EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 24, 2000
AMONG
▇▇▇▇▇ ▇▇▇▇▇, INC.
▇▇▇▇▇ ▇▇▇▇▇ ACQUISITION CORPORATION
AND
PROTOCOL SYSTEMS, INC.
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND CONSTRUCTION..................................... 2
1.1 Certain Definitions............................................ 2
1.2 Terms Generally................................................ 5
ARTICLE II THE OFFER AND RELATED MATTERS................................... 6
2.1 The Offer...................................................... 6
2.2 Company Action................................................. 8
ARTICLE III THE MERGER AND RELATED MATTERS................................. 9
3.1 The Merger..................................................... 9
3.2 Closing........................................................ 10
3.3 Conversion of Securities....................................... 10
3.4 Stock Options.................................................. 11
3.5 Dissenting Shares.............................................. 12
3.6 Surrender of Shares; Stock Transfer Books...................... 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 14
4.1 Organization and Qualification................................. 14
4.2 Authorization and Validity of Agreement........................ 14
4.3 Capitalization................................................. 15
4.4 Reports and Financial Statements............................... 15
4.5 No Approvals or Notices Required; No
Conflict with Instruments.................................... 16
4.6 Absence of Certain Changes or Events........................... 17
4.7 Information Supplied........................................... 18
4.8 Legal Proceedings.............................................. 19
4.9 Compliance with Applicable Laws; Environmental Matters......... 19
4.10 Brokers or Finders............................................. 20
4.11 Tax Matters.................................................... 20
4.12 Employee Matters............................................... 23
4.13 Real Property.................................................. 27
4.14 Intellectual Property.......................................... 27
4.15 Certain Agreements............................................. 28
4.16 Insurance...................................................... 29
4.17 No Investment Company.......................................... 29
4.18 Fairness Opinion............................................... 29
4.19 Recommendation of the Company Board............................ 29
4.20 Vote Required.................................................. 29
4.21 State Takeover Statutes........................................ 29
4.22 Rights Agreement............................................... 30
4.23 Equipment...................................................... 30
4.24 Customers and Suppliers........................................ 30
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ARTICLE V REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB................................................... 30
5.1 Organization and Qualification................................. 30
5.2 Authorization and Validity of Agreement........................ 31
5.3 No Prior Activities of Merger Sub.............................. 31
5.4 Information Supplied........................................... 31
5.5 Brokers........................................................ 32
5.6 Financing...................................................... 32
ARTICLE VI COVENANTS AND AGREEMENTS........................................ 32
6.1 Shareholders Meeting........................................... 32
6.2 Access to Information Concerning Properties and Records........ 33
6.3 Confidentiality................................................ 33
6.4 Public Announcements........................................... 33
6.5 Conduct of the Company's Business.............................. 33
6.6 No Solicitation................................................ 36
6.7 Reasonable Efforts............................................. 37
6.8 Certain Litigation............................................. 38
6.9 Indemnification of Directors and Officers...................... 39
6.10 Directors...................................................... 40
6.11 Stock Options.................................................. 40
6.12 Employee Matters............................................... 41
ARTICLE VII CONDITIONS TO THE MERGER....................................... 42
7.1 Conditions to the Merger....................................... 42
ARTICLE VIII TERMINATION................................................... 42
8.1 Termination and Abandonment.................................... 42
8.2 Effects of Termination; Expenses............................... 44
ARTICLE IX MISCELLANEOUS................................................... 45
9.1 Survival of Representations, Warranties,
Covenants and Agreements..................................... 45
9.2 Notices........................................................ 46
9.3 Entire Agreement............................................... 47
9.4 Assignment; Binding Effect; Benefit............................ 47
9.5 Amendment...................................................... 47
9.6 Extension; Waiver.............................................. 47
9.7 Headings....................................................... 48
9.8 Counterparts................................................... 48
9.9 Applicable Law; Jurisdiction................................... 48
9.10 Waiver of Jury Trial........................................... 48
9.11 No Remedy in Certain Circumstances............................. 48
9.12 Severability................................................... 48
9.13 Disclosure Schedule............................................ 48
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9.14 Enforcement.................................................... 49
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of this
24th day of May, 2000, by and among ▇▇▇▇▇ ▇▇▇▇▇, Inc., a New York corporation
("Parent"), ▇▇▇▇▇ ▇▇▇▇▇ Acquisition Corporation, an Oregon corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Protocol Systems, Inc., an
Oregon corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is in the best interests of their respective
shareholders for Parent, through Merger Sub, to acquire the Company upon the
terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, it is proposed that Merger Sub
shall make a cash tender offer (the "Offer") to acquire all the issued and
outstanding shares of Common Stock, par value $.01 per share, of the Company and
the associated Rights ("Company Common Stock"; shares of Company Common Stock
being hereinafter collectively referred to as the "Shares"), at a purchase price
of $16.00 per Share (such amount, or any greater amount per Share paid pursuant
to the Offer, being hereinafter referred to as the "Per Share Amount") net to
the seller in cash, without interest thereon, upon the terms and subject to the
conditions of this Agreement and the Offer; and
WHEREAS, the Board of Directors of Parent and Merger Sub have approved the
making of the Offer and the transactions related thereto; and
WHEREAS, the Board of Directors of the Company (the "Board") has approved
the making of the Offer, has determined that the consideration to be paid for
each Share in the Offer and the Merger is fair to and in the best interest of
the holders of the Company Common Stock and resolved and agreed, subject to the
terms and conditions contained herein, to recommend that holders of Shares
tender their Shares pursuant to the Offer; and
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the merger (the "Merger")
of Merger Sub with and into the Company in accordance with the Oregon Business
Corporation Act following the consummation of the Offer and upon the terms and
subject to the conditions set forth herein; and
WHEREAS, pursuant to the Merger, all Shares that remain outstanding after
the expiration of the Offer will be converted into and exchangeable for an
amount equal to the Per Share Amount.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
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ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following meanings unless the context otherwise requires:
An "Affiliate" of any Person shall mean any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person. A Person shall be deemed to "control," be "controlled by" or be "under
common control with" any other Person if such other Person possesses, directly
or indirectly, power to direct or cause the direction of the management and
policies of such Person whether through the ownership of voting securities or
partnership interests, by contract or otherwise.
"Agreement" shall mean this Agreement and Plan of Merger, including all
Exhibits and Schedules hereto.
"Alternative Proposal" shall mean any proposal, other than as contemplated
by this Agreement or otherwise proposed by Parent or its Affiliates, for (A) a
merger, consolidation, share exchange, reorganization, other business
combination, recapitalization or similar transaction involving the Company, (B)
the acquisition, directly or indirectly, of an equity interest representing
greater than 20% of the voting securities of the Company, (C) the acquisition of
a substantial portion of any of the assets of the Company, or (D) any
transaction the effect of which would be reasonably likely to prohibit, restrict
or delay the consummation of the Offer or the Merger or any of the other
transactions contemplated by this Agreement.
"Closing" shall mean the consummation of the Merger.
"Closing Date" shall mean the date on which the Closing occurs pursuant to
Section 3.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended
"Commission" shall mean the Securities and Exchange Commission and the
staff of the Securities and Exchange Commission.
"Company Common Stock" shall have the meaning specified in the preamble
hereto.
"Company Disclosure Schedule" shall mean the disclosure schedule, dated as
of the date of this Agreement, delivered by the Company to Parent.
"Company Stock Plans" shall mean the following: (i) the Company's 1993
Stock Option Plan for Nonemployee Directors; (ii) the Company's 1994 Employee
Stock Purchase Plan; (iii) the Company's 1987 Stock Incentive Plan; (iv) the
Company's 1992 Stock Incentive Plan; and (v) the Company's 1998 Stock Incentive
Plan.
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"Control" (including the terms "controlling," "controlled by" and "under
common control with") shall have the meaning given to such term in Rule 405
under the Securities Act.
"Effective Time" shall mean the time when the Merger of Merger Sub with and
into the Company becomes effective under applicable law as provided in Section
3.1.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, and the
rules and regulations thereunder.
"GAAP" shall mean generally accepted accounting principles as accepted by
the accounting profession in the United States as in effect from time to time.
"Governmental Entity" shall mean any agency, bureau, commission, court,
department, officer, political subdivision, or other instrumentality of any
nation or government, any region, state, or other political subdivision thereof
whether federal, state, county or local, domestic or foreign, or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any federal, state, foreign or local government,
and any Person owned or controlled through stock or capital ownership or
otherwise by any of the foregoing.
"▇▇▇▇-▇▇▇▇▇ Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, and the rules and regulations thereunder.
"Indebtedness" shall mean, with respect to any Person, without duplication
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (i) every liability of such Person
(excluding intercompany accounts between the Company and any wholly owned
Subsidiary of the Company or between wholly owned Subsidiaries of the Company)
(A) for borrowed money, (B) evidenced by notes, bonds, debentures or other
similar instruments (whether or not negotiable), (C) for reimbursement of
amounts drawn under letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (D) issued or assumed as the
deferred purchase price of property or services (excluding contingent payment
obligations and accounts payable) and (E) relating to a capitalized lease
obligation and all debt attributable to sale/leaseback transactions of such
Person; and (ii) every liability of others of the kind described in the
preceding clause (i) which such Person has guaranteed or which is otherwise its
legal liability, in either case to the extent required pursuant to GAAP to be
set forth as a liability on a balance sheet of such Person.
"Injunction" shall mean any permanent or preliminary injunction or
restraining order or decree or other similar order or decree issued or entered
by any court or Governmental Entity.
"Lien" shall mean any lien (statutory or other), security interest,
mortgage, pledge, hypothecation, charge, claim, option, assignment, encumbrance
or other restriction.
"Material Adverse Effect" on any Person shall mean any adverse change or
effect (i) that is materially adverse to the business, assets, result of
operations or financial condition of such Person;
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provided that with respect to the Company the term Material Adverse Effect shall
not include (A) any change, effect, event or legal claim that relates to or
primarily results from the announcement or other disclosure relating to the
transactions contemplated by this Agreement (including delays or cancellations
of orders for the Company's products), or (B) any effects of changes in general
economic conditions, or conditions affecting the Company's industry generally,
or (ii) that materially and adversely affects the ability of such Person to
perform its obligations under this Agreement.
"Merger" shall have the meaning specified in the preamble hereto.
"OBCA" shall mean the Oregon Business Corporation Act.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust, unincorporated organization, association, or joint
venture or a government, agency, political subdivision, or instrumentality
thereof.
"Proxy Statement" shall mean the proxy statement, as amended and
supplemented, to be sent to the shareholders of the Company in connection with
the Shareholders Meeting (as defined in Section 6.1).
"Rights" shall mean the rights issued under the Rights Agreement.
"Rights Agreement" shall mean the Rights Agreement, dated March 20, 1992,
between the Company and the Rights Agent, as amended through the date hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Subsidiary," when used with respect to any Person, shall mean any
corporation or other organization, whether incorporated or unincorporated, of
which such Person or any other Subsidiary of such Person is a general partner or
at least 50% of the securities or other interests having by their terms ordinary
voting power to elect at least 50% of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person, by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.
"Superior Proposal" shall mean any Alternative Proposal to acquire,
directly or indirectly, all or substantially all of the shares of Company Common
Stock then outstanding or all or substantially all the assets of the Company and
that a majority of disinterested members of the Company Board concludes in good
faith, after consultation with its outside legal counsel and financial advisor
and taking into account all the terms and conditions of the Alternative Proposal
(including the ability of the Person making the Alternative Proposal to
consummate the same), is more favorable to the Company's shareholders than the
Offer and the Merger.
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"Surviving Entity" shall mean the Company as the surviving entity in the
Merger as provided in Section 3.1.1.
"Tax" (including, with correlative meaning, the terms "taxes" and
"taxable") shall include but not be limited to, all federal, state, foreign and
local income, profits, franchise, capital stock, gross receipts, sales, use,
employment, withholding, payroll, social security, workers' compensation,
utility, severance, production, stamp, gain, unemployment, estimated, real
property, personal property, license, environmental (including taxes under
Section 59A of the Code), value added alternative or added minimum, ad valorem,
transfer, excise and other taxes, duties or assessment of any nature whatsoever,
together with all interest, penalties, fees costs and additions imposed that
relate in any way to the imposition, assessment or collection of any taxes.
"Tax Return" means a report, return, declaration, statement relating to
Taxes or other information to be supplied to or filed with a Governmental
Entity, including any schedule or statement required to be attached thereto,
with respect to any Tax, including an information return, claim for refund,
amended tax return or declaration of estimated Tax.
"Tender Offer Acceptance Date" shall mean the date on which Merger Sub
shall have accepted for payment all Shares validly tendered and not withdrawn
pursuant to the expiration date with respect to the Offer.
"Treasury Regulations" shall mean the treasury regulations promulgated
under the Code by the United States Department of Treasury.
1.2 Terms Generally. The definitions set forth or referenced in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The words "herein", "hereof" and "hereunder" and words of similar
import refer to this Agreement (including the Exhibits and Schedules) in its
entirety and not to any part hereof unless the context shall otherwise require.
As used herein, the term "to the Company's knowledge" or any similar term
relating to the knowledge of the Company means the actual knowledge upon due
inquiry of any of the officers (determined in accordance with Rule 16a-1(f)
under the Exchange Act as in effect on the date hereof) of the Company. All
references herein to Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and Schedules to, this
Agreement unless the context shall otherwise require. Unless the context shall
otherwise require, any references to any agreement or other instrument or
statute or regulation are to it as amended and supplemented from time to time
(and, in the case of a statute or regulation, to any successor provisions). Any
reference in this Agreement to a "day" or number of "days" (without the explicit
qualification of "business") shall be interpreted as a reference to a calendar
day or number of calendar days. If any action or notice is to be taken or given
on or by a particular calendar day, and such calendar day is not a business day,
then such action or notice shall be deferred until, or may be taken or given on,
the next business day. References to the term "business day" shall mean any
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day which is not a Saturday, Sunday or day on which banks in New York, New York
are authorized or required by law to close.
ARTICLE II
THE OFFER AND RELATED MATTERS
2.1 The Offer.
2.1.1 Provided that this Agreement shall not have been terminated in
accordance with Article VIII, and that none of the events described in the
conditions set forth in Annex A shall have occurred and be existing, Parent
shall cause Merger Sub to commence, and Merger Sub shall commence (within the
meaning of the applicable rules and regulations of the Commission), the Offer at
the Per Share Amount as promptly as reasonably practicable after the date
hereof, but in no event later than ten business days after the date of this
Agreement. The Offer will be made pursuant to an Offer to Purchase and related
Letter of Transmittal containing the terms and conditions set forth in this
Agreement. The initial expiration date of the Offer shall be the twentieth
business day from and after the date the Offer is commenced (as determined
pursuant to Rule 14d-2 promulgated under the Exchange Act) (the "Initial
Expiration Date"), unless this Agreement is terminated in accordance with the
terms hereof, in which case the Offer (whether or not previously extended in
accordance with the terms hereof) shall expire on such date of termination. The
obligation of Merger Sub to accept for payment and pay for Shares tendered
pursuant to the Offer shall be subject only to (i) the condition that at least
the number of Shares that, when combined with the Shares already owned by Parent
and its direct or indirect Subsidiaries, constitute a majority of the then
outstanding Shares on a fully diluted basis, including, without limitation, all
Shares issuable upon the conversion of any convertible securities or upon the
exercise of any options, warrants or rights (other than the Rights (as defined
in the Rights Agreement)) shall have been validly tendered and not withdrawn
prior to the expiration of the Offer (the "Minimum Condition") and (ii) the
satisfaction or waiver of the other conditions set forth in Annex A hereto.
