are duly qualified or licensed to do business as foreign
corporations in good standing in all jurisdictions in which the character or
the location of the assets owned or leased by any of them or the nature of the
business conducted by any of them requires licensing or qualification except
where the failure to be so qualified would not have a material adverse effect
on the consummation of the transactions contemplated hereby.
SECTION 5.2 Authority. Each of Parent and Purchaser has the requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder; the execution, delivery and performance by Parent and
Purchaser of this Agreement and the transactions contemplated hereby have been
duly authorized by all necessary corporate action on either of their part and
no other corporate proceedings on either of their part are necessary to
authorize the execution, delivery or performance of this Agreement. This
Agreement constitutes a valid and binding obligation of Parent and Purchaser
enforceable against Parent and Purchaser in accordance with its terms, except
as (i) such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws, now or hereafter in effect
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and the discretion of the courts before which any
proceeding therefor may be brought.
SECTION 5.3 Schedule 14D-1, Offer Documents and Schedule 14D-9. The Offer
Documents and the Schedule 14D-1 and all amendments and supplements thereto,
will, when filed with the SEC, comply in all material respects with the
Exchange Act, except that no representation is made by Parent or Purchaser
with respect to information supplied by or on behalf of the Company for
inclusion therein. None of the information supplied by Parent or Purchaser for
inclusion in Schedule 14D-9 and any amendments thereof or supplements thereto
will, on the respective dates such materials are filed with the SEC, 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
made therein, in light of the circumstances under which they were made, not
misleading.
SECTION 5.4 Effect of Agreement. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby,
including the making of the Offer, by Parent and Purchaser will not constitute
a breach or violation of or a default under (i) the Articles of
18
Incorporation or the Bylaws of Parent or Purchaser, (ii) any applicable Law,
(iii) any Permit issued by a Governmental Entity or otherwise, or (iv) any
indenture, agreement or instrument of Parent or Purchaser or to which Parent
or Purchaser or any of their respective properties is subject, other than in
the case of (i) through (iv) above, breaches, violations or defaults which
would not prevent, materially hinder or make materially more burdensome the
consummation by Parent or Purchaser of the transactions contemplated hereby.
Except for compliance with the HSR Act, the Exchange Act, the securities Laws
of the various states and the filing of the Articles of Merger pursuant to the
Massachusetts BCL, the consummation by Parent and Purchaser of the
transactions contemplated hereby will not require the consent or approval of
or filing with any Governmental Entity or other third party.
SECTION 5.5 Financing. Parent has, and will provide to Purchaser prior to
the expiration of the Offer, all funds necessary for the purchase of the
Shares pursuant to the Offer. Prior to the Effective Time, Purchaser will have
all funds necessary to consummate the Merger and to consummate all other
transactions contemplated hereunder.
SECTION 5.6 Brokers. No agent, broker, finder, or investment or commercial
banker, or other Person or firm engaged by or acting on behalf of Parent or
Purchaser or any of their respective affiliates in connection with the
negotiation, execution or performance of this Agreement, the Merger or the
other transactions contemplated by this Agreement, is or will be entitled to
any brokerage or finder's or similar fee or other commission as a result of
this Agreement, the Merger or such transactions, except that ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
Co. has been employed as financial advisor to Parent and Purchaser, who have
full responsibility for their fees, commissions, expenses and other charges.
ARTICLE 6.
COVENANTS
SECTION 6.1 No Solicitation.
(a) The Company and its Subsidiaries will not, and will cause their
respective officers, directors, employees and investment bankers, attorneys or
other agents retained by or acting on behalf of the Company or any of its
Subsidiaries (collectively, the "REPRESENTATIVES"), as applicable, not to, (i)
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any Acquisition Proposal (as defined below), (ii) except as
permitted below, engage in negotiations or discussions with, or furnish any
information or data to any third party relating to an Acquisition Proposal,
(iii) except as permitted below, enter into any agreement with respect to any
Acquisition Proposal or approve or resolve to approve any Acquisition Proposal
or (iv) except as permitted below, participate in any discussions regarding,
or take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to any
Acquisition Proposal (other than the transactions contemplated hereby).
Notwithstanding the foregoing, in response to any unsolicited Acquisition
Proposal, the Company may (at any time prior to the consummation of the Offer)
furnish information concerning its business, properties or assets to the
Person or group (a "POTENTIAL ACQUIROR") making such unsolicited Acquisition
Proposal and participate in negotiations with the Potential Acquiror if (x)
the Company's Board of Directors is advised by one or more of its independent
financial advisors that such Potential Acquiror has the financial wherewithal
to consummate without undue delay such an Acquisition Proposal, (y) the
Company's Board of Directors reasonably determines, after receiving advice
from the Company's financial advisor, that such Potential Acquiror has
submitted an Acquisition Proposal that involves consideration to the Company's
shareholders that are superior to the Offer and the Merger, and (z) based upon
advice of counsel to such effect, the Company's Board of Directors determines
in good faith that it is necessary to so furnish information and/or negotiate
in order to comply with its fiduciary duty to stockholders of the Company. In
the event the Company shall determine to provide any information as described
above or shall receive any offer of the type referred to in this Section
6.1(a), it shall (x) promptly inform Parent as to the fact that such an offer
has been received and/or such an offer has been received and/or information is
to be
19
provided, (y) promptly provide Parent with a copy of any written offer or
other materials received by Company, its Subsidiaries or Representatives in
connection therewith, and (z) if such offer is not in writing, promptly
furnish to Parent in writing the identity of the recipient of such information
and/or the proponent of such offer and a summary of the terms thereof. The
Company agrees that any non-public information furnished to a Potential
Acquiror will be pursuant to a confidentiality agreement with confidential
information and no solicitation/no hire provisions substantially similar to
those set forth in the Confidentiality Agreement (as defined in Section 6.4
hereof). The Company will keep Parent fully informed of the status and
details, including amendments or proposed amendments to any such Acquisition
Proposal.
