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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
▇▇▇▇▇ SYSTEMS, INC.,
THE CONTINUUM COMPANY, INC.
AND CONTINUUM ACQUISITION CORPORATION
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of December
10, 1995, is made by and among ▇▇▇▇▇ Systems, Inc., a Delaware corporation (the
"Company"), The Continuum Company, Inc., a Delaware corporation ("Parent"), and
Continuum Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Parent ("Merger Sub").
WITNESSETH:
WHEREAS, Merger Sub will merge into the Company (the "Merger") pursuant to
the General Corporation Law of the State of Delaware (the "DGCL") and upon the
terms and subject to the conditions hereinafter set forth, and pursuant thereto
each outstanding share of Common Stock, par value $.01 per share ("Company
Common Stock"), of the Company not owned directly or indirectly by the Company
or Parent or their respective subsidiaries will be converted into the right to
receive a number of shares of Parent Common Stock, par value $0.10 per share
(the "Parent Common Stock"), to be determined in the manner set forth herein;
WHEREAS, the Board of Directors of the Company has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and is fair to, and in the best interests of, the Company and its
stockholders and has approved and adopted this Agreement and the transactions
contemplated hereby, and recommended adoption of this Agreement by the
stockholders of the Company;
WHEREAS, the Board of Directors of Parent has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and is fair to, and in the best interests of, Parent and its stockholders and
has approved and adopted this Agreement and the transactions contemplated hereby
and recommended approval by the stockholders of Parent of the issuance of Parent
Common Stock in connection with this Agreement;
WHEREAS, the Board of Directors of Merger Sub has approved and adopted this
Agreement and Parent, as the sole stockholder of Merger Sub, will adopt this
Agreement promptly after the execution hereof by the parties hereto;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the United
States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Merger is intended to be treated as a "pooling of interests"
for financial accounting purposes;
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions set forth below, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Subject to the terms and conditions hereof and in
accordance with the DGCL, at the Effective Time (as defined in Section 1.2): (i)
Merger Sub shall be merged with and into the Company and the separate existence
of Merger Sub shall cease; (ii) the Company, as the surviving corporation in the
Merger (the "Surviving Corporation"), (A) shall be a wholly-owned subsidiary of
Parent, (B) shall continue its corporate existence under the laws of the State
of Delaware, (C) shall retain its present name and (D) shall succeed to all
rights, assets, liabilities and obligations of Merger Sub and the Company in
accordance with the DGCL; (iii) except as provided in the proviso to this
Section 1.1, the Restated Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall continue as the
certificate of incorporation of the Surviving Corporation; (iv) the By-Laws of
the Company, as in effect immediately prior to the Effective Time, shall
continue as the bylaws of the Surviving Corporation; (v) the
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directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, each to hold office in accordance with
the certificate of incorporation and bylaws of the Surviving Corporation, and
(vi) the officers of Merger Sub immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, each to hold office in accordance
with the bylaws of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified; provided,
however, that Article IV of the Restated Certificate of Incorporation of the
Company shall be amended in its entirety to read as follows:
"The aggregate number of shares which the Corporation shall have authority
to issue is one thousand (1,000), of the par value of one dollar ($1.00)
each, to be designated 'Common Stock'."
From and after the Effective Time, the Merger will have all the effects provided
by applicable law.
SECTION 1.2. Effective Time of the Merger. As soon as practicable after the
Closing Date (as defined in Section 5.1 hereof) the parties hereto shall cause
the Merger to be consummated by filing a certificate of merger (the "Certificate
of Merger") with the Secretary of State of the State of Delaware, in such form
as required by, and executed in accordance with the relevant provisions of, the
DGCL (the date and time of such filing, or such later date or time agreed upon
by Parent and the Company and set forth therein, being called the "Effective
Time").
SECTION 1.3. Conversion and Cancellation of Securities.
(a) At the Effective Time, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock described in Section 1.3(b) hereof) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive 0.355555 of a fully paid and nonassessable share of
Parent Common Stock (such fraction being called the "Conversion Number");
provided, however, that no fractional shares of Parent Common Stock shall be
issued and, in lieu thereof, a cash payment shall be made pursuant to Section
1.4(i) hereof; and provided, further, that the Conversion Number shall be
subject to adjustment in accordance with the provisions of Section 4.2(d)(vi).
(b) At the Effective Time, each share of Company Common Stock held in the
treasury of the Company and each share of Company Common Stock owned by Parent
or any direct or indirect wholly owned subsidiary of the Company or Parent
immediately prior to the Effective Time, shall by virtue of the Merger and
without any action on the part of the holder thereof, be automatically canceled
and retired and cease to exist, and no cash, securities or other property shall
be payable in respect thereof.
(c) At the Effective Time, each share of Merger Sub common stock, par value
$1.00 per share ("Merger Sub Common Stock"), validly issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action by the holder thereof, be converted into one validly issued,
fully paid and nonassessable share of Common Stock, par value $1.00 per share,
of the Surviving Corporation ("Surviving Corporation Common Stock").
SECTION 1.4. Exchange of Certificates.
(a) American Stock Transfer & Trust Company (or another bank or trust
company selected by Parent and reasonably acceptable to the Company) shall act
as exchange agent (the "Exchange Agent") in connection with the surrender of
certificates evidencing shares of Company Common Stock converted into shares of
Parent Common Stock pursuant to the Merger. On or prior to the Closing Date,
Parent shall deposit with the Exchange Agent one or more certificates
representing the shares of Parent Common Stock to be issued in the Merger (the
"Merger Stock"), which shares of Merger Stock shall be deemed to be issued at
the Effective Time. At and following the Effective Time, Parent shall deliver to
the Exchange Agent such cash as may be required from time to time to make
payments of cash in lieu of fractional shares in accordance with Section 1.4(i)
hereof.
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(b) As soon as practicable after the Effective Time, Parent shall cause the
Exchange Agent to mail to each person who was, at the Effective Time, a holder
of record of a certificate or certificates that immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock (the
"Certificates") (i) a letter of transmittal specifying that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, which shall be in a form and
contain any other provisions as Parent and the Surviving Corporation may
reasonably agree and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing the Merger Stock. Upon
the proper surrender of Certificates to the Exchange Agent, together with a
properly completed and duly executed letter of transmittal and such other
documents as may be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor certificates
representing the shares of Merger Stock that such holder has the right to
receive pursuant to the terms hereof (together with any dividend or distribution
with respect thereto made after the Effective Time and any cash paid in lieu of
fractional shares pursuant to Section 1.4(i) hereof), and the Certificate so
surrendered shall be canceled. In the event of a transfer of ownership of
Company Common Stock that is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Merger Stock
may be issued to a transferee if the Certificate representing such Company
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence reasonably
satisfactory to the Surviving Corporation and Parent that any applicable stock
transfer tax has been paid.
(c) After the Effective Time, each outstanding Certificate which
theretofore represented shares of Company Common Stock shall, until surrendered
for exchange in accordance with this Section 1.4, be deemed for all purposes to
evidence ownership of the number of full shares of Parent Common Stock into
which the shares of Company Common Stock (which, prior to the Effective Time,
were represented thereby) shall have been so converted.
(d) Except as otherwise expressly provided herein, Parent shall pay all
charges and expenses, including those of the Exchange Agent, in connection with
the exchange of Certificates for shares of Merger Stock. Any Merger Stock
deposited with the Exchange Agent pursuant to Section 1.4(a) hereof, and not
exchanged pursuant to Section 1.4(b) hereof for Company Common Stock within six
months after the Effective Time, shall be returned by the Exchange Agent to
Parent, which shall thereafter act as exchange agent subject to the rights of
holders of Company Common Stock hereunder.
(e) At the Effective Time, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Common Stock shall thereafter be
made.
(f) None of Parent, Merger Sub, the Company, the Surviving Corporation or
the Exchange Agent will be liable to any holder of shares of Company Common
Stock for any shares of Merger Stock, dividends or distributions with respect
thereto or cash payable in lieu of fractional shares pursuant to Section 1.4(i)
hereof delivered to a state abandoned property administrator or other public
official pursuant to any applicable abandoned property, escheat or similar law.
(g) If any Certificates shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificates to
be lost, stolen or destroyed, and delivery of such bond or other indemnity as
the Exchange Agent may reasonably request, the Exchange Agent will deliver in
exchange for such lost, stolen or destroyed Certificates one or more
certificates representing the Merger Stock deliverable in respect thereof, as
determined in accordance with the terms hereof.
(h) No dividend or other distribution declared or made after the Effective
Time with respect to the Merger Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Merger Stock issuable upon surrender thereof until the holder
of such Certificate shall surrender such Certificate in accordance with Section
1.4(b). Subject to the effect of applicable law, following surrender of any such
Certificate there shall be paid, without interest, to the record holder of
certificates representing whole shares of Merger Stock issued in exchange
therefor: (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Merger Stock; and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to
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surrender of such Certificate and a payment date subsequent to such surrender
payable with respect to such whole shares of Merger Stock.
(i) No certificates or scrip evidencing fractional shares of Merger Stock
shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests shall not entitle the owner thereof to any rights of
a stockholder of Parent. In lieu of any such fractional shares, each holder of a
Certificate previously evidencing Company Common Stock, upon surrender of such
Certificate for exchange pursuant to this Article I, shall be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(a) the per share closing price as reported on the New York Stock Exchange
Composite Tape of Parent Common Stock on the date of the Effective Time (or, if
shares of Parent Common Stock do not trade on the New York Stock Exchange (the
"NYSE") on such date, the first date of trading of Parent Common Stock on the
NYSE after the Effective Time) by (b) the fractional interest to which such
holder would otherwise be entitled (after taking into account all shares of
Company Common Stock held of record by such holder at the Effective Time).
SECTION 1.5. No Dissenters' Rights. The holders of shares of Parent Common
Stock and the holders of shares of Company Common Stock shall not be entitled to
appraisal rights.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Company's Disclosure Schedule hereto, the
Company represents and warrants to Parent as follows:
SECTION 2.1. Organization and Authority; Subsidiaries.
(a) Each of the Company and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as it is
now being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing would not
have a Company Material Adverse Effect. (The term "Company Material Adverse
Effect" as used in this Agreement shall mean any change or effect that,
individually or when taken together with all other such changes or effects,
would be materially adverse to the financial condition, results of operations or
current or future business of the Company and its subsidiaries, taken as a
whole.) The Company has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. All necessary action, corporate or otherwise, required to have been
taken by or on behalf of it by applicable law, its charter document or otherwise
to authorize (i) the approval, execution and delivery on its behalf of this
Agreement and (ii) its performance of its obligations under this Agreement and
the consummation of the transactions contemplated hereby has been taken, except
that the transactions must be approved by the stockholders of the Company. This
Agreement constitutes the Company's valid and binding agreement, enforceable
against it in accordance with its terms, except (A) as the same may be limited
by applicable bankruptcy, insolvency, moratorium or similar laws of general
application relating to or affecting creditors' rights, including without
limitation, the effect of statutory or other laws regarding fraudulent
conveyances and preferential transfers, and (B) for the limitations imposed by
general principles of equity.
(b) The Company's Disclosure Schedule identifies each subsidiary of the
Company as of the date hereof and shows the jurisdiction of incorporation of
each such subsidiary. All the outstanding shares of capital stock of the
subsidiaries of the Company (other than directors' qualifying shares in the case
of foreign subsidiaries) are validly issued, fully paid and nonassessable and
owned by the Company (or by a subsidiary of the Company) free and clear of all
liens, claims or encumbrances. There are no existing options, calls or
commitments of any character relating to, or securities or rights convertible
into or exchangeable for shares of, the issued or unissued capital stock of any
subsidiary of the Company. Except as disclosed in filings made by
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the Company pursuant to the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "Exchange Act"), the Company does not
directly or indirectly own any interest in any other corporation, partnership,
joint venture or other business association or entity which is material to the
Company and its subsidiaries taken as a whole.
SECTION 2.2. No Breach. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not, (i)
violate or conflict with the Company's charter or bylaws or (ii) constitute a
breach or default (or an event that with notice or lapse of time or both would
become a breach or default) or give rise to any lien, third party right of
termination, cancellation, material modification or acceleration under any
agreement, understanding or undertaking to which the Company or any subsidiary
is a party or by which it is bound, except where such breach, default, lien,
third party right, cancellation, modification or acceleration would not have a
Company Material Adverse Effect, or (iii) constitute a violation of any law,
rule or regulation to which the Company or any subsidiary is subject.
