EXHIBIT 2.1
REDACTED COPY
________________________________________________________________________________
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
AWARD SOFTWARE INTERNATIONAL, INC.,
a California corporation;
AWARD ACQUISITION SUB CORP.,
a Delaware corporation;
UNICORE SOFTWARE, INC.,
a Massachusetts corporation
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________
Dated As Of May 29, 1997
_____________________________
________________________________________________________________________________
TABLE OF CONTENTS
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SECTION 1.DESCRIPTION OF TRANSACTION.................................... 1
1.1 Merger of the Company into Merger Sub...................... 1
1.2 Effect of the Merger....................................... 1
1.3 Closing; Effective Time.................................... 2
1.4 Certificate of Incorporation and Bylaws; Directors and
Officers................................................... 2
1.5 Conversion of Shares....................................... 2
1.6 Closing of the Company's Transfer Books.................... 3
1.7 Exchange of Certificates................................... 3
1.8 Tax Consequences........................................... 5
1.9 Accounting Treatment....................................... 5
1.10 Further Action............................................. 5
1.11 Certain Other Agreements................................... 5
SECTION 2.REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDER........................................................ 6
2.1 Due Organization; No Subsidiaries; Etc..................... 6
2.2 Articles of Organization and Bylaws; Records............... 6
2.3 Capitalization, Etc........................................ 7
2.4 Financial Statements....................................... 8
2.5 Absence of Changes......................................... 8
2.6 Title to Assets............................................ 10
2.7 Bank Accounts; Receivables................................. 11
2.8 Equipment; Leasehold....................................... 11
2.9 Proprietary Assets......................................... 11
2.10 Contracts.................................................. 13
2.11 Liabilities................................................ 15
2.12 Compliance with Legal Requirements......................... 15
2.13 Governmental Authorizations................................ 15
2.14 Tax Matters................................................ 16
2.15 Employee and Labor Matters; Benefit Plans.................. 17
2.16 Environmental Matters...................................... 20
2.17 Insurance.................................................. 20
2.18 Related Party Transactions................................. 20
2.19 Legal Proceedings; Orders.................................. 21
2.20 Authority; Binding Nature of Agreement..................... 21
2.21 Non-Contravention; Consents................................ 22
2.22 Full Disclosure............................................ 22
2.23 Shareholder Capacity and Financial Capability.............. 23
2.24 Accounting Matters......................................... 23
SECTION 3.REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB....... 24
3.1 SEC Filings; Financial Statements.......................... 24
3.2 Authority; Binding Nature of Agreement..................... 24
TABLE OF CONTENTS
(CONT.)
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3.3 Valid Issuance............................................. 25
3.4 Organization; Subsidiaries................................. 25
3.5 Non-Contravention; Consents................................ 25
3.6 Business................................................... 26
3.7 Litigation................................................. 26
SECTION 4.CERTAIN COVENANTS OF THE COMPANY, THE SHAREHOLDER AND
PARENT............................................................. 26
4.1 Access and Investigation................................... 26
4.2 Operation of the Company's Business........................ 26
4.3 Notification; Updates to Disclosure Schedule............... 28
4.4 No Negotiation............................................. 29
4.5 Covenants of Parent........................................ 29
SECTION 5.ADDITIONAL COVENANTS OF THE PARTIES........................... 30
5.1 Filings and Consents....................................... 30
5.2 Public Announcements....................................... 30
5.3 Pooling of Interests....................................... 31
5.4 Tax Matters................................................ 31
5.5 Employment and Noncompetition Agreements................... 31
5.6 FIRPTA Matters............................................. 31
5.7 Release.................................................... 31
5.8 Termination of 401(k) Plan................................. 31
5.9 Tax Election............................................... 31
5.10 Tax Payments............................................... 32
5.11 Payment of Loan............................................ 32
SECTION 6.CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER
SUB................................................................ 32
6.1 Accuracy of Representations................................ 32
6.2 Performance of Covenants................................... 32
6.3 Consents................................................... 32
6.4 Agreements and Documents................................... 33
6.5 FIRPTA Compliance.......................................... 34
6.6 No Restraints.............................................. 34
6.7 No Material Adverse Change................................. 34
6.8 No Governmental Litigation................................. 34
6.9 No Other Litigation........................................ 34
6.10 Termination of 401(k) Plan................................. 34
6.11 Termination of Microid Distribution Agreement.............. 34
ii.
TABLE OF CONTENTS
(CONT.)
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SECTION 7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY............ 35
7.1 Accuracy of Representations................................ 35
7.2 Performance of Covenants................................... 35
7.3 Documents.................................................. 35
7.4 No Restraints.............................................. 35
7.5 No Material Adverse Change................................. 35
7.6 No Governmental Litigation................................. 36
7.7 No Other Litigation........................................ 36
SECTION 8.TERMINATION................................................... 36
8.1 Termination Events......................................... 36
8.2 Termination Procedures..................................... 37
8.3 Effect of Termination...................................... 37
SECTION 9.INDEMNIFICATION, ETC.......................................... 37
9.1 Survival of Representations, Etc........................... 37
9.2 Indemnification by the Shareholder......................... 38
9.5 No Contribution............................................ 38
9.6 Interest................................................... 39
9.7 Defense of Third Party Claims (Parent)..................... 39
9.8 Defense of Third Party Claims (Shareholder)................ 39
9.9 Exercise of Remedies by Indemnitees Other Than Parent
or the Shareholder......................................... 40
9.10 Method of Payment.......................................... 40
SECTION 10.MISCELLANEOUS PROVISIONS..................................... 40
10.1 Further Assurances......................................... 40
10.2 Fees and Expenses.......................................... 40
10.3 Brokers.................................................... 41
10.4 Attorneys' Fees............................................ 41
10.5 Notices.................................................... 41
10.6 Confidentiality............................................ 42
10.7 Time of the Essence........................................ 42
10.8 Headings................................................... 42
10.9 Counterparts............................................... 42
10.10 Governing Law.............................................. 43
10.11 Successors and Assigns..................................... 43
10.12 Remedies Cumulative; Specific Performance.................. 43
10.13 Waiver..................................................... 43
10.14 Amendments................................................. 43
10.15 Severability............................................... 44
10.16 Parties in Interest........................................ 44
iii.
TABLE OF CONTENTS
(CONT.)
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10.17 Entire Agreement........................................... 44
10.18 Construction............................................... 44
iv.
INDEX TO EXHIBITS
Exhibit A Certain Definitions
Exhibit B Restated Certificate of Incorporation and Bylaws
Exhibit C Directors and Officers
Exhibit D Registration Rights Agreement
Exhibit E Escrow Agreement
Exhibit F Tax Representation Letters
Exhibit G Continuity of Interest Certificate
Exhibit H Employment Agreement (▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇)
Exhibit I Noncompetition Agreement (▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇)
Exhibit J Employment and Noncompetition Agreement (▇▇▇▇▇ ▇. ▇▇▇▇)
Exhibit K Release
Exhibit L Legal Opinion of ▇▇▇▇▇▇, Milliment & Branch, Professional Association
Exhibit M Legal Opinion of ▇▇▇▇▇▇ Godward LLP
v.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this
"Agreement") is made and entered into as of May 29, 1997, by and among AWARD
SOFTWARE INTERNATIONAL, INC., a California corporation ("Parent"); AWARD
ACQUISITION SUB CORP., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"); UNICORE SOFTWARE, INC., a Massachusetts corporation (the
"Company"); and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual and sole shareholder of the
Company (the "Shareholder"). Certain other capitalized terms used in this
Agreement are defined in EXHIBIT A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub with the Company in accordance with this Agreement, the Delaware
General Corporation Law (the "DGCL"), the Massachusetts Business Corporation Law
("MBCL") and the California General Corporation Law (the "Merger"). Upon
consummation of the Merger, the Company will cease to exist, and Merger Sub will
be renamed Unicore Software, Inc. and operate as a wholly owned subsidiary of
Parent.
B. It is intended that the Merger qualify as a tax free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"). For accounting purposes, it is intended that
the Merger be treated as a "pooling of interests."
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company.
D. The Shareholder owns fifty-one (51) shares of the Common Stock (no
par value) of the Company ("Company Common Stock"), constituting all of the
outstanding capital stock of the Company.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF THE COMPANY INTO MERGER SUB. Upon the terms and
subject to the conditions set forth in this Agreement, at the Effective Time (as
defined in SECTION 1.3), Merger Sub shall be merged with the Company, and the
separate existence of Company shall cease. The Merger Sub will be renamed
Unicore Software, Inc. and will continue as the surviving corporation in the
Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set
forth in this Agreement and in the applicable provisions of the DGCL and the
MBCL.
1.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward llp, Five ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at
10:00 a.m. on May 30, 1997 (the "Scheduled Closing Time"). (The date on which
the Closing actually takes place is referred to in this Agreement as the
"Closing Date.") Contemporaneously with or as promptly as practicable after the
Closing, a properly executed certificate or agreement of merger conforming to
the requirements of the DGCL and MBCL shall be filed with the Secretaries of
State of the State of Delaware and the Commonwealth of Massachusetts. The
Merger shall become effective at the time such agreement of merger is filed with
and accepted by the Secretaries of State of the State of Delaware and the
Commonwealth of Massachusetts (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent and the Company prior to the Effective
Time:
(A) the Certificate of Incorporation and Bylaws of the Surviving
Corporation shall be amended and restated as of the Effective Time to conform to
EXHIBIT B; and
(B) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
EXHIBIT C.
1.5 CONVERSION OF SHARES.
(A) Subject to SECTION 1.7(C), at the Effective Time, by virtue
of the Merger and without any further action on the part of Parent, Merger Sub,
the Company or any shareholder of the Company:
(I) each share of Company Common Stock outstanding
immediately prior to the Effective Time (excluding any shares of Company Common
Stock held by the Company or any direct or indirect wholly owned subsidiary,
which, by virtue of the Merger and without any further action on part of such
holder thereof, shall cease to be outstanding, be canceled and retired without
payment of any consideration therefor and cease to exist) shall be converted
into the right to receive the "Applicable Fraction" (as defined in SECTION
1.5(B)(I)) of a share of the common stock (no par value) of Parent ("Parent
Common Stock"); and
(II) each share of the common stock (par value of $.01 per
share) of Merger Sub outstanding immediately prior to the Effective Time shall
be converted into one share of common stock of the Surviving Corporation.
(B) For purposes of this Agreement:
(I) The "Applicable Fraction" shall be determined by
multiplying (A) the quotient (1) 180,000 over (2) the Adjusted Fully Diluted
Company Share Amount (as defined in SECTION 1.5(B)(II)) by (B) the Exchange
Ratio (as defined in SECTION 1.5(B)(III)). If, between the date of this
Agreement and the Effective Time, the outstanding shares of Company Common Stock
or Parent Common Stock are changed into a different number or class of shares by
reason
2.
of any stock split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction, then the Applicable Fraction
shall be appropriately adjusted.
(II) The "Adjusted Fully Diluted Company Share Amount"
shall be the sum of (A) the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (including any such shares
that are subject to a repurchase option or risk of forfeiture under any
restricted stock purchase agreement or other agreement), and (B) the aggregate
number of shares of Company Common Stock issuable pursuant to or otherwise
subject to any subscription, option, warrant, call or any other right to acquire
any shares of capital stock of the Company outstanding immediately prior to the
Effective Time (including all shares of Company Common Stock that may ultimately
be issuable under any such right whether or not vested or currently
exercisable).