(b) The Board of Directors of the Company (x) shall not withdraw or modify
or propose to withdraw or modify, in any manner adverse to Parent, the
approval or recommendation of such Board of Directors of this Agreement, the
Offer or the Merger or (y) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal unless, in each case, in connection with a
Superior Offer, such Board of Directors determines in good faith, based on
advice of outside legal counsel, that it is necessary to do so in order to
comply with such Board of Directors' fiduciary duties under applicable Law.
(c) For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean any
bona fide proposal, whether in writing or otherwise, made by a third party to
acquire beneficial ownership (as defined under Rule 13(d) of the Exchange Act)
of all or a material portion of the assets of the Company or any of
Subsidiaries, or any material equity interest in the Company pursuant to a
merger, consolidation or other business combination, sale of shares of capital
stock, sale of assets, tender offer or exchange offer or similar transaction
involving either the Company or any of its Subsidiaries, including any single
or multi-step transaction or series of related transactions which is
structured to permit such third party to acquire beneficial ownership of any
material portion of the assets of, or any material equity interest in, the
Company and its Subsidiaries.
(d) The term "SUPERIOR OFFER" means a bona fide offer to acquire, directly
or indirectly, for consideration consisting of cash and/or securities, two-
thirds or more of the Shares then outstanding or all or substantially all the
assets of the Company, and otherwise on terms which the Board of Directors of
the Company determines in its good faith reasonable judgment to be more
favorable to the Company's shareholders than the Offer and the Merger (based
on advice of the Company's independent financial advisor that the value of the
consideration provided for in such proposal is superior to the value of the
consideration provided for in the Offer and the Merger), for which financing,
to the extent required, is then committed or which, in the good faith
reasonable judgment of the Board of Directors, based on advice from the
Company's independent financial advisor, is reasonably capable of being
financed by such third party and for which the Board of Directors determines,
in its good faith reasonable judgment, that such proposed transaction is
reasonably likely to be consummated without undue delay.
SECTION 6.2 Appraisal Rights. The Company shall not settle or compromise any
claim for appraisal rights in respect of the Merger without the prior written
consent of Parent or Purchaser.
SECTION 6.3 Conduct of Business of the Company. During the period from the
date of this Agreement to the Effective Time, except as specifically
contemplated by this Agreement (including matters specifically identified in
Section 6.3 of the Disclosure Schedule) or as otherwise approved in writing by
Parent or Purchaser, the Company shall conduct, and it shall cause each of its
Subsidiaries to conduct, its or their businesses in the ordinary course and
consistent with past practice, subject to the limitations contained in this
Agreement, and the Company shall, and it shall cause each of its Subsidiaries
to, use its or their reasonable best efforts to preserve intact its business
organization, to keep available the services of its officers and employees and
to maintain satisfactory relationships with all Persons with which the Company
has significant business relations. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, after
the date of this Agreement and prior to the Effective Time, neither the
Company nor any of its Subsidiaries will, without the prior consent of
Purchaser:
20
(i) amend or propose to amend its Articles of Organization or Bylaws (or
comparable governing instruments);
(ii) authorize for issuance, issue, grant, sell, pledge, dispose of or
propose to issue, grant, sell, pledge or dispose of any shares of, or any
options, warrants, commitments, subscriptions or rights of any kind to acquire
or sell any shares of, the capital stock or other securities of the Company or
any of its Subsidiaries including any securities convertible into or
exchangeable for shares of stock of any class of the Company or any of its
Subsidiaries, or enter into any agreement, understanding or arrangement with
respect to the purchase or voting of shares of its capital stock, except for
the issuance of Shares pursuant to the exercise of Options or the conversion
of the Subordinated Notes outstanding on the date of this Agreement, in
accordance with their present terms, and issuances of up to 120,000 Shares and
options under the ESPP to employees in the ordinary course of business;
(iii) split, combine or reclassify any shares of its capital stock, make any
other changes in its capital structure, or declare, pay or set aside any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, other than dividends or
distributions to the Company or a Subsidiary wholly owned by the Company, or
redeem, purchase or otherwise acquire or offer to acquire any shares of its
capital stock or other securities, except for the repurchase of shares of
common stock from employees, consultants or directors of the Company upon
termination of their relationship with the Company in accordance with existing
contractual rights or obligations of repurchase;
(iv) (a) except for debt (including, but not limited to, obligations in
respect of capital leases) not in excess of $7,000,000 per month or
$30,000,000 in the aggregate for all entities combined, create, incur or
assume any short-term debt, long-term debt or obligations in respect of
capital leases; (b) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, indirectly, contingently or otherwise) for the
obligations of any Person, except for obligations of the Company or any wholly
owned Subsidiary of the Company in the ordinary course of business consistent
with past practice; (c) make any capital expenditures other than in the
ordinary course in amounts not to exceed $7,000,000 per month or $30,000,000
in the aggregate; (d) or make any loans, advances or capital contributions to,
or investments in, any other Person (other than customary relocation loans to
employees made in the ordinary course of business consistent with past
practice); or (e) acquire the stock or substantially all the assets of, or
merge or consolidate with, any other Person;