SECTION 2.3. Consents and Approvals. Neither the execution and delivery by
the Company of this Agreement nor the consummation by the Company of the
transactions contemplated hereby will require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (i) for filings required under the Exchange Act,
(ii) for notification pursuant to, and expiration or termination of the waiting
period under, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (iii) for
filing and recording of the Certificate of Merger pursuant to the DGCL and (iv)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not prevent the Company from
performing its obligations under this Agreement without having a Company
Material Adverse Effect.
SECTION 2.4. Joint Proxy Statement/Prospectus and Other Information. None
of the information related to Company or any of its subsidiaries which is
supplied by Company for inclusion in the Joint Proxy Statement/Prospectus
described in Section 4.4(a) hereof will, at the time the Joint Proxy
Statement/Prospectus is mailed or at the time of the meeting of stockholders to
which the Joint Proxy Statement/Prospectus relates, contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation or warranty is otherwise made by
the Company with respect to the Joint Proxy Statement/Prospectus.
SECTION 2.5. Brokers and Finders. Neither the Company nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated herein, except that the Company has employed
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇") as its financial advisor.
Prior to the date of this Agreement the Company has delivered to Parent a copy
of all agreements pursuant to which ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ will be entitled to any
payment relating to the transactions contemplated by this Agreement.
SECTION 2.6. Capitalization. The Company's authorized capital stock
consists of (i) 50,000,000 shares of Company Common Stock, of which 14,507,415
were issued and outstanding as of November 13, 1995 (excluding 688,099 shares
held in treasury), and (ii) 1,000,000 shares of preferred stock, no par value
per share, of which no shares are issued and outstanding. Since November 13,
1995, no shares of Company Common Stock have been issued except upon exercise of
employee stock options. As of November 13, 1995 there were outstanding options
to purchase 2,383,002 shares of Company Common Stock and no options have been
granted after November 13, 1995. Except for such stock options, there are no
existing options, warrants, calls, subscriptions, or other rights or other
agreements or commitments obligating the Company to issue, transfer or sell any
shares of capital stock of the Company. There are no voting trusts or other
agreements or understandings to which the Company is a party with respect to the
voting of capital stock of the Company.
SECTION 2.7. SEC Reports. The Company has filed all required forms, reports
and documents with the Securities and Exchange Commission (the "SEC") pursuant
to the Exchange Act since March 31, 1993 (collectively, the "Company's SEC
Reports"). The Company's SEC Reports have complied in all material respects with
all applicable requirements of the Exchange Act. As of their respective dates,
none of the Company's SEC Reports, including, without limitation, any financial
statements or schedules included or
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incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company has heretofore delivered to Parent, in the form filed with the SEC, all
of the Company's SEC Reports.
SECTION 2.8. Financial Statements. The audited consolidated financial
statements of the Company contained in the Company's Annual Report on Form 10-K
for the year ended March 31, 1995, as amended by Form 10-K/A (the "1995 10-K"),
which consist of (i) consolidated balance sheets as of March 31, 1995 and 1994,
(ii) consolidated statements of income, changes in shareholders' equity and cash
flows and (iii) the notes thereto for each of the three fiscal years in the
period ended March 31, 1995, certified by Price Waterhouse LLP, whose reports
thereon and on the related financial statement schedule are included therewith,
were prepared in accordance with generally accepted accounting principles
("GAAP") and present fairly the Company's consolidated financial condition and
the consolidated results of its operations as of the relevant dates thereof and
for the periods covered thereby. The unaudited consolidated financial statements
of the Company contained in the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1995 (the "Company 10-Q"), which consist of
(i) consolidated balance sheets as of September 30, 1995 and ▇▇▇▇▇ ▇▇, ▇▇▇▇,
(▇▇) consolidated statements of income and cash flows for the three months and
six months ended September 30, 1995 and 1994 and (iii) the notes thereto, were
prepared in accordance with GAAP, subject to the absence of notes and schedules,
and present fairly the Company's consolidated financial condition and the
consolidated results of its operations as of the relevant dates thereof and for
the periods covered thereby, subject to normal and recurring year-end
adjustments.
SECTION 2.9. Absence of Certain Changes. Except as otherwise disclosed in
the Company's SEC Reports (without further amendment), since March 31, 1995
there has not been any (i) material adverse change in the financial condition,
results of operations or current or future business of the Company and its
subsidiaries, taken as a whole, except for material adverse changes due to
general economic or industry-wide conditions, or (ii) other events or conditions
of any character that, individually or in the aggregate, have or would
reasonably be expected to have a Company Material Adverse Effect.
SECTION 2.10. Absence of Undisclosed Liabilities. Neither the Company nor
any subsidiary has any material indebtedness, liability or obligation of the
type required by GAAP to be reflected on a balance sheet that is not reflected
or reserved against in the balance sheet dated as of September 30, 1995 included
in the Company 10-Q or otherwise disclosed in the Company SEC Reports, except
for such indebtedness, liabilities or obligations which have arisen after such
date in the ordinary course of business.
SECTION 2.11. Compliance With Law. Each of the Company and its subsidiaries
holds all licenses, franchises, certificates, consents, permits and
authorizations from all governmental authorities necessary for the lawful
conduct of its business, except where the failure to hold any of the foregoing
would not have a Company Material Adverse Effect. Neither the Company nor any
subsidiary has violated, nor is it in violation of, any such licenses,
franchises, certificates, consents, permits or authorizations or, to the
Company's knowledge, any applicable statutes, laws, ordinances, rules and
regulations (including, without limitation, any of the foregoing related to
occupational safety, storage, disposal, discharge into the environment of
hazardous wastes, environmental protection, conservation, unfair competition,
labor practices or corrupt practices) of any governmental authorities, except
where such violations do not, and insofar as reasonably can be foreseen will
not, have a Company Material Adverse Effect, and neither the Company nor any
subsidiary has received any notice from a governmental or regulatory authority
within three years of the date hereof of any such violation.
SECTION 2.12. Taxes.
(a) All Tax Returns required to be filed by the Company and any of its
subsidiaries, on any of their income, properties or operations, before the date
hereof are in all material respects true, complete and correct and have been
duly filed in a timely manner, and all taxes required to have been paid in
connection with such Tax Returns have been paid, except where the failure to so
file or pay would not have a Company Material Adverse Effect. For purposes of
this Agreement, "Tax Return" means any return, report, statement,
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information statement and the like required to be filed with any authority with
respect to any tax imposed by any governmental authority.
(b) To the Company's knowledge, (i) there are no claims, investigations or
assessments pending or threatened against the Company or its subsidiaries, for
any alleged deficiency in taxes, (ii) there is no audit or investigation
currently being conducted that could cause the Company or its subsidiaries to be
liable for any taxes, and (iii) the Company and its subsidiaries have not agreed
to extend any applicable statute of limitations relating to the assessment of
federal, state or local taxes relating to the Company or its subsidiaries, which
in any case would have a Company Material Adverse Effect.
(c) The Company and its subsidiaries have complied in all material respects
with all tax withholding provisions of applicable federal, state and local laws
and have paid over to the proper governmental authorities all amounts required
to be so withheld or paid over before the date hereof, except where the failure
to so withhold would not have a Company Material Adverse Effect.
SECTION 2.13. Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, before any court, arbitrator
or administrative, governmental or regulatory authority or body, domestic or
foreign, that, in the event of an adverse decision or outcome, could reasonably
be expected to have a Company Material Adverse Effect.
SECTION 2.14. Title to Property. Except for the office building in Woking,
England, disclosed in the 1995 10-K, neither the Company nor any subsidiary owns
any real property. The Company and each of its subsidiaries have good and
defensible title to all of their properties and assets, free and clear of all
liens, charges and encumbrances except liens for taxes not yet due and payable
and such liens or other imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use of the property
affected thereby or which, individually or in the aggregate, would not have a
Company Material Adverse Effect; and, to the Company's knowledge, all leases
pursuant to which the Company or any of its subsidiaries lease from others real
or personal property are in good standing, valid and effective in accordance
with their respective terms, and there is not, to the knowledge of the Company,
under any of such leases, any existing material default or event of default (or
event which with notice or lapse of time, or both, would constitute a material
default and in respect of which the Company or such subsidiary has not taken
adequate steps to prevent such a default from occurring) except where the lack
of such good standing, validity and effectiveness, or the existence of such
default or event of default would not have a Company Material Adverse Effect.
SECTION 2.15. Intellectual Property; Software.
(a) Each of the Company and its subsidiaries owns, or possesses adequate
licenses or other valid rights to use, all existing United States and foreign
patents, trademarks, trade names, service marks, copyrights, trade secrets, and
applications therefor that are material to its business as currently conducted
(the "Company Intellectual Property Rights").
(b) The validity of the Company Intellectual Property Rights and the title
thereto of the Company or any subsidiary, as the case may be, is not being
questioned in any litigation to which the Company or any subsidiary is a party.
(c) The conduct of the business of the Company and its subsidiaries as now
conducted does not, to the Company's knowledge, infringe any valid patents,
trademarks, trade names, service marks or copyrights of others. The consummation
of the transactions contemplated hereby will not result in the loss or
impairment of any Company Intellectual Property Rights.
(d) Prior to the execution and delivery of this Agreement, the Company has
provided Parent with a list of all computer software which the Company or any
subsidiary owns or has the right to market or use to provide services to third
parties.
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(e) Neither the Company nor any subsidiary has licensed (or otherwise
entered into any agreement permitting) any person to use or market any of its
computer software (whether or not copyrighted) other than licenses to end-users
to use (but not market, distribute, sell or transfer) the computer software.
(f) Each of the Company and its subsidiaries considers its computer
software as trade secrets, and each has taken steps it believes appropriate to
protect and maintain the same as such.
SECTION 2.16. Employee Benefit Plans; Employment Agreements.
(a) The Company's Disclosure Schedule lists all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, and any current or
former employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of the Company, any
trade or business (whether or not incorporated) which is a member of a
controlled group including the Company or which is under common control with the
Company (an "ERISA Affiliate") within the meaning of Section 414 of the Code, or
any subsidiary of the Company, as well as each plan with respect to which the
Company or an ERISA Affiliate could incur liability under Section 4069 (if such
plan has been or were terminated) or Section 4212(c) of ERISA (together, the
"Employee Plans"), excluding former agreements under which the Company has no
remaining obligations and any of the foregoing that are required to be
maintained by the Company under the laws of any foreign jurisdiction. The
Company has made available to Parent a copy of (i) the most recent annual report
on Form 5500 filed with the Internal Revenue Service (the "IRS") and (ii) each
such written Employee Plan (other than those referred to in Section 4(b)(4) of
ERISA).
(b) (i) None of the Employee Plans promises or provides retiree medical or
other retiree welfare benefits to any person and none of the Employee Plans is a
"multi-employer plan" as such term is defined in Section 3(37) of ERISA; (ii)
there has been no "prohibited transaction", as such term is defined in Section
406 of ERISA and Section 4975 of the Code, with respect to any Employee Plan,
which could result in any Company Material Adverse Effect; (iii) all Employee
Plans are in compliance in all material respects with the requirements
prescribed by any and all statutes (including ERISA and the Code), orders, or
governmental rules and regulations currently in effect with respect thereto
(including all applicable requirements for notification to participants or the
Department of Labor, IRS or Secretary of the Treasury), and the Company and each
of its subsidiaries have performed all material obligations required to be
performed by them under, are not in any material respect in default under or
violation of, and have no knowledge of any default or violation by any other
party to, any of the Employee Plans; (iv) each Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code is the subject of a favorable determination letter
from the IRS, and nothing has occurred which may reasonably be expected to
impair such determination; (v) all contributions required to be made to any
Employee Plan pursuant to Section 412 of the Code, or the terms of the Employee
Plan or any collective bargaining agreement, have been made on or before their
due dates and a reasonable amount has been accrued for contributions to each
Employee Plan for the current plan years; (vi) with respect to each Employee
Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) neither
the Company nor any ERISA Affiliate has incurred, nor reasonably expects to
incur, any liability under Title IV of ERISA (other than liability for premium
payments to the Pension Benefit Guaranty Corporation arising in the ordinary
course).