(III) The "Exchange Ratio" shall be determined by dividing
(A) $17.00 by (B) the Designated Parent Stock Price (as defined in SECTION
1.5(B)(IV)) rounded to six decimal places; provided, however, if the Designated
Parent Stock Price is greater than $15.30, such number shall be deemed to be
1.111111 and if the Designated Parent Stock Price is less than $14.00, such
shall be deemed to be 1.214285. Based on the Exchange Ratio, the minimum and
maximum numbers of shares of Parent Common Stock issuable pursuant to the Merger
as contemplated under this Agreement shall be 200,000 and 218,571, respectively.
(IV) The "Designated Parent Stock Price" shall be the
average of the closing sale prices of a share of Parent Common Stock (weighted
by the number of shares traded on each of such days) as reported on the Nasdaq
National Market for each of the five consecutive trading days immediately
preceding one business day prior to the Closing Date; provided, however, if such
price is greater than $15.30, the Designated Parent Stock Price shall be $15.30,
and if such price is less than $14.00, the Designated Parent Stock Price shall
be $14.00.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "Company Stock Certificate") is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be canceled and shall be
exchanged as provided in SECTION 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(A) At the Closing the Shareholder shall surrender certificate(s)
evidencing the Company Common Stock in exchange for certificates representing
Parent Common Stock. Upon surrender of a Company Stock Certificate to Parent
for exchange, the holder of such Company Stock Certificate shall be entitled to
receive in exchange therefor at the Closing or as soon thereafter as reasonably
practicable a certificate representing the number of whole shares of
3.
Parent Common Stock that such holder has the right to receive pursuant to the
provisions of SECTION 1.5 and the Company Stock Certificate so surrendered shall
be canceled. Until surrendered as contemplated by this SECTION 1.7, each Company
Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive upon such surrender a certificate
representing shares of Parent Common Stock (and cash in lieu of any fractional
share of Parent Common Stock) as contemplated by this SECTION 1.7. If any
Company Stock Certificate shall have been lost, stolen or destroyed, Parent may,
in its discretion and as a condition precedent to the issuance of any
certificate representing Parent Common Stock, require the owner of such lost,
stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as
indemnity against any claim that may be made against Parent or the Surviving
Corporation with respect to such Company Stock Certificate.
(B) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such Company Stock Certificate in accordance with this
SECTION 1.7 (at which time such holder shall be entitled to receive all such
dividends and distributions and such cash payment).
(C) No fractional shares of Parent Common Stock shall be issued
in connection with the Merger, and no certificates for any such fractional
shares shall be issued. In lieu of such fractional shares, any holder of capital
stock of the Company who would otherwise be entitled to receive a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock issuable to such holder) shall, upon surrender of such holder's
Company Stock Certificate(s), be paid in cash the dollar amount (rounded to the
nearest whole cent), without interest, determined by multiplying such fraction
by the Designated Parent Stock Price.
(D) Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise deliverable to
any holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(E) Neither Parent nor the Surviving Corporation shall be liable
to any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or for
any cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
(F) Each certificate representing shares of Parent Common Stock
to be issued in the Merger shall bear a legend substantially in the following
form:
4.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH
SHARES ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO AWARD SOFTWARE INTERNATIONAL, INC. IS OBTAINED TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
1.8 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.9 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.10 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation or Parent
with full right, title and possession of and to all rights and property of
Merger Sub and the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of Merger Sub, in
the name of the Company and otherwise) to take such action.
1.11 CERTAIN OTHER AGREEMENTS. Concurrently with the execution and
delivery of this Agreement:
(A) the Company shall deliver to Parent:
(I) a copy of the Registration Rights Agreement in the
form of EXHIBIT D (the "Registration Rights Agreement") duly executed and
delivered by the Shareholder; and
(II) a copy of the Escrow Agreement in the form of EXHIBIT
E (the "Escrow Agreement") duly executed and delivered by the Shareholder.
(B) Parent shall deliver to the respective other parties thereto
copies of the Registration Rights Agreement and the Escrow Agreement duly
executed by Parent.
1.12 In order to provide indemnification in accordance with SECTION 9
and the Escrow Agreement, at the Effective Time, Parent shall deliver to First
Trust of California, National Association, or any successor escrow agent
appointed pursuant to the Escrow Agreement (the "Escrow Agent") that number of
shares of Parent Common Stock otherwise issuable to the Shareholder pursuant to
SECTION 1.7 equal to 10% of the total number of shares of Parent Common Stock
issuable to the Shareholder, rounded down to the nearest whole share, such
shares to be held and applied in accordance with the Escrow Agreement (the
"Escrow Shares").
5.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER
The Company and the Shareholder jointly and severally represent and
warrant, to and for the benefit of the Indemnitees, as follows:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(A) Each of the Company and Microid Research, Inc., a California
corporation (the "Subsidiary"), is a corporation duly organized, validly
existing and in good standing under the corporate laws of the jurisdiction of
its incorporation and has all necessary corporate power and authority: (i) to
conduct its business in the manner in which its business is currently being
conducted; (ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all Company
Contracts.
(B) Except as set forth in PART 2.1 of the Disclosure Schedule,
neither the Company nor the Subsidiary has conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name, other than the name "Unicore Software,
Inc." and "Microid Research, Inc."
(C) Neither the Company nor the Subsidiary is, nor has been, required
to be qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions identified in PART
2.1 of the Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Material
Adverse Effect on the Company. Each of the Company and the Subsidiary is in
good standing as a foreign corporation in each of the jurisdictions identified
in PART 2.1 of the Disclosure Schedule.
(D) PART 2.1 of the Disclosure Schedule accurately sets forth (i) the
names of the members of the Company's and the Subsidiary's board of directors,
(ii) the names of the members of each committee of the Company's and the
Subsidiary's board of directors, and (iii) the names and titles of the Company's
and the Subsidiary's officers.
(E) Neither the Company nor the Subsidiary owns any controlling
interest in any Entity and, except for the equity interests identified in PART
2.1 of the Disclosure Schedule, neither the Company nor the Subsidiary has ever
owned, beneficially or otherwise, any shares or other securities of, or any
direct or indirect equity interest in, any Entity. Neither the Company nor the
Subsidiary has agreed nor is obligated to make any future investment in or
capital contribution to any Entity. Neither the Company nor the Subsidiary has
guaranteed nor is responsible or liable for any obligation of any of the
Entities in which it owns or has owned any equity interest.
2.2 ARTICLES OF ORGANIZATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies, in all material respects, of:
(1) the Company's and the Subsidiary's articles of organization/incorporation
and bylaws, including all amendments thereto; (2) the stock records of the
Company and the Subsidiary; and (3) except as set forth in
6.
PART 2.2 of the Disclosure Schedule, the minutes and other records of the
meetings and other proceedings (including any actions taken by written consent
or otherwise without a meeting) of the shareholders of the Company and the
Subsidiary, the board of directors of the Company and the Subsidiary and all
committees of the board of directors of the Company. There have been no formal
meetings or other proceedings of the shareholders of the Company and the
Subsidiary, the board of directors of the Company or any committee of the board
of directors of the Company and the Subsidiary that are not reflected in all
material respects in such minutes or other records. There has not been any
violation of any of the provisions of the Company's or the Subsidiary's articles
of organization/incorporation or bylaws, and neither the Company nor the
Subsidiary has taken any action that is inconsistent in any material respect
with any resolution adopted by the Company's or the Subsidiary's shareholders,
the Company's or the Subsidiary's board of directors or any committee of the
Company's or the Subsidiary's board of directors. The books of account, stock
records, minute books and other records of the Company and the Subsidiary are
accurate, up to date and complete in all material respects, and have been
maintained in accordance with prudent business practices.
2.3 CAPITALIZATION, ETC.
(A) The authorized capital stock of the Company consists of one
thousand (1,000) shares of Common Stock (no par value), of which fifty-one (51)
shares have been issued and are outstanding as of the date of this Agreement.
The authorized capital stock of the Subsidiary consists of Twenty Million
(20,000,000) shares of Common Stock (no par value), of which Five Million
(5,000,000) shares have been issued and are outstanding and owned beneficially
and of record by the Company. All of the outstanding shares of Company Common
Stock and the Subsidiary Common Stock have been duly authorized and validly
issued, and are fully paid and non assessable. PART 2.3 of the Disclosure
Schedule provides an accurate and complete description of the terms of each
repurchase option which is held by the Company and to which any of such shares
is subject.
(B) Except as set forth in PART 2.3 of the Disclosure Schedule, and
except as contemplated by this Agreement, there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities of
the Company or the Subsidiary; (ii) outstanding security, instrument or
obligation that is or may become convertible into or exchangeable for any shares
of the capital stock or other securities of the Company or the Subsidiary;
(iii) Contract under which the Company or the Subsidiary is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities; or (iv) condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or
other securities of the Company or the Subsidiary.
(C) Except as set forth in PART 2.3(C) of the Disclosure Schedule
there is no: (i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of the Company or the Subsidiary; (ii) outstanding
security, instrument or obligation that is or may become convertible into or
7.
exchangeable for any shares of the capital stock or other securities of the
Company or the Subsidiary; (iii) Contract under which the Company or the
Subsidiary is or may become obligated to sell or otherwise issue any shares of
its capital stock or any other securities; or (iv) condition or circumstance
that may give rise to or provide a basis for the assertion of a claim by any
Person to the effect that such Person is entitled to acquire or receive any
shares or capital stock or other securities of the Company or the Subsidiary.
(D) All outstanding shares of Company Common Stock have been issued
and granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all material requirements set forth in
applicable Contracts.
(E) Except as set forth in PART 2.3 of the Disclosure Schedule, the
Company has never repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities of the Company. All securities so reacquired
by the Company were reacquired in compliance with (i) the applicable provisions
of the MBCL and all other applicable Legal Requirements, and (ii) all material
requirements set forth in applicable restricted stock purchase agreements and
other applicable Contracts.
2.4 FINANCIAL STATEMENTS.
(A) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(I) The consolidated unaudited balance sheet of the Company and
the Subsidiary as of December 31, 1996, and the unaudited balance sheets of the
Company as of 1995 and 1994, and the related income statements, statements of
shareholder's equity and statements of cash flows of the Company for the years
then ended, together with all footnotes thereto; and
(II) the consolidated unaudited balance sheet of the Company and
the Subsidiary as of March 31, 1996 (the "Unaudited Interim Balance Sheet"), and
the related consolidated unaudited income statement of the Company for the three
months then ended.
(B) The Company Financial Statements are accurate and complete in all
material respects and present fairly the financial position of the Company as of
the respective dates thereof and the results of operations and (in the case of
the financial statements referred to in SECTION 2.4(A)(I)) cash flows of the
Company for the periods covered thereby. The Company Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except (i) as the
footnotes to the financial statements referred to in SECTION 2.4(A)(I) may
expressly indicate otherwise and (ii) that the financial statements referred to
in SECTION 2.1(A)(II) do not contain footnotes and are subject to normal and
recurring year-end audit adjustments, which adjustments will not, individually
or in the aggregate, be material).
2.5 ABSENCE OF CHANGES. Except as set forth in PART 2.5 of the Disclosure
Schedule, since December 31, 1996:
8.
(A) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations or financial performance
or, to the best knowledge of the Company and the Shareholder, prospects, and, to
the best of the knowledge of the Company and the Shareholder, no event has
occurred that will have a Material Adverse Effect on the Company;
(B) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of the Company's assets, taken as a
whole (whether or not covered by insurance);
(C) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(D) the Company has not sold, issued or authorized the issuance of (i)
any capital stock or other security, (ii) any option or right to acquire any
capital stock or any other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(E) there has been no amendment to the Company's articles of
organization or bylaws, and the Company has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(F) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(G) the Company has not made any capital expenditure which, when added
to all other capital expenditures made on behalf of the Company since December
31, 1996, exceeds $10,000;
(H) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in SECTION 2.10(A)), or (ii) amended
or prematurely terminated, or waived any material right or remedy under, any
such Material Contract;
(I) the Company has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or leased
or licensed, any right or other asset to any other Person other than sales of
inventory in the ordinary course of business, or (iii) waived or relinquished
any right, except for immaterial rights or other immaterial assets acquired,
leased, licensed or disposed of in the ordinary course of business and
consistent with the Company's past practices;
(J) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness except in the ordinary course of business and where the amount of
such uncollected receivables do not exceed $10,000 in the aggregate;
9.