(v) sell, transfer, mortgage, pledge or otherwise dispose of, or encumber,
or agree to sell, transfer, mortgage, pledge or otherwise dispose of or
encumber, any material assets or properties (including Intellectual Property),
real, personal or mixed (except for (i) sales of assets in the ordinary course
of business and in a manner consistent with past practice, (ii) disposition of
obsolete or worthless assets and (iii) encumbrances on assets to secure
purchase money financings of equipment and capital improvements);
(vi) (A) increase the compensation of any of its or their directors,
officers or key employees, except pursuant to the terms of agreements or plans
currently in effect; (B) pay or agree to pay any pension, retirement or other
employee benefit provided in any existing plan, agreement or arrangement to
any director, officer or key employee except in the ordinary course and
consistent with past practice; (C) commit, other than pursuant to any existing
collective bargaining agreement, to any additional pension, profit sharing,
bonus, extra compensation, incentive, deferred compensation, stock purchase,
stock option, stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or to any
employment or consulting agreement with or for the benefit of any director,
officer or key employee, whether past or present; (D) amend, in any material
respect, any such plan, agreement or arrangement; or (E) enter into, adopt or
amend any employee benefit plans or employment or severance agreement, or
(except for normal increases in the ordinary and usual course of business for
employees with annual base cash compensation of less than $80,000) increase in
any manner the compensation of any employees;
21
(vii) settle or compromise any claims or litigation involving payments by
the Company or any of its Subsidiaries of more than $250,000 in any single
instance or related instances, or that otherwise are material;
(viii) make any tax election or permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated, except in
the ordinary and usual course of business consistent with past practices;
(ix) enter into any license with respect to Intellectual Property unless
such license is non-exclusive and entered into in the ordinary course
consistent with past practice or in accordance with existing contracts or
other agreements;
(x) take any action or omit to take any action, which action or omission
would result in a breach of any of the covenants, representations and
warranties of the Company set forth in this Agreement;
(xi) enter into any lease or amend any lease of real property other than in
the ordinary course of business consistent with past practice;
(xii) change any accounting practices, other than in the ordinary course and
consistent with past practice;
(xiii) fail to use reasonable business efforts to keep in full force and
effect insurance comparable in amount and scope of coverage to insurance now
carried by it;
(xiv) fail to pay all accounts payable and other obligations, when they
become due and payable, in the ordinary course of business consistent with
past practice and with the provisions of this Agreement, except if the same
are contested in good faith, and, in the case of the failure to pay any
material accounts payable or other obligations which are contested in good
faith, only after consultation with Purchaser;
(xv) fail to comply in all material respects with all Laws applicable to it
or any of its properties, assets or business and maintain in full force and
effect all Permits necessary for, or otherwise material to, such business; or
(xvi) agree, commit or arrange to do the foregoing.
SECTION 6.4 Access and Information. The Company shall, upon reasonable
notice and subject to government security restrictions and restrictions
contained in confidentiality agreements to which it is subject, give to
Parent, Purchaser and their representatives full access to all of their
employees, and to all the premises and books and records of the Company and
its Subsidiaries and shall, and shall cause its Subsidiaries, officers and
independent auditors to furnish to Parent, Purchaser and their representatives
and designees such financial and operating data and other information,
including access to the working papers of its independent auditors, with
respect to its business and properties and the business and properties of its
Subsidiaries as Parent or Purchaser shall from time to time reasonably
request. Any such investigation shall be conducted in such manner as not to
interfere unreasonably with the operation of the business of the Company and
its Subsidiaries. No investigation pursuant to this Section shall affect or be
deemed to modify any representations or warranties made in this Agreement or
the conditions to the obligations of the parties to consummate the Merger. The
Confidentiality Agreement dated April 26, 1997 (the "CONFIDENTIALITY
AGREEMENT"), between Parent and the Company shall apply to the information
provided pursuant to this Section 6.4.
SECTION 6.5 Certain Filings, Consents and Arrangements.
(a) Parent, Purchaser and the Company shall use their reasonable best
efforts to obtain any Permits necessary for the consummation of the
transactions contemplated by this Agreement, provided that the Company shall
not, without the consent of Parent (which consent shall not be unreasonably
withheld), agree to any amendment to any material instrument or agreement to
which it is a party.
22
(b) Parent, Purchaser and the Company shall cooperate with one another (i)
in promptly determining whether any filings are required to be made or Permits
are required to be obtained under any Law or otherwise (including from other
parties to Material Contracts) in connection with the consummation of the
Offer and the Merger and (ii) in promptly making any such filings, furnishing
information required in connection therewith and seeking timely to obtain any
such Permits.
(c) Each party shall use its reasonable best efforts promptly to take, or
cause to be taken, all actions and promptly to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated by this Agreement; provided that
nothing in this Section 6.5 shall require any party hereto to proffer such
party's willingness to accept an Order providing for divestiture of its assets
or businesses which amount to 7.5% or more of Company's assets or earning
power. The Company shall take all actions reasonably requested by Parent to
ensure the orderly transition of the business of the Company and to preserve
and maintain the Company's business relationships.