2.1.2 Merger Sub expressly reserves the right to waive any condition
to the Offer (other than the Minimum Condition), to increase the price per Share
payable in the Offer, and to make any other changes in the terms and conditions
of the Offer; provided, however, that (notwithstanding Section 9.5) no change
may be made which (A) decreases the price per Share payable in the Offer, (B)
reduces the maximum number of Shares to be purchased in the Offer, (C) imposes
conditions to the Offer in addition to those set forth in Annex A, (D) amends or
changes the terms and conditions of the Offer in any manner adverse to the
holders of Shares (other than Parent and its Subsidiaries), (E) changes or
waives the Minimum Condition, (F) changes the form of consideration payable in
the Offer or (G) except as provided below or required by any rule, regulation,
interpretation or position of the Commission applicable to the Offer, changes
the expiration date of the Offer. Notwithstanding the foregoing, Merger Sub may,
without the consent of the Company, (A) extend the Offer, if at the scheduled
expiration date of the Offer any of the conditions set forth in Annex A (the
"Offer Conditions") shall not be satisfied or waived, until such time as such
conditions are satisfied or waived, (B) extend the Offer for any period required
by any
6
rule, regulation, interpretation or position of the Commission applicable to the
Offer and (C) extend the Offer to provide for a subsequent offering period
pursuant to Rule 14d-11 under the Exchange Act for an aggregate period of not
more than 20 business days (for all such extensions) beyond the latest
expiration date that would otherwise be permitted under clause (A) or (B) of
this sentence. In addition, Parent and Merger Sub agree that Merger Sub shall
from time to time extend the Offer, if requested by the Company, (A) if at the
Initial Expiration Date (or any extended expiration date of the Offer, if
applicable), any of the Offer Conditions other than the Minimum Condition shall
not have been waived or satisfied, and the Minimum Condition shall have been
satisfied, until (taking into account all such extensions) the earlier of the
date that is 60 days after the date of commencement of the Offer or such earlier
date upon which Parent reasonably determines that any such condition shall not
be capable of being satisfied prior to the date that is 60 days after the date
of commencement of the Offer; or (B) if at the Initial Expiration Date (or any
extended expiration date of the Offer, if applicable), all of the conditions to
the Offer other than the Minimum Condition shall have been waived or satisfied
and the Minimum Condition shall not have been satisfied, until the earlier of
ten (10) business days after such expiration date or the date that is 60 days
after the date of commencement of the Offer, provided, however, that, in case of
either clause (A) or (B) of this sentence, if this Agreement is terminated in
accordance with the terms hereof the Offer (whether or not previously extended
in accordance with the terms hereof) shall expire on the date of such
termination. Upon the prior satisfaction or waiver of all the conditions to the
Offer, and subject to the terms and conditions of this Agreement, Merger Sub
will, and Parent will cause Merger Sub to, accept for payment, purchase and pay
for, in accordance with the terms of the Offer, all shares of Company Common
Stock validly tendered and not withdrawn pursuant to the Offer as soon as
reasonably practicable after the expiration of the Offer. The Per Share Amount
shall, subject to applicable withholding of taxes, be net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions of the
Offer. Subject to the terms and conditions of the Offer (including, without
limitation, the Minimum Condition), Merger Sub shall accept for payment and pay,
as promptly as practicable after expiration of the Offer, for all Shares validly
tendered and not withdrawn.
2.1.3 As soon as reasonably practicable on the date of commencement
of the Offer, Merger Sub shall file with the Commission and disseminate to
holders of Shares to the extent required by law a Tender Offer Statement on
Schedule TO (together with all amendments and supplements thereto, the "Schedule
TO") with respect to the Offer and the other Transactions (as hereinafter
defined). The Schedule TO shall contain or shall incorporate by reference an
offer to purchase (the "Offer to Purchase") and forms of the related letter of
transmittal and any related summary advertisement (the Schedule TO, the Offer to
Purchase and such other documents, together with all supplements and amendments
thereto, being referred to herein collectively as the "Offer Documents").
Parent, Merger Sub and the Company agree to correct promptly any information
provided by any of them for use in the Offer Documents which shall have become
false or misleading, and Parent and Merger Sub further agree to take all steps
necessary to cause the Schedule TO as so corrected to be filed with the
Commission and the other Offer Documents as so corrected to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given an
opportunity to review and comment on the Offer Documents and any amendments
thereto prior to the filing thereof
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with the Commission. Parent and Merger Sub will provide the Company and its
counsel with a copy of any written comments or telephonic notification of any
verbal comments Parent or Merger Sub may receive from the Commission with
respect to the Offer Documents promptly after the receipt thereof and will
provide the Company and its counsel with a copy of any written responses and
telephonic notification of any verbal response of Parent, Merger Sub or their
counsel. In the event that the Offer is terminated or withdrawn by Merger Sub,
Parent and Merger Sub shall cause all tendered Shares to be returned to the
registered holders of the Shares represented by the certificate or certificates
surrendered to the Paying Agent.
2.2 Company Action.
2.2.1 The Company represents that the Board, at a meeting duly called
and held, has unanimously (with one director having recused himself) (A)
determined that this Agreement and the transactions contemplated hereby,
including, without limitation, each of the Offer and the Merger (the
"Transactions"), are fair to and in the best interests of the holders of Shares,
(B) approved and adopted this Agreement and the Transactions, and (C) resolved
to recommend, subject to the conditions set forth herein, that the shareholders
of the Company accept the Offer and approve and adopt this Agreement and the
Transactions (provided, however, that subject to and in accordance with Section
6.6.3, such recommendation may be withdrawn or modified in connection with a
Superior Proposal).
2.2.2 As soon as reasonably practicable on the date of commencement
of the Offer, the Company shall file with the Commission a
Solicitation/Recommendation Statement on Schedule 14D-9, including an
appropriate information statement under Rule 14f-1 (together with all amendments
and supplements thereto, the "Schedule 14D-9") containing the recommendation of
the Board described in Section 2.2.1 (unless such recommendation has been
withdrawn or modified in accordance with Section 6.6.3) and shall disseminate
the Schedule 14D-9 to the extent required by Rules 14d-9 and 14f-1 promulgated
under the Exchange Act and any other applicable federal securities laws. The
Company, Parent and Merger Sub agree to correct promptly any information
provided by any of them for use in the Schedule 14D-9 which shall have become
false or misleading, and the Company further agrees to take all steps necessary
to cause the Schedule 14D-9 as so corrected to be filed with the Commission and
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Parent, Merger Sub and their counsel shall
be given a reasonable opportunity to review and comment on the Schedule 14D-9
and any amendments thereto prior to the filing thereof with the Commission. The
Company will provide Parent and Merger Sub and their counsel with a copy of any
written comments or telephonic notification of any verbal comments the Company
may receive from the Commission with respect to the Offer Documents or Schedule
14D-9 promptly after the receipt thereof and will provide Parent and Merger Sub
and their counsel with a copy of any written responses and telephonic
notification of any verbal response of the Company or its counsel.
2.2.3 The Company shall promptly furnish Merger Sub with mailing
labels containing the names and addresses of all record holders of Shares and
with security position listings of Shares held in stock depositories, each as of
the most recent date reasonably practicable, together
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with all other available listings and computer files containing names, addresses
and security position listings of record holders and non-objecting beneficial
owners of Shares as of the most recent date reasonably practicable. The Company
shall furnish Merger Sub with such additional information, including, without
limitation, updated listings and computer files of shareholders, mailing labels
and security position listings, and such other assistance as Parent, Merger Sub
or their agents may reasonably request. 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 Offer or the
Merger, Parent and Merger Sub shall hold in confidence the information contained
in such labels, listings and files, shall use such information only in
connection with the Offer and the Merger, and, if this Agreement shall be
terminated in accordance with Article VIII, shall deliver promptly to the
Company all copies of such information then in their possession and shall
certify in writing to the Company its compliance with this Section 2.2.3.
ARTICLE III
THE MERGER AND RELATED MATTERS
3.1 The Merger.
3.1.1 Merger; Effective Time. Upon the prior satisfaction or waiver
of all the conditions to the Merger, and subject to the terms and conditions of
this Agreement, Merger Sub shall, and Parent shall cause Merger Sub to, merge
with and into the Company in accordance with the provisions of the OBCA, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the Surviving Entity. The Effective Time shall occur upon the filing
with the Secretary of State of the State of Oregon of Articles of Merger
("Articles of Merger") executed in accordance with the applicable provisions of
the OBCA, or at such later time as may be agreed to by Parent and the Company
and specified in the Articles of Merger. Provided that this Agreement has not
been terminated pursuant to Article VIII, the parties will cause the Articles of
Merger to be filed as soon as practicable after the Closing. At the election of
Parent, any direct or indirect wholly owned subsidiary of Parent may be
substituted for Merger Sub as a constituent corporation in the Merger, provided
that no such substitution shall be made if it would delay or impede the
transactions contemplated hereby. In such event, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect the foregoing.
3.1.2 Effects of the Merger. The Merger shall have the effect set
forth in the OBCA. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the Surviving Entity,
and all debts, liabilities and duties of the Company and Merger Sub shall become
the debts, liabilities and duties of the Surviving Entity. If, at any time after
the Effective Time, the Surviving Entity considers or is advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Entity its right, title or interest in, to or under any of the rights,
properties, or assets of either the Company or Merger Sub, or otherwise to carry
out the intent and purposes of this Agreement, the officers and directors of the
Surviving Entity will be
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authorized to execute and deliver, in the name and on behalf of each of the
Company and Merger Sub, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of the Company
and Merger Sub, all such other actions and things as the Board of Directors of
the Surviving Entity may determine to be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Entity or otherwise to carry out the
intent and purposes of this Agreement.
3.1.3 Articles of Incorporation and Bylaws of Surviving Entity. At
the Effective Time, the Company's Amended and Restated Articles of Incorporation
("Company Charter") shall be amended to be identical to the Articles of
Incorporation of Merger Sub in effect immediately prior to the Effective Time,
except that Article I thereof shall read as follows: "The name of the
corporation is: ▇▇▇▇▇ ▇▇▇▇▇ Protocol, Inc." Such Company Charter as so amended
shall be the Articles of Incorporation of the Surviving Entity until thereafter
duly amended in accordance with the terms thereof and the OBCA. At the Effective
Time, the Company's Amended and Restated Bylaws ("Company Bylaws") shall be
amended to be identical to the bylaws of Merger Sub in effect immediately prior
to the Effective Time and, in such amended form, shall be the bylaws of the
Surviving Entity until thereafter duly amended in accordance with the terms
thereof, the terms of the Articles of Incorporation of the Surviving Entity and
the OBCA.
3.1.4 Directors and Officers of Surviving Entity. At the Effective
Time, the directors of Merger Sub immediately prior to the Effective Time shall
be the directors of the Surviving Entity, and all such directors 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
Incorporation and Bylaws of the Surviving Entity, or as otherwise provided by
applicable law. At the Effective Time, the officers of Merger Sub immediately
prior to the Effective Time shall be the officers of the Surviving Entity, and
all such officers will hold office until their respective successors are duly
appointed and qualify in the manner provided in the Bylaws of the Surviving
Entity, or as otherwise provided by applicable law.
3.2 Closing. The Closing shall take place (i) at 10:00 a.m. (local time)
at the offices of Bond, ▇▇▇▇▇▇▇▇▇ & King, LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, on the first business day following the date on which the last of
the conditions set forth in Article VII (other than the filing of the
Certificate of Merger and other than any such conditions which by their terms
are not capable of being satisfied until the Closing Date) is satisfied or, if
permissible, waived, or (ii) on such other date and at such other time or place
as is mutually agreed by Parent and the Company.
3.3 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the Shares:
3.3.1 Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to Section 3.3.2
and any Dissenting Shares (as hereinafter defined), if any) shall be cancelled
and shall be converted automatically into the right to receive an amount equal
to the Per Share Amount in cash (the "Merger Consideration") payable,
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without interest, to the holder of such Share, upon surrender, in the manner
provided in Section 3.6, of the certificate that formerly evidenced such Share;
3.3.2 Each Share held in the treasury of the Company and each Share
owned by Merger Sub, Parent or any direct or indirect wholly owned subsidiary of
Parent or of the Company immediately prior to the Effective Time shall be
canceled without any conversion thereof and no payment or distribution shall be
made with respect thereto; and
3.3.3 Each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock, par
value $.01 per share, of the Surviving Entity.
3.4 Stock Options. At the Effective Time, each unexpired and unexercised
outstanding option, whether or not then vested or exercisable in accordance with
its terms, to purchase shares of Company Common Stock (the "Options") previously
granted by the Company or its Subsidiaries under any Company Stock Plan or
otherwise shall be automatically converted into the right to receive from the
Surviving Entity, at the Effective Time, cash in an amount equal to the product
of (i) the Merger Consideration minus the exercise price per share under such
Option (or, in the case of options outstanding under the Employee Stock Purchase
Plan, the Per Share Amount), times (ii) the number of shares of Common Stock
which may be purchased upon exercise of such Option (whether or not then
exercisable or vested), less any required withholding, and thereupon each Option
shall terminate and each holder thereof shall have no further rights to any
Company Common Stock. Prior to the Effective Time, the Company will take all
action necessary to (A) shorten the offering period under the Company's Employee
Stock Purchase Plan (the "ESPP") in which the Effective Time occurs so that such
offering period terminates on the day prior to the Effective Time, and (B)
terminate the ESPP effective as of the Effective Time. Prior to or at the
Effective Time, the Company will adopt such resolutions or take such actions as
are necessary, including, without limitation, to the extent necessary, obtaining
consents of holders of the Options, to carry out the terms of this Section 3.4.
In no event will any Options be exercisable after the Effective Time, except to
receive cash as provided in this Section.
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3.5 Dissenting Shares.
3.5.1 Notwithstanding any provision of this Agreement to the
contrary, Shares that are outstanding immediately prior to the Effective Time
and which are held by shareholders who shall have not voted in favor of the
Merger and who shall have demanded properly in writing payment for such Shares
in accordance with Sections 60.551 to 60.594 of the OBCA (insofar as such
Section is applicable to the Merger and provides for dissenters rights with
respect to it) (collectively, the "Dissenting Shares") shall not be converted
into or represent the right to receive the Merger Consideration. Such
shareholders shall be entitled to receive payment for such Shares held by them
in accordance with the provisions of Sections 60.551 to 60.594 of the OBCA
(insofar as such Section is applicable to the Merger and provides for dissenters
rights with respect to it), except that all Dissenting Shares held by
shareholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights dissent under the OBCA shall thereupon be deemed
to have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 3.6, of the
certificate or certificates that formerly evidenced such Shares.