(K) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(L) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;
(M) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees, or (iii) hired any new employee;
(N) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(O) the Company has not made any Tax election;
(P) the Company has not commenced or settled any Legal Proceeding;
(Q) the Company has not entered into any material transaction or taken
any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(R) the Company has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(r)" above.
2.6 TITLE TO ASSETS
(A) Except for assets held under capitalized leases set forth in PART
2.6 of the Disclosure Schedule and personal property sold in the ordinary course
of business since December 31, 1996, the Company owns, and has good, valid and
marketable title to, all assets purported to be owned by it, including: (i) all
assets reflected on the Unaudited Interim Balance Sheet; (ii) all assets
referred to in PARTS 2.1(E), 2.7(B) and 2.9 of the Disclosure Schedule and all
of the Company's rights under the Contracts identified in PART 2.10 of the
Disclosure Schedule; and (iii) all other assets reflected in the Company's books
and records as being owned by the Company. Except as set forth in PART 2.6 of
the Disclosure Schedule, all of said assets are owned by the Company free and
clear of any liens or other Encumbrances, except for (x) any lien for current
taxes not yet due and payable, (y) security interests identified in the
Unaudited Interim Balance Sheet or the footnotes thereto, and (z) minor liens
that have arisen in the ordinary course of business and that do not (in any case
or in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of the Company.
10.
(B) PART 2.6 of the Disclosure Schedule identifies all assets that are
material to the business of the Company and that are being leased or licensed to
the Company.
2.7 BANK ACCOUNTS; RECEIVABLES.
(A) PART 2.7(A) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(B) PART 2.7(B) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the Company as of December 31, 1996. Except as set forth
in PART 2.7(B) of the Disclosure Schedule, all existing accounts receivable of
the Company (including those accounts receivable reflected on the Unaudited
Interim Balance Sheet that have not yet been collected and those accounts
receivable that have arisen since December 31, 1996 and have not yet been
collected) represent valid obligations of customers of the Company arising from
bona fide transactions entered into in the ordinary course of business. Except
as set forth in PART 2.7(B) of the Disclosure Schedule, such accounts receivable
are collectible within 60 days (net of an allowance for doubtful accounts set
forth in PART 2.7(B) of the Disclosure Schedule) and are not subject to any
contest, claim or right of set-off other than refunds in the ordinary course of
business and consistent with past practice.
2.8 EQUIPMENT; LEASEHOLD.
(A) All material items of equipment and other tangible assets owned by
or leased to the Company which have a value, in the case of each item, of $1,000
or more are adequate for the uses to which they are being put, are in good
condition and repair (ordinary wear and tear excepted) and are adequate for the
conduct of the Company's business in the manner in which such business is
currently being conducted.
(B) The Company does not own any real property or any interest in real
property, except for the leasehold created under the real property lease
identified in PART 2.10 of the Disclosure Schedule.
2.9 PROPRIETARY ASSETS.
(A) PART 2.9(A)(I) of the Disclosure Schedule sets forth, with respect
to each Company Proprietary Asset registered with any Governmental Body or for
which an application has been filed with any Governmental Body, (i) a brief
description of such Proprietary Asset, and (ii) the names of the jurisdictions
covered by the applicable registration or application. PART 2.9(A)(II) of the
Disclosure Schedule identifies and provides a brief description of all other
Company Proprietary Assets owned by the Company. PART 2.9(A)(III) of the
Disclosure Schedule identifies and provides a brief description of each
Proprietary Asset licensed to the Company by any Person (except for any
Proprietary Asset that is licensed to the Company under any third party software
license generally available to the public at a cost of less than $10,000), and
identifies the license agreement under which such Proprietary Asset is being
licensed to the
11.
Company. Except as set forth in PART 2.9(A)(IV) of the Disclosure Schedule, the
Company has good, valid and merchantable title to all of the Company Proprietary
Assets identified in PARTS 2.9(A)(I) and 2.9(A)(II) of the Disclosure Schedule,
free and clear of all liens and other Encumbrances, and has a valid right to use
all Proprietary Assets identified in PART 2.9(A)(III) of the Disclosure
Schedule. Except as set forth in PART 2.9(A)(V) of the Disclosure Schedule, the
Company is not obligated to make any payment to any Person for the use of any
Company Proprietary Asset. Except as set forth in PART 2.9(A)(VI) of the
Disclosure Schedule, the Company has not developed jointly with any other Person
any Company Proprietary Asset with respect to which such other Person has any
rights.
(B) The Company has taken all reasonable measures and precautions
necessary to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Company Proprietary Assets. Except as set forth in PART 2.9(B) of the
Disclosure Schedule, the Company has not (other than pursuant to license
agreements identified in PART 2.10 of the Disclosure Schedule) disclosed or
delivered to any Person, or permitted the disclosure or delivery to any Person
of, (i) the source code, or any portion or aspect of the source code, of any
Company Proprietary Asset, or (ii) the object code, or any portion or aspect of
the object code, of any Company Proprietary Asset.
(C) None of the Company Proprietary Assets infringes or conflicts with
any Proprietary Asset owned or used by any other Person (provided, however,
notwithstanding anything contained in this SECTION 2.9(C) to the contrary, with
respect to any Proprietary Asset that is a patent, to the best knowledge of the
Company and the Shareholder, the foregoing is true). The Company is not
infringing, misappropriating or making any unlawful use of, and the Company has
not at any time infringed, misappropriated or made any unlawful use of, or
received any notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person
(provided, however, notwithstanding anything contained in this SECTION 2.9(C) to
the contrary, with respect to any Proprietary Asset that is a patent, to the
best knowledge of the Company and the Shareholder, the foregoing is true). To
the best of the knowledge of the Company and the Shareholder, no other Person is
infringing, misappropriating or making any unlawful use of, and no Proprietary
Asset owned or used by any other Person infringes or conflicts with, any Company
Proprietary Asset.
(D) Except as set forth in PART 2.9(D) of the Disclosure Schedule,
there has not been any written claim by any customer or other Person alleging
that any Company Proprietary Asset (including each version thereof that has ever
been licensed or otherwise made available by the Company to any Person) does not
conform in all material respects with any written specification, documentation,
performance standard, representation or statement made or provided by or on
behalf of the Company, and, to the best of the knowledge of the Company and the
Shareholder, there is no basis for any such claim.
(E) The Company Proprietary Assets have been sufficient to enable the
Company to conduct its business in the manner in which such business has been
and is being
12.
conducted. Except as set forth in PART 2.9(E) of the Disclosure Schedule, (i)
the Company has not licensed any of the Company Proprietary Assets to any Person
on an exclusive basis, and (ii) the Company has not entered into any covenant
not to compete or Contract limiting its ability to exploit fully any of its
Proprietary Assets or to transact business in any market or geographical area or
with any Person.
(F) Except as set forth in PART 2.9(F) of the Disclosure Schedule all
current and former employees of the Company have executed and delivered to the
Company Non-Compete Agreements and Employment Agreements as previously delivered
to Parent.
2.10 CONTRACTS.
(A) PART 2.10 of the Disclosure Schedule identifies:
(I) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor;
(II) each Company Contract relating to the acquisition, transfer,
use, development, sharing or license of any technology or any Proprietary Asset;
(III) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other Person, or (C)
develop or distribute any technology;
(IV) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(V) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(VI) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
(VII) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or any
surety arrangement;
(VIII)each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(IX) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Related Party (as defined in SECTION 2.18);
(X) each Company Contract constituting or relating to a
Government Contract or Government Bid;
13.
(XI) any other Company Contract that was entered into outside
the ordinary course of business or was inconsistent with the Company's past
practices and which contemplates or involves (A) the payment or delivery of cash
or other consideration in an amount in excess of $10,000 in the aggregate, or
(B) the performance of services having a value in excess of $10,000 in the
aggregate;
(XII) any other Company Contract that has a term of more than 60
days and that may not be terminated by the Company (without penalty) within 60
days after the delivery of a termination notice by the Company and which
contemplates or involves (A) the payment or delivery of cash or other
consideration in an amount in excess of $10,000 in the aggregate, or (B) the
performance of services having a value in excess of $10,000 in the aggregate;
and
(XIII) any other Company Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $10,000 in the aggregate, or (B) the performance of
services having a value in excess of $10,000 in the aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "Material Contracts.")
(B) The Company has delivered to Parent accurate and complete copies
in all material respects of all written Contracts identified in PART 2.10 of the
Disclosure Schedule, including all amendments thereto. PART 2.10 of the
Disclosure Schedule provides an accurate description of the material terms of
each Company Contract that is not in written form. Each Contract identified in
PART 2.10 of the Disclosure Schedule is valid and in full force and effect, and,
to the best of the knowledge of the Company and the Shareholder, is enforceable
by the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
(C) Except as set forth in PART 2.10 of the Disclosure Schedule:
(I) the Company has not violated or breached, or committed any
material default under, any Material Contract, and, to the best of the knowledge
of the Company and the Shareholder, no other Person has violated or breached, or
committed any material default under, any Material Contract;
(II) to the best of the knowledge of the Company and the
Shareholder, no event has occurred, and no circumstance or condition exists,
that (with or without notice or lapse of time) will, or could reasonably be
expected to, (A) result in a violation or breach of any of the material
provisions of any Material Contract, (B) give any Person the right to declare a
default or exercise any remedy under any Material Contract, (C) give any Person
the right to accelerate the maturity or performance of any Material Contract, or
(D) give any Person the right to cancel, terminate or modify any Material
Contract;
14.
(III) since June 30, 1995, the Company has not received any notice
or other communication regarding any actual or possible violation or breach of,
or default under, any Material Contract; and
(IV) the Company has not waived any of its material rights under
any Material Contract.
(D) No Person is renegotiating, or has a right pursuant to the terms
of any Company Contract to renegotiate, any amount paid or payable to the
Company under any Material Contract or any other material term or provision of
any Material Contract.
(E) The Contracts identified in PART 2.10 of the Disclosure Schedule
collectively constitute all of the Contracts necessary to enable the Company to
conduct its business in the manner in which its business is currently being
conducted.
(F) PART 2.10 of the Disclosure Schedule identifies and provides a
brief description of each proposed Material Contract as to which any bid, offer,
award, written proposal, term sheet or similar document has been submitted or
received by the Company since December 31, 1996, except for proposals relating
to the acquisition of the Company.
(G) PART 2.10 of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Company Contracts.
2.11 LIABILITIES. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Unaudited
Interim Balance Sheet and the footnotes thereto; (b) accounts payable or accrued
salaries that have been incurred by the Company since December 31, 1996 in the
ordinary course of business and consistent with the Company's past practices;
(c) liabilities under the Company Contracts identified in PART 2.10 of the
Disclosure Schedule, to the extent the nature and magnitude of such liabilities
can be specifically ascertained by reference to the text of such Company
Contracts; (d) the liabilities identified in PART 2.11 of the Disclosure
Schedule; and (e) liabilities referenced in PART 2.19 of the Disclosure
Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times since December 31, 1994 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had a Material Adverse Effect on the Company. Except as set forth in
PART 2.12 of the Disclosure Schedule, since December 31, 1994, the Company has
not received any notice or other communication from any Governmental Body
regarding any actual or possible violation of, or failure to comply with, any
Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. PART 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and the
Company has delivered to Parent accurate and complete copies of all Governmental
Authorizations identified
15.
in PART 2.13 of the Disclosure Schedule. The Governmental Authorizations
identified in PART 2.13 of the Disclosure Schedule are valid and in full force
and effect, and collectively constitute all Governmental Authorizations
necessary to enable the Company to conduct its business in the manner in which
its business is currently being conducted. The Company is, and at all times
since December 31, 1992 has been, in substantial compliance with the terms and
requirements of the respective Governmental Authorizations identified in PART
2.13 of the Disclosure Schedule. Since December 31, 1992, the Company has not
received any notice or other communication from any Governmental Body regarding
(a) any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Authorization.