(c) The Company's Disclosure Schedule sets forth a true and complete list,
as of the date of this Agreement, of each current or former employee, officer or
director of the Company or any of its subsidiaries who holds any option to
purchase Company Common Stock as of the date hereof (collectively, the "Stock
Options"), together with the number of shares of Company Common Stock which are
subject to such option, the date of grant of such option, the extent to which
such option is vested (or will become vested within six months from the date
hereof, or as a result of, the Merger), the option price of such option (to the
extent
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determined as of the date hereof), whether such option is intended to qualify as
an incentive stock option within the meaning of Section 422(b) of the Code (an
"ISO"), and the expiration date of such option. The Company's Disclosure
Schedule also sets forth the total number of such ISOs and such nonqualified
options. The Company has furnished Parent with complete copies of the plans
(collectively, the "Option Plans") pursuant to which the Stock Options were
issued.
(d) The Company has made available to Parent (i) copies of all employment
agreements with officers of the Company; (ii) copies of all agreements with
consultants who are individuals obligating the Company to make annual cash
payments in an amount exceeding $250,000; (iii) a schedule listing all officers
of the Company who have executed a non-competition agreement with the Company;
(iv) copies (or descriptions) of all severance agreements, programs and policies
of the Company with or relating to its employees, except programs and policies
required to be maintained by law; and (v) copies of all plans, programs,
agreements and other arrangements of the Company with or relating to its
employees which contain change in control provisions.
SECTION 2.17. Labor Matters.
(a) There are no controversies pending or, to the knowledge of the Company,
threatened, between the Company or any of its subsidiaries and any of their
respective employees, which controversies have or may reasonably be expected to
have a Company Material Adverse Effect.
(b) Neither the Company nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or its subsidiaries nor does the Company know of
any activities or proceedings of any labor union to organize any such employees.
(c) The Company has no knowledge of any strikes, slowdowns, work stoppages,
lockouts or threats thereof, by or with respect to any employees of the Company
or any of its subsidiaries.
SECTION 2.18. Environmental Matters. Except in all cases as, in the
aggregate, have not had and could not reasonably be expected to have a Company
Material Adverse Effect, the Company and each of its subsidiaries, to the
Company's knowledge, (i) have obtained all applicable permits, licenses and
other authorizations which are required under foreign, federal, state or local
laws relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by the Company or its subsidiaries (or their respective
agents); (ii) are in compliance with all terms and conditions of such required
permits, licenses and authorizations, and also are in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in such laws or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder; (iii) as of the date hereof, are
not aware of nor have received notice of any event, condition, circumstance,
activity, practice, incident, action or plan which is reasonably likely to
interfere with or prevent continued compliance with or which would give rise to
any common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, based on or resulting from the Company's or any of
its subsidiaries (or any of their respective agents ) manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling or the
emission, discharge or release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste; and (iv) have taken all
actions necessary under applicable requirements of foreign, federal, state or
local laws, rules or regulations to register any products or materials required
to be registered by the Company or its subsidiaries (or any of their respective
agents) thereunder.
SECTION 2.19. Insurance. The Company and its subsidiaries maintain general
liability and other business insurance that the Company believes to be
reasonably prudent for it business.
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SECTION 2.20. Vote Required. The affirmative vote of the holders of a
majority of the outstanding Company Common Stock is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve and
adopt this Agreement.
SECTION 2.21. Tax Matters; Pooling.
(a) Neither the Company nor, to the knowledge of the Company, any of its
affiliates has taken or agreed to take any action that would prevent the Merger
from (a) constituting a reorganization qualifying under the provisions of
Section 368(a) of the Code or (b) being treated for financial accounting
purposes as a pooling of interests in accordance with GAAP and the rules,
regulations and interpretations of the SEC (a "Pooling Transaction"). The
Company has been advised in writing as of the date of this Agreement by Price
Waterhouse LLP that in accordance with GAAP and applicable rules and regulations
of the SEC, the Company is eligible to be a party to a merger accounted for as a
pooling of interests and that Price Waterhouse LLP is not aware of any matters
that prohibit the use of pooling of interests accounting in connection with the
Merger, and the factual information provided by the Company to Price Waterhouse
LLP in connection with such advice was correct in all material respects.
(b) The Company is not an investment company as defined in Section
368(a)(2)(f)(iii) and (iv) of the Code.
(c) The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
SECTION 2.22. Affiliates. The Company's Disclosure Schedule identifies all
persons who, to the knowledge of the Company, may be deemed to be affiliates of
the Company under Rule 145 of the Securities Act, as well as all directors and
executive officers of the Company. Concurrently with the execution and delivery
of this Agreement, the Company has delivered to Parent an executed letter
agreement, substantially in the form of Exhibit A hereto, from certain of such
persons identified in the Company's Disclosure Schedule and will use its
reasonable best efforts to deliver to Parent within ten days after the date of
this Agreement an executed letter agreement, substantially in the form of
Exhibit A hereto, from each of the other persons so identified.
SECTION 2.23. Certain Business Practices. None of the Company, any of its
subsidiaries or any directors, officers, agents or employees of the Company or
any of its subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended (the
"FCPA"), or (iii) made any other unlawful payment.
SECTION 2.24. Insider Interests. No officer or director of the Company has
any interest in any material property, real or personal, tangible or intangible,
including without limitation, any computer software or Company Intellectual
Property Rights, used in or pertaining to the business of the Company or any
subsidiary, except for the ordinary rights of a stockholder or employee stock
optionholder.
SECTION 2.25. Opinion of Financial Advisor. The Company has received the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to the effect that, as of the date of delivery of such
opinion, the consideration to be received by the holders of Company Common Stock
in the Merger is fair, from a financial point of view, to such holders. The
Company will promptly deliver to Parent a copy of such opinion.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB
Except as set forth on Parent's Disclosure Schedule hereto, Parent and
Merger Sub each represents and warrants to the Company as follows:
SECTION 3.1. Organization and Authority.
(a) Each of the Parent and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as it is
now being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing would not
have a Parent Material Adverse Effect. (The term "Parent Material Adverse
Effect" as used in this Agreement shall mean any change or effect that,
individually or when taken together with all such other changes or effects,
would be materially adverse to the financial condition, results of operations or
current or future business of Parent and its subsidiaries, taken as a whole.) It
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. All necessary
action, corporate or otherwise, required to have been taken by or on behalf of
it by applicable law, its charter document or otherwise to authorize (i) the
approval, execution and delivery on its behalf of this Agreement and (ii) its
performance of its obligations under this Agreement and the consummation of the
transactions contemplated hereby has been taken, except that the transactions
must be approved by its stockholders. This Agreement constitutes its valid and
binding agreement, enforceable against it in accordance with its terms, except
(A) as the same may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws of general application relating to or affecting creditors'
rights, including without limitation, the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, and (B) for the
limitations imposed by general principles of equity.
(b) The Parent's Disclosure Schedule identifies each subsidiary of the
Parent as of the date hereof and shows the jurisdiction of incorporation of each
such subsidiary. All the outstanding shares of capital stock of the subsidiaries
of the Parent (other than directors qualifying shares in the case of foreign
subsidiaries) are validly issued, fully paid and nonassessable and owned by the
Parent (or by a subsidiary of the Parent) free and clear of all liens, claims or
encumbrances. There are no existing options, calls or commitments of any
character relating to, or securities or rights convertible into or exchangeable
for shares of, the issued or unissued capital stock of any subsidiary of the
Parent. Except as disclosed on the Parent's Disclosure Schedule or in filings
made by the Parent pursuant to the Exchange Act, the Parent does not directly or
indirectly own any interest in any other corporation, partnership, joint venture
or other business association or entity which is material to the Parent and its
subsidiaries taken as a whole.
SECTION 3.2. No Breach. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not, (i)
violate or conflict with its charter or bylaws or (ii) constitute a breach or
default (or an event that with notice or lapse of time or both would become a
breach or default) or give rise to any lien, third party right of termination,
cancellation, material modification or acceleration under any agreement,
understanding or undertaking to which it is a party or by which Parent or any of
its subsidiaries is bound, except where such breach, default, lien, third party
right, cancellation, modification or acceleration would not have a Parent
Material Adverse Effect, or (iii) constitute a violation of any law, rule or
regulation to which Parent or any of its subsidiaries is subject.
SECTION 3.3. Consents and Approvals. Neither the execution and delivery of
this Agreement by it nor its consummation of the transactions contemplated
hereby will require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, except (i)
for filings required under the Securities Exchange Act, (ii) for notification
pursuant to, and expiration or termination of the waiting period under, the HSR
Act, (iii) for filing and recording of the Certificate of Merger pursuant to the
DGCL, (iv) for registration of Parent Company Stock and related filings under
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act") and applicable state securities or
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blue sky laws ("Blue Sky Laws") and (v) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent it from performing its obligations under this
Agreement without having a Parent Material Adverse Effect.
SECTION 3.4. Joint Proxy Statement/Prospectus and Other Information. None
of the information related to Parent or any of its subsidiaries which is
supplied by Parent for inclusion in the Joint Proxy Statement/Prospectus
described in Section 4.4(a) hereof will, at the time the Joint Proxy
Statement/Prospectus is mailed or at the time of the meeting of stockholders to
which the Joint Proxy Statement/Prospectus relates, contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation or warranty is otherwise made by
Parent or Merger Sub with respect to the Joint Proxy Statement/Prospectus.
SECTION 3.5. Brokers. Neither it nor any of its officers, directors or
employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated herein.
SECTION 3.6. Capitalization. The Parent's authorized capital stock consists
of (i) 40,000,000 shares of Parent Common Stock, of which 19,201,000 were issued
and outstanding as of October 24, 1995, and (ii) 5,000,000 shares of preferred
stock, par value $.01 per share, of which no shares are issued and outstanding.
Since October 24, 1995, no shares of Parent Common Stock have been issued except
upon exercise of employee and director stock options or pursuant to employee
benefits plans. As of November 13, 1995 there were outstanding options to
purchase 2,262,559 shares of Parent Common Stock and no options have been
granted after November 13, 1995, except for options granted to employees and
directors under existing stock option plans in the ordinary course of business
and for options granted to new Parent employees in connection with any
acquisition disclosed in Parent's Disclosure Schedule. Except for such stock
options, there are no existing options, warrants, calls, subscriptions, or other
rights or other agreements or commitments obligating the Parent to issue,
transfer or sell any shares of capital stock of the Parent. There are no voting
trusts or other agreements or understandings to which the Parent is a party with
respect to the voting of capital stock of the Parent.
SECTION 3.7. SEC Reports. The Parent has filed all required forms, reports
and documents with the SEC pursuant to the Exchange Act since March 31,1993
(collectively, the "Parent's SEC Reports"). The Parent's SEC Reports have
complied in all material respects with all applicable requirements of the
Exchange Act. As of their respective dates, none of the Parent's SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Parent has heretofore delivered to Parent, in the form filed with the SEC, all
of the Parent's SEC Reports.
SECTION 3.8. Financial Statements. The audited consolidated financial
statements of the Parent contained in the Parent's Annual Report on Form 10-K
for the year ended March 31,1995 (the "Parent 1995 10-K"), which consist of (i)
consolidated balance sheets as of March 31,1995 and 1994, (ii) consolidated
statements of operations, changes of stockholders' equity and cash flows for
each of the three fiscal years in the period ended March 31,1995 and (iii) the
notes thereto, audited by Ernst & Young LLP, whose report thereon and on the
related schedule is included therewith, were prepared in accordance with GAAP
and present fairly the Company's consolidated financial condition and the
consolidated results of its operations as of the relevant dates thereof and for
the periods covered thereby. The unaudited consolidated financial statements of
Parent contained in its Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1995 (the "Parent 10-Q"), which consist of condensed
consolidated balance sheets as of September 30, 1995 and March 31, 1995,
condensed consolidated statements of operations and cash flows for the three
months and six months ended September 30, 1995 and 1994, and notes thereto, were
prepared in accordance with GAAP, subject to the absence of notes and schedules,
and present fairly Parent's
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consolidated financial condition and the consolidated results of its operations
as of the relevant dates thereof and for the periods covered thereby, subject to
normal and recurring year-end adjustments.