3.5.2 The Company shall give Parent (i) prompt notice of any demands
for payment received by the Company, withdrawals of such demands, and any other
instruments served pursuant to Sections 60.551 to 60.594 of the OBCA in respect
of Dissenting Shares and received by the Company and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under the OBCA. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any demands for appraisal or offer to
settle or settle any such demands.
3.5.3 The right of any shareholder to receive the Merger
Consideration shall be subject to and reduced by the amount of any required tax
withholding obligation.
3.5.4 The Company hereby represents that, so long as the Company
Common Stock is quoted on the Nasdaq National Market System, none of its
shareholders shall be entitled to dissenters rights under the applicable
sections of the OBCA with respect to the Merger.
3.6 Surrender of Shares; Stock Transfer Books.
3.6.1 Prior to the Effective Time, Merger Sub shall designate a bank
or trust company reasonably satisfactory to the Company to act as agent (the
"Paying Agent") for the holders of Shares in connection with the Merger to
receive the funds to which holders of Shares shall become entitled pursuant to
Section 3.3.1. Immediately prior to the Effective Time, Parent shall cause
Merger Sub to have sufficient funds to deposit, and shall cause Merger Sub to
deposit in trust with the Paying Agent, cash in the aggregate amount equal to
the product of (i) the number of shares outstanding immediately prior to the
Effective Time (other than Shares owned by Parent or Merger Sub and Shares as to
which dissenters' rights have been exercised as of the Effective Time, if any)
and (ii) the Per Share Amount plus the amount payable to the holders of the
Options pursuant to Section 3.4 hereof.
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3.6.2 Promptly after the Effective Time, Parent shall cause the
Surviving Entity to mail to each Person who was, at the Effective Time, a holder
of record of Shares entitled to receive the Merger Consideration pursuant to
Section 3.6.1 a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates evidencing
such Shares (the "Certificates") shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates pursuant to such letter of transmittal. Upon
surrender to the Paying Agent of a Certificate, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each Share formerly evidenced
by such Certificate, and such Certificate shall then be cancelled. No interest
shall accrue or be paid on the Merger Consideration payable upon the surrender
of any Certificate for the benefit of the holder of such Certificate. If payment
of the Merger Consideration is to be made to a Person other than the Person in
whose name the surrendered Certificate is registered on the stock transfer books
of the Company, it shall be a condition of payment that the Certificate so
surrendered shall be endorsed properly or otherwise be in proper form for
transfer and that the Person requesting such payment shall have paid all
transfer and other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Entity that such taxes either have been paid or are not applicable. The
Surviving Entity shall pay all charges and expenses, including those of the
Paying Agent, in connection with the distribution of the Merger Consideration.
Until surrendered as contemplated by this Section 3.6, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the amount of cash, without interest, into which the
Shares theretofore represented by such Certificate shall have been converted
pursuant to Section 3.3.
3.6.3 At any time following the sixth month after the Effective Time,
the Surviving Entity shall be entitled to require the Paying Agent to deliver to
it any funds which had been made available to the Paying Agent and not disbursed
to holders of Shares (including, without limitation, all interest and other
income received by the Paying Agent in respect of all funds made available to
it) and, thereafter, such holders shall be entitled to look to the Surviving
Entity (subject to abandoned property, escheat and other similar laws) only as
general creditors thereof with respect to any Merger Consideration that may be
payable upon due surrender of the Certificates held by them. Notwithstanding the
foregoing, neither the Surviving Entity nor the Paying Agent shall be liable to
any holder of a Share for any Merger Consideration delivered in respect of such
Share to a public official pursuant to any abandoned property, escheat or other
similar law.
3.6.4 At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and, thereafter, there shall
be no further registration of transfers of Shares on the records of the Company.
From and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
13
3.6.5 The Surviving Entity shall be entitled to deduct and withhold
from the consideration otherwise payable to any holder of Company Common Stock
or the Options pursuant to this Agreement such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the Code,
or under any provision of state, local or foreign tax law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule or the Company SEC
Reports, the Company hereby represents and warrants to Parent and Merger Sub as
follows:
4.1 Organization and Qualification. Each of the Company and each of its
Subsidiaries (i) is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation or organization, (ii) has
requisite corporate power and authority to carry on its business as it is now
being conducted, and (iii) is duly qualified or licensed to do business in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of its activities makes such qualification necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed is not
reasonably likely to have a Material Adverse Effect on the Company. Section 4.1
of the Company Disclosure Schedule sets forth a complete and accurate list of
each of the Company's Subsidiaries and reflects the percentage and nature of the
Company's ownership of each such Subsidiary and the jurisdiction of its
organization. The Company has made available to Parent true and complete copies
of the Company Charter and Company Bylaws, and the certificate of incorporation
and bylaws (or other comparable organizational documents) of each Subsidiary, in
each case as in effect on the date hereof. All the outstanding shares of capital
stock of each Subsidiary of the Company have been validly issued and are fully
paid and nonassessable and are owned by the Company, by another Subsidiary of
the Company or by the Company and another Subsidiary free and clear of all
Liens. Except for its interests in its Subsidiaries, the Company does not own,
directly or indirectly, any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any Person.
4.2 Authorization and Validity of Agreement. The Company has full
corporate power and authority to enter into this Agreement and, subject to
obtaining the approval of its shareholders specified in Section 4.20, to perform
its obligations hereunder and consummate the Merger. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the Merger have been duly and validly authorized by the Company Board and by
all other necessary corporate action on the part of the Company, subject to the
approval of the Company's shareholders specified in the previous sentence. This
Agreement has been duly executed and delivered by the Company and, assuming due
and valid authorization, execution and delivery by Parent and Merger Sub, is a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms (except insofar as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies).
14
4.3 Capitalization. The authorized capital stock of the Company consists
of 30,000,000 shares of Company Common Stock and 10,000,000 shares of preferred
stock, par value $0.01 per share (the "Company Preferred Stock"). As of the date
hereof, (i) 8,190,297 shares of Company Common Stock were issued and outstanding
and no shares were issued and held by the Company in its treasury or by
Subsidiaries of the Company and (ii) no shares of Company Preferred Stock were
issued and outstanding or were issued and held by the Company in its treasury or
by Subsidiaries of the Company. All issued and outstanding shares of Company
Common Stock have been validly issued and are fully paid and non-assessable and
not subject to or issued in violation of any purchase option, call option, right
of first refusal, preemptive right, subscription right or any similar right.
There are no issued or outstanding bonds, debentures, notes or other
Indebtedness of the Company or any of its Subsidiaries which have the right to
vote (or which are convertible into other securities having the right to vote)
on any matters on which shareholders may vote ("Voting Debt"). Section 4.3 of
the Company Disclosure Schedule describes all outstanding or authorized
subscriptions, options, warrants, calls, rights (other than the Rights),
commitments or any other agreements of any character to or by which the Company
or any of its Subsidiaries is a party or is bound which, directly or indirectly,
obligate the Company or any of its Subsidiaries to issue, deliver or sell or
cause to be issued, delivered or sold any additional shares of Company Common
Stock or any other capital stock, equity interest or Voting Debt of the Company
or any Subsidiary of the Company, any securities convertible into, or
exercisable or exchangeable for, or evidencing the right to subscribe for any
such shares, interests or Voting Debt, or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such subscription, option,
warrant, call or right (other than pursuant to the Rights Agreement)
(collectively, "Convertible Securities"). Neither the Company nor any Subsidiary
thereof is subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock. All shares of
capital stock or other equity interests in each Subsidiary of the Company are
owned free and clear of any Lien, and the shares of capital stock of each
corporate Subsidiary of the Company are validly issued, fully paid and non-
assessable.
4.4 Reports and Financial Statements.
4.4.1 The Company has filed all forms, reports and documents,
including all Reports on Form 10-K, Form 10-Q and Form 8-K, registration
statements and proxy statements required to be filed with the Commission since
January 1, 1997 through the date hereof (collectively, the "Company SEC
Reports"). None of the Company SEC Reports, as of their respective dates, and if
amended, as of the date of the last such amendment, contained any untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the
consolidated balance sheets (including the related notes) included in the
Company SEC Reports presents fairly, in all material respects, the consolidated
financial position of the Company and its Subsidiaries as of the respective
dates thereof, and the other related financial statements (including the related
notes) included in the Company SEC Reports present fairly, in all material
respects, the results of operations and the changes in financial position of the
Company and its Subsidiaries for the respective periods or as of the respective
dates set forth therein, all in conformity with GAAP consistently applied during
the periods involved, except as otherwise noted therein and
15
subject, in the case of the unaudited interim financial statements, to normal
year-end adjustments. All of the Company SEC Reports, as of their respective
dates, complied as to form in all material respects with the requirements of the
Exchange Act, the Securities Act and the applicable rules and regulations
thereunder.
4.4.2 Except as and to the extent set forth in the Company SEC
Reports or in any Section of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be required
by generally accepted accounting principles to be reflected on a consolidated
balance sheet of the Company and its Subsidiaries (including the notes thereto),
except for liabilities or obligations incurred (i) in the ordinary course of
business consistent with past practice since March 31, 2000, that would not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
or (ii) in connection with the potential sale of the Company or the transactions
contemplated by this Agreement.
4.5 No Approvals or Notices Required; No Conflict with Instruments. The
execution and delivery by the Company of this Agreement do not, and the
performance by the Company of its obligations hereunder and the consummation by
the Company of the Offer and Merger will not:
4.5.1 assuming approval by the Company's shareholders as contemplated
by Section 4.20, conflict with or violate the Company Charter or Company Bylaws
or the charter or bylaws (or comparable organizational documents) of any
Subsidiary of the Company;
4.5.2 require any consent, approval, order or authorization of or
other action by any Governmental Entity (a "Governmental Consent") or any
registration, qualification, declaration or filing with or notice to any
Governmental Entity (a "Governmental Filing"), except for (A) the filing of the
Articles of Merger with the Corporation Commission of the State of Oregon and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business, (B) the Governmental Filings required to be
made pursuant to the pre-merger notification requirements of the ▇▇▇▇-▇▇▇▇▇ Act,
(C) the filing with the Commission of (1) the Schedule 14D-9 and the Proxy
Statement and (2) such reports under Section 13(a), 13(d), 14(c), 15(d) or 16(a)
of the Exchange Act as may be required in connection with this Agreement or the
transactions contemplated hereby, and (D) such other Governmental Consents and
Government Filings the absence or omission of which would not, either
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on the Company.
4.5.3 except as set forth on Section 4.5 of the Company Disclosure
Schedule, require, on the part of the Company or any Subsidiary of the Company,
any consent by or approval or authorization of (a "Contract Consent") or notice
to (a "Contract Notice") any other Person (other than a Governmental Entity),
under any Contract (as defined below), except for such Contract Consents and
Contract Notices the absence or omission of which would not, either individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect on
the Company;
16
4.5.4 assuming that the Contract Consents and Contract Notices
described on Section 4.5 of the Company Disclosure Schedule are obtained and
given, conflict with or result in any violation or breach of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation, suspension, modification or acceleration of any
obligation or any increase in any payment required by, or the impairment, loss
or forfeiture of any material benefit, rights or privileges under, or the
creation of a Lien or other encumbrance on any assets pursuant to (any such
conflict, violation, breach, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation"), any "Contract" (which term shall
mean and include any note, bond, indenture, mortgage, deed of trust, lease,
franchise, permit, authorization, license, contract or other agreement or
obligation to which the Company or any Subsidiary of the Company is a party, by
which the Company, any Subsidiary of the Company or any of their respective
assets or properties is bound), except for such Violations which would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on the Company; or
4.5.5 assuming that the Governmental Consents and Governmental
Filings specified in Section 4.5.2 are obtained, made and given, result in a
Violation of, under or pursuant to any law, rule, regulation, order, judgment or
decree applicable to the Company or any Subsidiary of the Company or by which
any of their respective properties or assets are bound, except for such
Violations which would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect on the Company. As used herein, the
term "Governmental Entity" means and includes any court, arbitrators,
administrative, regulatory or other governmental department, agency, commission,
authority or instrumentality, domestic or foreign.
4.6 Absence of Certain Changes or Events. Except as contemplated by this
Agreement or otherwise disclosed in the Company SEC Reports filed with the
Commission prior to the date hereof or as set forth on Section 4.6 of the
Company Disclosure Schedule, since March 31, 2000 through the date of this
Agreement, (i) each of the Company and its Subsidiaries has conducted its
business in the ordinary course consistent with recent past practice; and (ii)
there has not occurred or arisen any event, condition or occurrence affecting
the Company or its Subsidiaries that has had, or would reasonably be expected to
have, a Material Adverse Effect on the Company, nor has there been:
4.6.1 any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
capital stock of the Company or any repurchase for value by the Company of any
of its capital stock;
4.6.2 any split, combination or reclassification of any capital stock
of the Company or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of the
Company's capital stock;
4.6.3 (1) any granting by the Company or any of its Subsidiaries to
any director or officer of the Company or any Subsidiary of any increase in
compensation, except in the ordinary course of business consistent with prior
practice, (2) any granting by the Company or any of its Subsidiaries to any such
director or officer of any increase in severance or termination pay, except
17
as was required under any employment, consulting, severance or termination
agreements in effect as of the date of the most recent audited financial
statements included in the Company SEC Reports, or (3) any entry by the Company
or any of its Subsidiaries into, or any amendment of, any employment,
consulting, deferred compensation, indemnification, severance or termination
agreement with any such director or officer;
4.6.4 any change in accounting methods, principles or practices by
the Company or any of its Subsidiaries affecting the consolidated assets,
liabilities or results of operations of the Company, except insofar as may have
been required by a change in GAAP;
4.6.5 any material elections with respect to Taxes by the Company or
any of its Subsidiaries or settlement or compromise by the Company or any of its
Subsidiaries of any material tax liability or refund;
4.6.6 (1) any acquisition by the Company or any of its Subsidiaries
by merging or consolidating with, or by purchasing a substantial equity interest
in or substantial portion of the assets of, or by any other method, any business
or any corporation, partnership, joint venture, association or other business
organization or division thereof or (2) any acquisition by the Company or any of
its Subsidiaries of any assets (other than inventory) that are material,
individually or in the aggregate, to the Company and its Subsidiaries;
4.6.7 any sale, lease, license, encumbrance or other disposition of
assets of the Company or any of its Subsidiaries in excess of $200,000 in the
aggregate, other than sales of products to customers and immaterial dispositions
of personal property and other than any encumbrance created in connection with
financing the purchase of equipment and other property, in each case in the
ordinary course of business consistent with past practice;
4.6.8 any incurrence of capital expenditures by the Company or any of
its Subsidiaries in excess of $100,000 individually, or in excess of $300,000 in
the aggregate; or
4.6.9 any transaction, contract, arrangement or agreement (other than
employment or compensation contracts, arrangements or agreements disclosed in
the Company Disclosure Schedule) between the Company or any of its Subsidiaries,
on the one hand and any of their respective shareholders, officers, directors or
affiliates on the other hand.