2.14 TAX MATTERS.
(A) Except as set forth in PART 2.14(A) of the Disclosure Schedule,
all Tax Returns required to be filed by or on behalf of the Company with any
Governmental Body with respect to any taxable period ending on or before the
Closing Date (the "Company Returns") (i) have been filed on or before the
applicable due date (including any extensions of such due date), and (ii) have
been accurately and completely prepared in all material respects in compliance
with all applicable Legal Requirements. All amounts shown on the Company
Returns to be due on or before the Closing Date have been or will be paid on or
before the Closing Date. The Company has delivered to Parent accurate and
complete copies of all Company Returns filed since December 31, 1992 which have
been requested by Parent.
(B) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. The
Company will establish, in the ordinary course of business and consistent with
its past practices, reserves adequate for the payment of all Taxes for the
period from December 31, 1996 through the Closing Date, and the Company will
disclose the dollar amount of such reserves to Parent on or prior to the Closing
Date.
(C) No Company Return relating to income Taxes has ever been examined
or audited by any Governmental Body. Except as set forth in PART 2.14 of the
Disclosure Schedule, there have been no examinations or audits of any Company
Return. The Company has delivered to Parent accurate and complete copies of all
audit reports of Government Bodies (to which the Company has access) relating to
the Company Returns. Except as set forth in PART 2.14 of the Disclosure
Schedule, no extension or waiver of the limitation period applicable to any of
the Company Returns has been granted (by the Company or any other Person), and
no such extension or waiver has been requested from the Company.
(D) Except as set forth in PART 2.14 of the Disclosure Schedule, no
claim or Proceeding is pending or, to the best knowledge of the Company and
Shareholder, has been threatened against or with respect to the Company in
respect of any Tax. There are no unsatisfied liabilities for Taxes (including
liabilities for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document
16.
received by the Company with respect to any Tax (other than liabilities for
Taxes asserted under any such notice of deficiency or similar document which are
being contested in good faith by the Company and with respect to which adequate
reserves for payment have been established). There are no liens for Taxes upon
any of the assets of the Company except liens for current Taxes not yet due and
payable. The Company has not entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code. Except as set forth in PART 2.14
of the Disclosure Schedule, the Company has not been, and the Company will not
be, required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(E) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
(F) Except for the period from April 17, 1996 to December 31, 1996,
the Company is, and has at all times since May 6, 1991 been, an S corporation
under Subchapter S of Subtitle A of the Code and under applicable state income
tax laws. The Shareholder shall be responsible for, and shall indemnify Parent
and Merger Sub against, any income tax liability of the Company through the
Closing Date.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(A) PART 2.15(A) of the Disclosure Schedule identifies each salary,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by the Company for
the benefit of any current or former employee of the Company ("Employee"),
except for Plans which would not require the Company to make payments or provide
benefits having a value in excess of $25,000 in the aggregate.
(B) Except as set forth in PART 2.15(B) of the Disclosure Schedule,
the Company does not maintain, sponsor or contribute to, and, to the best of the
knowledge of the Company and the Shareholder, has not at any time in the past
maintained, sponsored or contributed to, any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Subtitles of ERISA) for the benefit of Employees or former Employees
(a "Pension Plan").
17.
(C) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Subtitles of ERISA) for the
benefit of Employees or former Employees which are described in PART 2.15(C) of
the Disclosure Schedule (the "Welfare Plans"), none of which is a multiemployer
plan (within the meaning of Section 3(37) of ERISA).
(D) With respect to each Plan, the Company has delivered to Parent:
(I) an accurate and complete copy of such Plan (including all
amendments thereto);
(II) an accurate and complete copy of the annual report filed,
if required under ERISA, with respect to such Plan since its inception.
(III) an accurate and complete copy of the most recent summary
plan description, together with each summary of material modifications, if
required under ERISA, with respect to such Plan, and all material employee
communications relating to such Plan;
(IV) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof;
(V) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts, minimum
premium contracts, stop-loss agreements, investment management agreements,
subscription and participation agreements and recordkeeping agreements; and
(VI) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(E) The Company is not required to be, and, to the best of the
knowledge of the Company and the Shareholder, has never been required to be,
treated as a single employer with any other Person under Section 4001(b)(1) of
ERISA or Section 414(b), (c), (m) or (o) of the Code. The Company has never
been a member of an "affiliated service group" within the meaning of Section
414(m) of the Code. To the best of the knowledge of the Company and the
Shareholder, the Company has never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA, resulting
in "withdrawal liability," as such term is defined in Section 4201 of ERISA
(without regard to subsequent reduction or waiver of such liability under either
Section 4207 or 4208 of ERISA).
(F) The Company does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law) in a
manner that would affect any Employee.
18.
(G) Except as set forth in PART 2.15(G) of the Disclosure Schedule, no
Welfare Plan provides death, medical or health benefits (whether or not insured)
with respect to any current or former Employee after any such Employee's
termination of service (other than (i) benefit coverage mandated by applicable
law, including coverage provided pursuant to Section 4980B of the Code, (ii)
deferred compensation benefits accrued as liabilities on the Unaudited Interim
Balance Sheet, and (iii) benefits the full cost of which are borne by current or
former Employees (or the Employees' beneficiaries)).
(H) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(I) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
(J) Each of the Plans intended to be qualified under Section 401(a) of
the Code has received a favorable determination from the Internal Revenue
Service, and neither the Company nor the Shareholder is aware of any reason why
any such determination letter should be revoked.
(K) Except as set forth in PART 2.15(K) of the Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, will result in any payment (including any bonus, golden parachute or
severance payment) to any current or former Employee or director of the Company
(whether or not under any Plan), or materially increase the benefits payable
under any Plan, or result in any acceleration of the time of payment or vesting
of any such benefits.
(L) PART 2.15(L) of the Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to, and never has been a party to,
any collective bargaining contract or other Contract with a labor union
involving any of its Employees. All of the Company's employees are "at will"
employees.
(M) PART 2.15(M) of the Disclosure Schedule identifies each Employee
who is not fully available to perform work because of disability or other leave
and sets forth the basis of such leave and the anticipated date of return to
full service.
(N) The Company is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters, except where the failure to so comply would not
have a Material Adverse Effect on the Company.
19.
(O) Except as set forth in PART 2.15(O) of the Disclosure Schedule,
the Company has good labor relations, and the Shareholder has no reason to
believe that any of the Company's employees intends to terminate his or her
employment with the Company.
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by the Company of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. The Company has not received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that the Company is not in
compliance with any Environmental Law, and, to the best of the knowledge of the
Company and the Shareholder, there are no circumstances that may prevent or
interfere with the Company's compliance with any Environmental Law in the
future. To the best of the knowledge of the Company and the Shareholder, no
current or prior owner of any property leased or controlled by the Company has
received any notice or other communication (in writing or otherwise), whether
from a Government Body, citizens group, employee or otherwise, that alleges that
such current or prior owner or the Company is not in compliance with any
Environmental Law. All Governmental Authorizations currently held by the
Company pursuant to Environmental Laws are identified in PART 2.16 of the
Disclosure Schedule. For purposes of this Section 2.16: (i) "Environmental Law"
means any federal, state or local Legal Requirement relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern; and (ii) "Materials of
Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now or hereafter regulated by any Environmental Law or that is otherwise a
danger to health, reproduction or the environment.
2.17 INSURANCE. PART 2.17 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of the
Company and identifies any material claims made thereunder since December 31,
1992, and the Company has delivered to Parent accurate and complete copies in
all material respects of the insurance policies identified on PART 2.17 of the
Disclosure Schedule. Each of the insurance policies identified in PART 2.17 of
the Disclosure Schedule is in full force and effect. Since December 31, 1992,
the Company has not received any notice or other communication regarding any
actual or possible (a) cancellation or invalidation of any insurance policy, (b)
refusal of any coverage or rejection of any claim under any insurance policy, or
(c) material adjustment in the amount of the premiums payable with respect to
any insurance policy.
2.18 RELATED PARTY TRANSACTIONS. Except as set forth in PART 2.18 of the
Disclosure Schedule: (a) no Related Party has, and no Related Party has at any
time since December 31, 1992 had, any direct or indirect interest in any
material asset used in or otherwise relating to the business of the Company; (b)
no Related Party is, or has at any time since December 31, 1992
20.
been, indebted to the Company; (c) since December 31, 1992, no Related Party has
entered into, or has had any direct or indirect financial interest in, any
material Contract, transaction or business dealing involving the Company; (d) no
Related Party is competing, or has at any time since December 31, 1992 competed,
directly or indirectly, with the Company; and (e) no Related Party has any claim
or right against the Company (other than rights to receive compensation for
services performed as an employee of the Company). For purposes of the Section
2.18 each of the following shall be deemed to be a "Related Party": (i) the
Shareholder; (ii) each individual who is, or who has at any time since December
31, 1992 been, an officer of the Company; (iii) each member of the immediate
family of each of the individuals referred to in clauses "(i)" and "(ii)" above;
and (iv) any trust or other Entity (other than the Company) in which any one of
the individuals referred to in clauses "(i)", "(ii)" and "(iii)" above holds (or
in which more than one of such individuals collectively hold), beneficially or
otherwise, a material voting, proprietary or equity interest.
2.19 LEGAL PROCEEDINGS; ORDERS.
(A) Except as set forth in PART 2.19 of the Disclosure Schedule, there
is no pending Legal Proceeding, and (to the best of the knowledge of the Company
and the Shareholder) no Person has threatened to commence any Legal Proceeding:
(i) that involves the Company or any of the assets owned or used by the Company
or any Person whose liability the Company has or may have retained or assumed,
either contractually or by operation of law; or (ii) that challenges, or that
may have the effect of preventing, delaying, making illegal or otherwise
interfering with, the Merger or any of the other transactions contemplated by
this Agreement. To the best of the knowledge of the Company and the
Shareholder, except as set forth in PART 2.19 of the Disclosure Schedule, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that will, or that could reasonably be expected to, give rise to or
serve as a basis for the commencement of any such Legal Proceeding.
(B) There is no order, writ, injunction, judgment or decree to which
the Company, or any of the assets owned or used by the Company, is subject. The
Shareholder is not subject to any order, writ, injunction, judgment or decree
that relates to the Company's business or to any of the assets owned or used by
the Company. To the best of the knowledge of the Company and the Shareholder,
no officer or other employee of the Company is subject to any order, writ,
injunction, judgment or decree that prohibits such officer or other employee
from engaging in or continuing any conduct, activity or practice relating to the
Company's business.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the absolute
and unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
the Company of this Agreement have been duly authorized by all necessary action
on the part of the Company and its board of directors. This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
21.
2.21 NON-CONTRAVENTION; CONSENTS. Except as set forth in PART 2.21 of the
Disclosure Schedule or where occurrence will not have a Material Adverse Effect,
neither (1) the execution, delivery or performance of this Agreement or any of
the other agreements referred to in this Agreement, nor (2) the consummation of
the Merger or any of the other transactions contemplated by this Agreement, will
directly or indirectly (with or without notice or lapse of time):
(A) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's articles of organization or bylaws, or (ii) any
resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors;
(B) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the transactions
contemplated by this Agreement or to exercise any remedy or obtain any relief
under, any Legal Requirement or any order, writ, injunction, judgment or decree
to which the Company, or any of the assets owned or used by the Company, is
subject;
(C) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the Company's business
or to any of the assets owned or used by the Company;
(D) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Company Contract that is or
would constitute a Material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such Company Contract, (ii)
accelerate the maturity or performance of any such Company Contract, or (iii)
cancel, terminate or modify any such Company Contract; or
(E) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company).