SECTION 3.9. Absence of Certain Changes. Except as otherwise disclosed in
the Company's SEC Reports (without further amendment), since March 31,1995 there
has not been any (i) material adverse change in the financial condition, results
of operations or current or future business of the Company and its subsidiaries,
taken as a whole, except for material adverse changes due to general economic or
industry-wide conditions, or (ii) other events or conditions of any character
that, individually or in the aggregate, have or would reasonably be expected to
have a Parent Material Adverse Effect.
SECTION 3.10. Absence of Undisclosed Liabilities. Neither Parent nor any
subsidiary has any material indebtedness, liability or obligation of the type
required by GAAP to be reflected on a balance sheet that is not reflected or
reserved against in the balance sheet dated as of September 30, 1995 included in
the Parent 10-Q or otherwise disclosed in the Parent's SEC Reports, except for
such indebtedness, liabilities or obligations which have arisen after such date
in the ordinary course of business.
SECTION 3.11. Compliance With Law. Each of Parent and its subsidiaries
holds all licenses, franchises, certificates, consents, permits and
authorizations from all governmental authorities necessary for the lawful
conduct of its business, except where the failure to hold any of the foregoing
would not have a Parent Material Adverse Effect. Neither Parent nor any
subsidiary has violated, nor is it in violation of, any such licenses,
franchises, certificates, consents, permits or authorizations or, to Parent's
knowledge, any applicable statutes, laws, ordinances, rules and regulations
(including, without limitation, any of the foregoing related to occupational
safety, storage, disposal, discharge into the environment of hazardous wastes,
environmental protection, conservation, unfair competition, labor practices or
corrupt practices) of any governmental authorities, except where such violations
do not, and insofar as reasonably can be foreseen will not, have a Parent
Material Adverse Effect, and neither Parent nor any subsidiary has received any
notice from a governmental or regulatory authority within three years of the
date hereof of any such violation.
SECTION 3.12. Taxes.
(a) All Tax Returns required to be filed by Parent and any of its
subsidiaries, or any of their income, properties or operations, before the date
hereof are in all material respects true, complete and correct and have been
duly filed in a timely manner, and all taxes required to have been paid in
connection with such Tax Returns have been paid, except where the failure to so
file or pay would not have a Parent Material Adverse Effect.
(b) To Parent's knowledge, (i) there are no claims, investigations or
assessments pending or threatened against Parent or its subsidiaries, for any
alleged deficiency in taxes, and (ii) there is no audit or investigation
currently being conducted that could cause Parent or its subsidiaries to be
liable for any taxes, which in any case would have a Parent Material Adverse
Effect.
(c) Parent and its subsidiaries have complied in all material respects with
all tax withholding provisions of applicable federal, state and local laws and
have paid over to the proper governmental authorities all amounts required to be
so withheld or paid over before the date hereof, except where the failure to so
withhold would not have a Parent Material Adverse Effect.
SECTION 3.13. Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of Parent, threatened
against Parent or any of its subsidiaries, or any properties or rights of Parent
or any of its subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that, in the
event of an adverse decision or outcome, could reasonably be expected to have a
Parent Material Adverse Effect.
SECTION 3.14. Title to Property. Parent and each of its subsidiaries have
good and defensible title to all of their properties and assets, free and clear
of all liens, charges and encumbrances except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which, individually or in the aggregate, would not
have a Parent Material Adverse Effect; and, to Parent's knowledge, all leases
pursuant to
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which Parent or any of its subsidiaries lease from others real or personal
property are in good standing, valid and effective in accordance with their
respective terms, and there is not, to the knowledge of Parent, under any of
such leases, any existing material default or event of default (or event which
with notice or lapse of time, or both, would constitute a material default or
event of default (or event which with notice or lapse of time, or both, would
constitute a material default and in respect of which the Parent or such
subsidiary has not taken adequate steps to prevent such a default from
occurring) except where the lack of such good standing, validity and
effectiveness, or the existence of such default or event of default would not
have a Parent Material Adverse Effect.
SECTION 3.15. Intellectual Property; Software.
(a) Each of the Parent and its subsidiaries owns, or possesses adequate
licenses or other valid rights to use, all existing United States and foreign
patents, trademarks, trade names, service marks, copyrights, trade secrets, and
applications therefor that are material to its business as currently conducted
(the "Parent Intellectual Property Rights").
(b) The validity of the Parent Intellectual Property Rights and the title
thereto of the Parent or any subsidiary, as the case may be, is not being
questioned in any litigation to which the Parent or any subsidiary is a party.
(c) The conduct of the business of the Parent and its subsidiaries as now
conducted does not, to the Parent's knowledge, infringe any valid patents,
trademarks, tradenames, service marks or copyrights of others. The consummation
of the transactions contemplated hereby will not result in the loss or
impairment of any Parent Intellectual Property Rights.
(d) Prior to the execution and delivery of this Agreement, the Parent has
provided the Company with a list of all computer software which the Parent or
any subsidiary owns or has the right to market or use to provide services to
third parties.
(e) Neither the Parent nor any subsidiary has licensed (or otherwise
entered into any agreement permitting) any person to use or market any of its
computer software (whether or not copyrighted) other than licenses to end-users
to use (but not market, distribute, sell or transfer) the computer software.
(f) Each of the Parent and its subsidiaries considers its computer software
as trade secrets, and each has taken steps it believes appropriate to protect
and maintain the same as such.
SECTION 3.16. Employee Benefit Plans; Labor Matters. With respect to each
employee benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan", as defined in Section 3(3) of ERISA),
maintained or contributed to by Parent or any of its subsidiaries, or with
respect to which Parent or any of its subsidiaries could incur liability under
Section 4069, 4212(c) or 4204 of ERISA (the "Parent Benefit Plans"), no event
has occurred and, to the knowledge of Parent, there currently exists no
condition or set of circumstances, in connection with which Parent or any of its
subsidiaries could be subject to any liability under the terms of the Parent
Benefit Plans, ERISA, the Code or any other applicable law which would have a
Parent Material Adverse Effect. There is no pending or threatened labor dispute,
strike or work stoppage against Parent or any of its subsidiaries which may
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 3.17. Environmental Matters. Except in all cases as, in the
aggregate, have not had and could not reasonably be expected to have a Parent
Material Adverse Effect, Parent and each of its subsidiaries, to Parent's
knowledge, (i) have obtained all applicable permits licenses and other
authorizations which are required under foreign, federal, state or local laws
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
by Parent or its subsidiaries (or their respective agents); (ii) are in
compliance with all terms and conditions of such required permits, licenses and
authorizations, and also are in compliance with all other limitations,
restrictions, conditions, standards,
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prohibitions, requirements, obligations, schedules and timetables contained in
such laws or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder;
(iii) as of the date hereof, are not aware of nor have received notice of any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere with or prevent continued compliance
with or which would give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit or proceeding, based on or
resulting from Parent's or any of its subsidiaries (or any of their respective
agents') manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling or the emission, discharge or release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste; and (iv) have taken all actions necessary under applicable requirements
of foreign, federal, state or local laws, rules or regulations to register any
products or materials required to be registered by the Parent or its
subsidiaries (or any of their respective agents) thereunder.
SECTION 3.18. Insurance. Parent and its subsidiaries maintain general
liability and other business insurance that Parent believes to be reasonably
prudent for it business.
SECTION 3.19. Vote Required. The only vote of the holders of any class or
series of Parent's capital stock necessary to approve the issuance of the Parent
Common Stock in the Merger is, pursuant to the Rule 312 of the NYSE, the
affirmative vote of the holders of a majority of the outstanding shares of
Parent Common Stock voted on the proposal to so issue the Parent Common Stock,
provided that the total vote cast on such proposal represents over 50% in
interest of the outstanding Parent Common Stock. Parent, as the sole stockholder
of Merger Sub, will promptly vote to approve the Merger and adopt this
Agreement.
SECTION 3.20. Tax Matters; Pooling.
(a) Neither Parent nor, to the knowledge of Parent, any of its affiliates
has taken or agreed to take any action that would prevent the Merger (a) from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code or (b) from being treated as a Pooling Transaction for financial
accounting purposes. The Parent has been advised in writing as of the date of
this Agreement by Ernst & Young LLP that in accordance with GAAP and applicable
published rules and regulations of the SEC, the Parent is eligible to be a party
to a merger accounted for as a "pooling of interests" and that Ernst & Young LLP
is not aware of any matters that prohibit the use of pooling of interests
accounting in connection with the Merger, and the factual information provided
by the Parent to Ernst & Young LLP in connection with such advice was correct in
all material respects.
(b) The Parent is not an investment company as defined in Section
368(a)(2)(f)(iii) and (iv) of the Code.
(c) The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
SECTION 3.21. Affiliates. Except for the directors and executive officers
of Parent and DST Systems, Inc., there are no persons who, to the knowledge of
Parent, may be deemed to be affiliates of Parent under Rule 1-02 of Regulation
S-X of the SEC. Concurrently with the execution and delivery of this Agreement,
Parent has delivered to the Company an executed letter agreement, substantially
in the form of Exhibit B hereto, from certain such persons and will use its
reasonable best efforts to deliver to the Company within ten days after the date
of this Agreement an executed letter agreement, substantially in the form of
Exhibit B hereto, from each of the other such persons.
SECTION 3.22. Certain Business Practices. None of Parent, any of its
subsidiaries or any directors, officers, agents or employees of Parent or any of
its subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the FCPA, or (iii) made any other unlawful payment.
SECTION 3.23. Insider Interests. No officer or director of the Parent has
any interest in any material property, real or personal, tangible or intangible,
including without limitation, any computer software or Parent
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Intellectual Property Rights, used in or pertaining to the business of the
Parent or any subsidiary, except for the ordinary rights of a stockholder or
employee stock optionholder.
ARTICLE IV
OTHER AGREEMENTS
SECTION 4.1. No Solicitation. Neither the Company nor any of its
subsidiaries, officers, directors, representatives or agents shall, directly or
indirectly, knowingly encourage, solicit, initiate or participate in any way in
discussions or negotiations with, or knowingly provide any information to, any
person or group (other than Parent or any affiliate or associate of Parent and
their respective directors, officers, employees, representatives and agents)
concerning any merger of the Company, sale of substantially all of the assets of
the Company, sale of shares of capital stock of the Company or similar
transactions involving the Company; provided, however, that nothing contained in
this Section 4.1 shall prohibit the Board of Directors of the Company from (i)
taking and disclosing to the Company's stockholders a position with respect to a
tender offer for Company Common Stock by a third party pursuant to Rules 14d-9
and 14e-2 promulgated under the Exchange Act, (ii) making such disclosure to the
Company's stockholders as, in the judgment of the Board of Directors of the
Company, may be required under applicable law or (iii) participating in
discussions or negotiations with, or providing information to, any person in
connection with an unsolicited written proposal by such person to acquire the
Company pursuant to a merger, purchase of shares of capital stock of the Company
or other similar transaction or to acquire substantially all of the assets of
the Company, if, and only to the extent that (A) the Board of Directors of the
Company, after consultation with and based upon the advice of independent legal
counsel (who may be ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP), determines in good faith that
such action is necessary for such Board of Directors to comply with its
fiduciary duties to stockholders under applicable law and (B) prior to entering
into discussions or negotiations with, or providing such information to, such
person the Company (x) provides written notice to Parent to the effect that it
is participating in discussions or negotiations with, or providing information
to, such person and (y) enters into with such person a confidentiality agreement
in reasonably customary form on terms not more favorable to such person than the
terms contained in that certain Confidentiality Agreement (herein so called)
dated as of June 13, 1995, between the Company and Parent.
SECTION 4.2. Conduct of Business Pending Merger.
(a) The Company hereby covenants and agrees that, prior to the Effective
Time, unless otherwise contemplated by this Agreement or consented to in writing
by Parent, the Company shall and shall cause its subsidiaries to:
(i) operate its business in all material respects in the usual and
ordinary course consistent with past practice; and
(ii) use all reasonable efforts to preserve substantially intact its
business organization, maintain its material rights and franchises, retain
the services of its respective officers and key employees and maintain its
relationships with its material customers and suppliers.