4.7 Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in any
documents filed or to be filed with the Commission or any other Governmental
Entity in connection with the transactions contemplated hereby, including (i)
the Offer Documents, (ii) the Schedule 14D-9, (iii) the information to be filed
by the Company in connection with the Offer pursuant to Rule 14f-1 promulgated
under the Exchange Act (the "Information Statement"), and (iv) the Proxy
Statement, will, at the respective times such documents are filed, and also in
the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are first published, sent or given to the Company's
shareholders, and also,
18
in the case of the Proxy Statement, at the time the Proxy Statement is first
mailed to the Company's shareholders, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading (or necessary to correct any statement
in any earlier communication), except that no representation or warranty is made
by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Merger Sub in writing
specifically for inclusion or incorporation by reference therein. The Schedule
14D-9, the Information Statement and the Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder and will comply in all respects with the applicable
requirements of the OBCA.
4.8 Legal Proceedings. There is no (i) suit, action or proceeding pending
of which the Company or any of its Subsidiaries has received notice or, to the
knowledge of the Company, any investigation pending or any suit, action,
proceeding or investigation threatened, against, involving or affecting the
Company, any Subsidiary of the Company or any of its or their properties or
rights, which, if adversely determined, is, reasonably likely to have, either
individually or in the aggregate, a Material Adverse Effect on the Company; (ii)
judgment, order, decree, Injunction or order of any Governmental Entity entered
against and binding on the Company or any Subsidiary of the Company of which the
Company has received notice, which is reasonably likely to have, either
individually or in the aggregate, a Material Adverse Effect on the Company;
(iii) suit, action or proceeding pending of which the Company has received
notice or, to the knowledge of the Company, any investigation pending or any
suit, action, proceeding or investigation threatened, against the Company or any
Subsidiary of the Company which seeks to restrain, enjoin or delay the
consummation of the Merger, the Offer or any of the other transactions
contemplated hereby or which seeks damages in connection therewith; and (iv)
Injunction of any type referred to in Section 7.1.3 of which the Company has
received notice which has been entered or issued and is in effect.
4.9 Compliance with Applicable Laws; Environmental Matters. The Company
and its Subsidiaries hold all permits, licenses, certificates, variances,
exemptions, orders and approvals of Governmental entities required for the
ownership of the assets and operation of the businesses of the Company or any of
its Subsidiaries as presently conducted, except for the failure to hold any of
the foregoing as would not be reasonably likely to have, either individually or
in the aggregate, a Material Adverse Effect on the Company (collectively, the
"Permits"). Each of the Company and its Subsidiaries is in compliance with, and
has conducted its business so as to comply with, the terms of their respective
Permits and with all applicable laws, rules, regulations, ordinances and codes,
except where the failure so to comply has not had and, insofar as reasonably can
be foreseen by the Company, in the future is not reasonably likely to have,
either individually or in the aggregate, a Material Adverse Effect on the
Company. Without limiting the generality of the foregoing, the Company and its
Subsidiaries have duly complied with and have no liabilities or obligations
under, and the operation of their respective businesses, equipment and other
assets and the facilities owned or leased by them are in compliance with the
provisions of all applicable federal, state and local environmental, health and
safety laws, statutes, ordinances, rules and regulations of any governmental or
a quasi governmental authority relating to (i) emissions, (ii) discharges to
surface water or ground water, (iii) solid or liquid waste disposal, (iv) the
use, storage, generation, handling,
19
transport, discharge, release or disposal of toxic or hazardous substances or
waste, (v) the emission of non-ionizing electromagnetic radiation or ionizing
radiation or (vi) other environmental, health or safety matters, including
without limitation all matters set forth in federal statutes commonly known as
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
the Superfund Amendments and Authorization Act of 1986, the Occupational Safety
and Health Act, the Resource Conservation Recovery Act, the Federal Water
Pollution Control Act, the Safe Drinking Water Act, the Toxic Substances Control
Act, the Emergency Planning Community Right to Know Act, the Clean Air Act, the
Federal Insecticide Fungicide and Rodenticide Act, the Oil Pollution Act, and
equivalent, similar or related state or local laws (collectively "Environmental
and Health Laws"); except, with respect to any of the foregoing, where the
failure to be or have been in such compliance would not be reasonably likely to
have, either individually or in the aggregate, a Material Adverse Effect on the
Company. There are no investigations, administrative proceedings, judicial
actions, orders, claims or notices that are pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries relating to
violations of the Environmental and Health Laws alleging liability of the
Company or its subsidiaries under any of the Environmental and Health Laws,
including but not limited to, claims or potential claim for remediation, toxic
torts, corrective action or environmental restoration, except for such matters
as would not be reasonably likely to have, either individually or in the
aggregate, a Material Adverse Effect on the Company. The Company is aware of no
requirements under the Environmental and Health Laws which raise a reasonable
concern that the Company or its Subsidiaries will not be able to continue to
operate their respective businesses as presently conducted.
4.10 Brokers or Finders. No agent, broker, investment banker, financial
advisor or other Person is or will be entitled, by reason of any agreement, act
or statement by the Company or any of its Subsidiaries, directors, officers,
employees or Affiliates, to any financial advisory, broker's, finder's or
similar fee or commission, to reimbursement of expenses or to indemnification or
contribution in connection with any of the transactions contemplated by this
Agreement, except ▇▇ ▇▇▇▇▇ Securities Corporation ("▇▇ ▇▇▇▇▇"). The Company has
furnished to Parent a true and complete copy of all agreements between the
Company and ▇▇ ▇▇▇▇▇.
4.11 Tax Matters.
4.11.1 Except as set forth on Section 4.11 of the Company Disclosure
Schedule, (i) (A) there has been duly filed by or on behalf of the Company and
each of its Subsidiaries (and each of their respective predecessors, if any), or
(B) filing extensions (listed on Section 4.11 of the Company Disclosure
Schedule) from the appropriate federal, state, foreign and local Governmental
Entities have been obtained for the Company and/or each of its Subsidiaries with
respect to, all federal, state, foreign and local Tax Returns and reports
required to be filed on or prior to the date hereof; (ii) all Tax Returns and
extensions referred to in (i) above were complete, true and correct in all
material respects; (iii) payment in full or adequate provision for the payment
of all Taxes required to be paid in respect of all periods covered by the Tax
Returns and extensions referred to in (i) above have been made; (iv) a reserve
which the Company reasonably believes to be adequate has been set up for the
payment of all Taxes (whether or not shown on any Tax Return or extension)
anticipated to be payable in respect of all periods up to and including the
Closing Date; (v) none of
20
the Tax Returns referred to in (i) above filed by or on behalf of the Company
and each of its Subsidiaries consolidated in such Tax Returns (the "Company
Consolidated Returns") as of the date hereof has been examined or settled with
any Governmental Entity; (vi) there are no liens for Taxes on the assets of the
Company and/or any of its Subsidiaries, except for statutory liens for current
Taxes not yet due and payable; (vii) there have been no material claims,
disputes or assessments against the Company or any of its Subsidiaries with
respect to any claimed or alleged Tax liability (A) asserted in writing by any
Governmental Entity or (B) as to which any of the Company's or its Subsidiaries'
officers (and employees responsible for Tax matters) have knowledge based upon
personal contact with any agent of such entity; (viii) the Company, each of its
Subsidiaries and the Company's and its Subsidiaries' respective officers have no
reasonable basis to believe that the Company or any of its Subsidiaries,
respectively, is subject to any penalty by reason of a violation of any order,
rule or regulation of, or a default with respect to any Tax Return or report
required to be filed by the Company or any of its Subsidiaries with, a
Governmental Entity; and (ix) no material claim has ever been made by a
Governmental Entity in a jurisdiction where the Company and/or its Subsidiaries
does not file Tax Returns that they are or may be subject to taxation by that
jurisdiction.
4.11.2 Except as set forth on Section 4.11 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries (i) is a party to any
Tax indemnification, Tax allocation, Tax sharing agreement or similar agreement,
or (ii) has been a member of an affiliated group filing a consolidated federal
income Tax Return other than an affiliated group the common parent of which was
the Company.
4.11.3 Except as set forth on Section 4.11 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has executed or
entered into a closing agreement or offer in compromise pursuant to Sections
7221 or 7122 of the Code, respectively, or any predecessor provision or any
similar provision of state, foreign or local law.
4.11.4 The Company and each of its Subsidiaries has withheld and paid
over to the appropriate Governmental Entity all material Taxes required to have
been withheld in connection with amounts paid or owing to any employee,
director, officer, independent contractor, creditor, stockholder, or other third
party for all periods prior to and up to and including the Closing Date.
4.11.5 No director or officer (or employee responsible for Tax
matters) of the Company or any of its Subsidiaries expects any Governmental
Entity to assess any additional Taxes for any period for which Tax Returns
referred to in Section 4.11.1 above have been filed. Section 4.11 of the Company
Disclosure Schedule (i) lists all federal, state, foreign and local income Tax
Returns filed with respect to the Company's and any of its Subsidiaries' taxable
periods ended on or after January 1, 1990, (ii) indicates those Tax Returns that
have been audited, and (iii) indicates those Tax Returns that currently are the
subject of audit.
4.11.6 All material final adjustments made by the Internal Revenue
Service with respect to any federal Tax Return of the Company or any of its
Subsidiaries have been reported to the relevant state, foreign and/or local
Governmental Entities.
21
4.11.7 Neither the Company nor any of its Subsidiaries (i) has filed
a consent under Section 341(f) of the Code concerning collapsible corporations;
(ii) 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 (excess golden parachute
payments) except for Options and stock option agreements under which vesting may
be accelerated as contemplated by Section 3.4 of this Agreement and the change
in control provisions of the employment agreements identified in Section 4.12 of
the Company Disclosure Schedule; (iii) has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code; (iv)
has any liability for the Taxes of any Person (other than the Company and its
Subsidiaries) under Section 1.1502-6 of the Treasury Regulations (or any similar
provision of state, foreign or local law), as a transferee or successor, by
contract, or otherwise; (v) has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to any Tax assessment or
deficiency; (vi) has agreed to and is required to make any adjustments pursuant
to Section 481(a) of the Code by reason of any change in accounting method
initiated by the Company or any of its Subsidiaries, and the Internal Revenue
Service has not proposed any such adjustment or change in accounting method;
(vii) has in effect any Tax elections for federal income Tax purposes under
Sections 108, 168, 441, 471, 1017, 1033 or 4977 of the Code; and (ix) has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355(a) of the Code, either
(A) in the two-year period prior to the date of this Agreement or (B) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Offer or the Merger.
4.11.8 The Company and its Subsidiaries have disclosed on their
federal income Tax Returns (either individually or on a consolidated basis) all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662 of the Code.
4.11.9 The Company and its Subsidiaries have not, and no
representative of the Company or any of its Subsidiaries has, granted any power
of attorney extending beyond the Closing Date for any taxable period ending
after the Closing Date.
4.11.10 No requests by or relating to the Company or any of its
Subsidiaries for rulings or determination letters relating to Taxes are pending
with any Governmental Entity.
4.11.11 No material property of the Company or any of its
Subsidiaries is "tax exempt use property" within the meaning of Section
169(h)(1) of the Code or is property used "predominantly outside of the United
States" with the meaning of Section 168(g) of the Code.
4.11.12 Section 4.11 of the Company Disclosure Schedule sets forth
(i) the Company's basis in each Subsidiary and (ii) the foreign countries in
which the Company or its Subsidiaries has or has had a permanent establishment,
as defined in any applicable Tax treaty or convention between the United States
and such foreign country.
22
4.11.13 Section 4.11 of the Company Disclosure Schedule sets forth
the following information with respect to the Company and each of its
Subsidiaries as of the most recent practicable date (i) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign Tax credit, or excess charitable contribution allocable to the Company
and/or each of its Subsidiaries; and (ii) the amount of any deferred gain or
loss allocable to the Company or any of its Subsidiaries arising out of any
Deferred Intercompany Transaction (as defined in Section 1.1502-13 of the
Treasury Regulations).
4.11.14 Neither the Company nor any member of a controlled group
(within the meaning of Section 993(a)(3) of the Code) of which the Company is or
was a member has participated in, or cooperated with, an international boycott
(within the meaning of Section 999 of the Code).
4.11.15 The unpaid Taxes of the Company and its Subsidiaries (i) did
not, as of the most recent fiscal month end, exceed the reserve for the
Company's Tax liabilities (other than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) set forth on the face
of the most recent balance sheet (rather than in any notes thereto) and (ii) do
not exceed that reserve as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns.
4.12 Employee Matters.
4.12.1 Section 4.12 of the Company Disclosure Schedule contains a
true and complete list of (i) each "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
and the rules and regulations thereunder ("ERISA"); (ii) each bonus, deferred
compensation, incentive compensation, stock purchase, restricted stock, stock
option, severance or termination pay, voluntary employees beneficiary
associations under Code Section 501(c)(9), hospitalization, medical, life,
disability or other insurance, supplemental unemployment benefits, vacation,
sick pay, accrued leave, salary continuation, profit- sharing, pension or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement, arrangement, commitment, and/or practice
(whether or not insured) and (iii) employment, consulting, termination and
severance contracts or agreements; for active, retired or former employees or
directors, whether or not any such plans, programs, arrangements, commitments,
contracts, agreements, and/or practices (referred to in (i), (ii) or (iii)
above) are in writing or are otherwise exempt from the provisions of ERISA; that
have been established, maintained or contributed to (or with respect to which an
obligation to contribute has been undertaken) or with respect to which any
potential liability is borne by the Company or by any trade or business, whether
or not incorporated ("ERISA Affiliate"), that together with the Company would be
deemed a "single employer" within the meaning of Code Section 414, including any
such type of plan established, maintained or contributed to under the laws of
any foreign country (individually, a "Company Plan" and collectively, the
"Company Plans"). Except as set forth on Section 4.12 of the Company Disclosure
Schedule, the Company has heretofore made available to Parent true and complete
copies of (i) each Company Plan as in effect as of the date hereof, together
with all amendments thereto, and, if the Company Plan is funded through a trust
or any third party
23
funding vehicle, a copy of the trust or other funding document, (ii) the most
recent determination letter issued by the IRS with respect to each Company Plan
for which such a letter has been obtained, (iii) annual reports on Form 5500 -
series or Form 990 required to be filed with any Governmental Entity for each
Company Plan for the three most recent plan years, (iv) all actuarial reports
for the last two plan years of each Company Plan, (v) all current summary plan
descriptions and summaries of material modifications for each Company Plan, (vi)
the most recently prepared financial statements for each Company Plan, and (vii)
all contracts and agreements relating to each Company Plan, including, without
limitation, service provider agreements, insurance contracts, annuity contracts,
investment management agreements, subscription agreements, participation
agreements, recordkeeping agreements and collective bargaining agreements
specifically applicable to the Company and/or any ERISA Affiliate.
4.12.2 No Company Plan is subject to Title IV of ERISA or Section 412
of the Code and neither the Company nor any ERISA Affiliate made, or was
required to make, contributions to any employee benefit plan subject to Title IV
of ERISA during the five year period ending on the Effective Time. Neither the
Company nor any ERISA Affiliate has ever maintained, participated in or been
required to contribute to any employee benefit plan which is a "multi-employer
plan" (as such term is defined in Section 4001 (a)(3) of ERISA). No Company Plan
is a plan described in Section 4063(a) of ERISA.
4.12.3 There has been no event or circumstance which has resulted in
any liability being asserted by any Company Plan, the Pension Benefit Guaranty
Corporation ("PBGC") or any other Person or entity under Title IV of ERISA
against the Company or any ERISA Affiliate nor, except as would not have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole, is
there or has there been any event or circumstance which could reasonably be
expected to result in such liability.