Except as set forth in PART 2.21 of the Disclosure Schedule, the Company is not
and will not be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
2.22 FULL DISCLOSURE.
(A) This Agreement (including the Disclosure Schedule) does not, and
the Shareholder's Closing Certificate will not, (i) contain any representation,
warranty or information that is false or misleading with respect to any material
fact, or (ii) omit to state any
22.
material fact necessary in order to make the representations, warranties and
information contained herein and to be contained therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
(B) Except as set forth in PART 2.22(B) of the Disclosure Schedule,
the financial projections on a consolidated basis relating to the Company and
the Subsidiary for the fiscal year ending December 31, 1997 of [*] and [*]
previously delivered to Parent were prepared in good faith by the Company on the
basis of information and assumptions that were fair, complete and reasonable,
and consistent with the Company's knowledge of its business and operations, as
of the date of such information, and remains so as of the date hereof.
2.23 SHAREHOLDER CAPACITY AND FINANCIAL CAPABILITY.
(A) The Shareholder has the capacity and financial capability to
comply with and perform all of his covenants and obligations under this
Agreement and any of the other agreements contemplated hereby to which the
Shareholder is or may become a party.
(B) The Shareholder:
(I) has not, at any time, (A) made a general assignment for the
benefit of creditors, (B) filed, or had filed against him, any bankruptcy
petition or similar filing, (C) suffered the attachment or other judicial
seizure of all or a substantial portion of his assets, (D) admitted in writing
his inability to pay his debts as they become due, (E) been convicted of, or
pleaded guilty to, any felony, or (F) taken or been the subject of any action
that may have an adverse effect on his ability to comply with or perform any of
his covenants or obligations under this Agreement or any of the other agreements
contemplated hereby; or
(II) is subject to any Legal Requirement that may have an
adverse effect on his ability to comply with or perform any of his covenants or
obligations under this Agreement or any of the other agreements contemplated
hereby.
(C) There is no Legal Proceeding pending, and, to the best of the
Shareholder's knowledge, no Person has threatened to commence any Legal
Proceeding, that may have an adverse effect on the ability of the Shareholder to
comply with or perform any of his covenants or obligations under this Agreement
or any of the other agreements contemplated hereby. To the best of the
Shareholder's knowledge, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that might directly or indirectly give rise to
or serve as a basis for the commencement of any such Legal Proceeding.
2.24 ACCOUNTING MATTERS. Neither the Company nor the Shareholder has taken
or agreed to, or plans to, take any action that would prevent Parent from
accounting for the business combination to be effected by the Merger as a
"pooling of interests."
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
23.
For purposes of the representations and warranties contained in SECTIONS
2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 2.14, 2.15, 2.16, 2.17, 2.18,
2.19, 2.21 AND 2.24, "the Company" shall be deemed to mean each of the Company
and the Subsidiary.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the
Company and the Shareholder as follows:
3.1 SEC FILINGS; FINANCIAL STATEMENTS.
(A) Parent has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of each report (on a form other than Form S-8)
including, without limitation, the most recent annual report to stockholders and
Form 10-K and 10-Q reports, proxy statements and other periodic filings made
with the SEC and definitive proxy statement filed by Parent with the SEC between
January 1, 1996 and the date of this Agreement (the "Parent SEC Documents"). As
of the time it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing): (i) each
of the Parent SEC Documents were filed in a timely manner and complied in all
material respects with the applicable requirements of the Exchange Act and the
rules and regulations promulgated thereunder; and (ii) none of the Parent SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(B) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments; and (iii)
fairly present the consolidated financial position of Parent and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations of Parent and its subsidiaries for the periods covered thereby.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement (including the contemplated issuance of
Parent Common Stock in the Merger in accordance with this Agreement) have been
duly authorized by all necessary action on the part of Parent and Merger Sub and
their respective boards of directors. No vote of Parent's shareholders is
needed to approve the Merger. This Agreement constitutes the legal, valid and
binding obligation of Parent and Merger Sub, enforceable against them in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of
24.
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.3 VALID ISSUANCE. Subject to SECTION 1.5(C), the Parent Common Stock to
be issued in the Merger will, when issued in accordance with the provisions of
this Agreement, be validly issued, fully paid and nonassessable, without
violation of any preemptive or dissenter's rights and in full compliance with
all applicable securities laws.
3.4 ORGANIZATION; SUBSIDIARIES. Parent and Merger Sub are corporations
duly organized, validly existing and in good standing under the laws of the
respective jurisdiction in which they are incorporated. Each of Parent and
Merger Sub has the corporate power and authority to own and lease its properties
and assets and to carry on its business as now being conducted and is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the nature of the business conducted by it makes such qualification or licensure
necessary, except where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on its business, results of
operations or financial condition of Parent.
3.5 NON-CONTRAVENTION; CONSENTS. Except where occurrence of the foregoing
will not have a material adverse effect on Parent, the execution and delivery of
this Agreement and the consummation of any of the transactions contemplated
hereby by Parent and Merger Sub does not and will not:
(I) violate any provision of the Certificate of Incorporation or
Bylaws of Parent or Merger Sub;
(II) violate, or result with the passage of time in the violation
of, any provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or result in the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance upon any of the properties of
Parent or Merger Sub pursuant to any provision of any mortgage, lien, lease,
agreement, permit, indenture, license, instrument, law, order, arbitration
award, judgment or decree to which Parent or Merger Sub is a party or by which
it or any of its properties are bound;
(III) violate any law, order, judgment or decree to which Parent or
Merger Sub is subject;
(IV) violate or conflict with any other restriction of any kind or
character to which Parent or Merger Sub is subject, or by which any of its
assets may be bound; or
(V) constitute an event permitting termination of an agreement to
which Parent or Merger Sub is subject, if in any such circumstances,
individually or in the aggregate with all other such events, such termination
could have consequences materially adverse to Parent.
Except in connection with the organization of Merger Sub and other filings
necessary to effectuate the Merger and notification of listing of additional
shares to Nasdaq National Market,
25.
no consent, authorization, order or approval of, or filing or registration with
any governmental commission, board or other regulatory body is required for or
in connection with the execution, delivery and performance of this Agreement by
Parent or Merger Sub and the consummation by each of them of any of the
transactions contemplated hereby.
3.6 BUSINESS. Merger Sub has not engaged in any activities other than
those incident to its organization or as contemplated by the terms of this
Agreement.
3.7 LITIGATION. There is no action, suit, proceeding or investigation
pending, or, to the best knowledge of Parent or Merger Sub, threatened, against
or related to the respective properties or business of Parent or Merger Sub
which will materially adversely affect or prohibit consummation the transactions
contemplated thereby.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY, THE SHAREHOLDER AND PARENT.
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; and (b)
provide Parent and Parent's Representatives with copies of such existing books,
records, Tax Returns, work papers and other documents and information relating
to the Company, and with such additional financial, operating and other data and
information regarding the Company, as Parent may reasonably request. Except and
to the extent required by applicable law, each of the parties hereto will not
disclose or otherwise use, and will cause its Representatives not to use or
otherwise disclose, any Confidential Information (as defined below) furnished by
or on behalf of either Parent or the Company at any time or in any manner other
than in connection with the transactions contemplated hereby. "Confidential
Information" shall mean any information (written or oral) (i) pertaining to
either the Company or Parent, (ii) is confidential and proprietary in nature,
(iii) is furnished to any of the parties hereto and their Representatives, and
(iv) is conspicuously marked, or identified as, "CONFIDENTIAL" at the time of
its delivery; provided, that notwithstanding the foregoing, "Confidential
Information" shall not include any information or material (a) that is already
in the other party's possession prior to February 27, 1997, (b) that is obtained
by or that is or becomes available to any of the parties hereto or their
respective Representatives from a source other than pursuant to this Agreement
or in breach of this SECTION 4.1, (c) that is obtained or is or becomes
available through the normal course of any business dealings between the parties
hereto, (d) that is in or enters the public domain or that otherwise is or
becomes generally available other than in breach of this SECTION 4.1, or (e)
that is independently developed by any of the parties hereto or their respective
Representatives.
4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period:
(A) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
26.
(B) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
(C) the Company shall keep in full force all insurance policies
identified in PART 2.17 of the Disclosure Schedule;
(D) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities;
(E) the Company shall not sell, issue or authorize the issuance of (i)
any capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(F) neither the Company nor the Shareholder shall amend or permit the
adoption of any amendment to the Company's articles of organization or bylaws,
or effect or permit the Company to become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(G) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(H) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed $1,000.00 per
month;
(I) the Company shall not (i) enter into, or permit any of the assets
owned or used by it to become bound by, any Contract that is or would constitute
a Material Contract, or (ii) amend or prematurely terminate, or waive any
material right or remedy under, any such Material Contract;
(J) except for transactions in the ordinary course of business and
that do not exceed $5,000, individually or in the aggregate, the Company shall
not (i) acquire, lease or license any right or other asset from any other
Person, (ii) sell or otherwise dispose of, or lease or license, any right or
other asset to any other Person, or (iii) waive or relinquish any right, except
for assets acquired, leased, licensed or disposed of by the Company pursuant to
Contracts that are not Material Contracts;
(K) the Company shall not (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the ordinary course
of business and may, consistent with its past practices, allow employees to
acquire Company Common Stock in exchange for promissory notes upon exercise of
Company Options), or (ii) incur or guarantee any indebtedness for borrowed
money;
27.
(L) the Company shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus or make any profit sharing payment, cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees, or (iii) hire any new
employee whose aggregate annual compensation is expected to exceed $50,000;
(M) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(N) the Company shall not make any Tax election;
(O) the Company shall not commence or settle any material Legal
Proceeding;
(P) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(o)" above.
For purposes of this SECTION 4.2, "the Company" shall be deemed to mean
each of the Company and the Subsidiary.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(A) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:
(I) the discovery by the Company of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in or material
breach of any representation or warranty made by the Company or the Shareholder
in this Agreement;
(II) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute a material inaccuracy in or breach of any representation or warranty
made by the Company or the Shareholder in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement;
(III) any breach of any material covenant or obligation of the
Company or the Shareholder; and
(IV) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in SECTION 6 or
SECTION 7 impossible or unlikely.
(B) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to SECTION 4.3(A) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure
28.
Schedule were dated as of the date of the occurrence, existence or discovery of
such event, condition, fact or circumstance, then the Company shall promptly
deliver to Parent an update to the Disclosure Schedule specifying such change.
For purposes of this SECTION 4.3, "the Company" shall be deemed to
mean each of the Company and the Subsidiary.
4.4 NO NEGOTIATION. During the Pre-Closing Period, neither the Company
nor the Shareholder shall, directly or indirectly:
(A) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Acquisition
Transaction;
(B) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Acquisition Transaction; or
(C) accept any proposal or offer from any Person (other than Parent)
relating to a possible Acquisition Transaction.
The Company shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by the Company or the Shareholder during the Pre-closing Period.
4.5 COVENANTS OF PARENT. Parent hereby covenants and agrees with the
Company and the Shareholder as follows:
(A) PRESERVATION OF BUSINESS ORGANIZATION. Parent shall use all
reasonable efforts to cause to preserve without material impairment the business
of Parent and its subsidiaries and their goodwill as to payors, providers,
suppliers, distributors, clients and others having business relations with
Parent and its subsidiaries.
