EXHIBIT 2
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AGREEMENT AND PLAN
OF MERGER
DATED AS OF
MAY 1, 2002
BY AND AMONG
LEVEL 3 COMMUNICATIONS, INC.,
ELDORADO ACQUISITION THREE, INC.
AND
SOFTWARE SPECTRUM, INC.
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TABLE OF CONTENTS
ARTICLE I. THE MERGER........................................................2
Section 1.1. The Merger.........................................2
Section 1.2. Effective Time of the Merger.......................2
Section 1.3. Articles of Incorporation..........................2
Section 1.4. By-Laws............................................2
Section 1.5. Board of Directors; Officers.......................2
Section 1.6. Effects of Merger..................................2
Section 1.7. Closing............................................2
ARTICLE II. CONVERSION OF COMMON STOCK.......................................3
Section 2.1. Conversion of Common Stock.........................3
Section 2.2. Stock Options......................................3
Section 2.3. Closing of Company Transfer Books..................4
Section 2.4. Exchange of Certificates...........................5
Section 2.5. Funding of Paying Agent............................6
Section 2.6. No Further Ownership Rights in Common Stock........6
Section 2.7. Dissenting Shareholders............................6
Section 2.8. Assistance in Consummation of the Transactions.....7
ARTICLE III. COMPANY ACTION WITH RESPECT TO THE MERGER.......................7
Section 3.1. Company and Board Approval; Fairness Opinion.......7
Section 3.2. Proxy Statement....................................8
Section 3.3. Meeting of Shareholders of the Company............10
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................10
Section 4.1. Organization of the Company.......................10
Section 4.2. Authority and Binding Effect......................11
Section 4.3. No Conflict or Violation; Consents................12
Section 4.4. SEC Filings; Financial Statements; Undisclosed
Liabilities..................................12
Section 4.5. Capital Structure.................................13
Section 4.6. Subsidiaries......................................14
Section 4.7. Accounts Receivable...............................14
Section 4.8. Absence of Certain Changes or Events..............14
Section 4.9. Properties........................................15
Section 4.10. Compliance with Legal Requirements................16
Section 4.11. Affiliate Agreements and Liabilities..............17
Section 4.12. Material Contracts................................17
Section 4.13. Intellectual Property.............................19
Section 4.14. Labor Relations...................................21
Section 4.15. Employee Benefits.................................21
Section 4.16. Litigation........................................23
Section 4.17. Environmental Matters.............................23
Section 4.18. Tax Matters.......................................24
Section 4.19. Brokers...........................................26
Section 4.20. Books and Records of the Company..................26
Section 4.21. Customers and Suppliers...........................26
Section 4.22. Certain Payments..................................26
Section 4.23. Proxy Statement...................................27
Section 4.24. State Takeover Statutes Inapplicable..............27
Section 4.25. Statements True and Correct.......................27
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER...........28
Section 5.1. Organization, Standing and Power..................28
Section 5.2. Authority; No Violations; Consents and
Approvals....................................28
Section 5.3. Litigation........................................29
Section 5.4. Proxy Statement...................................29
Section 5.5. Ownership of Company Shares.......................29
Section 5.6. No Prior Activities; Assets of Purchaser..........29
Section 5.7. Statements True and Correct.......................30
Section 5.8. Brokers...........................................30
Section 5.9. Financing.........................................30
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER..........................30
Section 6.1. Conduct of Business by the Company Pending
the Merger...................................30
Section 6.2. No Solicitation...................................33
Section 6.3. Rights Agreement..................................36
Section 6.4. Access and Information............................36
Section 6.5. Notification of Certain Matters...................37
Section 6.6. Employee Stock Purchase Plan......................37
ARTICLE VII. ADDITIONAL AGREEMENTS..........................................37
Section 7.1. Indemnification of Company Officers and
Directors....................................37
Section 7.2. HSR Act; Foreign Filings..........................39
Section 7.3. Additional Agreements Regarding Consents and
Approvals....................................40
Section 7.4. Efforts; Further Assurances.......................40
Section 7.5. Takeover Statutes.................................41
Section 7.6. Initial Transactions..............................41
Section 7.7. Employee Matters..................................42
ARTICLE VIII. CONDITIONS PRECEDENT..........................................44
Section 8.1. Conditions to Each Party's Obligation to Effect
the Merger...................................44
Section 8.2. Conditions for the Obligation of Parent and
Purchaser....................................44
ARTICLE IX. TERMINATION AND FEES............................................45
Section 9.1. Termination.......................................45
Section 9.2. Effect of Termination.............................47
Section 9.3. Fees and Expenses.................................47
ARTICLE X. GENERAL PROVISIONS...............................................48
Section 10.1. Non-Survival of Representations, Warranties and
Agreements...................................48
Section 10.2. Amendment.........................................48
Section 10.3. Notices...........................................49
Section 10.4. Specific Performance..............................50
Section 10.5. Publicity.........................................50
Section 10.6. Interpretation....................................50
Section 10.7. Counterparts......................................50
Section 10.8. Entire Agreement; No Third Party Bene-
ficiaries....................................50
Section 10.9. Severability......................................51
Section 10.10. Governing Law.....................................51
Section 10.11. Assignment........................................51
Section 10.12. Descriptive Headings..............................51
ii
Exhibits
A Form of Voting Agreement
B Form of Promissory Note
Schedules
Schedule 4.1 Organization of the Company
Schedule 4.3 No Conflict or Violation; Consents
Schedule 4.4 SEC Filings; Financial Statements
Schedule 4.5 Capital Structure
Schedule 4.6 Subsidiaries
Schedule 4.8 Absence of Certain Changes or Events
Schedule 4.9 Properties
Schedule 4.10(a) Violation of Legal Requirements
Schedule 4.10(b) Necessary Permits
Schedule 4.11 Affiliate Agreements and Liabilities
Schedule 4.12 Material Contracts
Schedule 4.13 Intellectual Property
Schedule 4.14 Labor Relations
Schedule 4.15 Employee Benefit Plans
Schedule 4.16 Litigation
Schedule 4.17 Compliance with Environmental Laws
Schedule 4.18 Tax Matters
Schedule 4.19 Brokers
Schedule 4.21 Suppliers
Schedule 6.1 Conduct of Business by Company Pending the Merger
Schedule 7.6 Foreign Subsidiaries
Defined Term Location
Accounts Receivable Section 4.7
Adverse Recommendation Section 9.1
Affiliate Section 3.1
Agreement Preamble
Alternative Transaction Section 6.2
Articles of Incorporation Section 1.3
Balance Sheet Section 4.7
Board of Directors Recitals
Business Day Section 1.7
By-Laws Section 4.3
Certificates of Merger Section 1.2
Closing Section 1.7
Closing Date Section 1.7
Code Section 4.18
Commission Section 3.2
Common Stock Recitals
Company Preamble
Company Representatives Section 6.2
Competing Agreement Section 6.2
Confidentiality Agreement Section 6.2
Contract Section 4.12
D&O Insurance Section 7.1
DGCL Recitals
Dissenting Shares Section 2.7
Effective Time Section 1.2
Employees Section 4.14
Employee Stock Purchase Plan Section 6.6
Environmental Laws Section 4.17
ERISA Section 4.15
ERISA Affiliate Section 4.15
Escrow Procedures Section 6.2
Exchange Act Section 2.2
Expense Reimbursement Section 9.3
Foreign Plans Section 4.15
Foreign Subsidiary Sale Section 7.6
Foreign Subsidiary Stock Section 7.6
Former Employees Section 4.15
GAAP Section 4.4
Governmental Agency Section 4.25
Hazardous Materials Section 4.17
HSR Act Section 5.2
Indebtedness Section 4.12
ii
Indemnified Parties Section 7.1
Initial Transaction Time Section 7.6
Initial Transactions Section 7.6
Intellectual Property Section 4.13
Knowledge Section 10.6
Leases Section 4.9
Legal Requirement Section 2.6
Liability Section 4.4
Lien Section 4.9
LTIP Section 7.7
Major Supplier Section 4.21
Material Contracts Section 4.12
Merger Recitals
New LLC Section 7.6
New LLC Purchase Price Section 7.6
Option Plans Section 2.2
Options Section 2.2
Order Section 2.6
Parent Preamble
Paying Agent Section 2.4
Per Share Amount Section 2.1
Permit Section 4.3
Permitted Lien Section 4.9
Person Section 2.4
Plan Section 4.15
Prohibited Effect Section 4.1
Prohibited Result Section 8.2
Proxy Statement Section 3.2
Purchaser Preamble
Release Section 4.17
Rights Section 3.1
Rights Agreement Section 3.1
Salaried Employee Section 6.1
SEC Reports Section 4.4
Securities Act Section 2.1
Shareholders Recitals
Special Meeting Section 3.3
Subsequent Transactions Section 4.2
Subsidiary Section 2.1
Superfund Section 4.17
Superior Proposal Section 6.2
Surviving Corporation Section 1.1
Takeover Proposal Section 6.2
Tax Section 4.18
Tax Return Section 4.18
Taxes Section 4.18
iii
Taxing Authority Section 4.18
TBCA Recitals
Telecom Employees Section 7.7
Termination Fee Section 9.3
Third Party Section 6.2
Trade Secrets Section 4.13
Transaction Documents Section 4.2
Transactions Section 4.2
Vendor Excluded Indebtedness Section 7.6
Voting Agreement Recitals
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May 1,
2002, by and among ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇., a Delaware corporation
("Parent"), Eldorado Acquisition Three, Inc., a Delaware corporation and an
indirect wholly owned subsidiary of Parent ("Purchaser"), and Software Spectrum,
Inc., a Texas corporation (the "Company"):
W I T N E S S E T H:
WHEREAS, the board of directors of the Company (the "Board of Directors")
has determined that it is in the best interests of the Company and the holders
(the "Shareholders") of the shares of common stock, $0.01 par value, of the
Company (the "Common Stock") for Purchaser to merge with and into the Company
(the "Merger") in accordance with the General Corporation Law of the State of
Delaware ("DGCL") and the Texas Business Corporation Act ("TBCA") upon the terms
and subject to the conditions set forth herein;
WHEREAS, the board of directors of each of Parent and Purchaser has
determined that the Merger is in the best interests of Parent and Purchaser, and
the Merger has been approved by the sole stockholder of Purchaser;
WHEREAS, immediately prior to the consummation of the Merger, the parties
desire to effect the Initial Transactions (as defined in Section 7.6);
WHEREAS, concurrently with the execution and delivery of this Agreement, as
a condition and inducement to Parent's and Purchaser's willingness to enter into
this Agreement, certain Shareholders have entered into Voting Agreements, dated
as of the date of this Agreement, in the form attached hereto as Exhibit A (the
"Voting Agreement") pursuant to which each such Shareholder has, among other
things, agreed to grant to Parent a proxy with respect to the voting of such
shares, in each case upon the terms and subject to the conditions set forth in
the Voting Agreement; and
WHEREAS, the Board of Directors has approved this Agreement and the Voting
Agreement and has determined that the consideration to be paid for each share of
Common Stock (excluding the Dissenting Shares (as defined in Section 2.7)) upon
consummation of the Merger is fair to the holders of such shares and has
resolved to recommend that the holders of Common Stock approve this Agreement
and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I.