4.12.4 Neither the Company nor any Subsidiary of the Company is a
party to or bound by the terms of any collective bargaining agreement. There is
no labor strike or labor disturbance pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary of the Company, and
during the past five years neither the Company nor any Subsidiary of the Company
has experienced an actual or threatened employee strike, slowdown, lockout or
work stoppage.
4.12.5 To the Company's knowledge, each Company Plan complies in form
in all material respects with the requirements of all applicable laws,
including, without limitation, ERISA and the Code, and has been operated and
administered in all material respects in accordance with its terms and
applicable law, including, but not limited to, ERISA and the Code. Neither the
Company nor any ERISA Affiliate has any commitment, intention or understanding
to create, modify or terminate any Company Plan, except to the extent
contemplated by this Agreement or in connection with the transactions to be
effected pursuant hereto. Except as required to maintain the tax-qualified
status of any Company Plan, no condition or circumstance exists that would
prevent the amendment or termination of any Company Plan, except any Company
Plan that by its terms requires the agreement of another party. Except as
contemplated by this Agreement, no event has occurred and
24
no condition or circumstance has existed that could reasonably be expected to
result in a material increase in the benefits under or the expense of
maintaining any Company Plan that will be maintained by the Company after the
Effective Time from the level of benefits or expense incurred for the most
recent fiscal year ended thereof.
4.12.6 To the Company's knowledge, each Company Plan which is
intended to be "qualified" within the meaning of Section 401(a) of the Code is
so qualified and the trusts maintained thereunder are exempt from taxation under
Section 501(a) of the Code, and to the Company's knowledge, no event has
occurred and no condition exists which could reasonably be expected to result in
a revocation or loss of such qualified status.
4.12.7 No Company Plan provides welfare benefits, including without
limitation death or medical benefits, with respect to current or former
employees or consultants of the Company or any Subsidiary of the Company beyond
their retirement or other termination of service (other than coverage mandated
by applicable law), and neither the Company nor any Subsidiary has any
obligation to provide any such benefits to any retired or former employees, or
active employees following such employees' retirement or termination of service
or consultants.
4.12.8 There are no material pending, or to the Company's knowledge,
threatened or anticipated claims, actions, suits or disputes by or on behalf of
any Company Plan, by any employee or beneficiary covered under any such Company
Plan with respect to such Company Plan, or otherwise involving any such Company
Plan (other than routine claims for benefits). No civil or criminal action
brought pursuant to the provisions of Title I, Subtitle B, Part V of ERISA is
pending, threatened or expected to be asserted against the Company, any
Subsidiary or any fiduciary of any Company Plan in any case with respect to any
Company Plan. No Company Plan or, to the Company's knowledge, any fiduciary
thereof has been the direct or indirect subject of an audit, investigation or
examination by any governmental or quasi-governmental agency.
4.12.9 Section 4.12 of the Company Disclosure Schedule sets forth a
true and complete list as of the date hereof of, and separately identifies, each
of the following agreements, arrangements and commitments to which the Company
or any of its Subsidiaries is a party or by which any of them may be bound (true
and complete copies of which have been made available to Parent): (i) each
employment, consulting, severance, termination, agency or commission agreement
not terminable without liability to the Company or any of its Subsidiaries upon
60 days' or less prior notice to the employee, consultant or agent and involving
compensation or remuneration of more than $100,000 per annum; (ii) each
agreement with any executive officer or other key employee of the Company or any
Subsidiary of the Company the benefits of which are contingent, or the terms of
which are materially altered, upon the consummation of the transactions
contemplated by this Agreement; (iii) each agreement with respect to any officer
or other key employee of the Company or any Subsidiary of the Company providing
any term of employment or compensation guarantee extending for a period longer
than one year; and (iv) each other material agreement or Company Plan any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the
25
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
4.12.10 Neither the Company nor any Subsidiary has presently incurred
or been assessed any liability for any tax or excise tax arising under Sections
4977, 4980A, 4980B, 4980C, 4980D and 4980E of the Code, and to the Company's
knowledge, no event has occurred and no condition or circumstance has existed
that could reasonably be expected to give rise to any such liability.
4.12.11 The Company may cease contributions to, amend or terminate,
any Company Plan but only to the extent provided under the terms of such Company
Plan or as otherwise permitted by law.
4.12.12 Neither the Company nor any Subsidiary maintains any Company
Plan which is a "group health plan" (as such term is defined in Section
5000(b)(1) of the Code or Section 607(a) of ERISA) that has not been
administered and operated in all material respects in compliance with the
applicable requirements of Part VI of Subtitle B of Title I of ERISA and Section
4980B of the Code, except to the extent that the failure to comply does not have
a Material Adverse Effect on the Company and on any Subsidiary and, to the
Company's knowledge, neither the Company nor any Subsidiary is subject to any
liability, including, without limitation, additional contributions, fines,
taxes, penalties or loss of tax deduction as a result of such administration and
operation. No Company Plan which is such a group health plan is a "multiple
employer welfare arrangement" within the meaning of Section 3(40) of ERISA. Each
Company Plan that is intended to meet the requirements of Section 125 of the
Code complies in all materials respects with such requirements, except to the
extent that the failure to comply does not have a Material Adverse Effect on the
Company or on any Subsidiary, and each program of benefits for which employee
contributions are provided pursuant to elections under any Company Plan complies
in all material respects with the requirements of the Code applicable thereto.
4.12.13 Full payment has been timely made of all amounts which the
Company or any Subsidiary are required under applicable law or under any Company
Plan or any agreement relating to any such Company Plan to which the Company or
its Subsidiaries are a party to have paid as contributions or premiums thereto
as of the last day of the most recent fiscal year of each such Company Plan and
prior to the date hereof. All such contributions and/or premiums have been fully
deducted for income tax purposes, and no such deduction has been challenged or
disallowed by any governmental entity, and to the Company's knowledge, no event
has occurred and no condition or circumstance has existed that could reasonably
be expected to give rise to any such challenge or disallowance. An appropriate
accrued liability has been recorded on the records and books of the Company and
its Subsidiaries in accordance with generally accepted accounting principles for
each of the Company Plans.
4.12.14 The execution of this Agreement and the consummation of the
transactions contemplated hereby do not constitute a triggering event under any
Company Plan, whether or not legally enforceable, which (either alone or upon
the occurrence of any additional or subsequent
26
event) will or may result in any payment (whether of severance pay or
otherwise), "parachute payment" (as such term is defined in Section 280G of the
Code), acceleration, vesting or increase in benefits to any employee or former
employee or director of the Company or any of its Subsidiaries, except for the
acceleration of vesting of the Options as contemplated by Section 3.4 of this
Agreement and the change in control provisions of the employment agreements
identified in Section 4.12 of the Company Disclosure Schedule. Except as set
forth in Section 4.12 of the Company Disclosure Schedule, no Company Plan
provides for the payment of severance, termination, change in control or
similar-type payments or benefits.
4.13 Real Property. Section 4.13 of the Company Disclosure Schedule
contains a true and complete list of all real properties owned or leased by the
Company or its Subsidiaries ("Company Real Property"). There are no pending or,
to the knowledge of the Company, threatened condemnation proceedings against or
affecting any Company Real Property, and, to the knowledge of the Company, none
of the Company Real Property is subject to any commitment or other arrangement
for its sale to a third party. Each of the leases for real property under which
the Company or any Subsidiary is currently a lessor or lessee is valid,
enforceable and in full force and effect, and neither the Company nor any
Subsidiary has violated any provision of, or failed to perform any act which,
with or without notice, lapse of time, or both, could reasonably be expected to
constitute a default under the provisions of, any such lease, except where the
lack of validity, full force and effect or enforceability or the existence of
such default would not reasonably be expected to have a Material Adverse Effect
on the Company.
4.14 Intellectual Property.
4.14.1 Section 4.14 of the Company Disclosure Schedule sets forth a
list of (i) all patents and patent applications owned by the Company and/or each
of its Subsidiaries worldwide; (ii) all trademark and service ▇▇▇▇ registrations
and all trademark and service ▇▇▇▇ applications, material common law trademarks,
material trade dress and material slogans, and all trade names owned by the
Company and/or each of its Subsidiaries worldwide; (iii) all copyright
registrations and copyright applications owned by the Company and/or each of its
Subsidiaries worldwide; and (iv) all licenses in which the Company and/or any of
its Subsidiaries is (A) a licensor with respect to any of the patents,
trademarks, service marks, trade names or copyrights listed in Section 4.14 of
the Company Disclosure Schedule which are material to the Company or (B) a
licensee of any other Person's patents, trade names, trademarks, service marks
or copyrights material to the Company except for any licenses of software
programs that are commercially available "off the shelf." The Company and/or its
Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights
and any applications for such patents, trademarks, trade names, service marks
and copyrights, processes, formulae, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the business
of the Company or such Subsidiaries as currently conducted, or proposed to be
conducted, the absence of which would be reasonably likely to have a Material
Adverse Effect on the Company (the "Company Intellectual Property Rights").
27
4.14.2 The Company or any of its Subsidiaries is not, nor will it be
as a result of the execution and delivery of this Agreement or the performance
of its obligations under this Agreement, in breach of any license, sublicense or
other agreement relating to the Company Intellectual Property Rights or the
intellectual property rights of any third party, the breach of which would be
reasonably likely to have a Material Adverse Effect on the Company.
4.14.3 All patents, registered trademarks, service marks and
copyrights held by the Company or any of its Subsidiaries are valid and
subsisting, except where the failure to be valid or subsisting is not reasonably
likely to have a Material Adverse Effect on the Company. Except as set forth on
Section 4.14 of the Company Disclosure Schedule, the Company (i) has not been
sued in any suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party; (ii) has no knowledge that
the manufacturing, marketing, licensing or sale of its products infringes any
patent, trademark, service ▇▇▇▇, copyright, trade secret or other proprietary
right of any third party, which such infringement would reasonably be expected
to have a Material Adverse Effect on the Company; and (iii) to the knowledge of
the Company, there is no unauthorized use, infringement or misappropriation of
any of the Company Intellectual Property Rights by any third party, including
without limitation, any employee or former employee of the Company or any of its
Subsidiaries.
4.15 Certain Agreements. All contracts listed as an exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 under
the rules and regulations of the Commission relating to the business of the
Company and its Subsidiaries, and any contracts, commitments or agreements which
involve payments to or from the Company or any of its Subsidiaries exceeding
$1,000,000 per annum (the "Company Material Contracts") are valid, enforceable
and in full force and effect except to the extent they have previously expired
or been terminated in accordance with their terms, and, to the Company's
knowledge, neither the Company nor its Subsidiaries has violated any provision
of, or committed or failed to perform any act which, with or without notice,
lapse of time, or both, could reasonably be expected to constitute a default
under the provisions of, any such Company Material Contract, except where the
lack of validity, full force and effect, enforceability or defaults could not
reasonably be expected to have a Material Adverse Effect on the Company. To the
Company's knowledge, no counterparty to any such Company Material Contract has
violated any provision of, or committed or failed to perform any act which, with
or without notice, lapse of time, or both, could reasonably be expected to
constitute a default or other breach under the provisions of, such Company
Material Contract, except for defaults or breaches which would not reasonably be
expected to have a Material Adverse Effect on the Company. Except for any
distribution agreement to which the Company or any of its Subsidiaries is a
party, Section 4.15 of the Company Disclosure Schedule sets forth an accurate
and complete listing, as of the date hereof, of all contracts, leases,
agreements or understandings, whether written or oral, to which the Company or
any of its Subsidiaries is a party, or by which the Company, any of its
Subsidiaries or any of their respective assets is bound, which contain any
material restrictions or limitation on the ability of the Company or any of its
Subsidiaries or Affiliates to engage in any business anywhere in the world.
28
4.16 Insurance. The Company and each of its Subsidiaries have policies of
insurance of the type and in the amounts customarily carried by persons
conducting businesses or owning assets similar to those of the Company. Except
as disclosed in Section 4.16 of the Company Disclosure Schedule, there is no
material claim pending under any of such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies. All
premiums due and payable under all such policies have been paid and the Company
and its Subsidiaries are otherwise in compliance in all material respects with
the terms of such policies. The Company has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
4.17 No Investment Company. The Company is not an "investment company"
subject to the registration requirements of, and regulation as an investment
company under, the Investment Company Act of 1940, as amended.
4.18 Fairness Opinion. The Company Board has received the opinion of ▇▇
▇▇▇▇▇ to the effect that, as of the date hereof, the consideration to be
received in the Offer and the Merger by the Company's shareholders is fair, from
a financial point of view, to the shareholders of the Company (the "Fairness
Opinion"). The Company has been authorized by ▇▇ ▇▇▇▇▇, subject to prior review
by such financial advisor, to include the fairness opinion (or references
thereto) in the Offer Documents, the Schedule 14D-9 and the Proxy Statement. The
Company has provided Parent with a true and complete copy of the executed
Fairness Opinion.
4.19 Recommendation of the Company Board. The Company Board, by vote at a
meeting duly called and held, has approved the Offer, the Merger and this
Agreement, and has determined that the consideration to be paid to the Company's
shareholders is fair to and in the best interests of the Company's shareholders
and has adopted resolutions recommending approval and adoption of this Agreement
and the transactions contemplated hereby to the shareholders of the Company.
4.20 Vote Required. The only vote of shareholders of the Company required
under the OBCA, Nasdaq Stock Market requirements and the Company Charter and
Company Bylaws in order to approve the Merger is the affirmative vote of a
majority of the total number of votes entitled to be cast by the holders of the
issued and outstanding shares of Company Common Stock voting as a single class,
and no other vote or approval of or other action by the holders of any capital
stock of the Company is required for such approval and adoption.
4.21 State Takeover Statutes. The Company Board has approved the Offer,
the Merger and this Agreement and the Transactions, and such approvals and
additional actions taken by the Company Board are sufficient to render
inapplicable to the Offer, the Merger and this Agreement and the Transactions
the provisions of Sections 60.825 to 60.845 of the OBCA. The Company has, or
will have prior to the Initial Expiration Date, amended the Company Bylaws to
cause Sections 60.801 to 60.816 of the OBCA to be inapplicable to the
acquisition of its voting shares within the meaning of Section 60.804(1) of the
OBCA. To the Company's knowledge, no other state
29
takeover statute or similar statute or regulation applies or purports to apply
to the Offer, the Merger, this Agreement or any of the Transactions.
4.22 Rights Agreement. The Company has heretofore provided Parent with a
complete and correct copy of the Rights Agreement, including all amendments and
exhibits thereto. The amendment to the Rights Agreement attached hereto as
Section 4.22 to the Company Disclosure Schedule has been duly authorized by the
Board of Directors of the Company and has been duly executed by the Company,
and, accordingly, the execution of this Agreement, the announcement or making of
the Offer, the acquisition of Shares pursuant to the Offer and the Merger and
the other transactions contemplated in this Agreement will not cause the Rights
to become exercisable or otherwise applicable or result in either Parent or
Merger Sub or any of their Affiliates being considered to be an "Acquiring
Person" (as defined in the Rights Agreement) or the occurrence of a
"Distribution Date" (as such term is defined in the Rights Agreement) or an
event described in Sections 11(a)(ii) or 13 of the Rights Agreement. Except as
provided above or approved in writing by Parent, during the term of this
Agreement, the Board will not (a) amend or terminate the Rights Agreement, or
(b) redeem the Rights.