SECTION 6.6 State Takeover Statutes. The Company shall, upon the request of
Parent or Purchaser, take all reasonable steps to assist in any challenge by
Parent or Purchaser to the validity or applicability to the Offer or Merger of
any state takeover statutes.
SECTION 6.7 Compliance with Antitrust Laws. Each party shall as promptly as
practicable make all filings necessary under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), or to comply with any
other request or demand by a Governmental Entity investigating the Offer or
the Merger under applicable antitrust Laws. Each party shall use its
reasonable best efforts to resolve such objections, if any, as any
Governmental Entity may assert with respect to the Offer or the Merger.
Nothing in this Section 6.7 shall require any party hereto to proffer such
party's willingness to accept an Order providing for divestiture of its assets
or businesses which amount to 7.5% or more of Company's assets or earning
power.
SECTION 6.8 Press Releases. Parent, Purchaser and the Company shall consult
with each other before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated hereby as may
be required by Law or by obligations pursuant to any listing agreement with
any national securities exchange.
SECTION 6.9 Indemnification; Insurance.
(a) From and after the consummation of the Offer, Parent shall cause the
Company and, after the Effective Time, the Surviving Corporation to indemnify,
defend and hold harmless the present and former directors and officers of the
Company and its Subsidiaries (each an "INDEMNIFIED PARTY") against all losses,
claims, damages or liabilities arising out of actions or omissions in their
capacity as a director or officer of the Company or a Subsidiary occurring on
or prior to the consummation of the Offer to the maximum extent permitted or
required under the Massachusetts BCL and the Company's Bylaws in effect on the
date hereof, including provisions with respect to advances of expenses
incurred in the defense of any action or suit, provided that any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth under the Massachusetts BCL and the
Company's Bylaws shall be made by independent legal counsel selected in good
faith by the Surviving Corporation. From and after the consummation of the
Offer, Parent shall cause the Company and, after the Effective Time, the
Surviving Corporation, to pay from time to time in advance of the disposition
of any such action, suit or other proceeding expenses, including counsel fees,
reasonably incurred by the Indemnified Party in connection with any such
action, suit or other proceeding; provided that such Indemnified Party shall
undertake to repay the amounts so paid if it is ultimately determined that
indemnification for such expenses is not authorized under this Agreement or
otherwise.
(b) From and after the consummation of the Offer, Parent shall cause the
Company and, after the Effective Time, the Surviving Corporation to maintain
the Company's existing officers' and directors'
23
liability insurance ("D&O INSURANCE") in full force and effect without
reduction of coverage for a period of three years after the Effective Time;
provided that the Surviving Corporation will not be required to pay an annual
premium therefor in excess of 200% of the last annual premium paid prior to
the date hereof (the "CURRENT PREMIUM"); and, provided, further, that if the
existing D&O Insurance expires, is terminated or canceled during the 3-year
period, the Surviving Corporation will use reasonable efforts to obtain as
much D&O Insurance as can be obtained for the remainder of such period for a
premium on an annualized basis not in excess of 200% of the Current Premium.
(c) The Company will maintain, through the Effective Time, the Company's
existing D&O Insurance in full force and effect without reduction of coverage.
(d) If 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
and the continuing or surviving entity does not assume the obligations of the
Surviving Corporation set forth in this Section 6.9, or (ii) transfers all or
substantially all of its properties and assets to any person, then, and in
each such case, proper provision shall be made so that the successors and
assigns of the Surviving Corporation assume the obligations set forth in this
Section 6.9.
SECTION 6.10 Notification of Certain Matters. The Company shall give prompt
notice to Parent and Purchaser, and Parent or Purchaser shall give prompt
notice to the Company, of (i) any claims, actions, proceedings or
investigations commenced or, to the best of its knowledge, threatened,
involving or affecting the Company or any of its Subsidiaries or any of their
property or assets, that relate to the Offer or the Merger, (ii) the
occurrence, or failure to occur, of any event that would be likely to cause
(with the passage of time or otherwise) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
or, in the case of the Company, a Material Adverse Effect, and (iii) any
material failure of the Company, Parent or Purchaser, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. No such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
SECTION 6.11 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses (including, in the case of the
Company, the costs of printing the Proxy Statement), whether or not the Offer
or the Merger is consummated.
SECTION 6.12 Actions Regarding the Rights.
Prior to the execution of this Agreement, the Company, in accordance with
the terms and provisions of the Common Stock Rights Agreement dated as of June
23, 1988 between the Company and The First National Bank of Boston, as Rights
Agent (the "RIGHTS AGREEMENT"), has amended the Rights Agreement so that the
transactions contemplated by this Agreement are exempted from certain
provisions of the Rights Agreement and a "Common Stock Event" thereunder will
not occur as a result of such transactions. The Company, with the consent of
Parent, shall continue to take all actions necessary to cause the transactions
contemplated by this Agreement to remain exempted from such provisions of the
Rights Agreement, including, if desirable, entering into further amendments to
the Rights Agreement or causing the rights issued under the Rights Agreement
(the "RIGHTS") to be extinguished, canceled or redeemed.
SECTION 6.13 Shareholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any shareholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement; provided, however, that Parent shall have the
right to prevent the Company from entering into any such settlement without
Parent's consent if Parent agrees to indemnify the Company and each director
of the Company for the amount of its, his or her liability, if any, arising
from the underlying claim, net of any insurance proceeds received by such
person, that is in excess of the amount that such person would have been
liable for under such settlement.