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the DGCL and the TBCA, at the Effective Time,
Purchaser shall be merged into the Company and the separate existence of
Purchaser shall thereupon cease, and the Company shall be the surviving
corporation in the Merger (the "Surviving Corporation") and an indirect
wholly-owned subsidiary of Parent, and shall continue its corporate existence
under the laws of the State of Texas.
Section 1.2. Effective Time of the Merger. On the Closing Date, the Company
and Purchaser shall file a certificate of merger with the Secretary of State of
the State of Delaware and deliver articles of merger to the Secretary of State
of the State of Texas in accordance with the DGCL and TBCA and make all other
filings or recordings required by applicable law in connection with the Merger.
The Merger shall become effective at the date and time (the "Effective Time")
when a properly executed certificate of merger is filed with the Secretary of
State of the State of Delaware and a certificate of merger is issued to the
Surviving Corporation by the Secretary of State of the State of Texas or at such
later time as is specified in the respective certificates of merger. The
certificates and articles of merger filed with the Secretary of States of the
States of Delaware and Texas are referred to throughout the remainder of this
Agreement as the "Certificates of Merger."
Section 1.3. Articles of Incorporation. At the Effective Time the Second
Restated Articles of Incorporation ("Articles of Incorporation") of the Company,
as in effect immediately before the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation upon and after the Effective Time
until thereafter amended as provided by law and such Articles of Incorporation.
Section 1.4. By-Laws. The By-laws of Purchaser as in effect immediately
before the Effective Time shall be the By-laws of the Surviving Corporation
until thereafter amended as provided by law, the Articles of Incorporation of
the Surviving Corporation and such By-laws.
Section 1.5. Board of Directors; Officers. The directors of Purchaser
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation and the officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified.
Section 1.6. Effects of Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of DGCL and TBCA.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.7. Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
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▇▇▇▇, ▇▇ ▇▇▇▇▇ no later than 10:00 a.m. on the second business day (as such term
is defined in Rule 14d-1 under the Exchange Act (a "Business Day")) after the
conditions set forth in Article VIII have been satisfied (or, to the extent
permitted by law, waived by the parties entitled to the benefits thereof), or at
such other place, time and date as shall be agreed between Parent and the
Company (the "Closing Date").
ARTICLE II.
CONVERSION OF COMMON STOCK
Section 2.1. Conversion of Common Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of any Shareholder:
(a) All shares of Common Stock issued and outstanding immediately
prior to the Effective Time which are held by the Company or any Subsidiary
of the Company, and any shares of Common Stock issued and outstanding
immediately prior to the Effective Time owned by Parent, Purchaser or any
other Subsidiary of Parent, shall be cancelled and extinguished and no
payment or other consideration shall be made with respect thereto. As used
in this Agreement, "Subsidiary" means any "subsidiary" as defined in Rule
405 promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
(b) Each remaining share of Common Stock issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares)
shall automatically be cancelled and extinguished and be converted into and
become solely a right to receive $37.00 per share (the "Per Share Amount")
in cash payable to the holder thereof, without interest, upon surrender of
the certificate representing such share. From and after the Effective Time,
each holder of a certificate or certificates representing any such shares
of Common Stock shall cease to have any rights with respect thereto, except
the right to receive the Per Share Amount, without interest, upon the
surrender of such certificate in accordance with Section 2.4 hereof.
(c) Each share of capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted and exchanged
into one validly issued, fully paid and nonassessable share of common stock
of the Surviving Corporation.
Section 2.2. Stock Options
(a) Prior to the consummation of the Merger, the Company shall take
all actions necessary, and obtain any required consents, to provide that,
(i) effective as of the Effective Time each then outstanding option to
purchase Common Stock granted under any of the Company's stock option plans
referred to in Section 4.5 (collectively, the "Option Plans"), and (ii) any
and all other outstanding options, stock warrants and rights to acquire
Common Stock, whether or not granted pursuant to such Option Plans, whether
or not then exercisable or vested (the "Options") shall be cancelled by
virtue of the Merger, shall cease to exist and shall be of no further force
or effect; provided,
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however, that each holder of an Option, whether vested or unvested, shall
be entitled to receive, for each share of Common Stock issuable on exercise
of such Option, an amount in cash equal to the excess of (x) the Per Share
Amount over (y) the per share exercise price of the Option as in effect
immediately prior to the Effective Time. Such amount shall be subject to
reduction by any applicable tax withholding. The Company and Parent agree
that such amounts are the sole payments that will be made with respect to
or in relation to the Options. No consideration shall be payable with
respect to any Option which has an exercise price that exceeds the Per
Share Amount.
(b) The consideration due under this Section 2.2 shall be payable as
soon as practicable after the Effective Time without interest after (x)
verification by the Paying Agent of the ownership and terms of the
particular Option by reference to the Company's records, and (y) delivery
in the manner provided in Section 2.4 of a written instrument duly executed
by the owner of the applicable Option, in a form provided by the Paying
Agent and setting forth (i) the aggregate number of Options owned by that
person and their respective issue dates and exercise prices, (ii) a
representation by the person that he or she is the owner of all Options
described pursuant to clause (x), that none of those Options has expired or
ceased to be exercisable prior to the Effective Time, and (iii) a consent
to the treatment of such Options pursuant to this Section 2.2 in full
satisfaction of all rights relating to such Options.
(c) Except as provided herein or as otherwise agreed to by the
parties, the Company shall cause the Option Plans to terminate effective
not later than the Effective Time, and the provisions in any other plan,
program or arrangement, providing for the issuance or grant by the Company
or any of its Subsidiaries of any interest in respect of the capital stock
of the Company or any of its Subsidiaries shall be terminated effective not
later than the Effective Time.
(d) The Company represents and warrants that all of the Option Plans
provide that the Company can take the actions described in this Section 2.2
without obtaining the consent of any holders of Options.
(e) The Company shall take any reasonable action required to cause the
disposition of the Options in accordance with this Section 2.2 to be exempt
from the provisions of 16(b) of the Securities Exchange Act of 1934, as
amended, including the rules and regulations promulgated thereunder (the
"Exchange Act").
(f) Pursuant to the terms of the Company's Non-Employee Directors'
Retainer Stock Plan, all share equivalents credited to participant deferral
accounts shall be cancelled in exchange for an amount in cash equal to the
Per Share Amount multiplied by the equivalents so cancelled. The Company
shall pay such amount as soon as practicable after the Effective Time.