(b) Except as contemplated by this Agreement or otherwise consented to in
writing by Parent, from the date of this Agreement until the Effective Time, the
Company shall not do, and shall not permit any of its subsidiaries to do, any of
the following:
(i) adopt any amendments to its charter document, which would alter
the terms of the Company Common Stock or would have an adverse impact on
the consummation of the transactions contemplated by this Agreement;
(ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, except for dividends by a subsidiary to the Company
or another subsidiary of the Company, or redeem or otherwise acquire any of
its securities;
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(iii) issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other securities or amend any of the terms of any such
securities or agreements outstanding on the date hereof; provided, however,
the Company may issue shares of Company Common Stock upon the exercise of
employee stock options outstanding on the date hereof and any subsidiary
may issue securities to the Company or any other subsidiary;
(iv) (A) create, incur or assume any long-term debt (including
obligations in respect of capital leases but excluding any intercompany
indebtedness) that is material to the Company and its subsidiaries taken as
a whole, (B) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any person other than the Company or a subsidiary that is
material to the Company and its subsidiaries taken as a whole, or (C) make
any loans, advances or capital contributions to, or investments in, any
person other than the Company or a subsidiary, which loans, advances or
capital contributions are material to the Company and its subsidiaries
taken as a whole;
(v) acquire, sell, lease or dispose of any assets that are material to
the Company and its subsidiaries taken as a whole, other than sales that
are in the ordinary and usual course of business consistent with past
practice;
(vi) mortgage, pledge or subject to any lien, lease, security interest
or other charge or encumbrance any of its properties or assets, tangible or
intangible, material to the Company and its subsidiaries taken as a whole;
(vii) (A) increase the compensation payable to or to become payable to
any director or officer, except for increases in salary or wages payable or
to become payable in the ordinary course of business and consistent with
past practice; (B) grant any severance or termination pay (other than
pursuant to agreements in effect on the date of this Agreement) to, or
enter into or amend any employment or severance agreement with, any
director, officer or employee;
(viii) (A) effect any reorganization or recapitalization or (B) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock;
(ix) extend, renew or otherwise amend the Company's lease of its
executive offices in Dallas, Texas;
(x) change any of its methods of accounting in effect at September 30,
1995, except as may be required by law or GAAP;
(xi) take (and will use reasonable efforts to prevent any affiliate of
the Company from taking) any action that, in the judgment of Ernst & Young
LLP, would cause the Merger not to be treated as a pooling of interests for
financial accounting purposes; or
(xii) take, or agree in writing or otherwise to take, any of the
foregoing actions or any actions that would (A) make any representation or
warranty of the Company contained in this Agreement untrue or incorrect as
of the date when made or as of the Closing Date, (B) result in any of the
conditions of this Agreement not being satisfied or (C) be inconsistent
with the terms of this Agreement or the transactions contemplated hereby.
(c) Parent hereby covenants and agrees that, prior to the Effective Time,
unless otherwise contemplated by this Agreement or consented to in writing by
the Company, Parent shall and shall cause its subsidiaries to:
(i) operate its business in all material respects in the usual and
ordinary course consistent with past practice; and
(ii) use all reasonable efforts to preserve substantially intact its
business organization, maintain its material rights and franchises, retain
the services of its respective officers and key employees and maintain its
relationships with its material customers and suppliers.
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(d) Except as contemplated by this Agreement or otherwise consented to in
writing by the Company, from the date of this Agreement until the Effective
Time, Parent shall not do, and shall not permit any of its subsidiaries to do,
any of the following:
(i) knowingly take any action which would result in a failure to
maintain the trading of the Parent Common Stock on the NYSE;
(ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, except for dividends by a subsidiary of Parent to
Parent or another subsidiary of Parent;
(iii) acquire or agree to acquire, by merging or consolidating with,
by purchasing an equity interest in or the assets of, or by any other
manner, any business or any corporation, partnership or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets of any other entity (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent with
past practice), which, in each case, would materially delay or prevent the
consummation of the transactions contemplated by this Agreement;
(iv) adopt or propose to adopt any amendments to its charter document,
which would have an adverse impact on the consummation of the transactions
contemplated by this Agreement;
(v) take (and will use reasonable efforts to prevent any affiliate of
Parent from taking) any action that, in the judgment of Price Waterhouse
LLP, would cause the Merger not to be treated as a "pooling of interests"
for financial accounting purposes;
(vi) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other securities (except for bank loans) or amend any of
the terms of any such securities or agreements outstanding on the date
hereof or make any public announcement thereof; provided, however, any
subsidiary may issue securities to Parent or any other subsidiary and
Parent may issue securities or make a public announcement thereof (A) upon
the exercise of employee or director stock options or (B) having an
aggregate market value of up to $100,000,000, provided that, in such event,
the Conversion Number shall be increased to the extent necessary, if any,
so that the product of (x) the Conversion Number and (y) the Average Daily
Price of the Parent Common Stock is not less than $13.00;
(vii) acquire, sell, lease or dispose of any assets that are material
to Parent and its subsidiaries taken as a whole, (A) other than sales that
are in the ordinary and usual course of business consistent with past
practice, (B) except as disclosed in Parent's Disclosure Schedule, or (C)
that are only among Parent and any of its subsidiaries;
(viii) (A) effect any reorganization or recapitalization or (B) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock; or
(ix) take, or agree in writing or otherwise to take, any of the
foregoing actions or any action that would (A) make any representation or
warranty of Parent or Merger Sub contained in this Agreement untrue or
incorrect as of the date when made or as of the Closing Date, (B) result in
any of the conditions of this Agreement not being satisfied or (C) be
inconsistent with the terms of this Agreement or the transactions
contemplated hereby.
SECTION 4.3. Access to Information.
(a) Between the date of this Agreement and the Effective Time, the Company
will (i) give Parent and its authorized representatives reasonable access,
during regular business hours upon reasonable notice, to all offices and other
facilitates and to all of its books and records, (ii) permit Parent to make such
reasonable inspections as it may require, and (iii) cause its officers and those
of its subsidiaries to furnish Parent with such financial and operating data and
other information with respect to the business and properties of the
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Company, as Parent may from time to time reasonably request and as the Company
may have on hand or be able to produce without hardship. All such access and
information obtained by Parent and its authorized representatives shall be
subject to the terms and conditions of the Confidentiality Agreement.
(b) Between the date of this Agreement and the Effective Time, Parent will
(i) give Company and its authorized representatives reasonable access, during
regular business hours upon reasonable notice, to all offices and other
facilitates and to all of its books and records, (ii) permit the Company to make
such reasonable inspections as it may require, and (iii) cause its officers and
those of its subsidiaries to furnish Company with such financial and operating
data and other information with respect to the business and properties of Parent
as the Company may from time to time reasonably request and as Parent may have
on hand or be able to produce without hardship. All such access and information
obtained by the Company and its authorized representatives shall be subject to
the terms and conditions of the Confidentiality Agreement.
(c) Notwithstanding the foregoing provisions of this Section 4.3, neither
party shall be required to grant access or furnish information to the other
party to the extent that such access or the furnishing of such information is
prohibited by law. No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the parties which
are herein contained and each such representation and warranty shall survive
such investigation.
SECTION 4.4. SEC Filings.
(a) As promptly as practicable after the date hereof, the Company and
Parent shall jointly prepare and file with the SEC a joint proxy
statement/registration statement combining preliminary proxy materials of the
Company and Parent under the Exchange Act with respect to the Merger and a
preliminary prospectus of Parent with respect to the Parent Common Stock to be
issued in the Merger and will thereafter use their respective best efforts to
respond to any comments of the SEC with respect thereto and to cause a
definitive joint proxy statement/registration statement (including all
supplements and amendments thereto, the "Joint Proxy Statement/Prospectus") and
proxy to be mailed to their respective stockholders as promptly as practicable.
The Joint Proxy Statement/Prospectus shall include the recommendation of the
Company's Board of Directors in favor of the Merger and adoption of this
Agreement, unless otherwise necessary due to the applicable fiduciary duties of
the directors of the Company, as determined by such directors in good faith
after consultation with and based upon the advice of independent legal counsel
(who may be ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP).
(b) As soon as practicable after the date hereof, the Company and Parent
shall prepare and file any other filings required to be filed by each under the
Exchange Act or any other federal or state laws relating to the Merger and the
transactions contemplated hereby (collectively "Other Filings") and will use
their best efforts to respond to any comments of the SEC or any other
appropriate government official with respect thereto.
(c) The Company and Parent shall cooperate with each other and provide to
each other all information necessary in order to prepare the Joint Proxy
Statement/Prospectus and the Other Filings (collectively, the "SEC Filings") and
shall provide promptly to each other party any information that such party may
obtain that could necessitate amending any such document.
(d) The Company and Parent will notify the other party promptly of the
receipt of any comments from the SEC or its staff or any other appropriate
government official and of any requests by the SEC or its staff or any other
appropriate government official for amendments or supplements to any of the SEC
Filings or for additional information and will supply the other party with
copies of all correspondence between the Company or any of its representatives
or Parent and any of its representatives, as the case may be, on the one hand,
and the SEC or its staff or any other appropriate government official, on the
other hand, with respect thereto. If at any time prior to the Effective Time,
any event shall occur that should be set forth in an amendment of, or a
supplement to, any of the SEC Filings, the Company and Parent agree promptly to
prepare and file such amendment or supplement and to distribute such amendment
or supplement as required by applicable law, including, in the case of an
amendment or supplement to the Joint Proxy Statement/Prospectus, mailing such
supplement or amendment to their respective stockholders.
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(e) The information provided and to be provided by the Company and Parent
for use in the SEC Filings shall at all times prior to the Effective Time be
true and correct in all material respects and shall not omit to state any
material fact required to be stated therein or necessary in order to make such
information not false or misleading, and the Company and Parent each agree to
promptly correct any such information provided by it for use in the SEC Filings
that shall have become false or misleading. The SEC Filings, when filed with the
SEC or any appropriate government official, shall comply as to form in all
material respects with all applicable requirements of law.
(f) Parent shall indemnify, defend and hold harmless the Company, each of
its officers and directors and each other person, if any, who controls any of
the foregoing within the meaning of the Exchange Act against any losses, claims,
damages or liabilities, joint or several, to which any of the foregoing may
become subject under the Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) an untrue statement or alleged
untrue statement of a material fact contained in any SEC Filing or (ii) the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that Parent
was responsible for such misstatement or omission, and Parent shall reimburse
the Company and each such officer, director and controlling person for any legal
or any other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action.
(g) The Company shall indemnify, defend and hold harmless Parent, each of
its officers and directors and each other person, if any, who controls any of
the foregoing within the meaning of the Exchange Act against any losses, claims,
damages or liabilities, joint or several, to which any of the foregoing may
become subject under the Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) an untrue statement or alleged
untrue statement of a material fact contained in any SEC Filing or (ii) the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that the
Company was responsible for such misstatement or omission, and the Company shall
reimburse Parent and each such officer, director and controlling person for any
legal or any other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action.
(h) For the purpose of this Section 4.4, the term "Indemnifying Party"
shall mean the party having an obligation hereunder to indemnify the other party
pursuant to this Section 4.4, and the term "Indemnified Party" shall mean the
party having the right to be indemnified pursuant to this Section 4.4. Whenever
any claim shall arise for indemnification under this Section 4.4, the
Indemnified Party shall promptly notify the Indemnifying Party in writing of
such claim and, when known, the facts constituting the basis for such claim (in
reasonable detail). Failure by the Indemnified Party to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
hereunder unless such failure materially prejudices the Indemnifying Party.