24
ARTICLE 7.
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to the Obligations of Parent, Purchaser and the
Company. The obligations of Parent, Purchaser and the Company to consummate
the Merger are subject to the satisfaction, at or before the Effective Time,
of each of the following conditions:
(a) the stockholders of the Company shall have duly approved the Merger, if
required by applicable Law; and
(b) the consummation of the Merger shall not be precluded by any order or
injunction of a court of competent jurisdiction (each party agreeing to use
its reasonable best efforts to have any such order reversed or injunction
lifted), and there shall not have been any action taken or any statute, rule
or regulation enacted, promulgated or deemed applicable to the Merger by any
Governmental Entity that makes consummation of the Merger illegal.
SECTION 7.2 Conditions to the Obligations of Parent and Purchaser. The
obligations of Parent and Purchaser to consummate the Merger are subject to
the satisfaction, at or before the Effective Time, of the following additional
conditions:
(a) the Company shall have performed in all material respects the covenants
and agreements set forth herein to be performed by it at or prior to the
Effective Time;
(b) the representations and warranties of the Company in Article 4 shall be
true and correct in all material respects on the date as of which made and on
the Effective Date with the same force and effect as though made on and as of
such date;
(c) there shall not have occurred after the completion of the Offer any
material adverse change in the business of the Company and its Subsidiaries
taken as a whole, except for such changes that are caused by the Company's
compliance with the terms of this Agreement and the Offer or that are
contemplated hereby;
(d) no governmental or other action or proceeding shall have been commenced
after completion of the Offer that (a) in the opinion of Parent's or
Purchaser's counsel is more likely than not to be successful, and (b) either
(i) seeks an injunction, a restraining order or any other Order seeking to
prohibit, restrain, invalidate or set aside consummation of the Merger or (ii)
if successful, would have a Material Adverse Effect; and
(e) the Company shall have delivered to Parent and Purchaser a certificate,
as of the Effective Time, executed by a senior executive officer of the
Company, to the effect that, to the best of such officer's knowledge, the
conditions set forth in this Section 7.2 have been fulfilled.
SECTION 7.3 Conditions to the Company's Obligation. The obligation of the
Company to consummate the Merger is subject to the satisfaction, at or before
the Effective Time, of the following additional conditions:
(a) Parent and Purchaser shall have performed in all material respects the
covenants and agreements set forth herein to be performed by them at or prior
to the Effective Time;
(b) The representations and warranties of Parent and Purchaser set forth in
Article 5 shall be true and correct in all material respects on the date as of
which made and on the Effective Date with the same force and effect as though
made on and as of such date; and
(c) Parent and Purchaser shall have each delivered to the Company a
certificate, dated the date of the Effective Time and executed in each case by
a senior executive officer thereof, that to the best of such officer's
knowledge, the conditions set forth in this Section 7.3 have been fulfilled.
25
SECTION 7.4 Exception. The conditions set forth in Section 7.2 and 7.3
hereof shall cease to be conditions to the obligations of any of the parties
hereto if Purchaser shall have accepted for payment and paid for Shares
validly tendered pursuant to the Offer.
ARTICLE 8.
MISCELLANEOUS
SECTION 8.1 Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after shareholder approval thereof:
(a) subject to Section 1.5, by the mutual consent of Parent and the Company;
(b) by either the Company, on the one hand, or Parent and Purchaser, on the
other hand:
(i) if the Shares shall not have been purchased pursuant to the Offer on or
prior to the Final Termination Date; provided, however, that the right to
terminate this Agreement under this Section 8.1(b)(i) shall not be available
to any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of Purchaser to purchase the
Shares pursuant to the Offer on or prior to such date; or
(ii) if any Governmental Entity shall have issued an order, decree or ruling
or taken any other action (which order, decree, ruling or other action the
parties hereto shall use their respective reasonable best efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement or prohibiting Parent or Purchaser
to acquire or hold or exercise rights of ownership of the Shares except such
prohibitions which would not reasonably be expected to have a Material Adverse
Effect or prevent the consummation of the Offer prior to the Final Termination
Date, and such order, decree, ruling or other action shall have become final
and non-appealable;
(c) by the Company:
(i) if, prior to the purchase of Shares pursuant to the Offer the Board of
Directors shall have withdrawn, or modified or changed in a manner adverse to
Parent or Purchaser its approval or recommendation of the Offer, this
Agreement or the Merger (or the Board of Directors resolves to do any of the
foregoing) as a result of a Superior Offer, and if concurrently with such
termination the Termination Fee (as defined in Section 8.2) is paid to Parent;
or
(ii) if Parent or Purchaser shall have terminated the Offer, or the Offer
shall have expired, without Purchaser purchasing any Shares pursuant thereto;
provided that the Company may not terminate this Agreement pursuant to this
Section 8.1(c)(ii) if the Company's failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, termination of the Offer
or the failure of Purchaser to purchase any Shares pursuant to the Offer; or
(iii) if, due to an occurrence that if occurring after the commencement of
the Offer would result in a failure to satisfy any of the Conditions, the
Parent, Purchaser or any of their affiliates shall have failed to commence the
Offer on or prior to five business days following the date of the initial
public announcement of the Offer; provided, that the Company may not terminate