Section 2.3. Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed with respect to Common Stock
issued and outstanding immediately prior to the Effective Time and no further
transfer of such Common Stock shall thereafter be made on such stock transfer
books. If, after the Effective Time, valid
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certificates previously representing such Common Stock are presented to the
Surviving Corporation or the Paying Agent, they shall be exchanged as provided
in Section 2.4.
Section 2.4. Exchange of Certificates. Prior to the Effective Time,
Purchaser shall designate a bank or trust company with capital exceeding $500
million to act as agent (the "Paying Agent") for the Shareholders to receive the
funds necessary to effect the exchange for cash of certificates which,
immediately prior to the Effective Time, represented Common Stock entitled to
payment pursuant to Section 2.1(b). As soon as practicable after the Effective
Time, the Paying Agent shall mail a transmittal form to each holder of record of
certificates theretofore representing such Common Stock advising such holder of
the procedure for surrendering to the Paying Agent such certificates. If a check
or wire transfer for the Per Share Amount is to be issued in the name of any
individual, partnership, corporation, trust, association, limited liability
company, Governmental Agency or any other entity (each, a "Person") other than
the Person in whose name the certificates for Common Stock surrendered for
exchange are registered on the books of the Company, it shall be a condition of
the exchange that the Person requesting such exchange shall pay to the Paying
Agent all transfer or other taxes, if any, required by reason of the issuance of
such check or wire transfer in the name of a Person other than the registered
owner of the certificates surrendered, or shall establish to the satisfaction of
the Paying Agent that such taxes have been paid or are not applicable. Upon the
surrender and exchange of a certificate theretofore representing Common Stock,
the holder shall be paid by check or wire transfer, without interest thereon,
the Per Share Amount to which such holder is entitled hereunder, less only such
amount, if any, required to be withheld under applicable backup withholding
federal income tax regulations, and such certificate shall forthwith be
cancelled. Until so surrendered and exchanged, each such certificate shall
represent solely the right to receive the Per Share Amount into which the Common
Stock it theretofore represented shall have been converted pursuant to Section
2.1, without interest, and the Surviving Corporation shall not be required to
pay the holder thereof the Per Share Amount to which such holder otherwise would
be entitled. If any certificates representing any Common Stock shall not have
been surrendered prior to five years after the Effective Time (or immediately
prior to such earlier date on which any payment in respect thereof would
otherwise escheat to or become the property of any Governmental Agency), the
payment in respect of such certificates shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any Person previously entitled thereto.
Notwithstanding the foregoing, neither the Paying Agent nor any party hereto
shall be liable to a holder of certificates theretofore representing Common
Stock for any amount paid to a public official pursuant to any applicable
abandoned property, escheat or similar laws. In the event that any holder is
unable to deliver the certificate which formerly represented such holder's
Common Stock, then Parent or Purchaser, in the absence of actual notice that any
Common Stock represented by any such certificate has been acquired by a bona
fide purchaser, shall deliver to such holder the Per Share Amount to which
Shareholder is entitled in accordance with the provisions of this Agreement upon
the presentation of the following: (i) an affidavit or other evidence that the
certificate has been lost, wrongfully taken or destroyed; (ii) evidence that
such Person is the beneficial owner of the certificate claimed by such Person to
be lost, wrongfully taken or destroyed and that such Person is the person who
would be entitled to present such certificate for exchange pursuant to this
Agreement and (iii) reasonable indemnity against the claims of any third party
claiming to be the beneficial owner of such lost, wrongfully taken or destroyed
certificate.
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Section 2.5. Funding of Paying Agent.
(a) Parent shall provide or cause to be provided to Purchaser, and
Purchaser shall transmit by wire transfer, or other acceptable means to the
Paying Agent, at or prior to the Effective Time funds required for the
exchange of all Common Stock and cancellation of all Options in accordance
with this Agreement. The Paying Agent shall agree to hold such funds in
trust and deliver such funds (in the form of checks of the Paying Agent or
wire transfers) in accordance with this Section 2.5 and Sections 2.2 and
2.4. Any portion of such funds which has not been paid to holders of the
Common Stock or Options pursuant to Section 2.2 or 2.4 within six months
after the Effective Time shall promptly be paid to the party which provided
such funds, and thereafter holders of certificates representing the right
to receive the cash into which Common Stock or Options formerly represented
by such certificates shall have been converted pursuant to Section 2.1(b)
or 2.2 who have not theretofore complied with Section 2.2 or 2.4 shall look
solely to the Surviving Corporation for payment of the amount of cash to
which they are entitled pursuant to this Agreement.
(b) The Paying Agent shall invest the funds, as directed by Purchaser,
prior to the Effective Time, and as directed by the Surviving Corporation,
on or after the Effective Time, in (i) direct obligations of the United
States of America, (ii) obligations for which the full faith and credit of
the United States of America is pledged to provide for the payment of
principal and interest, (iii) commercial paper rated the highest quality by
either ▇▇▇▇▇'▇ Investors Services, Inc. or Standard & Poor's Corporation or
(iv) certificates of deposit, bank repurchase agreements or bankers'
acceptances of commercial banks with capital exceeding $500 million. Any
net earnings with respect to the funds shall be the property of and paid
over to the Surviving Corporation as and when requested by the Surviving
Corporation; provided, however, that any such investment or any such
payment of earnings may not delay the receipt by holders of certificates of
any Per Share Amount.
Section 2.6. No Further Ownership Rights in Common Stock. From and after
the Effective Time, the Shareholders shall cease to have any rights with respect
to the Common Stock except as otherwise provided in this Agreement or by any
federal, state, local, municipal, foreign, international, multinational, or
other Order, constitution, law, rule, ordinance, permit, principle of common
law, regulation, statute, or treaty (each, a "Legal Requirement"). All cash paid
upon the surrender of certificates in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to
Common Stock. For purposes of this Agreement, the term "Order" means any award,
decision, injunction, judgment, order, ruling, subpoena, or verdict entered,
issued, made, or rendered by any Governmental Agency.
Section 2.7. Dissenting Shareholders. Notwithstanding anything in this
Agreement to the contrary, shares of Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by
Shareholders who (i) have not voted such shares in favor of the Merger, (ii)
have otherwise complied with the relevant provisions of Section 5.13 of the TBCA
and (iii) as of the Effective Time, shall not have effectively withdrawn or lost
such right to relief as a dissenting Shareholder ("Dissenting Shares") shall not
be converted into a right to
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receive the Per Share Amount described in Section 2.1(b). The holders thereof
shall be entitled only to such rights as are granted by Section 5.13 of the
TBCA. Each holder of Dissenting Shares who becomes entitled to payment for such
Dissenting Shares pursuant to Section 5.13 of the TBCA shall receive payment
therefor from the Surviving Corporation in accordance with the TBCA; provided,
however, that if any such holder of Dissenting Shares (i) shall have failed to
establish his entitlement to relief as a dissenting Shareholder as provided in
Section 5.13 of the TBCA, (ii) shall have withdrawn his demand for relief as a
dissenting Shareholder with respect to such Dissenting Shares or lost his right
to relief as a dissenting Shareholder and payment for his Dissenting Shares
under Section 5.13 of the TBCA or (iii) shall have failed to file a complaint
with the appropriate court seeking relief as to determination of the value of
all Dissenting Shares within the time provided in Section 5.13 of the TBCA, such
holder shall forfeit the right to relief as a dissenting Shareholder with
respect to such Dissenting Shares and each such Dissenting Share shall be
converted into the right to receive the Per Share Amount from the Surviving
Corporation as provided in Section 2.4. The Company shall give Parent prompt
notice of any demands received by the Company prior to the Effective Time, any
attempted withdrawals of such demands and any other instruments served pursuant
to the TBCA and received by the Company relating to Shareholders' rights of
appraisal, and Parent shall have the right to direct all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands.
Section 2.8. Assistance in Consummation of the Transactions. Each of
Parent, Purchaser and the Company shall provide all reasonable assistance to,
and shall cooperate with, each other to bring about the consummation of the
Merger and the other Transactions as soon as possible in accordance with the
terms and conditions of this Agreement. Parent shall cause Purchaser to perform
all of its obligations in connection with this Agreement required to be
performed by it on or prior to the Effective Time.
ARTICLE III.
COMPANY ACTION WITH RESPECT TO THE MERGER
Section 3.1. Company and Board Approval; Fairness Opinion.
(a) The Company hereby approves of and consents to the Merger and
represents and warrants that the Board of Directors, at a meeting duly
called and held on May 1, 2002, at which all the Directors were present
duly and unanimously: (i) approved and adopted this Agreement and the
Transactions, including the Merger, (ii) resolved to recommend that the
Shareholders approve this Agreement and the Transactions, including the
Merger, provided that such recommendation may be withdrawn, modified or
amended to the extent that the Board of Directors determines in good faith
following consultation with outside legal counsel that failure to take such
action would constitute a breach of the Board of Directors' fiduciary
obligations under applicable law, (iii) determined that this Agreement and
the transactions contemplated hereby, including the Merger, are fair to and
in the best interests of the Shareholders, (iv) took all action necessary
to render Section 13.03 of the TBCA and the Rights inapplicable to the
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Merger, the Voting Agreement, this Agreement, and any of the Transactions
and Subsequent Transactions, (v) elected, to the extent permitted by law,
not to be subject to any "moratorium," "control share acquisition,"
"business combination," "fair price" or other form of corporate
anti-takeover laws and regulations of any jurisdiction that may purport to
be applicable to this Agreement, and (vi) approved the execution, delivery
and performance of this Agreement, such approval constituting approval of
the foregoing for purposes of Section 5.03 of the TBCA.