(i) After such notice, if the Indemnifying Party undertakes to defend any
such claim, then the Indemnifying Party shall be entitled, if it so elects, to
take control of the defense and investigation with respect to such claim and to
employ and engage attorneys of its own choice to handle and defend the same, at
the Indemnifying Party's cost, risk and expense, upon written notice to the
Indemnified Party of such election, which notice acknowledges the Indemnifying
Party's obligation to provide indemnification hereunder. The Indemnifying Party
shall not settle any third-party claim that is the subject of indemnification
without the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld; provided, however, that the Indemnifying Party may settle
a claim without the Indemnified Party's consent if such settlement (i) makes no
admission or acknowledgment of liability or culpability with respect to the
Indemnified Party, (ii) includes a complete release of the Indemnified Party and
(iii) does not require the Indemnified Party to make any payment or forego or
take any action. The Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party and its attorneys in the investigation,
trial and defense of any lawsuit or action with respect to such claim and any
appeal arising therefrom (including the filing in the Indemnified Party's name
of appropriate cross claims and counterclaims). The Indemnified Party may, at
its
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own cost, participate in any investigation, trial and defense of such lawsuit or
action controlled by the Indemnifying Party and any appeal arising therefrom.
If, after receipt of a claim notice pursuant to Section 4.4(h), the Indemnifying
Party does not undertake to defend any such claim the Indemnified Party may, but
shall have no obligation to, contest any lawsuit or action with respect to such
claim and the Indemnifying Party shall be bound by the result obtained with
respect thereto by the Indemnified Party (including, without limitation, the
settlement thereof without the consent of the Indemnifying Party). If there are
one or more legal defenses available to the Indemnified Party that conflict with
those available to the Indemnifying Party, the Indemnified Party shall have the
right, at the expense of the Indemnifying Party, to assume the defense of the
lawsuit or action; provided, however, that the Indemnified Party may not settle
such lawsuit or action without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. At any time after the commencement
of defense of any lawsuit or action, the Indemnifying Party may request the
Indemnified Party to agree in writing to the abandonment of such contest or to
the payment or compromise by the Indemnifying Party of such claim, whereupon
such action shall be taken unless the Indemnified Party determines that the
contest should be continued and so notifies the Indemnifying Party in writing
within 15 days of such request from the Indemnifying Party. If the Indemnified
Party determines that the contest should be continued, the Indemnifying Party
shall be liable hereunder only to the extent of the lesser of (i) the amount
which the other party(ies) to the contested claim had agreed to accept in
payment or compromise as of the time the Indemnifying Party made its request
therefor to the Indemnified Party or (ii) such amount for which the Indemnifying
Party may be liable with respect to such claim by reason of the provisions
hereof.
(j) If the indemnification provided for in this Section 4.4 shall for any
reason be unavailable to the Indemnified Party in respect of any loss, claim,
damage or liability, or action referred to herein, then the Indemnifying Party
shall, in lieu of indemnifying the Indemnified Party, contribute to the amount
paid or payable by the Indemnified Party as a result of such loss, claim, damage
or liability, or action in respect thereof, in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other with respect to the statements or omissions that
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to whether the untrue or alleged untrue statement or
omission of a material fact relates to information supplied by the Indemnifying
Party on the one hand or the Indemnified Party on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by the
Indemnified Party as a result of the loss, claim, damage or liability, or action
in respect thereof, referred to above in this paragraph shall be deemed to
include, for purposes of this paragraph, any legal or other expenses reasonably
incurred by the Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 4.5. New York Stock Exchange Listing. Parent shall use all
reasonable best efforts to obtain, prior to the Effective Time, approval for
listing of the Parent Common Stock to be issued pursuant to the Merger on the
NYSE upon official notice of issuance.
SECTION 4.6. Reasonable Best Efforts. Subject to the fiduciary duties of
the Company's Board of Directors, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement in the most expeditious manner
practicable, including but not limited to the satisfaction of all conditions to
the Merger.
SECTION 4.7. Public Announcements; Confidentiality. Except as may be
required by applicable law, no party hereto shall make any public announcements
or otherwise communicate with any news media or any other party, with respect to
this Agreement or any of the transactions contemplated hereby without prior
consultation with the other parties as to the timing and contents of any such
announcement or communications as may be reasonable under the circumstances;
provided, however, that nothing contained herein shall
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prevent any party from (i) promptly making all filings with governmental
authorities as may, in its judgment, be required or advisable in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby or (ii) disclosing the terms of this Agreement
to such party's legal counsel, financial advisors or accountants in furtherance
of the transactions contemplated by this Agreement. The press release announcing
the execution and delivery of this Agreement shall be a joint press release of
the Company and Parent.
SECTION 4.8. Notification. Each party hereto shall, in the event of, or
promptly after obtaining knowledge of the occurrence or threatened occurrence
of, any fact or circumstance that would cause or constitute a material breach of
any of its representations and warranties set forth herein, give notice thereof
to the other parties and shall use its best efforts to prevent or promptly to
remedy such breach.
SECTION 4.9. Meetings of Stockholders. Each of Parent and the Company shall
take all action necessary, in accordance with the DGCL and its respective
certificate of incorporation and bylaws, to duly call, give notice of, convene
and hold a meeting of its stockholders as promptly as practicable, in the case
of the Company, to consider and vote upon the adoption and approval of this
Agreement and the transactions contemplated hereby, and, in the case of Parent,
to vote upon the issuance of Parent Common Stock pursuant to the Merger
(collectively, the "Transactions"). The stockholder votes required for the
adoption and approval of the Transactions shall be the vote required by the DGCL
and its charter and bylaws, in the case of the Company, and Rule 312 of the
NYSE, in the case of Parent. Subject to the fiduciary duties of the Boards of
Directors under applicable law as advised by outside counsel, the Company and
Parent shall use their best efforts to solicit from their respective
stockholders proxies in favor of adoption and approval of the Transactions and
to take all other action necessary to secure the votes of stockholders required
to effect the Transactions.
SECTION 4.10. Regulatory and Other Authorizations. Each party hereto agrees
to use its best efforts to obtain all authorizations, consents, orders and
approvals of federal, state, local and foreign regulatory bodies and officials
and non-governmental third parties that may be or become necessary for (i) its
respective execution and delivery of, and the performance of its respective
obligations pursuant to, this Agreement and (ii) the ownership of the Surviving
Corporation by Parent, and each party will cooperate fully with the other
parties in promptly seeking to obtain all such authorizations, consents, orders
and approvals. Without limitation, the Company and Parent shall each make an
appropriate filing of a Notification and Report Form pursuant to the HSR Act as
promptly as practicable. Each such filing shall request early termination of the
waiting period imposed by the HSR Act.
SECTION 4.11. Further Assurances. Each of the parties hereto shall execute
such documents and other instruments and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and
consummate the transactions contemplated hereby or, at and after the Effective
Time, to evidence the consummation of the transactions contemplated by this
Agreement. Upon the terms and subject to the conditions hereof, each of the
parties hereto shall take or cause to be taken all actions and to do or cause to
be done all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement and to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings.
SECTION 4.12. Indemnification; Director's and Officer's Insurance. After
the Effective Time, the Surviving Corporation shall indemnify and hold harmless
(and shall also advance expenses as incurred to the fullest extent permitted
under applicable law to) each person who is now, or has been prior to the date
hereof or who becomes prior to the Effective Time, an officer or director of the
Company or any of the Company's subsidiaries (the "Indemnified Persons") against
(i) all losses, claims, damages, costs, expenses (including without limitation
counsel fees and expenses), settlement payments or liabilities arising out of or
in connection with any claim, demand, action, suit, proceeding or investigation
based in whole or in part on, or arising in whole or in part out of, the fact
that such person is or was an officer or director of the Company or any of the
Company subsidiaries, whether or not pertaining to any matter existing or
occurring at or prior to the Effective Time and whether or not asserted or
claimed prior to or at or after the Effective Time ("Indemnified Liabilities")
and (ii) all Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out
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of, or pertaining to this Agreement, or the transactions contemplated hereby, in
each case to the fullest extent required or permitted under applicable law or
under the Surviving Corporation's certificate of incorporation or bylaws (which
in relevant part are and shall remain identical to the Company's Restated
Certificate of Incorporation and By-Laws). Any determination required to be made
with respect to whether an Indemnified Person's conduct complies with the
standards set forth under applicable law or the Surviving Corporation's
certificate of incorporation or bylaws shall be made by a person, mutually
acceptable to the Surviving Corporation and the Indemnified Person, who shall
have been a director or executive officer of a corporation whose shares of
common stock were listed during at least one year of such service on the NYSE or
the American Stock Exchange or quoted on the National Association of Securities
Dealers Automated Quotations System. The parties hereto intend, to the extent
not prohibited by applicable law, that the indemnification provided for in this
Section 4.12 shall apply without limitation to negligent acts or omissions by an
Indemnified Person. The Surviving Corporation's certificate of incorporation and
bylaws shall not be amended in a manner that adversely affects the rights of any
Indemnified Person thereunder or under this Section 4.12, unless otherwise
required by applicable law. The Surviving Corporation shall maintain, for not
less than five years after the Effective Time, director's and officer's
liability insurance covering each Indemnified Person on terms not materially
less favorable than the insurance maintained in effect by the Company on the
date hereof in terms of coverage (including without limitation types of claims,
time period of claims, exclusions and persons covered), amounts and deductibles;
provided, however, that in no event shall the Surviving Corporation be required
to expend more than 200% of the current annual premiums paid by the Company for
such insurance. Parent hereby guarantees the payment and performance of the
Surviving Corporation's obligations in this Section 4.12. Each Indemnified
Person is intended to be a third party beneficiary of this Section 4.12 and may
specifically enforce its terms. This Section 4.12 shall not limit or otherwise
adversely affect any rights any Indemnified Person may have under any agreement
with the Company or under the Company's Restated Certificate of Incorporation or
By-Laws.
SECTION 4.13. Employee Benefits.
(a) Parent hereby unconditionally agrees to, and agrees to cause its
subsidiaries to honor, without modification except as provided in this Section
4.13, all contracts, agreements and commitments of the Company or any of its
subsidiaries authorized by the Company or any of its subsidiaries prior to the
date hereof which apply to any current or former employee or current or former
director of the Company or any of its subsidiaries, including, without
limitation, the severance agreements between the Company and certain of its
senior officers (copies of which severance agreements have been furnished to
Parent).
(b) Parent hereby unconditionally agrees to, and to cause its subsidiaries
to, provide to officers and employees of the Company and its subsidiaries who
become or remain regular (full-time) employees of Parent or any of its
subsidiaries, employee benefits, other than stock options, no less favorable
than the most favorable of (i) benefits which are substantially comparable to
those provided by the Company or its subsidiaries to its officers or employees
as of September 30, 1995, or (ii) those provided by Parent and its subsidiaries
to their similarly situated officers and employees; provided, however, that if
(i) above is more favorable, Parent shall only be obligated to provide such
benefits through September 30, 1996, after which time Parent shall only be
obligated to provide the benefits in accordance with (ii) above. Any employee of
the Company or any of its subsidiaries who becomes a participant in any employee
benefit plan, program, policy, or arrangement of Parent or any of its
subsidiaries after the Effective Date shall be given credit under such plan,
program, policy, or arrangement for all service with the Company or any of its
subsidiaries, and, if applicable, with Parent or any of its subsidiaries, prior
to becoming such a participant for purposes of eligibility and vesting.
(c) Parent and the Company shall take such actions consistent with the
Merger being accounted for financial accounting purposes as a Pooling
Transaction, including (with respect to the Company) the amendment of the Option
Plans and Stock Options, to permit Parent to assume, and Parent shall assume,
effective at the Effective Time, each Stock Option that remains unexercised in
whole or in part as of the Effective Time and substitute shares of Parent Common
Stock for the shares of Company Common Stock
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purchasable under each such assumed option ("Assumed Option"), which assumption
and substitution shall be effected as follows:
(i) the Assumed Option shall not give the optionee additional benefits
which such optionee did not have under the Stock Option before such
assumption and shall be assumed on the same terms and conditions as the
Stock Option being assumed, subject to Section 4.13(c)(ii) and (iii) below;
(ii) the number of shares of Parent Common Stock purchasable under the
Assumed Option shall be equal to the number of shares of Parent Common
Stock that the holder of the Stock Option being assumed would have received
(without regard to any vesting schedule) upon consummation of the Merger
had such Stock Option been exercised in full immediately prior to
consummation of the Merger; and
(iii) the per share exercise price of such Assumed Option shall be an
amount equal to the purchase exercise price of the Stock Option being
assumed divided by the Conversion Number.