this Agreement pursuant to this Section 8.1(c)(iii) if the Company's failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of Parent, Purchaser or any affiliate to commence the
Offer; or
(iv) prior to the purchase of Shares pursuant to the Offer, (x) if any
representation or warranty of Parent and Purchaser set forth in this Agreement
shall be untrue in any material respects when made, or (y) upon a breach in
any material respect of any covenant or agreement on the part of Parent or
Purchaser set forth in this Agreement, in each case where such
misrepresentation or breach would result in a failure to satisfy any of the
Conditions, provided, that, if any such breach is curable by
26
Parent or Purchaser through the exercise of its reasonable best efforts prior
to the Final Termination Date and for so long as Parent or Purchaser continues
to exercise such reasonable best efforts, the Company may not terminate this
Agreement under this Section 8.1(c)(iv); or
(d) by Parent and Purchaser:
(i) if, prior to the purchase of the Shares pursuant to the Offer, the Board
of Directors shall have (A) withdrawn, modified or changed in a manner adverse
to Parent or Purchaser its approval or recommendation of the Offer, this
Agreement or the Merger, (B) recommended an Acquisition Proposal or shall have
executed an agreement in principle or definitive agreement relating to an
Acquisition Proposal or similar business combination with a person or entity
other than Parent, Purchaser, or their affiliates (or the Board of Directors
resolves to do any of the foregoing); or
(ii) if, due to an occurrence that if occurring after the commencement of
the Offer would result in a failure to satisfy any of the Conditions, Parent,
Purchaser or any of their affiliates shall have failed to commence the Offer
on or prior to five business days following the date of the initial public
announcement of the Offer; provided that neither Parent nor Purchaser may
terminate this Agreement pursuant to this Section 8.1(d)(ii) if the failure of
Purchaser or Parent to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Parent, Purchaser or any
affiliate to commence the Offer; or
(iii) prior to the purchase of Shares pursuant to the Offer, (i) if any
representation or warranty of the Company set forth in this Agreement shall be
untrue in any material respect when made or (ii) upon a breach in any material
respect of any covenant or agreement on the part of the Company set forth in
this Agreement, in each case where such misrepresentation or breach would
cause any of the Conditions not to be met, provided, that, if any such breach
is curable by the Company through the exercise of its reasonable best efforts
prior to the Final Termination Date and for so long as the Company continues
to exercise such reasonable best efforts, neither Parent nor Purchaser may
terminate this Agreement under this Section 8.1(c)(iii); or
(iv) any Person or group shall have become the beneficial owner of 20% or
more of the outstanding Shares; or
(v) if the Company shall have failed to file its Schedule 14D-9 with the SEC
within 10 business days of the commencement of the Offer;
provided, however, that the Company shall not terminate this Agreement
pursuant to Section 8.1(c)(i), and neither Parent nor Purchaser shall
terminate this Agreement pursuant to Section 8.1(d)(i), if any Shares are
purchased by Purchaser pursuant to the Offer.
SECTION 8.2 Effect of Termination.
(a) In the event of the termination of this Agreement as provided in Section
8.1, written notice thereof shall forthwith be given to the other party or
parties specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall forthwith become null and void, and there shall
be no liability on the part of Parent, Purchaser or the Company or their
respective directors, officers, employees, shareholders, representatives,
agents or advisors other than, with respect to Parent, Purchaser and the
Company, the obligations pursuant to this Article 8 and the last sentence of
Section 6.4. Nothing contained in this Section 8.2(a) shall relieve Parent,
Purchaser or the Company from liability for willful breach of this Agreement.
(b) The Company shall pay to Parent by wire transfer $13.5 million (the
"TERMINATION FEE"), upon demand, if (i) the Company terminates this Agreement
pursuant to Section 8.1(c)(i), in which case the Termination Fee must be paid
simultaneously with such termination, (ii) Parent or Purchaser terminates this
Agreement pursuant to Section 8.1(d)(i), or (iii) this Agreement is terminated
for any reason (other than as a result of (x) the failure of Parent or
Purchaser to fulfill any material obligation
27
under this Agreement, (y) the applicable waiting period under the HSR Act
shall not have expired or been terminated on or prior to the Final Termination
Date or (z) the failure of any of the Conditions set forth in paragraph (iii)
(a) of Exhibit A hereto or the Conditions set forth in paragraph (iii) (d) of
Exhibit A hereto to be satisfied or waived by Parent on or prior to the Final
Termination Date), at any time after an Acquisition Proposal has been made and
within nine months after such a termination, the Company completes either (x)
a merger, consolidation or other business combination between the Company or a
Subsidiary of the Company and any other Person (other than Parent, Purchaser
or an affiliate of Parent) or (y) the sale of 30% or more (in voting power) of
the voting securities of the Company or of 30% or more (in market value) of
the assets of the Company and its Subsidiaries, on a consolidated basis.
(c) Concurrently with the execution hereof the Company is issuing to Parent
an option to purchase 4,225,000 Shares at a price per Share equal to $29.00
(such option is referred to herein as the "TERMINATION OPTION"), in the form
set forth as Exhibit B hereto.
SECTION 8.3 Non-Survival of Representations, Warranties and Agreements. The
representations and warranties in this Agreement shall terminate at the
Effective Time or the termination of this Agreement pursuant to Section 8.1,
as the case may be. The covenants and agreements contained in this Agreement
shall survive the Effective Time or termination of this Agreement, as the case
may be, and shall continue until they terminate in accordance with their
terms.