(b) The Company further represents and warrants that SunTrust ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, as financial advisor to the Board of Directors has delivered to
the Board of Directors a written opinion, dated as of the date of this
Agreement (or an oral opinion which will be promptly confirmed in writing),
to the effect that the Per Share Amount to be received by Shareholders
(other than Parent or any "affiliate" as defined in Rule 405 promulgated
under the Securities Act ("Affiliate")) pursuant to the Merger is fair to
such holders from a financial point of view. The Company hereby represents
and warrants that it has been authorized by its financial advisor to permit
the inclusion in its entirety of the fairness opinion (and, subject to
prior review and consent by the financial advisor, references thereto) in
the Proxy Statement. The Company has been advised by each of its directors
who owns shares of Common Stock that such person intends to vote all shares
of Common Stock owned by such person in favor of the Merger.
(c) The Company has irrevocably taken all necessary action, including,
without limitation, amending the Rights Agreement, dated as of December 13,
1996, as amended, between the Company and Mellon Investor Services, LLC, as
rights agent (the "Rights Agreement"), with respect to all of the
outstanding rights issued pursuant to the Rights Agreement (the "Rights")
to ensure that (i) Parent and Purchaser, or either of them, are not deemed
to be an Acquiring Person (as defined in the Rights Agreement) and (ii) the
Rights will not become exercisable, in any such case, by reason of the
execution and delivery of the Voting Agreement, this Agreement or the
consummation of the Merger and the Subsequent Transactions. The Rights
Agreement, as so amended, has not been further amended or modified. Copies
of all such amendments to the Rights Agreement have been previously
provided or made available to Purchaser.
Section 3.2. Proxy Statement.
(a) As promptly as practicable following the date of this Agreement,
the Company shall prepare a preliminary proxy statement (the "Proxy
Statement") relating to the Special Meeting and a form of proxy for use at
the Special Meeting relating to the vote of the Shareholders with respect
to the Merger. Parent shall be afforded a reasonable opportunity to comment
on the Proxy Statement. The Proxy Statement shall comply in all material
respects with the provisions of the Exchange Act, and shall be in form and
substance reasonably satisfactory to Parent.
(b) The Company shall cause the preliminary Proxy Statement to be
filed with the Securities and Exchange Commission (the "Commission") at the
earliest practicable date after the date of this Agreement, and in any
event not more than 14 days after the date hereof.
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(c) The Company shall promptly notify Parent of the receipt of any
comments of the Commission with respect to the preliminary Proxy Statement
and of any requests by the Commission for any amendment or supplement
thereto or for additional information and shall provide to Parent promptly
copies of all correspondence between the Company or any representative of
the Company and the Commission. As promptly as practicable after comments
are received from the Commission with respect to the preliminary Proxy
Statement, the Company shall use its commercially reasonable efforts to
respond to the comments of the Commission and, to the extent comments of
the Commission relate to Parent or Purchaser, Parent and Purchaser shall
use their commercially reasonable efforts to respond to the comments of the
Commission. The Company shall give Parent and its counsel the reasonable
opportunity to review all amendments and supplements to the Proxy Statement
and all responses to requests for additional information and replies to
comments of the Commission prior to their being filed with or sent to the
Commission, and Parent and Purchaser shall provide the Company with such
information about them as may be required to be included in the Proxy
Statement or as may be reasonably required to respond to any comment of the
Commission.
(d) After all the comments received from the Commission have been
cleared by the Commission staff and all information required to be
contained in the Proxy Statement has been included therein by the Company,
the Company shall file with the Commission the definitive Proxy Statement
and the Company shall use its commercially reasonable efforts to have the
Proxy Statement cleared by the Commission as soon thereafter as
practicable. The definitive Proxy Statement shall contain the fairness
opinion of the financial advisor for the Company pursuant to Section
3.1(b). The Company shall cause the Proxy Statement to be mailed to record
holders of the Common Stock as promptly as practicable after clearance by
the Commission.
(e) The Proxy Statement shall contain the determination and
recommendation of the Board of Directors referred to in and subject to
Section 3.1; provided, however, that any withdrawal or change in its
recommendation must be made in compliance with Section 6.2(c), if
applicable, and subject to the requirement that the Board of Directors
submit this Agreement and the Transactions, including the Merger, to a
shareholder vote in accordance with Section 3.3(c).
(f) The Company shall prepare and revise the Proxy Statement so that,
at the date mailed to the Shareholders, at the time of the Special Meeting,
and at the Closing Date the Proxy Statement shall (x) not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order that the statements
made therein, in light of the circumstances under which they are made, not
misleading (except that the Company shall not be responsible under this
paragraph with respect to statements made therein based on information
supplied by Parent or Purchaser expressly for inclusion in the Proxy
Statement), and (y) comply in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
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Section 3.3. Meeting of Shareholders of the Company.
(a) The Company shall promptly take all action necessary in accordance
with the TBCA and its Articles of Incorporation and By-Laws to duly call,
give notice of, convene and hold a special meeting of its shareholders for
the purpose of considering and taking action upon the approval of the
Merger and the authorization and adoption of this Agreement (the "Special
Meeting") as promptly as practicable following the date hereof, and in no
event more than 21 Business Days following the clearance of the Proxy
Statement by the Commission.
(b) The vote required for approval of the Merger will be two-thirds or
more of the outstanding Common Stock. Subject to the right of the Board of
Directors to withdraw, modify or amend its recommendation of the Merger in
accordance with Section 3.1(a), the Company shall use its reasonable best
efforts to solicit from Shareholders proxies in favor of the Merger and
shall take all other action necessary or, in the reasonable opinion of
Purchaser, advisable to secure any vote of Shareholders required by the
TBCA and the Articles of Incorporation to effect the Merger.
(c) The Company shall call and hold the Special Meeting whether or not
the Board of Directors at any time subsequent to the date hereof determines
that this Agreement or the Transactions, including the Merger, is no longer
advisable, recommends the rejection thereof by the Shareholders, or
otherwise makes an Adverse Recommendation.
(d) At the Special Meeting, Parent and Purchaser shall vote or cause
to be voted all of the Common Stock then owned or as to which they have
voting control by Parent, Purchaser or their Subsidiaries in favor of
adoption of this Agreement and the Company shall vote or cause to be voted
all shares of Common Stock with respect to which proxies in the form
distributed by the Company have been given, and not voted against the
adoption of this Agreement, in favor of adoption of this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as of the
date of this Agreement as follows:
Section 4.1. Organization of the Company.
(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing, and except as set forth on Schedule 4.1 in
good standing under the laws of the jurisdiction of its organization. Each
of the Company and its Subsidiaries is duly qualified to do business and is
in good standing in the states in which the ownership of its properties or
the conduct of its business requires such qualification, except where the
failure to so qualify, individually or in the aggregate, would not
reasonably be expected to have a Prohibited Effect.
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(b) For the purposes of this Agreement, a "Prohibited Effect" means:
(i) a material adverse change in or effect with respect to the business,
revenues, results of operations, properties, or financial condition of the
Company and its Subsidiaries, taken as a whole, other than any change or
effect resulting from or attributable to (A) the announcement or pendency
of this Agreement or the Transactions, (B) any decrease in the market price
of the Common Stock (but not any change or effect underlying such decrease
to the extent that it would otherwise constitute a Prohibited Effect), (C)
changes, effects, conditions, events or circumstances that generally affect
the industries in which the Company or its Subsidiaries operate (including
legal and regulatory changes), or (D) general economic conditions or
changes, effects, conditions or circumstances affecting the securities
markets generally, including any change in general economic conditions due
to any act or war, terrorism, or threat of war or terrorism; or (ii) notice
from a Major Supplier after the date of this Agreement that it intends to
materially alter its relationship with the Company or any of its
Subsidiaries in a manner that would be materially adverse to the Company's
business taken as a whole other than any such notice arising directly from
a request to amend or delete provisions of Contracts designated as Vendor
Excluded Indebtedness pursuant to Section 7.6.
Section 4.2. Authority and Binding Effect.