(d) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of the Assumed Options, and, as soon as practicable after the Effective
Time, Parent shall file a registration statement on Form S-8 (or other
appropriate form) with respect to the shares of Parent Common Stock subject to
the Assumed Options, and shall use its best efforts to maintain the
effectiveness of such registration statement for so long as any of the Assumed
Options remain outstanding.
(e) Promptly after March 31, 1996, the Surviving Corporation shall
determine and declare bonuses payable under the Company's executive (including
management) bonus program for the fiscal year ending March 31, 1996, subject to
the terms of the severance agreements referred to in Section 4.13(a) hereof.
Such determination shall be made jointly in good faith by the current Presidents
of each of the Company and Parent and shall be made consistent with the
determinations made with respect to prior awards by the Company under comparable
bonus plans and based upon GAAP as consistently applied by the Company.
(f) After the Effective Time, Parent shall not permit the Surviving
Corporation to terminate the employment of the current President and five Senior
Vice Presidents of the Company prior to such time as financial statements that
include at least 30 days of combined operations of Parent and the Surviving
Corporation after the Merger have been publicly reported as contemplated by
Accounting Series Release 135 and related rules, and during such time the
compensation of such officers shall not be reduced below the levels thereof as
of September 30, 1995.
SECTION 4.14. Merger Sub. Prior to the Effective Time, Merger Sub shall not
conduct any business or make any investments other than as specifically
contemplated by this Agreement and will not have any assets (other than a de
minimis amount of cash paid to Merger Sub for the issuance of its stock to
Parent) or liabilities.
SECTION 4.15. Affiliates; Pooling; Tax Treatment.
(a) The Company shall use all reasonable efforts to obtain from any person
who may be deemed to have become an affiliate of the Company after the date of
this Agreement and on or prior to the Effective Time a written agreement
substantially in the form of Exhibit A hereto as soon as practicable after
attaining such status.
(b) Parent shall use all reasonable efforts to obtain from any person who
may be deemed to have become an affiliate of Parent after the date of this
Agreement and on or prior to the Effective Time a written agreement
substantially in the form of Exhibit B hereto as soon as practicable after
obtaining such status.
(c) Parent shall not be required to maintain the effectiveness of the Joint
Proxy Statement/Prospectus for the purpose of resale by stockholders of the
Company who may be affiliates of the Company or Parent pursuant to Rule 145
under the Securities Act.
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(d) Each party hereto shall use all reasonable best efforts to cause the
Merger to be treated for financial accounting purposes as a Pooling Transaction,
and shall not take, and shall use all reasonable best efforts to prevent any
affiliate of such party from taking, any actions which could prevent the Merger
from being treated for financial accounting purposes as a Pooling Transaction.
(e) Each party hereto shall use all reasonable best efforts to cause the
Merger to qualify, and shall not take, and shall use all reasonable efforts to
prevent any affiliate of such party from taking, any actions which could prevent
the Merger from qualifying, as a reorganization under the provisions of Section
368(a) of the Code.
SECTION 4.16. Comfort Letters.
(a) The Company shall use all reasonable best efforts to cause Price
Waterhouse LLP to deliver a letter dated as of the date of the Joint Proxy
Statement/Prospectus, and addressed to itself and Parent and their respective
Boards of Directors, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for agreed upon procedures letters delivered by
independent public accountants in connection with registration statements and
proxy statements similar to the Joint Proxy Statement/Prospectus.
(b) Parent shall use all reasonable efforts to cause Ernst & Young LLP to
deliver a letter dated as of the date of the Joint Proxy Statement/Prospectus,
and addressed to itself and the Company and their respective Boards of
Directors, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for agreed upon procedures letters delivered by
independent accountants in connection with registration statements and proxy
statements similar to the Joint Proxy Statement/Prospectus.
SECTION 4.17. Parent Directors. Parent shall appoint, effective as of the
Effective Time, any two of the current directors of the Company as Advisory
Directors of Parent, each of whom shall hold office until the next annual
meeting of the Board of Directors of Parent and in accordance with the bylaws of
Parent. Further, subject to the consummation of the Merger, Parent shall take
all action necessary under its bylaws or otherwise in order to elect one other
current director of the Company to the Board of Directors of Parent, effective
no later than the third regular meeting of such Board of Directors following the
Effective Time, who shall hold office until the next annual meeting of Parent's
stockholders and until his or her successor shall have been elected and
qualified.
SECTION 4.18. Stockholder's Agreement. Parent has delivered to the Company
an agreement from DST Systems, Inc. whereby DST Systems, Inc. agrees to vote all
of its shares of Parent Common Stock in favor of Parent's issuance of Parent
Common Stock pursuant to this Agreement.
ARTICLE V
CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING
SECTION 5.1. Closing and Closing Date. As soon as practicable after the
satisfaction or waiver of the conditions set forth herein and prior to the
filing of the Certificate of Merger, a closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇
L.L.P., First City Tower, Houston, Texas or at such other location as the
parties may agree in writing. The date on which the Closing occurs is referred
to as the "Closing Date."
SECTION 5.2. Conditions to the Obligations of the Company, Parent and
Merger Sub. The respective obligations of the Company, on the one hand, and
Parent and Merger Sub, on the other hand, to consummate the transactions
contemplated hereby are subject to the satisfaction at or prior to the Closing
Date of the following conditions, any or all of which may be waived in writing
by the parties hereto, in whole or in part, to the extent permitted by
applicable law:
(a) this Agreement shall have been approved and adopted by the
stockholders of the Company as contemplated hereby;
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(b) the issuance of Parent Common Stock pursuant to the Merger shall
have been approved by the stockholders of Parent as contemplated hereby;
(c) approval for listing by the NYSE upon official notice of issuance
of the Parent Common Stock to be issued in the Merger shall have been
received by Parent;
(d) any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or
been terminated, and any other governmental or regulatory notices or
approvals required with respect to the transactions contemplated hereby
shall have been either filed or received;
(e) no federal, state or foreign governmental authority or other
agency or commission or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute or rule, regulation,
injunction or other order (whether temporary or preliminary or permanent)
which remains in effect and which has the effect of making the transactions
contemplated hereby illegal or otherwise prohibiting the transactions
contemplated by this Agreement, or which questions the validity or the
legality of the transactions contemplated hereby and which could reasonably
be expected to materially and adversely affect the value of the business of
the Company;
(f) the Joint Proxy Statement/Prospectus shall have been declared
effective under the Securities Act and no stop orders with respect thereto
shall have been issued; and Parent shall have received all Blue Sky permits
and other authorizations necessary to consummate the Transactions; and
(g) Parent and the Company shall have received a confirmation in
writing by Ernst & Young LLP and Price Waterhouse LLP, respectively, on the
Closing Date that the Merger should be treated for financial accounting
purposes as a Pooling Transaction.
SECTION 5.3. Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger and the other
transactions contemplated hereby are also subject to the satisfaction at or
prior to the Closing Date of the following conditions, any or all of which may
be waived in writing by Parent, in whole or in part, to the extent permitted by
applicable law:
(a) each of the representations and warranties of the Company
contained in this Agreement shall be true and correct except to the extent
that the breach thereof shall not constitute a Company Material Adverse
Effect as of the Closing Date as though made on and as of the Closing Date
(except to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date), and Parent
and Merger Sub shall have received a certificate of the President or the
chief financial officer of the Company, dated the Closing Date, to such
effect;
(b) the Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date, and
Parent and Merger Sub shall have received a certificate of the President or
the chief financial officer of the Company, dated the Closing Date, to that
effect; and
(c) ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. shall have delivered to Parent its written
opinion as of the date that the Joint Proxy Statement/Prospectus is first
mailed to Parent's stockholders substantially to the effect that (x) the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, (y) Parent, Merger Sub and the Company will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code, and (z) Parent, Merger Sub and the Company will not recognize any
gain or loss for U.S. federal income tax purposes as a result of the
Merger, and such opinion shall not have been withdrawn or modified in any
material respect.
SECTION 5.4. Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger and the other transactions
contemplated hereby are also subject to the satisfaction at or
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prior to the Closing Date of the following conditions, any or all of which may
be waived in writing by the Company, in whole or in part, to the extent
permitted by applicable law:
(a) each of the representations and warranties of Parent and Merger
Sub contained in this Agreement shall be true and correct except to the
extent that the breach thereof shall not constitute a Parent Material
Adverse Effect as of the Closing Date as though made on and as of the
Closing Date (except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall be true and correct as of such earlier date), and the
Company shall have received a certificate of the President or the chief
financial officer of each of the Parent and Merger Sub, dated the Closing
Date, to such effect;
(b) Parent and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the
Closing Date, and the Company shall have received a certificate of the
President or the chief financial officer of each of the Parent and Merger
Sub, dated the Closing Date, to that effect;
(c) the shares of Parent Common Stock to be issued in the Merger shall
have been approved for listing (subject to official notice of issuance) on
the NYSE; and
(d) ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP shall have delivered to the Company
its written opinion as of the date that the Joint Proxy
Statement/Prospectus is first mailed to the Company's stockholders
substantially to the effect that (x) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, (y)
Parent, Merger Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, and (z) no
gain or loss for U.S. federal income tax purposes will be recognized by the
holders of Company Common Stock upon receipt of shares of Parent Common
Stock in the Merger, except with respect to any cash received in lieu of a
fractional share interest in Parent Common Stock, and such opinion shall
not have been withdrawn or modified in any material respect.
ARTICLE VI
TERMINATION
SECTION 6.1. Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, whether before or after approval and adoption of this Agreement
by the Company's stockholders:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company and Parent;
(b) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 5.3(a) or Section
5.3(b) of this Agreement, as the case may be, would be incapable of being
satisfied by April 30, 1996; provided, however, that in any case, a wilful
material breach shall be deemed to cause such conditions to be incapable of
being satisfied for purposes of this Section 6.1(b);
(c) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent or Merger Sub set forth in this
Agreement, or if any representation or warranty of Parent or Merger Sub
shall have become untrue, in either case such that the conditions set forth
in Section 5.4(a) or Section 5.4(b) of this Agreement, as the case may be,
would be incapable of being satisfied by April 30, 1996; provided, however,
that in any case, a wilful breach shall be deemed to cause such conditions
to be incapable of being satisfied for purposes of this Section 6.1(c);
(d) by either Parent or the Company, if the Merger shall not have been
consummated on or before April 30, 1996;
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(e) by either Parent or the Company, if this Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of
the Company at the Company's stockholders meeting referred to in Section
4.9 hereof or if the issuance of the Parent Common Stock in connection with
the Merger shall fail to receive the requisite vote for approval by the
stockholders of Parent at the Parent's stockholders meeting referred to in
Section 4.9 hereof;
(f) by Parent, if (i) the Board of Directors of the Company shall
withdraw, modify or change its recommendation of this Agreement or the
Merger in a manner adverse to Parent or shall have resolved to do so; (ii)
the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ referred to in Section 2.25 shall be
withdrawn, or (iii) a tender offer or exchange offer for 30% or more of the
outstanding shares of Company Common Stock shall commence, and the Board of
Directors of the Company shall not have timely filed a Schedule 14D-9 which
recommends that stockholders not tender their shares into such tender or
exchange offer; or
(g) by the Company, if the Board of Directors of the Company, after
consultation with and based upon the advice of independent legal counsel
(who may be ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP), determines in good faith that
such action is necessary for such Board of Directors to comply with its
fiduciary duties to stockholders under applicable law.
The right of any party hereto to terminate this Agreement pursuant to this
Section 6.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto or any of their
respective officers, directors, representatives or agents, whether prior to or
after the execution of this Agreement.
SECTION 6.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 6.1 hereof, this Agreement, except as provided in
Sections 6.5 and 7.13, shall forthwith become null and void and have no effect,
without any liability on the part of any party or its directors, officers or
stockholders. Nothing in this Section 6.2 shall relieve any party to this
Agreement of liability for breach of this Agreement.
SECTION 6.3. Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval and
adoption of this Agreement by the stockholders of the Company, (i) no amendment,
which under applicable law may not be made without the approval of the
stockholders of the Company, may be made without such approval, and (ii) no
amendment, which under the applicable rules of the NYSE, may not be made without
the approval of the stockholders of Parent, may be made without such approval.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
SECTION 6.4. Waiver. At any time prior to the Effective Time, either party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby. For purposes of this Section 6.4,
Parent and Merger Sub shall be deemed to be one party.