(B) CARRY ON IN REGULAR COURSE. Parent shall carry on its business in
the ordinary and usual course in a manner consistent with its past practices.
(C) Documents and information to be Furnished. Parent shall furnish
to the Shareholder, promptly after filed with the SEC, its audited year-end
report in the form filed with the SEC on Form 10-K prescribed under the Exchange
Act, its unaudited quarterly financial reports in the form filed with the SEC on
Form 10-Q prescribed under the Exchange Act and such other reports, statements,
documents and other items Parent delivers, or is required to deliver, to any of
its shareholders.
(D) NOTICES OF CERTAIN EVENTS. During the Pre-Closing Period, Parent
shall promptly notify the Company of:
(I) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or
29.
constitutes an inaccuracy in or breach of any representation or warranty made by
Parent in this Agreement;
(II) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
Parent in this Agreement if (A) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
(III) any breach of any covenant or obligation of Parent; and
(IV) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in SECTION 6 or
SECTION 7 impossible or unlikely.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Material Contract, or otherwise) by such party in connection with
the Merger and the other transactions contemplated by this Agreement, except
where the failure to obtain such Consent would not, in the case of the Company,
have a Material Adverse Effect and, in the case of Parent, a material adverse
effect on its business, financial condition or results of operations. The
Company shall (upon request) promptly deliver to Parent a copy of each such
filing made, each such notice given and each such Consent obtained by the
Company during the Pre-Closing Period.
5.2 PUBLIC ANNOUNCEMENTS.
(A) During the Pre-Closing Period, neither the Company, the Subsidiary
nor the Shareholder shall (and the Company and the Subsidiary shall not permit
any of their Representatives to) issue any press release or make any public
statement regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without Parent's prior written
consent.
(B) Parent shall not, and shall not permit any its Representatives to,
issue any press release or otherwise publicly disseminate any document or other
written material relating to the Merger or any of the other transactions
contemplated by this Agreement unless (i) the Company shall have approved such
press release or written material (it being understood that the Company shall
not unreasonably withhold its approval of any such press release or written
material), or (ii) Parent shall have been advised by its outside legal counsel
that the issuance of such press release or the dissemination of such written
material is required by any applicable law
30.
or regulation, and Parent shall have consulted with the Company prior to issuing
such press release or disseminating such written material; provided, however,
that notwithstanding anything to the contrary contained in this SECTION 5.2,
Parent shall be entitled to file with the SEC, after the execution and delivery
of this Agreement, a Report on Form 8-K, together with a copy of this Agreement
(including the exhibits hereto) and the press release (which shall have been
approved by the Company) announcing this Agreement.
5.3 POOLING OF INTERESTS. Before and after the Closing, no party to this
Agreement shall take any action that could reasonably be expected to have an
adverse effect on the ability of Parent to account for the Merger as a "pooling
of interests."
5.4 TAX MATTERS. Prior to the Closing, (a) Parent and the Company shall
execute and deliver, to ▇▇▇▇▇▇ Godward llp and to ▇▇▇▇▇▇, Millimet & Branch,
Professional Association, tax representation letters in substantially the form
of EXHIBIT F (which will be used in connection with the legal opinion
contemplated by SECTION 7.3(A)), and (b) the Shareholder shall execute and
deliver to Parent a Continuity of Interest Certificate in the form of EXHIBIT G.
5.5 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. At or prior to the Closing,
the Shareholder shall execute and deliver to the Company and Parent an
Employment Agreement in the form of EXHIBIT H and a Noncompetition Agreement in
the form of EXHIBIT I. The Company shall use all commercially reasonable
efforts to cause ▇▇▇▇▇ ▇. ▇▇▇▇ to execute and deliver to the Company and Parent,
at the Closing, an Employment and Noncompetition Agreement in the form of
EXHIBIT J.
5.6 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under ▇▇▇▇▇▇▇ ▇.▇▇▇ - ▇(▇)(▇)
▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Treasury Regulations.
5.7 RELEASE. At the Closing, the Shareholder shall execute and deliver to
the Company a Release in the form of EXHIBIT K.
5.8 TERMINATION OF 401(K) PLAN. Immediately prior to the Closing, the
Company shall terminate its 401(k) Plan, and shall ensure that no employee or
former employee of the Company has any rights under such Plan after termination
thereof and that any liabilities of the Company under such Plan (including any
such liabilities relating to services performed prior to the Closing) are fully
extinguished at no cost to the Company. Following the Closing Date, Parent and
Merger Sub shall take all commercially reasonable actions as are necessary to
provide for a direct rollover of the accounts of the Company's employees in the
Company's 401(k) Plan to a qualified retirement plan maintained by Parent for
all such employees who request such direct rollover.
5.9 TAX ELECTION. After the Closing, Parent, the Company and the
Shareholder shall make an election under Section 1377(a)(2) of the Code to treat
the Company or Surviving
31.
Corporation as having two taxable years, the first of which will be deemed to
terminate on the Closing Date.
5.10 TAX PAYMENTS. Prior to April 15, 1998, Parent shall cause the
Surviving Corporation to distribute to the Shareholder cash in an amount equal
(i) the amount of K-1 income recognized from the Company for the period from
January 1, 1997 through the date immediately preceding the Closing Date
multiplied by (ii) the combined maximum marginal rate of federal and applicable
state income tax applicable to individuals (taking into account the
deductibility of state income taxes and any distributions in respect of such tax
liability previously made to the Shareholder).
5.11 PAYMENT OF LOAN. Within 60 days following the Closing Date, Merger
Sub agrees, and Parent agrees to cause Merger Sub, to prepay the amounts
outstanding under that certain loan agreement, dated April 17, 1996, between
▇▇▇▇▇▇▇▇ Savings Bank and the Company for the original principal amount of
$450,000 (the "Loan Agreement"). The Company and the Shareholder represent that
as of the Closing Date, the principal balance outstanding under the Loan
Agreement shall not exceed $352,500. Except as set forth in PART 2.10(C) of the
Disclosure Schedule, the Company and the Shareholder represent that neither the
Company nor the Shareholder has violated, breached or committed any default
under the Loan Agreement nor any other agreements entered into in connection
with the Loan Agreement. The Company and the Shareholder further represent that
prepayment of the amounts under the Loan Agreement or any agreement contemplated
thereby shall not subject the Company, Merger Sub, the Shareholder or Parent to
any prepayment penalty, make whole payment provision or other similar fee
whether or not pursuant to the terms of the Loan Agreement.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company and the Shareholder in this Agreement and in each
of the other agreements and instruments delivered to Parent in connection with
the transactions contemplated by this Agreement shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate in all
material respects as of the Scheduled Closing Time as if made at the Scheduled
Closing Time.
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
the Company and the Shareholder is required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all material
respects.
6.3 CONSENTS. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
Consents identified in PART 2.21 of the Disclosure Schedule) shall have been
obtained and shall be in full force and
32.
effect, except when failure to obtain such Consent will not have a Material
Adverse Effect on the Company or Parent.
6.4 AGREEMENTS AND DOCUMENTS. Parent and the Company shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(A) Employment Agreement and Noncompetition Agreement in the form of
EXHIBITS H and I, executed respectively, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇;
(B) Employment and Noncompetition Agreement in the form of EXHIBIT J,
executed by ▇▇▇▇▇ ▇. ▇▇▇▇
(C) Release in the form of EXHIBIT K, executed by the Shareholder;
(D) confidential information and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by those employees listed
in PART 6.4(D) of the Disclosure Schedule;
(E) the statement referred to in SECTION 5.6(A), executed by the
Company;
(F) Continuity of Interest Certificates in the form of EXHIBIT G,
executed by the Shareholder;
(G) an estoppel certificate, dated as of a date not more than five
days prior to the Closing Date and satisfactory in form and content to Parent,
executed by 114 Executive Park Trust (the "Landlord") and an Amendment to
Commercial Lease, dated January 5, 1996, between the Company and the Landlord
satisfactory in form and content to Parent;
(H) a legal opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Branch, Professional
Association, dated as of the Closing Date, in the form of EXHIBIT L;
(I) a letter from Price Waterhouse LLP, dated as of the Closing Date,
confirming that no transaction entered into by the Company, and no other fact or
circumstance relating to the Company, will prevent Parent from accounting for
the Merger as a "pooling of interests" in accordance with generally accepted
principles, Accounting Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC;
(J) a certificate executed by the Shareholder and containing the
representation and warranty of the Shareholder that each of the representations
and warranties set forth in Section 2 is accurate in all material respects as of
the Closing Date as if made on the Closing Date and that the conditions set
forth in Sections 6.1, 6.2 and 6.3 have been duly satisfied (the "Shareholder's
Closing Certificate"); and
(K) written resignations of all directors of the Company and the
Subsidiary, effective as of the Effective Time.
33.
6.5 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in SECTION 5.6(B).
6.6 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.7 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the business, condition, assets, liabilities, operation or financial
performance, or, to the best knowledge of the Company and the Shareholder,
prospects of the Company since December 31, 1996, except for (a) any such
material adverse change that is demonstrated by the Company to have resulted
from changes that occurred after the date of this Agreement in general business
conditions in the personal computer industry, and (b) any material adverse
change in the Company's financial performance that is temporary in nature and is
demonstrated by the Company to have resulted directly from the public
announcement or the pendency of the Merger.
6.8 NO GOVERNMENTAL LITIGATION. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to become
a party or is otherwise involved: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (b) relating to the Merger and seeking to obtain
from Parent or any of its subsidiaries any damages that may be material to
Parent; (c) seeking to prohibit or limit in any material respect Parent's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving Corporation; or (d)
which would materially and adversely affect the right of Parent, the Surviving
Corporation or any subsidiary of Parent to own the assets or operate the
business of the Company.
6.9 NO OTHER LITIGATION. There shall not be pending or threatened to
commence any Legal Proceeding (a) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Agreement; (b) relating to the Merger and seeking to obtain from Parent or
any of its subsidiaries any damages that may be material to Parent; (c) seeking
to prohibit or limited in any material respect Parent's ability to vote, receive
dividends with respect to or otherwise exercise ownership rights with respect to
the stock of the Surviving Corporation; or (d) which would affect adversely the
right of Parent, the Surviving Corporation or any subsidiary of Parent to own
the assets or operate the business of the Company.
6.10 TERMINATION OF 401(K) PLAN. The Company shall have provided Parent
with evidence, reasonably satisfactory to Parent, as to the termination of its
401(k) plan referred to in SECTION 5.8.
6.11 TERMINATION OF MICROID DISTRIBUTION AGREEMENT. The Company shall have
provided Parent with evidence, reasonably satisfactory to Parent, as to the
termination of that certain Domestic Mail Order Distribution Agreement, dated
April 11, 1994, between the
34.
Company and the Subsidiary, as amended by Modification No. 1 to Domestic Mail
Order Distribution Agreement, dated September 16, 1994. Pursuant to such
termination, neither the Company, the Subsidiary, Merger Sub nor Parent shall
have any further obligations, and shall not be subject to any liability, under
such agreement as amended.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company and Shareholder to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement, and shall be
accurate in all material respects as of the Scheduled Closing Time as if made at
the Scheduled Closing Time.
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 DOCUMENTS. The Shareholder shall have received the following
documents:
(A) a legal opinion of ▇▇▇▇▇▇ Godward LLP, dated as of the Closing
Date, in the form of EXHIBIT M.
(B) Employment Agreement and Noncompetition Agreement of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ in the form of Exhibits H and I, each executed on behalf of the Parent;
(C) Employment and Noncompetition Agreement of ▇▇▇▇▇ ▇. ▇▇▇▇ in the
form of EXHIBIT J, executed on behalf of Parent;
(D) A certificate executed by Parent and Merger Sub containing the
representation and warranty of each entity that each of the representations and
warranties set forth in SECTION 3 is accurate in all respects as of the Closing
Date as if made on the Closing Date and that the conditions set forth in
SECTIONS 7.1, 7.2 and 7.3 have been duly satisfied.