(a) The Company has the requisite corporate power to execute and
deliver this Agreement and all other agreements and documents contemplated
hereby or executed in connection herewith to which it is a party (the
"Transaction Documents") and subject, with respect to the consummation of
the Merger, to the approval of Shareholders holding at least two-thirds of
the outstanding Common Stock, to consummate the Initial Transactions, the
Merger and the other transactions contemplated hereby and thereby
(collectively, the "Transactions"), and to consummate the subsequent merger
of Parent's wholly owned subsidiary engaged in the same line of business
with and into the Surviving Corporation (the "Subsequent Transactions").
(b) The execution and delivery of the Transaction Documents by the
Company and the consummation by the Company of the Transactions have been
duly and validly authorized by the Board of Directors, and no other
corporate proceedings on the part of the Company are necessary to authorize
Transaction Documents or to consummate the Transactions (other than with
respect to the consummation of the Merger, the adoption of this Agreement
by Shareholders holding at least two-thirds of the outstanding Common
Stock).
(c) This Agreement has been, and each other Transaction Document at
the time of its execution will have been, duly and validly executed and
delivered by the Company, and (assuming this Agreement and such Transaction
Documents each constitute a valid and binding obligation of Parent and
Purchaser) this Agreement constitutes, and each such other Transaction
Document at the time of execution will constitute, the valid and binding
obligations of the Company, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
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moratorium and similar laws of general applicability relating to or
affecting the rights of creditors and to general principles of equity.
Section 4.3. No Conflict or Violation; Consents. Except as set forth on
Schedule 4.3, neither the execution and delivery of the Transaction Documents
nor the consummation or performance of the Transactions will, directly or
indirectly (with or without notice or lapse of time):
(a) contravene, conflict with, or result in a violation of (i) any
provision of the Articles of Incorporation or the Second Amended and
Restated By-Laws (the "By-Laws") of the Company or the equivalent
organizational documents of any of its Subsidiaries, or (ii) any resolution
adopted by the Board of Directors or the Shareholders;
(b) contravene, or conflict with, or result in a violation of any
material Legal Requirement to which the Company or any of the assets owned
or used by the Company, may be subject;
(c) contravene, or conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Agency the right to
revoke, withdraw, suspend, cancel, terminate, or materially modify any
permit, approval, consent, authorization, license, variance, or permission
required by a Governmental Agency under any Legal Requirement (each, a
"Permit") that is material and is held by the Company or any of its
Subsidiaries;
(d) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, or to receive any additional
consideration under any Material Contract or material Permit;
(e) result in the imposition or creation of any material Lien upon or
with respect to any of the material assets owned or used by the Company; or
(f) require any material consent, approval, or authorization of, or
material registration or filing with, any Governmental Agency or any other
Person.
Section 4.4. SEC Filings; Financial Statements; Undisclosed Liabilities.
(a) The Company has filed all forms, reports and documents (including
all exhibits thereto) required to be filed with the Commission since April
30, 1999, and has heretofore made available to Parent, in the form filed
with the Commission, its (i) Annual Report on Form 10-K for the fiscal year
ended April 30, 2001, (ii) Quarterly Reports on Form 10-Q for the fiscal
quarters ended July 31, 2001, October 31, 2001 and January 31, 2002, (iii)
all proxy statements relating to the Company's meetings of Shareholders
(whether annual or special) held since April 30, 1999 and (iv) all other
reports or registration statements filed by the Company with the Commission
since April 30, 1999 (collectively, the "SEC Reports"). Except as set forth
in Schedule 4.4, the SEC Reports (i) at the time filed complied as to form
in all material respects with the
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requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time they were filed contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. None of
the Subsidiaries of the Company is required to file any statements or
reports with the Commission pursuant to Sections 13(a) or 15(d) of the
Exchange Act.
(b) The consolidated financial statements contained in the SEC Reports
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis ("GAAP") throughout the periods involved
(except as may be indicated in the notes thereto) and fairly presented the
consolidated financial position of the Company and its Subsidiaries as at
the respective dates thereof and the consolidated results of operations and
cash flows of the Company and its Subsidiaries for the periods indicated,
except that the unaudited interim financial statements were or are subject
to normal and recurring year-end adjustments (which in the aggregate are
not material in amount).
(c) Except as (i) set forth on Schedule 4.4, (ii) incurred in the
ordinary course of business consistent with past practice since April 30,
2001, (iii) set forth in the financial statements or notes thereto or in
the Management's Discussion and Analysis of Financial Condition and Results
of Operations, in each case, included in the SEC Reports filed after April
30, 2001 and prior to the date of this Agreement, (iv) relating to
performance obligations under Contracts in accordance with the terms and
conditions thereof which are not required by GAAP to be reflected on a
consolidated balance sheet of the Company and its Subsidiaries, or (v)
liabilities or obligations contained in this Agreement, the Company and its
Subsidiaries have no material liabilities or obligations (whether asserted
or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated and whether due or to become
due) (each, a "Liability") of any nature (whether accrued, absolute,
contingent or otherwise).
Section 4.5. Capital Structure. The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock and 1,000,000 shares of Series A
Junior Participating Preferred Stock, par value $.01 per share. As of the date
of this Agreement: (a) no shares of Series A Junior Participating Preferred
Stock are issued and outstanding; (b) 3,170,912 shares of Common Stock are
issued and outstanding; and (c) 691,240 shares of Common Stock are reserved for
issuance pursuant to outstanding Options. Schedule 4.5 sets forth a list of all
Option Plans, together with all Options outstanding as of the date of this
Agreement and the number of shares of Common Stock issuable upon exercise of
such Options, and the exercise price thereof. Each outstanding share of capital
stock of the Company is duly authorized and validly issued, fully paid and
nonassessable and free of any preemptive rights and was not issued in violation
of any preemptive rights or federal or state securities laws. Except for the
Options and the periodic options granted prior to the date of this Agreement
under the Employee Stock Purchase Plan, there are no, and at Closing there will
be no, outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type granted or
issued by the Company relating to the issuance, sale or transfer by the Company
of any securities of the Company, nor will there be outstanding any voting
securities of the Company or any
- 13 -
securities of the Company which are convertible into or exchangeable for any
shares of capital stock of the Company, and the Company will have no obligation
of any kind to issue any additional capital stock or voting securities.
Section 4.6. Subsidiaries.
(a) Except as set forth on Schedule 4.6, the Company does not own any
stock of, or any equity participation in, any Person (other than those held
by Plans, or acquired in connection with the settlement of outstanding
accounts receivable subsequent to the date of this Agreement).
(b) Schedule 4.6 sets forth a correct and complete list of all
Subsidiaries of the Company. The Company has made available to Parent and
Purchaser, true and correct copies of the certificates of incorporation and
by-laws or similar organizational documents of each Subsidiary as amended
to date.
(c) All of the outstanding shares of capital stock of each Subsidiary
of the Company are duly authorized, validly issued, fully paid, and
non-assessable, and except as set forth on Schedule 4.6 are owned by the
Company or a Subsidiary of the Company as set forth on Schedule 4.6, free
and clear of any Lien.
(d) Except as set forth on Schedule 4.6, operations of the Company and
its Subsidiaries conducted outside of the United States are conducted by
the Subsidiaries listed on Schedule 4.6.
(e) There are no outstanding or authorized options, warrants, calls,
subscriptions, rights, commitments or any other agreements of any character
(i) evidencing the right to purchase or subscribe for any shares of capital
stock of a Subsidiary of the Company and set forth on Schedule 4.6 or (ii)
obligating any Subsidiary of the Company to issue any additional shares of
its capital stock.
Section 4.7. Accounts Receivable. The accounts receivable of the Company
and its Subsidiaries reflected on the consolidated balance sheet of the Company
dated as of January 31, 2002 which is included in the SEC Reports filed prior to
the date of this Agreement ("Balance Sheet") or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. The Account
Receivable reserves are adequate and calculated in accordance with GAAP.
Section 4.8. Absence of Certain Changes or Events. Except as expressly
permitted by this Agreement or as set forth in Schedule 4.8 hereto, (i) since
April 30, 2001, the Company and its Subsidiaries have conducted their business
only in the ordinary course consistent with past practice, (ii) since April 30,
2001, there have not occurred any events or changes or developments having, or
which would reasonably be expected to have, individually or in the aggregate, a
Prohibited Effect, and (iii) since January 31, 2002, neither the Company nor any
of its Subsidiaries has taken, or committed to take any action which would have
been prohibited under Section 6.1 if such section applied to the period since
January 31, 2002.
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Section 4.9. Properties.
(a) Neither the Company nor any of its Subsidiaries own any real
property.
(b) Except as would not, individually or in the aggregate, reasonably
be expected to have a Prohibited Effect, each of the Company and its
Subsidiaries has good and marketable title to all the properties and assets
owned by the Company or any of its Subsidiaries or, in the case of property
held under Lease or other Contract, each of the Company and its
Subsidiaries have a valid and subsisting leasehold interest in or a legal,
valid and enforceable right to use, free and clear of all Liens except
Permitted Liens.