SECTION 8.4 Waiver and Amendment. Subject to Section 1.5, any provision of
this Agreement may be waived at any time by the party that is, or whose
stockholders are, entitled to the benefits thereof. Subject to Section 1.5,
this Agreement may be amended or supplemented at any time, except that after
approval hereof by the stockholders of the Company, no amendment shall be made
which decreases the Merger Consideration or that in any other way materially
adversely affects the rights of such stockholders (other than a termination of
this Agreement) without the further approval of such stockholders. No such
waiver, amendment or supplement shall be effective unless in writing and
signed by the party or parties intended to be bound thereby.
SECTION 8.5 Entire Agreement. Except for the Confidentiality Agreement,
(which is hereby incorporated herein by this reference) and the Termination
Option, this Agreement (a) contains the entire agreement among Parent,
Purchaser and the Company with respect to the Offer, the Merger and the other
transactions contemplated hereby, and supersedes all prior agreements among
the parties with respect to such matters, and (b) is not intended to confer
upon any other persons any rights or remedies hereunder. The parties hereto
acknowledge that the Confidentiality Agreement remains in full force and
effect and is unmodified, except that paragraph 7 thereof is terminated and of
no further force or effect.
SECTION 8.6 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in that State, except to the extent
Massachusetts law is mandatorily applicable to the Merger.
SECTION 8.7 Headings. The descriptive headings contained herein are for
convenience and reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.8 Notices. All notices or other communications hereunder shall be
in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by facsimile, telegram, telex or other
standard form of telecommunications, or by registered or certified mail,
postage prepaid, return receipt requested addressed as follows:
If to the Company:
BBN Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
28
With a copy to:
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser or Parent:
GTE Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Senior Vice President
and General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may have furnished to the other parties
in writing in accordance herewith.
SECTION 8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute but one agreement.
SECTION 8.10 Parties in Interest; Assignment. This Agreement is binding upon
and is solely for the benefit of the parties and their respective successors,
legal representatives and assigns except that Section 6.9 shall be for the
express benefit of the persons in the categories referred to therein. Parent
and Purchaser shall have the right (i) to assign to one or more direct or
indirect wholly owned Subsidiaries of the Parent any and all rights and
obligations of Purchaser under this Agreement, including the right to
substitute in Purchaser's place such a Subsidiary as one of the constituent
corporations in the Merger (if such Purchaser assumes all of the obligations
of Purchaser in connection with the Merger), (ii) to transfer to one or more
direct or indirect wholly owned Subsidiaries of Parent the right to purchase
Shares tendered pursuant to the Offer and (iii) to restructure the transaction
to provide for the merger of the Company with and into Purchaser or any such
other corporation as provided above. If Parent or Purchaser exercise their
right to so restructure the transaction, the Company shall promptly enter into
appropriate agreements to reflect such restructuring. In any such event the
amounts to be paid to holders of Shares shall not be reduced nor shall there
be any material delay of the Effective Time.
SECTION 8.11 Specific Performance. The parties agree that irreparable damage
would occur if any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached. It is agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, in addition to any other remedy to which any party is entitled
at law or in equity.
SECTION 8.12 Certain Undertakings of Parent. Parent shall perform, or cause
to be performed, any obligation of Purchaser (or any successor person pursuant
to Section 8.10) under this Agreement which shall have been breached by
Purchaser (or such successor).
29
SECTION 8.13 Interpretation. The words "hereof", "herein" and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, paragraph, exhibit and schedule references
are to the articles, sections, paragraphs, exhibits and schedules of this
Agreement unless otherwise specified. Whenever the words "include", "includes"
or "including" are used in this Agreement they shall be deemed to be followed
by the words "without limitation". The words describing the singular number
shall include the plural and vice versa, and words denoting any gender shall
include all genders and words denoting natural persons shall include
corporations and partnerships and vice versa. The phrase "to the best
knowledge of" or any similar phrase shall mean such facts and other
information which as of any date of determination are known to any vice
president, chief financial officer, controller, or any officer superior to any
of the foregoing, of the referenced party. The phrases "the date of this
Agreement", "the date hereof" and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to May 5, 1997. As used in this
Agreement, the term "affiliate(s)" shall have the meaning set forth in Rule
12b-2 of the Exchange Act. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any provisions of this Agreement.
SECTION 8.14 Severability. If any provision of this Agreement is determined
to be invalid, illegal or unenforceable by any Governmental Entity, the
remaining provisions of this Agreement to the extent permitted by Law shall
remain in full force and effect provided that the essential terms and
conditions of this Agreement for all parties remain valid, binding and
enforceable; provided that the economic and legal substance of the
transactions contemplated is not affected in any manner materially adverse to
any party. In the event of any such determination, the parties agree to
negotiate in good faith to modify this Agreement to fulfill as closely as
possible the original intents and purposes hereof. To the extent permitted by
Law, the parties hereby to the same extent waive any provision of Law that
renders any provision hereof prohibited or unenforceable in any respect.
[Remainder of Page Intentionally Left Blank]
30
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
under seal as of the date first written above.