4.23 Equipment. Except as set forth in Section 4.23 of the Company
Disclosure Schedule, all (i) the material equipment of the Company and its
Subsidiaries, and (ii) the equipment currently in use that, in the aggregate, is
necessary to produce the products of the Company and its Subsidiaries or
otherwise necessary to conduct the business of the Company and its Subsidiaries
as currently conducted, is in good operating condition and repair (ordinary wear
and tear excepted), taking into account its age and use, and is available for
immediate use in the business of the Company and its Subsidiaries.
4.24 Customers and Suppliers. Except as set forth in Section 4.24 of the
Company Disclosure Schedule, since January 1, 2000, there has not been (i) any
material adverse change in the business relationship of the Company or any of
its Subsidiaries with any of their top 20 suppliers, (ii) any material adverse
change in the terms of the purchase or supply agreements or related arrangements
with any such supplier, or (iii) any material deterioration in the business
relationship between the Company and any of its material customers. To the
knowledge of the Company, the transactions contemplated by this Agreement will
not adversely affect its or any of its Subsidiaries' business relationships with
any of their material customers or top 20 suppliers, other than as a result of a
pre-existing relationship with Parent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company as
follows:
5.1 Organization and Qualification. Each of Parent and Merger Sub (i) is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) has all requisite corporate
power and authority to own, lease and operate its
30
properties and to carry on its business as now being conducted and (iii) is duly
qualified or licensed and is in good standing to do business in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of its activities makes such qualification necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing has not had and is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Parent and its Subsidiaries taken as
a whole.
5.2 Authorization and Validity of Agreement. This Agreement has been duly
executed and delivered by Parent and Merger Sub. Each of Parent and Merger Sub
has all requisite corporate power and authority to enter into this Agreement and
each of Parent and Merger Sub has all requisite corporate power and authority to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Parent and
Merger Sub of this Agreement and the consummation by each of Parent and Merger
Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub (including in the case of Merger Sub, approval and adoption of this
Agreement and the Merger by Parent, as the sole shareholder of Merger Sub). This
Agreement is a legal, valid and binding obligation of Parent and Merger Sub,
enforceable in accordance with its terms (except insofar as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies).
5.3 No Prior Activities of Merger Sub. Merger Sub was formed by Parent
solely for the purpose of engaging in the transactions contemplated hereby, and
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
5.4 Information Supplied. None of the information supplied or to be
supplied by Parent or Merger Sub for inclusion or incorporation by reference in
any documents filed or to be filed with the Commission or any other Governmental
Entity in connection with the transactions contemplated hereby, including (i)
Offer Documents, (ii) the Schedule 14D-9, (iii) the Information Statement and
(iv) the Proxy Statement, will, at the respective times such documents are
filed, and also, in the case of the Offer Documents, the Schedule 14D-9 and the
Information Statement, at the respective times the Offer Documents, the Schedule
14D-9 and the Information Statement are first published, sent or given to the
Company's shareholders, and also, in the case of the Proxy Statement, at the
date the Proxy Statement is first mailed to the Company's shareholders or at the
time of the meeting of the Company's shareholders held to vote upon the approval
and adoption of this Agreement, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading (or necessary to correct any statement in any
earlier communication), except that no representation is made by Parent or
Merger Sub with respect to information supplied by the Company in writing
specifically for inclusion or incorporation by reference therein. The Offer
Documents will comply as to form in all material respects with the Exchange Act
and the rules and regulations promulgated thereunder.
31
5.5 Brokers. No broker, investment banker, financial advisor or other
Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Merger
Sub, other than ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company.
5.6 Financing. Parent has, and will make available to Merger Sub,
sufficient funds to permit Merger Sub to acquire all the outstanding Shares in
the Offer and the Merger.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 Shareholders Meeting.
6.1.1 If the Company Shareholder Approval (as hereinafter defined) is
required by law, the Company will, at Parent's request, subject to the fiduciary
duties of the Board of Directors of the Company under applicable law, as soon as
practicable following the expiration of the Offer, duly call, give notice of,
convene and hold a meeting of its shareholders (the "Shareholders Meeting") for
the purpose of approving and adopting this Agreement and the Transactions (the
"Company Shareholder Approval"). Notwithstanding the foregoing, if Merger Sub or
any other subsidiary of Parent shall acquire at least 90% of the outstanding
Shares, the parties shall, at the request of Parent, take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a Shareholders Meeting in
accordance with Section 60.491 of the OBCA.
6.1.2 If the Company Shareholder Approval is required by law, the
Company will, at Parent's request, as soon as practicable following the
expiration of the Offer, prepare and file a preliminary Proxy Statement with the
Commission and will use its best efforts to respond to any comments of the
Commission and to cause the Proxy Statement to be mailed to the Company's
shareholders as promptly as practicable after responding to all such comments to
the satisfaction of the Commission. The Company will notify Parent promptly of
the receipt of any comments from the Commission and of any request by the
Commission for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the
Commission, on the other hand, with respect to the Proxy Statement or the
Merger. If at any time prior to the Shareholders Meeting there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company will promptly prepare and mail to its shareholders such
an amendment or supplement. The Company will not mail any Proxy Statement or
file it with the Commission, or any amendment or supplement thereto, to which
Parent reasonably objects after being afforded a reasonable opportunity to
review the same.
6.1.3 Parent agrees to cause all Shares purchased pursuant to the
Offer and all other Shares owned by Parent or any Subsidiary of Parent to be
voted in favor of the Company Shareholder Approval.
32
6.2 Access to Information Concerning Properties and Records. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, upon reasonable notice, the
Company will (and will cause each of its Subsidiaries to) afford to the
officers, employees, counsel, accountants and other authorized representatives
of Parent reasonable access during normal business hours to all its properties,
personnel, books and records and furnish promptly to such Persons such financial
and operating data and other information concerning its business, properties,
personnel and affairs as such Persons will from time to time reasonably request
and instruct the officers, directors, employees, counsel and financial advisors
of the Company to discuss the business operations, affairs and assets of the
Company and otherwise fully cooperate with the other party in its investigation
of the business of the Company. Parent agrees that it will not, and will cause
its officers, employees, counsel, accountants and other authorized
representatives not to, use any information obtained pursuant to this Section
6.2 except in accordance with the provisions of the Confidentiality Agreement.
6.3 Confidentiality. The provisions of the letter agreement between the
Company and Parent, dated March 9, 2000 (the "Confidentiality Agreement") shall
survive the execution and delivery of this Agreement and remain in full force
and effect.
6.4 Public Announcements. The Company and Parent shall use commercially
reasonable efforts to develop a joint communications plan and each party hereto
shall use reasonable efforts to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan. Unless otherwise required by
applicable law or regulation or by obligations pursuant to any listing agreement
with or rules of any securities exchange, the National Association of Securities
Dealers, Inc. or the Nasdaq Stock Market, each party shall use commercially
reasonable efforts to consult with, and use commercially reasonable efforts to
accommodate the comments of the other parties before issuing any press release
or otherwise making any public statement with respect to this Agreement or the
transactions contemplated hereby.
6.5 Conduct of the Company's Business. Except as set forth on Section 6.5
of the Company Disclosure Schedule, the Company will, and will cause each of its
Subsidiaries to, except as permitted, required or specifically contemplated by
this Agreement, including without limitation Section 6.6 hereof, or consented to
or approved by Parent in writing, during the period commencing on the date
hereof and ending at the election or appointment or Merger Sub's designees to
the Board pursuant to Section 6.10 upon the purchase by Merger Sub of any shares
pursuant to the Offer (the "Merger Sub's Election Date"):
6.5.1 conduct its business only in, and not take any action except
in, the ordinary course of its business and consistent with recent past
practices;
6.5.2 use reasonable efforts to preserve intact its business
organization, to preserve its relationships with customers and suppliers, to
keep available the services of its present officers and key employees, and to
preserve the goodwill of others having business relationships with it;
33
6.5.3 not (i) make any change or amendments in its charter or bylaws;
(ii) issue, grant, sell or deliver any shares of its capital stock or any of its
other equity interests or securities (including, without limitation, any options
or warrants to acquire capital stock or Voting Debt of the Company) (other than
shares of Company Common Stock issued upon the exercise of any Company Stock
Options and the granting of stock options in the ordinary course of business and
consistent with recent past practice to new hires or pursuant to the 1993 Stock
Option Plan for Nonemployee Directors, in each case with the exercise price no
less than the fair market value of a share of Company Common Stock on the date
of grant) or any "phantom stock," "phantom stock" rights, stock appreciation
rights or stock-based performance units; (iii) split, combine or reclassify the
outstanding shares of its capital stock or any of its other outstanding equity
interests or securities or issue any capital stock or other equity interests or
securities in exchange for any such shares or interests; (iv) redeem, purchase
or otherwise acquire, directly or indirectly, any shares of capital stock or any
other securities of the Company or any Subsidiary of the Company; (v) amend,
accelerate or modify any outstanding options, warrants, or rights to acquire, or
securities convertible into shares of its capital stock or other equity
interests or securities, or adopt or authorize any other stock or equity
appreciation rights, restricted stock or equity, stock or equity purchase, stock
or equity bonus or similar plan, arrangement or agreement; (vi) make any changes
in its equity capital structure; (vii) declare, set aside, pay or make any
dividend or other distribution or payment (whether in cash, property or
securities) with respect to its capital stock or other securities, except for
dividends by a Subsidiary of the Company paid ratably to its shareholders or the
partners thereof, as the case may be; (viii) sell, transfer or otherwise dispose
of, or pledge any stock, equity or partnership interest owned by it in any
Subsidiary of the Company; or (ix) enter into or assume any contract, agreement,
obligation, commitment or arrangement with respect to any of the foregoing;
6.5.4 not (i) modify or change in any material respect any Company
Material Contract, other than in the ordinary course of business consistent with
recent past practice; (ii) enter into any new employment, consulting, agency,
severance, termination or commission agreement, make any amendment or
modification to any existing such agreement or grant any increases in
compensation, (A) in each case other than in the ordinary course of business and
consistent with recent past practice and with or granted to Persons who are not
officers or directors of the Company or any Subsidiary of the Company and which
do not, in the aggregate, materially increase the compensation or benefit
expense of the Company, and (B) other than the regular annual salary increase
granted in the ordinary course of business and consistent with recent past
practice to employees of the Company or its Subsidiaries who are not directors
or executive officers of the Company; (iii) establish, amend or modify any
employee benefit plan of any kind referred to in Section 4.12.1, except to the
extent required by any applicable law, or the existing terms of any such plan or
the provisions of this Agreement; (iv) secure any of its outstanding unsecured
Indebtedness, provide additional security for any of its outstanding secured
Indebtedness or grant, create or suffer to exist any material Lien on or with
respect to any property, assets or rights of the Company; (v) pay, discharge or
satisfy claims, liabilities or obligations (absolute, accrued, contingent or
otherwise), other than any payment, discharge or satisfaction in the ordinary
course of business consistent with recent past practice; (vi) cancel any
Indebtedness or waive any claims or rights, except in the ordinary course of
business and consistent with recent past practice; (vii) make any material
capital expenditures (other than in accordance with the capital expenditure
budget for the
34
year 2000 in effect on the date hereof, a copy of which has been made available
to Parent); (viii) accelerate the payment of, or otherwise prepay, any existing
outstanding Indebtedness except in the ordinary course of business consistent
with recent past practice; (ix) other than as contemplated or otherwise
permitted by this Agreement and other than the normal cash management practices
of the Company conducted in the ordinary and usual course of business and
consistent with recent past practice, make any advance or loan to or engage in
any material transaction with any director, officer, partner or Affiliate not
required by the terms of an existing contract; (x) guarantee or otherwise become
responsible for any Indebtedness of any other Person; (xi) make any change in
accounting methods, principles or practices, except as may have been required by
the Commission or the Company's independent auditors, or (xii) enter into or
assume any contract, agreement, obligation, commitment or arrangement with
respect to any of the foregoing;
6.5.5 not acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to otherwise acquire any assets which are material,
individually or in the aggregate, to the Company;
6.5.6 except (i) as described on Section 6.5 of the Company
Disclosure Schedule and (ii) for dispositions in the ordinary course of business
consistent with prior practice, not sell, lease or encumber or otherwise
voluntarily dispose of, or agree to sell, lease, encumber or otherwise dispose
of, any of its assets which are material, individually or in the aggregate, to
the Company;
6.5.7 not incur any Indebtedness;
6.5.8 not take any action that would cause its representations and
warranties contained in Section 4.1 to be untrue in any respect or, except as
otherwise contemplated by this Agreement, make any changes to the corporate
structure of the Company and its Subsidiaries (including the structure of the
ownership by the Company of the direct and indirect interests in its
Subsidiaries and of the ownership by the Company and its Subsidiaries of their
respective businesses, properties and assets);
6.5.9 not enter into any agreement that would (after the Effective
Time) purport to bind Parent or any of its Subsidiaries (other than the Company
or any of its Subsidiaries);
6.5.10 not make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
6.5.11 not settle or comprise any pending or threatened suit, action
or claim which is material or which relates to any of the Transactions; and
6.5.12 confer on a regular and frequent basis with Parent, report on
operational matters and promptly advise Parent of any material adverse change;
and promptly provide to Parent (or its counsel) copies of all filings made by
the Company with any federal, state, foreign or
35
supranational Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
Notwithstanding this Section 6.5, but subject to the provisions of Section
6.6 (to the extent applicable), the foregoing provisions of this Section 6.5
shall not prohibit or restrict in any way the Company from entering into an
agreement with respect to a Superior Proposal or taking any other action in
connection therewith.
6.6 No Solicitation.
6.6.1 Except as provided in Section 6.6.2 below, the Company, from
the date of this Agreement until the earlier of termination of this Agreement or
the Effective Time, will not nor shall it authorize or permit its officers,
directors, employees, investment bankers, attorneys, accountants and other
agents to directly or indirectly (i) initiate, solicit or knowingly encourage or
facilitate the submission of any Alternative Proposal, (ii) enter into any
agreement with respect to any Alternative Proposal, or (iii) in the event of an
unsolicited Alternative Proposal engage in negotiations or discussions with, or
provide any information or data to, any Person (other than Parent, any of its
affiliates or representatives) relating to any Alternative Proposal or take any
other action to facilitate any inquiries or the making of an Alternative
Proposal; provided, however, that nothing contained in this Section 6.6 or any
other provision hereof shall prohibit the Company or the Company Board from (i)
taking and disclosing to the Company's shareholders a position contemplated by
Rule 14e-2 promulgated under the Exchange Act or otherwise making disclosure to
the Company's shareholders, or (ii) otherwise discharging its fiduciary duties
to shareholders.