(c) All material leases, subleases, licenses and other occupancy
agreements together with any amendments thereto, any option agreements and
any subordination, nondisturbance and attornment agreements (the "Leases"),
with respect to all real property leased or subleased by the Company or any
of its Subsidiaries are in full force and effect. Neither the Company or
any of its Subsidiaries nor, to the Company's Knowledge, any other party
thereto is in default under any of the Leases (and no event has occurred
which, with due notice or lapse of time or both, would constitute such a
default), except for such defaults which, individually or in the aggregate,
would not reasonably be expected to have a Prohibited Effect. The Company
has made available to Parent true correct and complete copies of each Lease
required to be listed on Schedule 4.12.
(d) The assets of the Company and its Subsidiaries in the aggregate
are adequate to conduct the operations of the Company and its Subsidiaries
in substantially the manner currently conducted.
(e) The tangible personal property of the Company and its Subsidiaries
is in good condition and repair (ordinary wear and tear excepted) and is
adequate for the uses to which it is being put and for the conduct of the
business of the Company and its Subsidiaries as currently conducted.
(f) For purposes of this Agreement, the term "Lien" means any charge,
claim, community property interest, condition, equitable interest, lien,
option, pledge, security interest, right of first refusal, or restriction
of any kind, including any restriction on use, voting, transfer, receipt of
income, or exercise of any other attribute of ownership. In addition, the
term "Permitted Liens" means, with respect to any asset, (i) covenants,
conditions, restrictions, encroachments, encumbrances, easements, rights of
way, licenses, grants, building or use restrictions, exceptions,
reservations, limitations or other imperfections of title (other than a
Lien securing any Indebtedness) with respect to such asset which,
individually or in the aggregate, does not materially detract from the
value of, or materially interfere with the present occupancy or use of,
such asset and the continuation of the present occupancy or use of such
asset; (ii) the matters set forth on Schedule 4.9; (iii) unfiled
mechanic's, materialmen's and similar liens with respect to amounts not yet
due and payable or which are being contested in good faith through
appropriate proceedings; (iv) liens for Taxes not yet delinquent or which
are being contested in good faith through appropriate proceedings and, for
those existing on the
- 15 -
date of the Balance Sheet, for which adequate reserves in accordance with
GAAP are reflected on the Balance Sheet, or arose subsequent to the date of
the date of the Balance Sheet in the ordinary course of business; and (v)
liens securing rental payments under operating leases and capital lease
arrangements, which capital lease arrangements if existing on the date of
the Balance Sheet were reflected on the Balance Sheet, or arose subsequent
to the date of the Balance Sheet in the ordinary course of business.
Section 4.10. Compliance with Legal Requirements.
(a) Except as set forth on Schedule 4.10(a), the Company and its
Subsidiaries have complied in all material respects with all material Legal
Requirements, and, to the Company's Knowledge, no event has occurred which
with or without notice could reasonably be expected to constitute a
material violation of any material Legal Requirements. Since April 30,
2001, except as set forth on Schedule 4.10(a), neither the Company nor any
of its Subsidiaries has received any notice or other communication (whether
oral or written) from any Governmental Agency or any other Person regarding
(i) any actual, alleged, possible, or potential violation of, or failure to
comply with, any material Legal Requirement, or (ii) any actual, alleged,
possible, or potential obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any material remedial action
of any nature, nor to the Company's Knowledge is there any basis for any
such notice or other communication.
(b) All material Permits, except as noted on Schedule 4.10(b), are in
full force and effect and no proceeding is pending or, to the Company's
Knowledge, threatened, to revoke or materially limit any such Permit, nor
is there a basis for any such revocation. Except as set forth on Schedule
4.10(b):
(i) the Company and its Subsidiaries are, and at all times since
April 30, 2001 have been, in material compliance with all of the terms
and requirements of each material Permit;
(ii) since April 30, 2001, neither Company nor any of its
Subsidiaries has received any notice or other communication (whether
oral or written) from any Governmental Agency or any other Person
regarding (A) any actual, alleged, possible, or potential violation of
or failure to comply with any material term or requirement of any
material Permit, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
material modification to any such material Permit, nor is there any
basis for such notice or other communication; and
(iii) all applications required to have been filed for the
renewal of the material Permits have been duly filed on a timely basis
with the appropriate Governmental Agencies, and all other filings
required to have been made with respect to such Permits have been duly
made on a timely basis with the appropriate Governmental Agencies.
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Section 4.11. Affiliate Agreements and Liabilities. Except as set forth on
Schedule 4.11 or those solely among the Company and its wholly owned
Subsidiaries:
(a) there are no written or oral Contracts between the Company and any
Affiliate of the Company including, without limitation, any such Contracts
relating to the provision of any services by the Company to any such
Affiliate, or by any such Affiliate to the Company; and
(b) (i) since the date of the Balance Sheet, there have been and (ii)
from the date of this Agreement to the Closing Date there will be no
material transactions, agreements or arrangements made upon or containing
terms and provisions less favorable to the Company than could have been
obtained on an arm's length basis from a Third Party between the Company
and (x) any Affiliate of the Company, (y) any director or officer of the
Company or of any Affiliate of the Company or (z) any member of the
immediate family of any individual described in clause (x) or (y) of this
sentence.
Section 4.12. Material Contracts.
(a) The Company has made available to Parent true, correct and
complete copies of all of, the following written Contracts (and all
amendments thereto) (or a summary of the material terms of any oral
Contracts) to which the Company or any of its Subsidiaries is a party or by
which any of their properties or assets are bound as of the date of this
Agreement:
(i) mortgage, indenture, note, letter of credit, reimbursement or
installment obligation, or other instrument for or relating to
Indebtedness in excess of $250,000;
(ii) (x) guaranty of any obligation in excess of $250,000 for
borrowings or performance, or (y) guaranty or warranty of products or
services, excluding endorsements or guaranties of instruments made in
the ordinary course of business, including in connection with the
deposit of items for collection, and statutory warranties;
(iii) Contract for the sale or lease of any of its assets in
excess of $250,000 other than in the ordinary course of business;
(iv) Contract for the purchase of any real estate, machinery,
equipment, or other capital assets in excess of $250,000;
(v) Contract for the future purchase of materials, supplies,
services, merchandise, or equipment parts in excess of $250,000;
(vi) Contract pursuant to which it is or may be obligated to make
payments, contingent or otherwise, on account of or arising out of
prior acquisitions or sales of businesses, assets, or stock of other
companies;
- 17 -
(vii) distribution, dealership, representative, broker, sales
agency, advertising or consulting Contract pursuant to which in excess
of $5,000,000 in annual gross revenues are recognized by the Company,
in the case of any such Contract with a Person primarily engaged in
the software publishing, distribution or resale business, and
$250,000, in the case of any other such Contract; excepting in each
case any such Contract that is terminable at will, or by giving notice
of 30 days or less, without Liability;
(viii) Lease for the use of real or personal property with rent
in excess of $250,000 per year;
(ix) Contract imposing non-competition or exclusive dealing
obligations on it;
(x) Contract in excess of $250,000 providing for payments to or
by any Person based on sales, purchases, or profits, other than direct
payments for goods;
(xi) Contract for the employment of any Shareholder, director,
officer, consultant or key employee not terminable without penalty or
Liability arising from such termination or any severance or
change-in-control contract or arrangement;
(xii) Contract relating to cleanup, abatement or other actions in
connection with environmental liabilities; or
(xiii) Contract which (A) involves future payment by or to the
Company or the applicable Subsidiary in excess of $250,000 or (B) is
otherwise material to the extent relating to the conduct of the
business of the Company and its Subsidiaries ((i) through (xiii)
collectively, the "Material Contracts").
(b) Schedule 4.12 sets forth a list of all (i) Material Contracts,
excluding customer contracts entered into in the ordinary course of
business and (ii) all Contracts described in Section 4.12(a)(i) relating to
Indebtedness for borrowed money regardless of whether the amount thereof is
in excess of or less than $250,000. Each Material Contract is valid,
binding and enforceable against the Company or the applicable Subsidiary,
and to the Company's Knowledge the other parties thereto in accordance with
its terms (subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting the rights of creditors and to general principles
of equity), and is in full force and effect. The Company or the applicable
Subsidiary has performed all material obligations required to be performed
by it to date under each of the Material Contracts. Except as set forth in
Schedule 4.12, neither the Company nor any of its Subsidiaries nor, to the
Company's Knowledge, any other party thereto is in material breach of or
default under any Material Contract (and no event has occurred which, with
due notice or lapse of time or both, would constitute such a lapse or
default).