GTE CORPORATION
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Secretary
GTE MASSACHUSETTS INCORPORATED
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By: _________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Treasurer
BBN CORPORATION
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Senior Vice President
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Treasurer
S-1
EXHIBIT A
TO
AGREEMENT AND PLAN OF MERGER
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including without limitation, Rule 14e-1(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return Shares
promptly after termination or withdrawal of the Offer), pay for, or may delay
the acceptance for payment of or payment for, any tendered shares, or may, in
its sole discretion, terminate or amend the Offer as to any Shares not then
paid for, if (i) any applicable waiting period under the HSR Act shall not
have expired or been terminated, (ii) the number of Shares validly tendered
and not withdrawn when added to the Shares then beneficially owned by Parent
does not constitute two-thirds of the Shares then outstanding, or (iii) on or
after the date of this Agreement and at or before the time of payment for the
Shares, any of the following events shall occur and be continuing:
(a) there shall have occurred and be continuing (1) any general suspension
of trading in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., (2) the declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States (whether or not
mandatory), (3) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States and having had or being reasonably likely to have a Material Adverse
Effect or would restrain, prohibit or delay beyond the Final Termination Date
the consummation of the Offer, (4) any limitation or proposed limitation
(whether or not mandatory) by any Governmental Entity, or any other event,
that materially adversely affects generally the extension of credit by banks
or other financial institutions, (5) from the date of this Agreement through
the date of termination or expiration of the Offer, a decline of at least 25%
in the Standard & Poor's 500 Index or (6) in the case of any of the situations
described in clauses (1) through (5) inclusive, existing at the date of this
Agreement, a material acceleration, escalation or worsening thereof;
(b) (i) the representations and warranties of the Company set forth in this
Agreement shall not have been true and correct in any material respect on the
date hereof or (ii) the representations and warranties of the Company set
forth in this Agreement shall not be true and correct in any respect as of the
scheduled expiration date (as such date may be extended) of the Offer as
though made on or as of such date or the Company shall have breached or failed
in any respect to perform or comply with any obligation, agreement or covenant
required by this Agreement to be performed or complied with by it except, in
each case with respect to clause (ii), (x) for changes specifically permitted
by this Agreement and (y) (A) for those representations and warranties that
address matters only as of a particular date which are true and correct as of
such date or (B) where the failure of representations and warranties (without
giving effect to any limitation based on "materiality," "Material Adverse
Effect" or words of similar effect set forth therein) to be true and correct,
or the performance or compliance with such obligations, agreements or
covenants, would not in the aggregate reasonably be expected to have a
Material Adverse Effect;
(c) there shall be any action or proceeding commenced by or before, or
threatened in writing by, any Governmental Entity, which has a reasonable
likelihood of success and which, if decided adversely to the Company, would
have a Material Adverse Effect or would restrain, prohibit or delay beyond the
Final Termination Date the consummation of the Offer, and if decided adversely
to Parent, would have the effect of (i) making the purchase of, or payment
for, some or all of the Shares pursuant to the Offer or the Merger or
otherwise illegal, or resulting in a material delay in the ability of Parent
or Purchaser to accept for payment or pay for some or all of the Shares, (ii)
compelling Parent or Purchaser to dispose of or hold separately all or any
material portion of the Company's or Parent's business or assets, (iii) making
illegal, or otherwise directly or indirectly restraining or prohibiting or
A-1
imposing material financial burdens, penalties or, fines or requiring the
payment of material damages in connection with the making of, the Offer, the
acceptance for payment of, payment for, or ownership, directly or indirectly,
of some of or all the Shares by Parent or Purchaser, the consummation of the
Offer or the Merger, (iv) otherwise preventing consummation of the Offer or
the Merger, or (v) imposing limitations on the ability of Parent or Purchaser
effectively (A) to acquire, hold or operate the business of the Company and
its Subsidiaries taken as a whole or (B) 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, which, in either case, would effect a material
diminution in the value of the Company or the Shares;
(d) there shall been any Law enacted, promulgated, entered or deemed
applicable to the Offer or the Agreement or any other action shall have been
taken or threatened in writing, by any Governmental Entity on or after the
date of the Offer that would reasonably be expected to, directly or
indirectly, result in any of the consequences referred to in clauses (i)
through (v) of paragraph (c) above;
(e) the Board of Directors of the Company shall have publicly (including by
amendment of its Schedule 14D-9) withdrawn or adversely modified its
recommendation of acceptance of the Offer; or
(f) since the date hereof, there shall have occurred any event or events
that, singly or in the aggregate, have had or would reasonably be expected to
have a Material Adverse Effect; or
(g) the Agreement shall have been terminated in accordance with its terms,
or Parent or Purchaser shall have reached an agreement or understanding in
writing with the Company providing for termination or amendment of the Offer;
which, in any such case, and regardless of the circumstances (including any
action or inaction by Parent or Purchaser) giving rise to any such conditions,
makes it in the sole discretion of Parent inadvisable to proceed with the
Offer and/or with such acceptance for payment of or payment for the Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent or Purchaser regardless of the circumstances
giving rise to any such condition and may be waived by Parent or Purchaser, in
whole or in part, at any time and from time to time, in the sole discretion of
Parent or Purchaser. The failure by Parent or Purchaser at any time to
exercise any of the foregoing rights will not be deemed a waiver of any right
and each right will be deemed an ongoing right which may be asserted at any
time and from time to time.
A-2
EXHIBIT B
TO
AGREEMENT AND PLAN OF MERGER
FORM OF TERMINATION OPTION
B-1