SECTION 6.5. Fees, Expenses and Other Payments.
(a) Except as provided in Section 6.5(c) of this Agreement, all Expenses
(as defined in paragraph (b) of this Section 6.5) incurred by the parties hereto
shall be borne solely and entirely by the party which has incurred such
Expenses; provided, however, that the allocable share of the Parent and Merger
Sub as a group and the Company for all Expenses related to printing, filing and
mailing the Joint Proxy Statement/Prospectus and all SEC and other regulatory
filing fees incurred in connection with the Joint Proxy Statement/Prospectus
shall be one-half each; and provided further that Parent may, at its option, pay
any Expenses of the Company, and Parent shall pay all SEC and HSR filing fees.
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(b) "Expenses" as used in this Agreement shall include all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Joint Proxy Statement/Prospectus, the solicitation of stockholder approvals
and all other matters related to the consummation of the transactions
contemplated hereby.
(c) The Company agrees that if this Agreement is terminated pursuant to:
(i) Section 6.1(e) because this Agreement shall fail to receive the
requisite vote for approval and adoption by the stockholders of the Company
at their meeting referred to in Section 4.9 hereof and at the time of such
meeting there shall exist a Competing Transaction; or
(ii) Section 6.1(f)(i) or (ii) and at the time of the withdrawal,
modification or change, there shall exist a Competing Transaction; or
(iii) Section 6.1(f)(iii); or
(iv) Section 6.1(g);
then the Company shall pay to Parent an amount equal to $5,000,000, which amount
is inclusive of all Parent's Expenses.
(d) Any payment required to be made pursuant to Section 6.5(c) of this
Agreement shall be made as promptly as practicable but not later than three
business days after termination of this Agreement, and shall be made by wire
transfer of immediately available funds to an account designated by Parent.
(e) For purposes of this Section 6.5, the term "Competing Transaction"
means any of the following (other than the transactions contemplated by this
Agreement) involving the Company or any of its subsidiaries: (i) any merger,
consolidation, share exchange, business combination or similar transaction; (ii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of
20% or more of the assets of the Company and its subsidiaries, taken as a whole;
(iii) any tender offer or exchange offer for 30% or more of the outstanding
shares of Company Common Stock or the filing of a registration statement under
the Securities Act in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Survival of Representations and Warranties. The
representations and warranties contained herein shall not survive beyond the
Effective Time. This Section 7.1 shall not limit any covenant or agreement of
the parties hereto which by its terms requires performance after the Effective
Time.
SECTION 7.2. Entire Agreement. This Agreement (together with the Exhibits,
the Company's Disclosure Statement and Parent's Disclosure Statement) and the
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior written and oral
and all contemporaneous oral agreements and understandings with respect to the
subject matter hereof.
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SECTION 7.3. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when delivered in
person, by telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
if to Parent or Merger Sub:
The Continuum Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
2300 First City Tower
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
if to the Company:
▇▇▇▇▇ Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: R. ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy shall be deemed effective
on the first business day at the place of which such notice or communication is
received following the day on which such notice or communication was sent. Any
notice or communication sent by registered or certified mail shall be deemed
effective on the fifth business day at the place from which such notice or
communication was mailed following the day in which such notice or communication
was mailed.
SECTION 7.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
SECTION 7.5. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 7.6. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement except
for Section 4.12 (which is intended to be for the benefit of the persons
provided for therein, and may be enforced by such persons).
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SECTION 7.7. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
SECTION 7.8. Certain Definitions. For the purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "Average Daily Price of the Parent Common Stock" means the average
of the closing prices, regular way, per share of Parent Common Stock as
reported on the NYSE Composite Tape during the 15 consecutive trading days
ending on (but excluding) the trading day on which the Effective Time
occurs; provided, however, if during such 15-day period Parent shall issue
any securities referred to in clause (B) of the proviso to Section
4.2(d)(vi) or make any public announcement thereof, then such period shall
begin on the trading date on which such issuance or public announcement
thereof shall occur;
(c) "business day" means any day other than a day on which banks in
the State of Texas are authorized or obligated to close;
(d) "knowledge" or "known" shall mean, with respect to any matter in
question, if an executive officer of the Company or Parent, as the case may
be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization or other entity; and
(f) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person, means any corporation,
partnership, joint venture or other legal entity of which the Company,
Parent, the Surviving Corporation or any such other person, as the case may
be (either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests,
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity.
SECTION 7.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company or Parent or any officer,
director, employee, agent, representative or investor of any party hereto.
SECTION 7.10. Binding Effect, Assignment. This Agreement shall inure to the
benefit of be binding upon the parties hereto and their respective legal
representatives and successors. This Agreement may not be assigned by any party
hereto.
SECTION 7.11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 7.12. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
SECTION 7.13. Legal Fees; Costs. If any party hereto institutes any action
or proceeding, whether before a court or arbitrator, prior to the Effective
Date, to enforce any provision of this Agreement, the
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prevailing party therein shall be entitled to received from the losing party
reasonable attorneys' fees and costs incurred in such action or proceeding,
whether or not such action or proceeding is prosecuted to judgment.
SECTION 7.14. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
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34
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by one of its officers thereunto duly authorized,
effective as of the day and year first above written.
▇▇▇▇▇ SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President and Chief Executive
Officer
THE CONTINUUM COMPANY, INC.
By: /s/ W. ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------------
W. ▇▇▇▇▇▇▇ ▇▇▇▇
President and Chief Executive
Officer
CONTINUUM ACQUISITION CORPORATION
By: /s/ W. ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------------
W. ▇▇▇▇▇▇▇ ▇▇▇▇
President
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EXHIBIT A
COMPANY AFFILIATE'S AGREEMENT
The Continuum Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have been advised that as of the date hereof, I may be deemed to be an
"affiliate" of ▇▇▇▇▇ Systems, Inc., a Delaware corporation ("HSI"), as that term
is defined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act").
Pursuant to the terms and subject to the conditions of that certain
Agreement and Plan of Merger by and among The Continuum Company, Inc., a
Delaware corporation ("TCC"), Continuum Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of TCC ("Merger Sub"), and HSI (the
"Merger Agreement"), providing for, among other things, the merger of Merger Sub
with and into HSI (the "Merger"), I will be entitled to receive shares of common
stock, par value $0.10 per share, of TCC ("TCC Common Stock"), in exchange for
shares of common stock, par value $0.01 per share, of HSI ("HSI Common Stock")
owned by me at the Effective Time (as defined in the Merger Agreement) of the
Merger as determined pursuant to the Merger Agreement.
I further understand that the Merger will be treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and that the staff of the SEC has issued certain
guidelines that should be followed to ensure the pooling of the entities.
In consideration of the agreements contained herein, TCC's reliance on this
letter in connection with the consummation of the Merger and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledge, I hereby represent, warrant and agree that (i) I will not make any
sale, transfer or other disposition of HSI Common Stock owned by me during the
period commencing 30 days before the Effective Time and ending at the earlier of
the Effective Time and the termination of the Merger Agreement, (ii) I will not
make any sale, transfer or other disposition of TCC Common Stock owned by me
after the Effective Time until such time as financial statements that include at
least 30 days of combined operations of HSI and TCC after the Merger shall have
been publicly reported, unless I shall have delivered to TCC prior to any such
sale, transfer or other disposition, a written opinion from Ernst & Young LLP,
independent auditors of TCC, or a written no-action letter from the accounting
staff of the SEC, in either case in form and substance reasonably satisfactory
to TCC, to the effect that such sale, transfer or other disposition will not
cause the Merger not to be treated as a "pooling of interests" for financial
accounting purposes in accordance with generally accepted accounting principles
and the rules, regulations and interpretations of the SEC and (iii) I will not
make any sale, transfer or other disposition of any shares of TCC Common Stock
received by me pursuant to the Merger in violation of the Securities Act or the
Rules and Regulations. I have been advised that the issuance of the shares of
TCC Common Stock pursuant to the Merger will have been registered with the SEC
under the Securities Act on a Registration Statement on Form S-4. However, I
have also been advised, and I agree, that since I may be deemed to be an
affiliate of HSI at the time the Merger is submitted for a vote of the
stockholders of HSI, the TCC Common Stock received by me pursuant to the Merger
can be sold by me only (i) pursuant to an effective registration statement under
the Securities Act, (ii) in conformity with the volume and other limitations of
Rule 145 promulgated by the SEC under the Securities Act, or (iii) in reliance
upon an exemption from registration that is available under the Securities Act.
I also understand and agree that stop transfer instructions will be given
to TCC's transfer agent with respect to the TCC Common Stock to be received by
me pursuant to the Merger and that there will be placed
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36
on the certificates representing such shares of TCC Common Stock, or any
substitutions therefor, a legend stating in substance as follows:
"These shares were issued in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. These shares may only be
transferred in accordance with the terms of such Rule and an Affiliate's
Agreement between the original holder of such shares and The Continuum
Company, Inc., a copy of which agreement is on file at the principal
offices of The Continuum Company, Inc."
It is understood and agreed that the legend set forth above shall be
removed upon surrender of certificates bearing such legend by delivery of
substitute certificates without such legend if I shall have delivered to TCC an
opinion of counsel, in form and substance reasonably satisfactory to TCC, to the
effect that (i) the sale or disposition of the shares represented by the
surrendered certificates may be effected without registration of the offering,
sale and delivery of such shares under the Securities Act, and (ii) the shares
to be so transferred may be publicly offered, sold and delivered by the
transferee thereof without compliance with the registration provisions of the
Securities Act.
By its execution hereof, TCC agrees that it will, as long as I own any TCC
Common Stock to be received by me pursuant to the Merger which remains subject
to Rule 145 under the Securities Act, take all reasonable efforts to make timely
filings with the SEC of all reports required to be filed by it pursuant to the
Securities Exchange Act of 1934, as amended, and will promptly furnish upon
written request of the undersigned a written statement confirming that such
reports have been so timely filed.
If you are in agreement with the foregoing, please so indicate by signing
below and returning a copy of this letter to the undersigned, at which time this
letter shall become a binding agreement between us.
Very truly yours,
By:
----------------------------
Name:
Title:
Date:
Address:
ACCEPTED this day
of , 199
The Continuum Company, Inc.
By:
------------------------
Name:
Title:
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37
EXHIBIT B
PARENT AFFILIATE'S AGREEMENT
The Continuum Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have been advised that as of the date hereof, I may be deemed to be an
affiliate of The Continuum Company, Inc., a Delaware corporation ("TCC"), as
that term is defined in Rule 1-02 of Regulation S-X of the Rules and Regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"SEC").
I understand that, pursuant to the terms and subject to the conditions of
that certain Agreement and Plan of Merger (the "Merger Agreement") by and among
TCC, Continuum Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of TCC ("Merger Sub"), and ▇▇▇▇▇ Systems, Inc., a Delaware
corporation ("HSI"), Merger Sub will be merged with and into HSI (the "Merger")
at the Effective Time (as defined in the Merger Agreement).
I further understand that the Merger will be treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and that the staff of the SEC has issued certain
guidelines that should be followed to ensure the pooling of the entities.
In consideration of the agreements contained herein, TCC's reliance on this
letter in connection with the consummation of the Merger and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, I hereby represent, warrant and agree that (i) I will not make any
sale, transfer or other disposition of TCC Common Stock (as defined in the
Merger Agreement) owned by me during the period commencing 30 days before the
Effective Time and ending at the earlier of the Effective Time and the
termination of the Merger Agreement, and (ii) I will not make any sale, transfer
or other disposition of TCC Common Stock owned by me after the Effective Time
until such time as financial statements that include at least 30 days of
combined operations of HSI and TCC after the Merger shall have been publicly
reported, unless I shall have delivered to TCC prior to any such sale, transfer
or other disposition, a written opinion from Ernst & Young LLP, independent
auditors of TCC, or a written no-action letter from the accounting staff of the
SEC, in either case in form and substance reasonably satisfactory to TCC, to the
effect that such sale, transfer or other disposition will not cause the Merger
not to be treated as a "pooling of interests" for financial accounting purposes
in accordance with generally accepted accounting principles and the rules,
regulations and interpretations of the SEC.
Very truly yours,
By:
-------------------------
Name:
Title:
Date:
Address:
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