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(c) For the purposes of this Agreement, the term "Contract" means,
collectively, all contracts, agreements, commitments, instruments and
guaranties to which the Company or any Subsidiary is a party. For the
purposes of this Agreement, the term "Indebtedness" means (without
duplication), with respect to any Person, whether recourse is to all or a
portion of the assets of such Person, (i) the principal of and premium, if
any, in respect of any indebtedness of such Person for money borrowed, (ii)
the principal, premium, if any, and interest of such Person with respect to
obligations evidenced by bonds, debentures, notes or, except for accrued
liabilities arising in the ordinary course of business, other similar
instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses (other than trade payables
which are not overdue or in default), (iii) all obligations of such Person
in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto) but only to the extent of
drawings thereunder, (iv) every obligation of such Person issued or assumed
as the deferred purchase price of property or services (excluding trade
accounts payable or accrued liabilities arising in the ordinary course of
business which are not overdue or in default), (v) every capital lease
obligation (determined in accordance with GAAP) of such Person, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of such Indebtedness shall be the lesser
of (A) the fair market value of such asset at such date of determination
and (B) the amount of such Indebtedness of such other Persons, (vii) every
obligation to pay rent or other payment amounts of such Person with respect
to any sale-leaseback transaction to which such Person is a party, payable
through the stated maturity of such sale-leaseback transaction, (viii)
factoring arrangements of such Person, whether or not such arrangements
appear on the balance sheet of such Person; and (ix) every obligation of
the type referred to in clauses (i) through (viii) of another Person the
payment of which, in any case, such Person has guaranteed or is responsible
or liable, directly or indirectly, as obligor, guarantor or otherwise.
Section 4.13. Intellectual Property.
(a) Except as would not reasonably be expected to have, individually
or in the aggregate, a Prohibited Effect, the Company and its Subsidiaries
own all right, title and interest in and to, or possess adequate licenses
or other valid rights to use (in each case, free and clear of any Liens),
all Intellectual Property used or held for use in connection with the
business of the Company and its Subsidiaries as currently conducted or as
contemplated to be conducted.
(b) Except as would not reasonably be expected to have, individually
or in the aggregate, a Prohibited Effect, the use of any Intellectual
Property by the Company or its Subsidiaries does not infringe or otherwise
violate the rights of any Person and is in accordance with any applicable
license pursuant to which the Company or any of its Subsidiaries acquired
the right to use any Intellectual Property.
(c) Except as would not reasonably be expected to have, individually
or in the aggregate, a Prohibited Effect, no Person or Intellectual
Property of any Person is
- 19 -
challenging, infringing or otherwise violating any right of the Company or
any of its Subsidiaries with respect to any Intellectual Property owned by
and/or licensed to the Company or any of its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has received any
written notice or, to the Knowledge of the Company, other notice of any
assertion or claim with respect to any Intellectual Property owned or used
by the Company or any of its Subsidiaries other than as would not
reasonably be expected to have, individually or in the aggregate, a
Prohibited Effect.
(e) No Intellectual Property owned or licensed by the Company or any
of its Subsidiaries is being used by the Company or any of its Subsidiaries
in a manner that would result in the cancellation or unenforceability of
such Intellectual Property, nor is the Company or any of its Subsidiaries
failing to use any Intellectual Property in a manner that would result in
the abandonment of such Intellectual Property, in each case other than as
would not reasonably be expected to have, individually or in the aggregate,
a Prohibited Effect. For purposes of this Agreement, "Intellectual
Property" means (i) all trademarks, trademark rights, trade names, trade
name rights, trade dress and other indications of origin, corporate names,
brand names, logos, certification rights, service marks, applications for
trademarks and for service marks, know-how and other proprietary rights and
information, the goodwill associated with the foregoing and registration in
any jurisdiction of, and applications in any jurisdictions to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; (ii) all inventions, discoveries and ideas
(whether patentable or unpatentable and whether or not reduced to
practice), in any jurisdiction, all improvements thereto, and all patents,
patent rights, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications),
and any renewals, extensions or reissues thereof, in any jurisdiction;
(iii) trade secrets, customer lists, know-how, including confidential and
other non-public information, and the right in any jurisdiction to limit
the use or disclosure thereof by any Person (collectively "Trade Secrets"),
(iv) writings and other works, whether copyrightable or not, in any
jurisdiction, and all registrations or applications for registration of
copyrights in any jurisdiction, and any renewals or extensions thereof; (v)
all mask works and all applications, registrations and renewals in
connection therewith, in any jurisdiction; (vi) all computer software
(including data and related documentation); (vii) Internet Web sites, Web
pages, domain names and applications and registrations pertaining thereto;
(viii) any similar intellectual property or proprietary rights; and (ix)
all copies and tangible documentation thereof and any claims or causes of
action arising out of or relating to any infringement or misappropriation
of any of the foregoing. Schedule 4.13 contains a list of all of the
Company's patent and patent applications and all trademark, copyright and
domain name applications and registrations, including patent registrations,
and the application number (except with respect to domain names), record
owner and jurisdiction as to each.
(f) Except as would not reasonably be expected to have, individually
or in the aggregate, a Prohibited Effect, the Company and its Subsidiaries
have taken all
- 20 -
reasonable precautions to protect the secrecy, confidentiality, and value
of the Trade Secrets.
(g) No Former Employee or Employee, officer or director of the Company
or any of its Subsidiaries holds any right, title or interest, directly or
indirectly, in whole or in part, in or to any material Intellectual
Property.
(h) The Intellectual Property is sufficient, in all material respects
for the Company and its Subsidiaries to carry on their business as
presently conducted.
Section 4.14. Labor Relations. Except as set forth on Schedule 4.14,
neither the Company nor its Subsidiaries is party to any collective bargaining
agreement covering any individual who performs services as an employee primarily
for the Company or any of its Subsidiaries (including such persons who are on an
approved leave of absence, vacation, short-term disability or otherwise treated
as an active employee of the Company or any of its Subsidiaries, "Employees"),
and there are no controversies or unfair labor practice proceedings pending or,
to the Company's Knowledge, threatened between the Company or any of its
Subsidiaries and any of their current or former Employees or any labor or other
collective bargaining unit representing any current or former Employee of the
Company or any of its Subsidiaries that would reasonably be expected to result
in a labor strike, dispute, slow-down or work stoppage or otherwise have a
Prohibited Effect. To the Company's Knowledge, except as set forth on Schedule
4.14, no organizational effort is presently being made or to the Company's
Knowledge, threatened by or on behalf of any labor union.
Section 4.15. Employee Benefits.
(a) Schedule 4.15 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 other employee benefit practices or arrangements,
including, without limitation, any such practices or arrangements providing
severance pay, sick leave, vacation pay, salary continuation for
disability, retirement benefits, deferred compensation, bonus pay,
incentive pay, stock options or other stock-based compensation,
hospitalization insurance, medical insurance, life insurance, scholarships
or tuition reimbursements, maintained by the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries is
obligated to contribute for Employees or individuals other than Employees
who at any time prior to the date of this Agreement performed services as
an Employee primarily for the Company ("Former Employees"). Each of the
employee benefit plans, practices and arrangements set forth on Schedule
4.15 (with the exception of Foreign Plans, as defined in subsection (j)
below) shall hereafter be referred to as a "Plan" (or "Plans" as the
context may require).
(b) Copies of the following documents, with respect to each of the
Plans, as applicable, have been made available to Parent by the Company:
(i) all plan and related trust documents, and amendments thereto; (ii) the
most recent IRS Form 5500; (iii) the most recent IRS determination letter;
(iv) summary plan descriptions; and (v) the most recent actuarial report.
-21-
(c) Neither the Company nor any trade or business (whether or not
incorporated) which has been under common control or treated as a single
employer with the Company under Section 414(b), (c) or (m) of the Code (an
"ERISA Affiliate") has incurred, or is reasonably likely to incur, any
Liability under Title IV of ERISA or Section 412 of the Code and none of
the Plans is a Multiemployer Plan, as defined in Section 3(37) of ERISA.
Neither the Company nor any ERISA Affiliate has incurred any Liability
resulting from a complete or partial withdrawal from any Multiemployer
Plan, and none of them has incurred, or is reasonably likely to incur, any
Liability due to the termination or reorganization of a Multiemployer Plan
which has not been satisfied in full, and to the Company's Knowledge, no
event has occurred that would subject the Company or any ERISA Affiliate to
any such liability.
(d) Each Plan has been administered in material compliance with its
terms, and other Legal Requirements including, without limitation, the
provisions of ERISA and the Code, and there are no material pending or, to
Company's Knowledge, threatened claims by, on behalf of or involving any
plan administrator or any plan trustee (other than routine claims for
benefits).
(e) Neither the Company nor any ERISA Affiliate has incurred any
liability for any tax or penalty imposed by Section 4975 of the Code or
Section 502(i) of ERISA with respect to any Plan that has not been
satisfied in full.
(f) Each Plan which is intended to qualify under Section 401(a) of the
Code has received an IRS determination letter concluding that such Plan so
qualifies in form, and to the Company's Knowledge, no event has occurred
and no condition exists that could cause such letter to be revoked.
(g) Except as set forth on Schedule 4.15 or as may be required under
Section 4980B of the Code, or Section 601 of ERISA, neither the Company nor
any of its Subsidiaries has any Liability for post-retirement medical or
life insurance benefits or coverage for any Employee or Former Employee or
any dependent of any such Employee or Former Employee.