7.4 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.5 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in Parent's business, condition, assets, liabilities, operations or
financial performance since the date of this Agreement, except for (a) any such
material adverse change that is demonstrated by Parent to have resulted directly
from changes that occurred after the date of this
35.
Agreement in general business conditions in the personal computer industry, and
(b) any material adverse change in Parent's financial performance that is
temporary in nature and is demonstrated by Parent to have resulted directly from
the public announcement or the pendency of the Merger (it being understood that
a decline in Parent's stock price shall not, in and of itself, constitute a
"material adverse change in Parent's business, condition, assets, liabilities,
operations or financial performance").
7.6 NO GOVERNMENTAL LITIGATION. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to become
a party or is otherwise involved: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (b) relating to the Merger and seeking to obtain
from the Company or any of its subsidiaries any damages that may be material to
the Company; (c) seeking to prohibit or limit in any material respect the
Company's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporation; or (d) which would materially and adversely affect the right of the
Parent, the Surviving Corporation or any subsidiary of Parent to own the assets
or operate the business of the Company.
7.7 NO OTHER LITIGATION. There shall not be pending or threatened to
commence any Legal Proceeding (a) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Agreement; (b) relating to the Merger and seeking to obtain from the
Company or any of its subsidiaries any damages that may be material to the
Company; (c) seeking to prohibit or limited in any material respect the
Company's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporation; or (d) which would affect adversely the right of Parent, the
Surviving Corporation or any subsidiary of Parent to own the assets or operate
the business of the Company.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(A) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in SECTION 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement);
(B) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in SECTION 7 has become
impossible (other than as a result of any failure on the part of the Company or
the Shareholder to comply with or perform any covenant or obligation set forth
in this Agreement or in any other agreement or instrument delivered to Parent);
(C) by Parent at or after the Scheduled Closing Time if any condition
set forth in SECTION 6 has not been satisfied by the Scheduled Closing Time;
36.
(D) by the Company and the Shareholder at or after the Scheduled
Closing Time if any condition set forth in SECTION 7 has not been satisfied by
the Scheduled Closing Time;
(E) by Parent if the Closing has not taken place on or before May 30,
1997 (other than as a result of any failure on the part of Parent to comply with
or perform any covenant or obligation of Parent set forth in this Agreement);
(F) by the Company and the Shareholder if the Closing has not taken
place on or before May 30, 1997 (other than as a result of the failure on the
part of the Company or the Shareholder to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or instrument
delivered to Parent); or
(G) by the mutual consent of Parent and the Company.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this Agreement
pursuant to SECTION 8.1(A), SECTION 8.1(C) or SECTION 8.1(E), Parent shall
deliver to the Company a written notice stating that Parent is terminating this
Agreement and setting forth a brief description of the basis on which Parent is
terminating this Agreement. If the Company wishes to terminate this Agreement
pursuant to SECTION 8.1(B), SECTION 8.1(D) or SECTION 8.1(F), the Company shall
deliver to Parent a written notice stating that the Company is terminating this
Agreement and setting forth a brief description of the basis on which the
Company is terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
SECTION 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither the Company nor Parent shall be
relieved of any obligation or liability arising from any prior breach by such
party of any provision of this Agreement; (b) the parties shall, in all events,
remain bound by and continue to be subject to the provisions set forth in
SECTION 10 (except SECTION 10.1); and (c) the Company shall, in all events,
remain bound by and continue to be subject to SECTION 5.2.
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(A) The representations and warranties made by the Shareholder
(including the representations and warranties set forth in SECTION 2 and the
representations and warranties set forth in the Shareholder's Closing
Certificate) shall survive the Closing and shall expire on the [*] of the
Closing Date; provided, however, that the representations and warranties of the
Company and the Shareholder set forth in [*] shall survive the Closing until
[*]; provided, further, that if, at any time prior to the [*] of the Closing
Date, any Indemnitee (acting in good faith) delivers to the Shareholder a
written notice alleging the existence of an inaccuracy in or a breach of any of
the representations and warranties made by the Shareholder (and setting forth in
reasonable detail the basis for such Indemnitee's belief that such an inaccuracy
or breach may exist) and asserting a
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
37.
claim for recovery under SECTION 9.2 based on such alleged inaccuracy or breach,
then the claim asserted in such notice shall survive the first anniversary of
the Closing until such time as such claim is fully and finally resolved.
(B) The Disclosure Schedule, the representations, warranties,
covenants and obligations of the Company and the Shareholder, and the rights and
remedies that may be exercised by the Indemnitees, shall not be limited or
otherwise affected by or as a result of any information furnished to (except as
set forth in the Disclosure Schedule), or any investigation made by or knowledge
of, any of the Indemnitees or any of their Representatives.
(C) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Company and the Shareholder in this Agreement.
(D) The representations and warranties made by Parent set forth in
SECTION 3 shall survive the Closing and shall expire on the date that is [*]
after the filing of Parent's first quarterly report on Form 10-Q filed with
the SEC subsequent to the Closing Date; provided, however, that if, at any
-----------------
time prior to such date, the Shareholder (acting in good faith) delivers to
Parent a written notice alleging the existence of an inaccuracy in or a breach
of any of the representations and warranties made by Parent (and setting forth
in reasonable detail the basis for the Shareholder's belief that such an
inaccuracy or breach may exist) and asserting a claim for recovery under
SECTION 9.3 based on such alleged inaccuracy or breach, then the claim
asserted in such notice shall survive such date until such time as such claim
is fully and finally resolved.
9.2 INDEMNIFICATION BY THE SHAREHOLDER.
(A) From and after the Effective Time (but subject to SECTIONS 9.1(A)
and 9.4), the Shareholder, shall hold harmless and indemnify each of the
Indemnitees from and against, and shall compensate and reimburse each of the
Indemnitees for, any Damages which are directly or indirectly suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject (regardless of whether or not such Damages relate to
any third party claim) and which arise from or as a result of, or are directly
or indirectly connected with: (i) any inaccuracy in or breach of any
representation or warranty set forth in SECTION 2 or in the Shareholder's
Closing Certificate; (ii) any breach of any covenant or obligation of the
Company or the Shareholder (including the covenants set forth in SECTIONS 4 and
5); or (iii) any Legal Proceeding relating to any inaccuracy or breach of the
type referred to in clause "(i)" or "(ii)" above (including any Legal Proceeding
commenced by any Indemnitee for the purpose of enforcing any of its rights under
this SECTION 9).
(B) The Shareholder acknowledges and agrees that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then Parent shall also be
deemed, by virtue of its ownership of the stock of the Surviving Corporation, to
have incurred Damages as a result of and in connection with such inaccuracy or
breach (provided, however, Parent and the Surviving Corporation together shall
not be entitled to recover more than once for the same Damages).
9.3 INDEMNIFICATION BY THE PARENT. From and after the Effective Time
(but subject to SECTIONS 9.1(d) AND 9.4), Parent, shall hold harmless and
indemnify the Shareholder from and against, and shall compensate and reimburse
the Shareholder for, any Damages which are directly or indirectly suffered or
incurred by the Shareholder or to which the Shareholder may otherwise become
subject (regardless of whether or not such Damages relate to any third party
claim) and which arise from or as a result of, or are directly or indirectly
connected with: (i) any inaccuracy in or breach of any representation or
warranty set forth in SECTION 3; (ii) any breach of any covenant or obligation
of Parent; or (iii) any Legal Proceeding relating to any inaccuracy or breach
of the type referred to in clause "(i)" or "(ii)" above (including any Legal
Proceeding commenced by the Shareholder for the purpose of enforcing any of
its rights under this SECTION 9).
9.4 LIMITATIONS.
(a) Notwithstanding anything contained herein to the contrary, the
Shareholder shall not be required to make any indemnification payments to any
Indemnitee pursuant to this Agreement, including, without limitation SECTION
9.2, until such time as the total amount of all Damages suffered or incurred
by the Indemnitees exceeds [*] at which time the Indemnitees shall be entitled
to be indemnified against all Damages in excess of [*], provided that the
Shareholder obligations under SECTION 9 shall not exceed [*].
(b) Notwithstanding anything contained herein to the contrary,
Parent shall not be required to make any indemnification payments to the
Shareholder pursuant to this Agreement, including without limitation SECTION
9.2, until such time as the total amount of all Damages suffered or incurred
by the Shareholder exceeds [*] at which time the Shareholder shall be entitled
to be indemnified against all Damages in excess of [*]; provided, that the
Purchaser's obligations under this SECTION 9 shall not exceed [*].
9.5 NO CONTRIBUTION. The Shareholder waives, and acknowledges and agrees
that he shall not have and shall not exercise or assert (or attempt to exercise
or assert), any right of
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
38.
contribution, right of indemnity or other right or remedy against the Surviving
Corporation in connection with any indemnification obligation or any other
liability to which he may become subject under or in connection with this
Agreement or the Shareholder's Closing Certificate.
9.6 INTEREST. Any Person who is required to hold harmless, indemnify,
compensate or reimburse any other Person (whether an Indemnitee or the
Shareholder) pursuant to this SECTION 9 with respect to any Damages shall also
be liable for interest on the amount of such Damages (for the period commencing
as of the date on which such Person first received notice of a claim for
recovery and ending on the date on which the liability of the indemnifying party
is fully satisfied) at a floating rate equal to the rate of interest publicly
announced by Bank of America, N.T. & S.A. from time to time as its prime, base
or reference rate.
9.7 DEFENSE OF THIRD PARTY CLAIMS (PARENT). In the event of the assertion
or commencement by any Person of any claim or Legal Proceeding (whether against
the Surviving Corporation, against Parent or against any other Person) with
respect to which the Shareholder may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this SECTION 9,
Parent shall have the right, at its election, to proceed with the defense of
such claim or Legal Proceeding on its own. If Parent so proceeds with the
defense of any such claim or Legal Proceeding:
(A) all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by the Shareholder;
(B) the Shareholder shall make available to Parent any documents and
materials in his possession or control that may be necessary to the defense of
such claim or Legal Proceeding; and
(C) Parent shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the consent of the Shareholder; provided,
however, that such consent shall not be unreasonably withheld.
Parent shall give the Shareholder prompt notice of the commencement of any such
Legal Proceeding against Parent or the Surviving Corporation; provided, however,
that any failure on the part of Parent to so notify the Shareholder shall not
limit any of the obligations of the Shareholder under this SECTION 9 (except to
the extent such failure materially prejudices the defense of such Legal
Proceeding).
9.8 DEFENSE OF THIRD PARTY CLAIMS (SHAREHOLDER). In the event of the
assertion or commencement by any Person of any claim or Legal Proceeding with
respect to which Parent may become obligated to hold harmless, indemnify,
compensate or reimburse the Shareholder pursuant to this SECTION 9, the
Shareholder shall have the right, at his election, to proceed with the defense
of such claim or Legal Proceeding on his own. If the Shareholder so proceeds
with the defense of any such claim or Legal Proceeding:
(A) all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by the Parent;
39.
(B) Parent shall make available to Parent any documents and materials
in his possession or control that may be necessary to the defense of such claim
or Legal Proceeding; and
(C) the Shareholder shall have the right to settle, adjust or
compromise such claim or Legal Proceeding with the consent of Parent; provided,
however, that such consent shall not be unreasonably withheld.
The Shareholder shall give Parent prompt notice of the commencement of any such
Legal Proceeding against the Shareholder; provided, however, that any failure on
the part of the Shareholder to so notify the Parent shall not limit any of the
obligations of the Shareholder under this SECTION 9 (except to the extent such
failure materially prejudices the defense of such Legal Proceeding).