6.6.2 Notwithstanding the foregoing, prior to the acceptance for
payment of Shares in the Offer, the Company may furnish information concerning
its business, properties or assets to any Person pursuant to a confidentiality
agreement with terms no less favorable to the Company than those contained in
the Confidentiality Agreement and may negotiate and participate in discussions
and negotiations with such Person concerning an Alternative Proposal if such
entity or group has, on an unsolicited basis, submitted an Alternative Proposal
to the Company which the Company Board concludes in good faith after
consultation with its outside legal counsel and financial advisor is or may
result in a Superior Proposal. The Company shall promptly (but in no event later
than 48 hours) following receipt of an Alternative Proposal, notify Parent of
the receipt of the same, the identity of the Person or group making any such
Alternative Proposal, and provide a copy of such Alternative Proposal to Parent.
The Company shall promptly provide to Parent any material non-public information
regarding the Company provided to any other party which was not previously
provided to Parent.
6.6.3 Except as set forth herein, neither the Company Board nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Merger Sub, the approval or
recommendation by the Company Board or any such committee of the Offer, this
Agreement or the Merger, (ii) approve or recommend or propose to approve or
recommend any Alternative Proposal or (iii) enter into any agreement with
respect to any Alternative Proposal. Notwithstanding the foregoing, prior to the
time of acceptance for payment
36
of Shares in the Offer, the Company Board may withdraw or modify its approval or
recommendation of the Offer, this Agreement or the Merger, approve or recommend
a Superior Proposal, or enter into an agreement with respect to a Superior
Proposal, in each case at any time after the elapse of 72 hours following the
Company's delivery to Parent of written notice advising Parent that the Company
Board has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal; provided that the Company shall not enter into an agreement
with respect to a Superior Proposal before the Company also shall have furnished
Parent with written notice that it intends to enter into such agreement and
shall have terminated this Agreement in accordance with its terms. Except as
such rights are limited by Section 2.1.2, Merger Sub reserves the right to amend
or change the terms and conditions of the Offer at any time before or after it
receives notice that the Company has received a Superior Proposal.
Notwithstanding anything to the contrary contained in this Section 6.6 or
elsewhere in this Agreement, prior to the Effective Time the Company may, in
connection with a possible Alternative Proposal, refer any third party to this
Section 6.6 and Section 8.2 and make a copy of this Section 6.6 and Section 8.2
available to a third party. The Company shall, and shall cause its Subsidiaries
and the directors, employees and other agents of the Company and its
Subsidiaries to, cease immediately and cause to be terminated all activities,
discussions or negotiations, if any, with any Persons conducted prior to the
date hereof with respect to any Alternative Proposal. Without limiting the
foregoing, it is agreed that any violation of the restrictions set forth in this
Section 6.6 by any representative or affiliate (including any officer, director
or employee) of the Company or any of its Subsidiaries, whether or not such
person is purporting to act on behalf of the Company or such Subsidiary or
otherwise, shall be deemed to be a breach of this Section 6.6 by the Company.
6.7 Reasonable Efforts.
6.7.1 Each of the Company, Parent and Merger Sub agree to use
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement as
soon as reasonably practicable, including such actions or things as any party
hereto may reasonably request in order to cause any of the conditions to any
other party's obligation to consummate such transactions specified in Article
VII and Annex A to be fully satisfied, and to promptly cooperate with and
furnish information to each other in connection with any requirements imposed
upon any of them with respect thereto. Without limiting the generality of the
foregoing, the parties shall (and shall cause their respective directors,
officers and Subsidiaries, and use their reasonable efforts to cause their
respective Affiliates, employees, agents, attorneys, accountants and
representatives, to) consult and fully cooperate with and provide reasonable
assistance to each other in (i) the preparation and filing of any documents with
the Commission contemplated hereby (including any necessary amendments or
supplements); (ii) using commercially reasonable efforts to obtain all necessary
consents, approvals, waivers, licenses, permits, authorizations, registrations,
qualifications, or other permission or action by, and giving all necessary
notices to and making all necessary filings with and applications and
submissions to, any Governmental Entity or other Person required to be obtained
or made by Parent, Merger Sub, the Company or any of their Subsidiaries in
connection with the Offer, the Merger or the taking of any action contemplated
thereby or by this Agreement; (iii) filing all pre-merger notification and
report forms required under the ▇▇▇▇-▇▇▇▇▇ Act
37
and responding to any requests for additional information made by any
Governmental Entity pursuant to the ▇▇▇▇-▇▇▇▇▇ Act; (iv) using commercially
reasonable efforts to lift any Injunction of any type referred to in Section
7.1.3; (v) providing all such information about such party, its Subsidiaries and
its officers, directors, partners and Affiliates and making all applications and
filings as may be necessary or reasonably requested in connection with any of
the foregoing; and (vi) in general, using commercially reasonable efforts to
consummate and make effective the transactions contemplated thereby; provided,
however, that in making any such filing and in order to obtain any consent,
approval, waiver, license, permit, authorization, registration, qualification,
or other permission or action or the lifting of any Injunction referred to in
this sentence, (A) no party shall be required to pay any consideration, to
divest itself of any of, or otherwise rearrange the composition of, any of its
assets or to agree to any of the foregoing or any other condition or requirement
that is materially adverse or burdensome; and (B) Parent shall not be required
to take any action pursuant to the foregoing if the taking of such action is
reasonably likely to result in the imposition of a condition or restriction of
the type referred to in paragraphs (a), (b) or (c) of Annex A. Prior to making
any application to or filing with any Governmental Entity or other Person in
connection with this Agreement, each party shall provide the other party with
drafts thereof and afford the other party a reasonable opportunity to comment on
such drafts. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement then in office shall use
their reasonable best efforts to take all such action. The parties hereto agree
to file all pre-merger notification and report forms required under the ▇▇▇▇-
▇▇▇▇▇ Act, and to respond to any requests for additional information made by any
Governmental Entity pursuant to the ▇▇▇▇-▇▇▇▇▇ Act, as soon as reasonably
practicable, but not later than the expiration of the time period prescribed by
the ▇▇▇▇-▇▇▇▇▇ Act.
6.7.2 In its capacity as the sole shareholder of Merger Sub, Parent
will cause Merger Sub to approve and adopt this Agreement and the Transactions
and to take all corporate action necessary on its part to consummate the
Transactions and its obligations under this Agreement. Except as contemplated by
this Agreement or in connection with transactions contemplated thereby, Merger
Sub will not conduct any other business, and will have no other assets or
liabilities.
6.7.3 The Company shall give prompt notice to Parent, and Parent
shall give prompt notice to the Company, of (i) the occurrence, or non-
occurrence, of any event the occurrence, or non-occurrence, of which would be
likely to cause any representation or warranty contained in this Agreement to be
untrue or inaccurate and (ii) any failure of the Company, Parent or Merger Sub,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
6.8 Certain Litigation. Each of the Company and Parent agrees to
vigorously defend against all actions, suits or proceedings in which such party
is named as a defendant which seek to enjoin, restrain or prohibit the
transactions contemplated hereby or seek damages with respect to such
transactions. The Company will not settle any such action, suit or proceeding or
fail to perfect
38
on a timely basis any right to appeal any judgment rendered or order entered
against the Company therein without the consent of Parent (which consent will
not be withheld or delayed unreasonably). Each of Parent and the Company further
agrees to use its reasonable efforts to cause each of its Affiliates, directors
and officers to vigorously defend any action, suit or proceeding in which such
Affiliate, director or officer is named as a defendant and which seeks any such
relief to comply with this Section 6.8 to the same extent as if such Person were
a party hereto.
6.9 Indemnification of Directors and Officers.
6.9.1 The articles of incorporation and bylaws of the Surviving
Entity shall contain provisions with respect to indemnification substantially to
the same effect as those set forth in the Company Charter and the Company Bylaws
on the date hereof, which provisions shall not be amended, modified or otherwise
repealed for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder as of the Effective Time of
individuals who at the Effective Time were directors, officers, employees or
agents of the Company, unless such modification is required after the Effective
Time by law.
6.9.2 Parent shall cause the Surviving Entity to the fullest extent
permitted under applicable law or under the Surviving Entity's articles of
incorporation or bylaws, to indemnify and hold harmless, each present and former
director, officer or employee of the Company or any of its Subsidiaries
(collectively, the "Indemnified Parties") against any costs or expenses
(including attorney's fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, (x) arising out of or pertaining to the transactions contemplated
by this Agreement or (y) otherwise with respect to any acts or omissions
occurring at or prior to the Effective Time, to the same extent as provided in
the Company Charter or Company Bylaws or any applicable contract or agreement as
in effect on the date hereof, in each case for a period of six years after the
date hereof. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time) and subject
to the specific terms of any indemnification contract, (i) any counsel retained
by the Indemnified Parties for any period after the Effective Time shall be
reasonably satisfactory to the Surviving Entity, (ii) after the Effective Time,
the Surviving Entity shall pay the reasonable fees and expenses of such counsel,
promptly after statements therefor are received and (iii) the Surviving Entity
will cooperate in the defense of any such matter; provided, however, that the
Surviving Entity shall not be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld or delayed);
and provided, however, that, in the event that any claim or claims for
indemnification are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until the
disposition of any and all such claims. The Indemnified Parties as a group may
retain only one law firm to represent them with respect to any single action
unless there is, under applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two or more Indemnified
Parties, in which case each Indemnified Person with respect to whom such a
conflict exists (or group of such Indemnified Persons who among them have no
such conflict) may retain one separate law firm.
39
6.9.3 In addition, Parent will provide, or cause the Surviving Entity
to provide, for a period of not less than six years after the Effective Time,
the Company's current directors and officers an insurance and indemnification
policy that provides coverage for events occurring at or prior to the Effective
Time that is no less favorable than the existing policy or, if substantially
equivalent insurance coverage is unavailable, the best available coverage;
provided, however, that, after the second anniversary of the Effective Time,
Parent and the Surviving Entity shall not be required to pay an annual premium
for such insurance in excess of 150% of the annual premium currently paid by the
Company for such insurance, but in such case shall purchase as much coverage as
possible for such amount.
6.9.4 This Section shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, the Surviving Entity and
the Indemnified Parties, shall be binding on all successors and assigns of the
Surviving Entity and shall be enforceable by the Indemnified Parties.
6.10 Directors.
6.10.1 Promptly upon the purchase by Merger Sub of Shares pursuant to
the Offer, and from time to time thereafter, Merger Sub shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Board as shall give Merger Sub representation on the Board equal to the
product of the total number of directors on the Board (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Merger Sub or any Affiliate
of Merger Sub at such time bears to the total number of Shares then outstanding,
and the Company shall, at such time, promptly take all actions necessary to
cause Merger Sub's designees to be elected as directors of the Company,
including increasing the size of the Board. The Company has secured, or will
secure prior to the Initial Expiration Date, conditional resignations of
incumbent directors in furtherance thereof. At such times, the Company shall use
its best efforts to cause Persons designated by Merger Sub to constitute the
same percentage as Persons designated by Merger Sub shall constitute of the
Board of (i) each committee of the Board (some of whom may be required to be
independent as required by applicable law), (ii) each board of directors of each
domestic Subsidiary, and (iii) each committee of each such board, in each case
only to the extent permitted by applicable law.
6.10.2 The Company shall promptly take all actions required pursuant
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill its obligations under this Section 6.10 and shall include in
the Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Parent or Merger Sub shall supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1.
6.11 Stock Options. Prior to the Effective Time, the parties to this
Agreement shall take all such actions as shall be necessary to effectuate the
provisions of Section 3.4.
40
6.12 Employee Matters.
6.12.1 Parent agrees that, and shall take all necessary action to
ensure that, during the period commencing at the Effective Time and ending on
the first anniversary thereof, the employees of the Company will continue to be
provided with (whether by Parent, the Surviving Entity or otherwise) employee
benefit plans (other than stock option or other plans involving the potential
issuance of securities or other equity-based instruments of the Company) which
in the aggregate are not materially less favorable than those currently provided
by the Company to such employees; provided, however, that subject to compliance
with this Section 6.12, Parent reserves the right to review all employee
benefits after the Effective Time and to make such changes as it deems
appropriate and provided further that nothing herein shall confer upon any
employee the right to be retained in the service of the Company, the Surviving
Entity or any of their respective Subsidiaries nor shall it interfere with the
right of any of these entities to discharge or otherwise take actions against
such employee. Parent intends to cause the Surviving Entity to provide or enter
into new incentive and performance based compensation plans or arrangements with
management employees of the Company, the purpose of which will be to provide
such management employees with incentive and performance based compensation.
6.12.2 For purposes of determining eligibility to participate,
waiting periods, vesting and accrual or entitlement to benefits where length of
service is relevant under any employee benefit plan or arrangement of Parent,
the Surviving Entity or any of their respective Subsidiaries, employees of the
Company and its Subsidiaries as of the Effective Time shall receive service
credit for service with the Company and its Subsidiaries, provided, however,
that service with the Company or any of its Subsidiaries for any employee of the
Company or any of its Subsidiaries shall not be credited for benefit accrual or
entitlement to benefits under any employee benefit plan or arrangement of
Parent, the Surviving Entity or any of their respective Subsidiaries if such
service was credited for benefit accrual or entitlement to benefits under any
Company Plan.
6.12.3 From and after the Effective Time, Parent shall and shall
cause the Surviving Entity and its Subsidiaries to (i) cause any pre-existing
condition or limitation and any eligibility waiting periods under any group
health plans of Parent or any of its Subsidiaries to be waived with respect to
employees of the Company and its Subsidiaries and their eligible dependents, and
(ii) give each employee of the Company and its Subsidiaries credit for the plan
year in which the Effective Time occurs toward applicable deductibles and annual
out-of-pocket limits for expenses incurred prior to the Effective Time (or such
later date on which participation commences) during the applicable plan year, in
both instances subject to the consent (where required) of any insurance company
or other third party.
6.12.4 Parent shall cause the Surviving Entity to assume and honor in
accordance with their terms all written employment, severance and termination
plans and agreements (including change in control provisions) of employees of
the Company and its Subsidiaries as in effect on the Closing Date, subject to
all rights to amend or terminate as set forth therein.
41
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to the Merger. The respective obligations of each party to
effect the Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions and only the following conditions:
7.1.1 Shareholder Approval. This Agreement and the Merger shall have
been approved and adopted by the affirmative vote of the shareholders of the
Company to the extent required by Oregon Law and the Company Charter;
7.1.2 HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the ▇▇▇▇-▇▇▇▇▇ Act shall have
expired or been terminated;
7.1.3 No Order. No permanent or preliminary Injunction or
restraining order by any court or other Government Entity of competent
jurisdiction, or other legal restraint or prohibition, shall be in effect
preventing consummation of the transactions contemplated hereby as provided
herein; and
7.1.4 Offer. Merger Sub or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer;
provided, however, that neither Parent nor Merger Sub shall be entitled to
assert the failure of this condition if, in breach of this Agreement or the
terms of the Offer, Merger Sub fails to purchase any Shares validly tendered and
not withdrawn pursuant to the Offer.