9.9 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT OR THE
SHAREHOLDER. Parent (or any successor thereto or assign thereof) and the
Shareholder shall be the only Persons permitted to assert any indemnification
claim or exercise any other remedy under this Agreement unless Parent (or any
successor thereto or assign thereof) or the Shareholder, as the case may be,
shall have consented to the assertion of such indemnification claim or the
exercise of such other remedy.
9.10 METHOD OF PAYMENT. In the event the Designated Parent Stock Price
(calculated at the time of claim for indemnification) is greater than $15.30,
any claims for indemnification against the Shareholder pursuant to SECTION 9.2
may first be satisfied from the Escrow Shares at the Shareholder's option.
Notwithstanding the preceding sentence, for purposes of the payment of Escrow
Shares in satisfaction of such indemnification obligations, the Escrow Shares
shall be valued at the Designated Parent Stock Price.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.2 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to Parent
and its Representatives in connection with such investigation and review), (b)
the negotiation, preparation and review of this Agreement (including the
Disclosure Schedule) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
transactions contemplated by this
40.
Agreement, (c) the preparation and submission of any filing or notice required
to be made or given in connection with any of the transactions contemplated by
this Agreement, and the obtaining of any Consent required to be obtained in
connection with any of such transactions, and (d) the consummation of the
Merger; provided, however, that, to the extent the total amount of all such
fees, costs and expenses incurred by or for the benefit of the Company
(including all such fees, costs and expenses incurred prior to the date of this
Agreement and including the amount of all special bonuses and other amounts that
may become payable to any officers of the Company or other Persons in connection
with the consummation of the transactions contemplated by this Agreement,
excluding amounts payable pursuant to Employment Agreements referenced at
Exhibit H and J) exceeds [*] in the aggregate, such fees, costs and expenses
shall be borne and paid by the Shareholder and not by the Company.
10.3 BROKERS. None of the parties hereto has agreed or become obligated to
pay, or has taken any action that might result in any party claiming to be
entitled to receive, any brokerage commission, finder's fee or similar
commission or fee in connection with any of the transactions contemplated by
this Agreement. The Shareholder agrees to indemnify and hold harmless the
Indemnitees from and against, and shall compensate and reimburse any of the
Indemnitees for, Damages suffered or incurred as a result of a breach of the
foregoing representation on behalf of the Company of the Shareholder. Parent
agrees to indemnify and hold harmless the Shareholder from and against, and
shall compensate and reimburse the Shareholder for, Damages suffered or incurred
as a result of a breach of the foregoing representation on behalf of Parent.
10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
IF TO PARENT:
Award Software International, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
41.
with a copy (not constituting notice) to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Cooley Godward LLP
Five Palo Alto Square
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
IF TO THE COMPANY:
Unicore Software, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
IF TO THE SHAREHOLDER:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
c/o Unicore Software, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy (not constituting notice) to:
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Branch, Professional Association
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
10.6 CONFIDENTIALITY. Without limiting the generality of anything
contained in SECTION 5.2, on and at all times after the Closing Date, the
Shareholder and the Company shall keep confidential, and shall not use or
disclose to any other Person, any non-public document or other non-public
information in such Shareholder's possession that relates to the business,
financial condition, results of operations or prospects of the Company or
Parent. In the event the Closing does not occur, Parent shall continue to abide
by its obligations under SECTION 4.1.
10.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
10.8 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
42.
10.10 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
California (without giving effect to principles of conflicts of laws).
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Shareholder and its
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); Parent and its successors and assigns (if any);
and Merger Sub and its successors and assigns (if any). This Agreement shall
inure to the benefit of: the Company; the Company's shareholders (to the extent
set forth in SECTION 1.5); the holders of assumed Company Options (to the extent
set forth in SECTION 1.6); Parent; Merger Sub; the other Indemnitees (subject to
SECTION 9.6); and the respective successors and assigns (if any) of the
foregoing. Parent may freely assign any or all of its rights under this
Agreement (including its indemnification rights under SECTION 9), in whole or in
part, to any other Person without obtaining the consent or approval of any other
party hereto or of any other Person; provided, however, that Parent shall have
no right to assign its obligations under this Agreement.
10.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
10.13 WAIVER.
(A) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(B) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
10.14 AMENDMENTS. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
43.
10.15 SEVERABILITY. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.16 PARTIES IN INTEREST. Except for the provisions of SECTIONS 1.5, 1.6
and 9, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
10.17 ENTIRE AGREEMENT. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
10.18 CONSTRUCTION.
(A) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(B) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(C) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(D) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
44.
The parties hereto have caused this Agreement to be executed and delivered
as of May 29, 1997.
AWARD SOFTWARE INTERNATIONAL, INC.,
a California corporation
By: \s\ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: Chief Financial Officer
----------------------------------------
AWARD ACQUISITION SUB CORP.,
a Delaware corporation
By: \s\ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: President
----------------------------------------
UNICORE SOFTWARE, INC.,
a Massachusetts corporation
By: \s\ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and Treasurer
\s\ ▇▇▇▇▇▇ ▇. Narrath
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
45.
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(A) the sale, license, disposition or acquisition of all or a material
portion of the Company's or the Subsidiary's business or assets;
(B) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of the Company, (ii) any option, call, warrant or right
(whether or not immediately exercisable) to acquire any capital stock or other
equity security of the Company or the Subsidiary, or (iii) any security,
instrument or obligation that is or may become convertible into or exchangeable
for any capital stock or other equity security of the Company or the Subsidiary;
or
(C) any merger, consolidation, business combination, reorganization or
similar transaction involving the Company or the Subsidiary.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization, as it may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company or the Subsidiary is a party; (b) by which the Company or the
Subsidiary or any of their assets is or may become bound or under which the
Company or the Subsidiary has, or may become subject to, any obligation; or (c)
under which the Company or the Subsidiary has or may acquire any right or
interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or the Subsidiary or
otherwise used by the Company or the Subsidiary.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, liability,
claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including
reasonable attorneys' fees), charge, cost (including costs of investigation) or
expense of any nature.
A-1
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule (dated
and delivered as of the date of the Agreement), which is arranged in parts
corresponding to the numbered and lettered subsections in SECTION 2 and
identifies the exception with particularity, describes the relevant facts in
reasonable detail and states with specificity the subsection to which each
disclosure or exception is made, delivered to Parent on behalf of the Company
and the Shareholder. No disclosure or exception in the Disclosure Schedule
shall be adequate to disclose an exception to a representation or warranty
unless such disclosure satisfies the requirements set forth in the preceding
sentence.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
(I) nation, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign or other government; or (c) governmental or quasi
governmental authority of any nature (including any governmental division,
department, agency, commission, instrumentality, official, organization, unit,
body or Entity and any court or other tribunal).
(II) Parent; (b) Parent's current and future affiliates (including the
Surviving Corporation); (c) the respective Representatives of the Persons
referred to in clauses "(a)" and "(b)" above; and (d) the respective successors
and assigns of the Persons referred to in clauses "(a)", "(b)" and "(c)" above;
provided, however, that the Shareholder shall not be deemed to be "Indemnitees."
A-2
GOVERNMENTAL BODY. "Governmental Body" shall mean any:
(A) nation, principality, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature;
(B) federal, state, local, municipal, foreign or other government.
(C) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal);
(D) multi-national organization or body; or
(E) individual, Entity or body exercising, or entitled to exercise,
any executive, legislative, judicial, administrative, regulatory, police,
military or taxing authority or power of any nature.
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a) Parent;
(b) Parent's current and future affiliates (including the Surviving
Corporation); (c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and (d) the respective successors and assigns of
the Persons referred to in clauses "(a)", "(b)" and "(c)" above; provided,
however, that the Shareholder shall not be deemed to be an "Indemnitee."
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on the Company
if such event, violation, inaccuracy, circumstance or other matter (considered
together with all other matters that would constitute exceptions to the
representations and warranties set forth in the Agreement or in the
Shareholder's Closing Certificate but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications, in
such representations and warranties) could be reasonably expected to have a
material adverse effect on the Company's or the Subsidiary's business,
condition, assets, liabilities, operations or financial performance or, in the
reasonable good faith belief of the Company or the Shareholder, the Company's or
the Subsidiary's prospects.
A-3
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service ▇▇▇▇ (whether
registered or unregistered), service ▇▇▇▇ application, copyright (whether
registered or unregistered), copyright application, trade secret, know-how,
customer list, franchise, system, computer software, computer program,
invention, design, blueprint, engineering drawing, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset; or (b) right to use or exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
A-4
Pursuant to Regulation S-K Item 601(b)(2), the following is a list briefly
describing the contents of all omitted attachments. The omitted attachments do
not contain information that is material to an investment decision or that has
otherwise been disclosed in the Merger Agreement or the Form 8-K/A. The Company
will furnish supplementally a copy of any omitted attachment to the Commission
upon request.
INDEX TO EXHIBITS
Exhibit B Restated Certificate of Incorporation and Bylaws
Exhibit C Directors and Officers
Exhibit F Tax Representation Letters
Exhibit G Continuity of Interest Certificate
Exhibit J Employment and Noncompetition Agreement (▇▇▇▇▇ ▇. ▇▇▇▇)
Exhibit L Legal Opinion of ▇▇▇▇▇▇, Milliment & Branch, Professional Association
Exhibit M Legal Opinion of ▇▇▇▇▇▇ Godward LLP
Pursuant to Regulation S-K Item 601(b)(2), the following is a list
briefly the contents of all omitted schedules. The omitted schedules do not
contain information that is material to an investment decision or that has
otherwise been disclosed in the Merger Agreement or the Form 8-K/A. The Company
will furnish supplementally a copy of any omitted schedule or attachment to the
Commission upon request.
1. Other Names
2. Foreign Qualifications
3. Officers and Directors
4. Controlling Interests in Other Entities
5. Repurchase Options
6. Distributions
7. Licensing of Assets
8. Accounts Receivable
9. Contributions to Employee Benefit Plans
10. Raises since December 31, 1996
11. New Employees Since December 31, 1996
12. Tax Elections
13. Emcumbrances
14. Capitalized Leases
15. Items Leased or Licensed to the Company
16. Bank Accounts
17. Accounts Receivable
18. Description of Proprietary Assets filed with a Governmental Body
19. Description of All Other Company Proprietary Assets
1.
20. Proprietary Assets Licensed to the Company
21. Title to Proprietary Assets
22. Payments for Proprietary Assets
23. Precautionary Measures; Disclosures of Source of Object Codes
24. Customer Claims Regarding Proprietary Assets
25. Exclusive License of Proprietary Assets
26. Covenant Not to Compete
27. Current Employees Without Non-Disclosure Agreements and/or Employment
Contracts
28. Past Employees Without Non-Disclosure Agreements and/or Employment Contracts
29. Employment Contracts
30. Contracts Relating to Proprietary Assets
31. Contracts Restricting the Company
32. Contracts Relating to Encumbrances
33. Guaranty and Indemnity Agreements
34. Contracts Relating to Sharing of Revenues
35. Related Party Contracts
36. Government Contracts
37. Contracts Outside of the Ordinary Course of Business
38. Contract that cannot be Terminated on 60 days Notice
39. Enforceability of Material Contracts
40. Violations of Contracts
41. Other Contracts
42. Proposed Contracts
43. Extensions
44. Tax Returns
45. Revenue Accruals
46. Extensions or Waivers
47. Tax Claims
48. Adjustments
49. Employee Benefit Plans
50. Pension Plans
51. Benefits After Termination of Employment
52. Additional Payments Related to Merger
53. Salaried Employees
54. Insurance
55. Related party Transactions
56. Legal Proceedings
57. Orders
58. Violation of Contracts
59. Filings
60. Projections
61. Accounts Receivable