ARTICLE VIII
TERMINATION
8.1 Termination and Abandonment. This Agreement may be terminated and the
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated hereby by the shareholders of the
Company:
8.1.1 By mutual written consent duly authorized by the Boards of
Directors of Parent and the Company prior to Merger Sub's Election Date (as
defined in Section 6.5);
8.1.2 By either the Company or Parent if any court of competent
jurisdiction in the United States or other governmental authority shall have
issued an order, decree, ruling or taken any other action restraining, enjoining
or otherwise prohibiting the acceptance for payment of, or payment for, shares
of Company Common Stock pursuant to the Offer or the Merger and such order,
decree, ruling or other action shall have become final and nonappealable;
42
8.1.3 By either the Company or Parent if the Merger shall not have
been consummated by the date which is six (6) months from the date of this
Agreement; provided, that such date shall be extended to the date which is nine
(9) months from the date of this Agreement in the event all conditions to effect
the Merger other than those set forth in Sections 7.1.2 and 7.1.3 (the
"Extension Conditions") have been or are capable of being satisfied at the time
of such extension and the Extension Conditions have been or are reasonably
capable of being satisfied on or prior to the date which is nine (9) months from
the date of this Agreement, (such date, as it may be so extended, shall be
referred to herein as the "Outside Date"); provided further that the right to
terminate this Agreement under this Section 8.1.3 shall not be available to any
party whose failure to fulfill any obligation or condition under this Agreement
has been the cause of, or resulted in, the failure of the Merger to occur on or
before such date and shall not be available to Parent if it has purchased Shares
pursuant to the Offer;
8.1.4 By either the Company or Parent if the Offer is terminated,
withdrawn or expires pursuant to its terms without any Shares being purchased
thereunder; provided that Parent may terminate this Agreement pursuant to this
Section 8.1.4 only if Parent's or Merger Sub's termination or withdrawal of the
Offer is not in violation of the terms of this Agreement or the Offer;
8.1.5 By either the Company or Parent if any approval by the
shareholders of the Company required for the consummation of the Merger or the
other transactions contemplated hereby shall not have been obtained at the
Company Shareholder Meeting or any adjournment thereof by reason of the failure
to obtain the required vote at a duly held meeting of shareholders or at any
adjournment thereof;
8.1.6 By Parent, prior to the acceptance for payment by Merger Sub of
Shares pursuant to the Offer, if (i) the Company Board shall have withdrawn or
materially or adversely modified its recommendation of the Offer or the adoption
of this Agreement (it being understood, however, that for all purposes of this
Agreement, and without limitation, the fact that the Company has supplied any
Person with information regarding the Company or has entered into discussions or
negotiations with such Person as permitted by this Agreement, or the disclosure
of such facts, shall not in itself be deemed a withdrawal or modification of the
Company Board's recommendation of the Offer or the adoption of this Agreement);
(ii) the Company Board shall have recommended to the shareholders of the Company
that they approve an Alternative Proposal other than transactions contemplated
by this Agreement and at least 72 hours have elapsed since the recommendation;
(iii) a tender offer or exchange offer that, if successful, would result in any
Person or "group" becoming a "beneficial owner" (such terms having the meaning
in this Agreement as is ascribed under Regulation 13D under the Exchange Act) of
50% or more of the outstanding shares of Company Common Stock is commenced
(other that by Parent or an affiliate of Parent) and the Company Board
recommends that the shareholders of the Company tender their shares in such
tender or exchange offer; or (iv) any Person or "group" has become the
"beneficial owner" (such terms having the meaning ascribed under Regulation 13D
under the Exchange Act) of more than 50% of the outstanding shares of Company
Common Stock;
43
8.1.7 By the Company, prior to the acceptance for payment by Merger
Sub of Shares pursuant to the Offer, if the Company Board determines to take any
action described in the second sentence of Section 6.6.3;
8.1.8 By Parent, prior to the acceptance for payment by Merger Sub of
Shares pursuant to the Offer, upon a material breach of any material covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company set forth in this Agreement shall not
have been true and correct at the date of this Agreement, and as a result
thereof there shall have been, or it is reasonably likely that there will be, a
Material Adverse Effect on the Company (a "Terminating Company Breach");
provided, however, that if such Terminating Company Breach is capable of being
cured by the Company within five business days after the giving of written
notice of such breach by Parent to the Company through the exercise of its best
efforts, so long as the Company continues to exercise such best efforts, Parent
may not terminate this Agreement under this Section 8.1.8 until after such fifth
business day; provided, further, that Parent may not terminate this Agreement
under this Section 8.1.8 at any time that there exists a Terminating Parent
Breach;
8.1.9 By the Company, upon a material breach of any material covenant
or agreement on the part of Parent or Merger Sub set forth in this Agreement, or
if any representation or warranty of Parent or Merger Sub set forth in this
Agreement shall not have been true and correct at the date of this Agreement,
and as a result thereof there shall have been, or it is reasonably likely that
there will be, a Material Adverse Effect on Parent or Merger Sub ("Terminating
Parent Breach"); provided, however, that, if such Terminating Parent Breach is
capable of being cured by Parent within five business days after the giving of
written notice of such breach by the Company to Parent through the exercise of
best efforts, so long as Parent continues to exercise such best efforts, the
Company may not terminate this Agreement under this Section 8.1.9 until after
such fifth business day; provided, further, that the Company may not terminate
this Agreement under this Section 8.1.9 at any time that there exists a
Terminating Company Breach; or
8.1.10 By the Company, if Merger Sub shall have failed to commence
the Offer within the ten business day period specified in Section 2.1.1 or
Merger Sub fails to pay for validly tendered shares of Company Common Stock in
violation of the terms of the Offer or this Agreement.
The party desiring to terminate this Agreement pursuant to this Section 8.1
(other than pursuant to Section 8.1.1) shall give notice of such termination to
the other party.
8.2 Effects of Termination; Expenses.
8.2.1 In the event of termination of this Agreement by either the
Company or Parent as provided in Section 8.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of Parent
or the Company or their respective officers or directors except (i) with respect
to Section 6.3, this Section 8.2 and Article IX and (ii) with respect to any
liabilities or damages incurred or suffered by a party as a result of the
willful breach by the other party of any of its covenants or other agreements
set forth in this Agreement.
44
8.2.2 In the event that this Agreement is terminated pursuant to
Section 8.1.6 or 8.1.7, then the Company shall pay Parent a cash fee of $5
million, which amount shall be payable by wire transfer of immediately available
funds no later than two business days after such termination.
8.2.3 Whether or not the transactions contemplated hereby are
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except (a) the Expenses incurred in connection with the printing,
filing and mailing to shareholders of the Offer Documents, the Schedule 14D-9,
the Information Statement and the Proxy Statement and the solicitation of
shareholder approvals shall be shared equally by the Company and Parent, and (b)
as provided in Sections 8.2.4 and 8.2.5. As used in this Agreement, "Expenses"
includes all out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby and all other matters related to the transactions contemplated hereby.
8.2.4 In the event that this Agreement is terminated pursuant to
Section 8.1.8, then the Company shall pay Parent an amount equal to Parent's
reasonable, actual and documented Expenses not in excess of $600,000, which
amount shall be payable by wire transfer of immediately available funds no later
than five business days after the Company's receipt of documentation of such
Expenses.
8.2.5 In the event that this Agreement is terminated pursuant to
Section 8.1.9, then the Parent shall pay the Company an amount equal to the
Company's reasonable, actual and documented Expenses not in excess of $600,000,
which amount shall be payable by wire transfer of immediately available funds no
later than five business days after Parent's receipt of documentation of such
Expenses.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations, Warranties, Covenants and Agreements.
None of the respective representations, warranties, covenants and agreements of
Parent, Merger Sub, and the Company contained herein or in any certificate or
other instrument delivered pursuant hereto, including any rights arising out of
any breach of such representation, warranties, covenants and other agreements,
shall survive the Effective Time, except for those covenants and agreements
contained herein and therein that by their terms apply or are to be performed in
whole or in part after the Effective time and this Article 9; provided that the
representations of the Company in Article IV and Parent and Merger Sub in
Article V shall expire upon acceptance for payment of, and payment for, the
Shares by Merger Sub pursuant to the Offer.
45
9.2 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
(by courier service or otherwise) or mailed, certified or registered mail with
postage prepaid, or sent by confirmed telecopier, as follows:
If to Parent or Merger Sub:
▇▇▇▇▇ ▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Bond, ▇▇▇▇▇▇▇▇▇ & King, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
Protocol Systems, Inc.
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other Person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been
46
received on the date of delivery if delivered on a business day, on the business
day following delivery if not delivered on a business day, or on the third
business day after the mailing thereof, except that any notice of a change of
address shall be effective only upon actual receipt thereof.
9.3 Entire Agreement. This Agreement (including the Schedules, Annexes,
Exhibits and other documents referred to herein) constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, oral and written, between the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement, which shall
survive the execution and delivery of this Agreement.
9.4 Assignment; Binding Effect; Benefit. Neither this Agreement nor any
of the rights, benefits or obligations hereunder may be assigned by any party
(whether by operation of law or otherwise) without the prior written consent of
the other party. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Except for the provisions of Section
6.9 (which may be enforced by the Indemnified Parties), nothing in this
Agreement, expressed or implied, is intended to confer on any Person other than
the parties or their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.5 Amendment. This Agreement may be amended by action of all the
parties, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval and adoption of this Agreement and the
Merger by the shareholders of the Company, but, after any such approval by the
shareholders of the Company, no amendment shall be made which by law requires
further approval by such shareholders of the Company without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
9.6 Extension; Waiver. At any time prior to the Effective Time, the
parties, by action taken or authorized by each such party's Board of Directors,
may, to the extent legally allowed, (i) extend the time specified herein for the
performance of any of the obligations of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto, (iii) waive compliance by
the other party with any of the agreements or covenants of such other party
contained herein or (iv) waive any condition to such waiving party's obligation
to consummate the transactions contemplated hereby or to any of such waiving
party's other obligations hereunder. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in a written
instrument signed by such party. Any such extension or waiver by any party shall
be binding on such party but not on the other party entitled to the benefits of
the provision of this Agreement affected unless such other party also has agreed
to such extension or waiver. No such waiver shall constitute a waiver of, or
estoppel with respect to, any subsequent or other breach or failure to strictly
comply with the provisions of this Agreement. The failure of any party to insist
on strict compliance with this Agreement or to assert any of its rights or
remedies hereunder or with respect hereto shall not constitute a waiver of such
rights or remedies. Whenever this Agreement requires or permits consent or
approval by any party,
47
such consent or approval shall be effective if given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 9.6.
9.7 Headings. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
9.8 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.
9.9 Applicable Law; Jurisdiction. This Agreement and the legal relations
between the parties hereunder shall be governed by and construed in accordance
with the laws of the State of Oregon, without regard to the conflict of laws
rules thereof.
9.10 Waiver of Jury Trial. Each party of this Agreement waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any action, suit or proceeding arising out of or relating to
this Agreement.
9.11 No Remedy in Certain Circumstances. Each party agrees that, should
any court or other competent governmental authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach thereof or of any other provision of this Agreement or
part hereof as a result of such holding or order.
9.12 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provisions of this Agreement, or the application thereof to any Person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
9.13 Disclosure Schedule. The parties acknowledge that the Company
Disclosure Schedule to this Agreement (i) relates to certain matters concerning
the disclosures required and transactions contemplated by this Agreement, (ii)
is qualified in its entirety by reference to specific provisions of this
Agreement and (iii) is not intended to constitute and shall not be construed as
indicating that such matter is required to be disclosed, nor shall such
disclosure be construed as an
48
admission that such information is material with respect to the Company or any
of its Subsidiaries or will have or is likely to have a Material Adverse Effect
on the Company and its Subsidiaries taken as a whole, or Parent and its
Subsidiaries taken as a whole.
9.14 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
49
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
▇▇▇▇▇ ▇▇▇▇▇ ACQUISITION CORPORATION
By: /s/ M. ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Name: M. ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇ ▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
PROTOCOL SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
50
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Merger Sub shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) promulgated under the
Exchange Act (relating to the obligation of Merger Sub to pay for or return
tendered shares of Company Common Stock promptly after termination or withdrawal
of the Offer), pay for any Shares tendered pursuant to the Offer, and (subject
to any such rules or regulations and except as provided in the Agreement) may
terminate or amend the Offer and may postpone the acceptance for payment of and
payment for Shares tendered, if (i) the Minimum Condition shall not have been
satisfied, (ii) any applicable waiting period under the ▇▇▇▇-▇▇▇▇▇ Act shall not
have expired or been terminated prior to the expiration of the Offer or (iii) at
any time on or after the date of this Agreement, and prior to the acceptance for
payment of Shares, any of the following conditions shall exist:
(a) there shall have been instituted or be pending any action or
proceeding brought by any Governmental Entity (i) challenging or
seeking to make illegal, materially delay or otherwise directly or
indirectly restrain or prohibit the making of the Offer, the
acceptance for payment of, or payment for, any Shares by Parent,
Merger Sub or any other Affiliate of Parent pursuant to the Offer, or
the consummation of the Merger, or seeking to obtain material damages
in connection with the Merger; (ii) seeking to prohibit or limit
materially the ownership or operation by the Company, Parent or any of
their Subsidiaries of all or any material portion of the business or
assets of the Company, or to compel the Company, to dispose of or hold
separate all or any material portion of the business or assets of the
Company, as a result of the Transactions; (iii) seeking to impose or
confirm limitations on the ability of Parent, Merger Sub or any other
Affiliate of Parent to exercise effectively full rights of ownership
of any Shares, including, without limitation, the right to vote any
Shares acquired by Merger Sub pursuant to the Offer, or otherwise on
all matters properly presented to the Company's shareholders or (iv)
seeking to prohibit Parent or any of its Subsidiaries from effectively
controlling in any material respect any material portion of the
business or operations of the Company and its Subsidiaries;
(b) there shall have been issued any Injunction resulting from any action
or proceeding brought by any Person other than any Governmental Entity
that is reasonably likely to result, directly or indirectly, in any of
the consequences referred to in clauses (i) through (iv) of paragraph
(a) above;
(c) there shall have been any statute, rule, regulation, order or
injunction enacted, entered, enforced, promulgated, amended, issued or
deemed applicable to the Offer or the Merger, by any Governmental
Entity, the routine application of the waiting period provisions of
the ▇▇▇▇-▇▇▇▇▇ Act to the Offer or the Merger, that is reasonably
likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (iv) of paragraph (a) above;
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(d) the Board shall have withdrawn or modified in a manner adverse to
Parent or Merger Sub the approval or recommendation of the Offer, the
Merger or this Agreement or approved or recommended any Alternative
Proposal or any other takeover proposal or any other acquisition of
Shares other than the Offer and the Merger;
(e) any of the representations and warranties of the Company set forth in
this Agreement shall cease to be true and correct at any time on or
after the date of this Agreement and before the acceptance for payment
of Shares as if made at such time (other than representations and
warranties made as of a specified date which shall be true and correct
as of such specified date) if such failure to be true and correct,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect on the Company; provided, however, that such
representation or warranty is incapable of being cured or has not been
cured within five (5) days after the giving of written notice thereof
to the Company;
(f) this Agreement shall have been terminated in accordance with its
terms; and
(g) Merger Sub and the Company shall have agreed that Merger Sub shall
terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder.
The foregoing conditions are for the sole benefit of Merger Sub and Parent
and may be asserted by Merger Sub or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Merger Sub or Parent in
whole or in part at any time and from time to time in their sole discretion. The
failure by Parent or Merger Sub at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right; the waiver of any such
right with respect to particular facts and other circumstances shall not be
deemed a waiver with respect to any other facts and circumstances; and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time.
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