(h) Except as provided in Section 2.2 of this Agreement or as set
forth on Schedule 4.15, the consummation of the Transactions will not
result in any increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any compensation or benefits
payable by the Company to or in respect of any Employee or Former Employee
or the beneficiary or dependent of any such Employee or Former Employee
under any Plan or Contract.
(i) Except as set forth on Schedule 4.15, no amount payable by the
Company or any of its Subsidiaries to any Employee or Former Employee will
fail to be deductible for Federal income tax purposes by reason of Section
162(m) or 280G of the Code.
(j) All employee benefits practices or arrangements which are
maintained by the Company or any of its Subsidiaries for the benefit of
their non-United States Employees or United States Employees located in a
foreign jurisdiction (collectively, the
-22-
"Foreign Plans") have been maintained in all material respects in
accordance with the applicable laws of such foreign jurisdiction, and all
Foreign Plans required to be registered with any Governmental Agency have
been registered and have been maintained in good standing with such
Governmental Agency.
Section 4.16. Litigation. Except as set forth on Schedule 4.16 there are no
claims, actions, suits, proceedings, labor disputes or investigations pending
or, to the Company's Knowledge threatened, before any Governmental Agency
against the Company or any of its Subsidiaries that (i) challenges the validity
of this Agreement or any action taken or to be taken by the Company or any of
its Subsidiaries pursuant to this Agreement or in connection with the
Transactions, or (ii) individually or in the aggregate, are or would be expected
to be material. There is no material Order or material judgment outstanding
against the Company or any of its Subsidiaries.
Section 4.17. Environmental Matters.
(a) For purposes of this Agreement, the term "Environmental Laws"
shall mean all Legal Requirements with respect to the protection of the
public health, safety or the environment, including, without limitation,
with respect to any Hazardous Materials, drinking water, groundwater,
wetlands, landfills, open dumps, storage tanks, solid waste, or waste
water, water, soil, air, pollution, the protection, preservation or
restoration of natural resources, plant and animal life or human health or
the environment, or waste management, regulation or control, including
without limitation the following Legal Requirements:
(i) The Resource Conservation and Recovery Act, 42 U.S.C.ss.6901
(ii) The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 26 U.S.C.ss.4611; 42 U.S.C.ss.9601
("Superfund").
(iii) The Superfund Amendments and Reauthorization Act of 1986.
(iv) The Clean Air Act, 42 U.S.C.ss.7401.
(v) The Clean Water Act, 33 U.S.C.ss.1251.
(vi) The Safe Drinking Water Act, 42 U.S.C.ss.300f.
(vii) The Toxic Substances Control Act, 15 U.S.C.ss.2601.
(viii) The Hazardous Materials Transportation Act, 49
U.S.C.ss.1801 et seq.
(ix) Applicable state mining laws.
(b) Except as set forth on Schedule 4.17:
-23-
(i) Except for matters which, individually or in the aggregate,
would not reasonably be expected to have a Prohibited Effect, the
Company and its Subsidiaries are and since April 30, 2001 have been,
in compliance with all Environmental Laws;
(ii) Except for matters which, individually or in the aggregate,
would not reasonably be expected to have a Prohibited Effect, the
Company and its Subsidiaries have no Liability under any Environmental
Law; and
(iii) no written notice, notification, demand, request for
information, Governmental Agency inquiry, demand letter, notice of
violation or alleged violation of, non-compliance or alleged
non-compliance with or any Liability under, any Environmental Law by
or relating to operations or properties of the Company or any of its
Subsidiaries has been received by or threatened in writing against the
Company or any of its Subsidiaries which has not been resolved or
which is or would be reasonably likely to be material to the Company
and its Subsidiaries, taken a whole.
(c) For purposes of this Agreement, the following terms shall have the
meanings specified below:
(i) "Hazardous Materials" means each and every element, compound,
chemical mixture, pollutant, contaminant, material, waste or other
substance which is defined, designated, regulated, determined,
classified or identified as hazardous, radioactive, harmful or toxic
under any Environmental Law, or the Release of which is prohibited or
regulated under any Environmental Law, or which to the Knowledge of
the Company could reasonably be expected to cause, whether now or with
the passage of time, damage to Persons, property, flora, fauna or the
environment. Without limiting the generality of the foregoing, the
term shall include any "toxic substance," "hazardous substance,"
"hazardous waste," or "hazardous material" as defined in any
Environmental Law, and any explosive or radioactive material,
asbestos, asbestos-containing material, waste water, sludge, untreated
dye, other effluent, coal ash, polychlorinated biphenyls, special
waste, petroleum or any derivative or byproduct thereof, and toxic
waste.
(ii) "Release" means any spilling, leaking, pumping, releasing,
depositing, pouring, emitting, emptying, migrating, discharging,
injecting, storing, escaping, leaching, dumping, burying, abandoning,
disposing or moving into the environment.
Section 4.18. Tax Matters.
(a) Except as set forth in Schedule 4.18, (i) the Company and its
Subsidiaries have timely filed with the appropriate Taxing Authority all
material Tax Returns required to be filed by or with respect to the
Company, its Subsidiaries or their operations or assets, and such Tax
Returns are true, correct and complete in all material respects; (ii) all
material Taxes due with respect to taxable years for which the Company's
and its
-24-
Subsidiaries' Tax Returns were filed, all material Taxes required to be
paid on an estimated or installment basis, and all material Taxes required
to be withheld with respect to the Company or any of its Subsidiaries or
their Employees, operations or assets have been timely paid or, if
applicable, withheld and paid to the appropriate Taxing Authority in the
manner provided by Legal Requirements; (iii) the reserve for Taxes set
forth on the balance sheet of the Company as of January 31, 2002 is
adequate for the payment of all material Taxes through the date thereof and
no material Taxes have been incurred after January 31, 2002 which were not
incurred in the ordinary course of business; (iv) there are no Liens (other
than Permitted Liens) for Taxes upon the assets of the Company or any of
its Subsidiaries; (v) no federal, state, local or foreign audits,
administrative proceedings or court proceedings are pending with regard to
any material Taxes or material Tax Returns of the Company or any of its
Subsidiaries and there are no outstanding deficiencies or assessments
asserted or proposed, and any such proceedings, deficiencies or assessments
shown in Schedule 4.18 are being contested in good faith through
appropriate proceedings diligently conducted and the Company has made or
will make available to Purchaser copies of all revenue agent reports (or
similar reports) and related schedules relating to pending income tax
audits of the Company or any of its Subsidiaries; (vi) there are no
outstanding agreements, consents or waivers extending the statutory periods
of limitation applicable to the assessment of any material Taxes or
deficiencies against the Company or any of its Subsidiaries, or with
respect to their operations or assets; (vii) the federal income Tax Returns
of the Company and its Subsidiaries have been examined by the Internal
Revenue Service (or the applicable statutes of limitation for the
assessment of federal income Taxes for such periods have expired) for all
periods through and including April 30, 1999; (viii) the Company and its
Subsidiaries will not be required to include any material item of income
in, or exclude any material item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a
result of any (x) change in method of accounting for a taxable period
ending on or prior to the Closing Date, or (y) "closing agreement," as
described in Section 7121 of the Code (or any corresponding provision of
state, local or foreign income Tax law), entered into on or prior to the
Closing Date, or (z) any ruling received from the Internal Revenue Service;
(ix) neither the Company or any of its Subsidiaries has filed a consent to
the application of Section 341(f) of the Code; and (x) the Company is not
and has not been a United States real property holding company (as defined
in Section 897(c)(2) of the Code) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Taxes" means all federal, state, local and foreign taxes,
including, without limitation, income, gross income, gross receipts,
unincorporated business, production, excise, employment, sales, use,
transfer, ad valorem, profits, license, capital stock, franchise,
severance, stamp, withholding, social security, employment, unemployment,
disability, worker's compensation, payroll, utility, windfall profit,
custom duties, personal property, real property, registration, alternative
or add-on minimum, estimated and other taxes, governmental fees or like
charges of any kind whatsoever, including any interest, penalties or
additions thereto, imposed by any Governmental
-25-
Agency ("Taxing Authority") whether disputed or not; and "Tax" shall mean
any one of them.
(d) "Tax Return" means any report, return, information return, filing,
claim for refund or other information, including any schedules, exhibits or
attachments thereto, and any amendments to any of the foregoing required to
be filed or maintained in connection with the calculation, determination,
assessment or collection of any Taxes (including estimated Taxes).
Section 4.19. Brokers. Except for the financial advisory fees set forth on
Schedule 4.19, neither the Company nor any of its Subsidiaries nor any of their
respective officers or directors on behalf of the Company or any such Subsidiary
has employed any financial advisor, broker or finder or incurred any liability
for any financial advisory fee, broker's fees, commissions or finder's fees in
connection with any of the Transactions.
Section 4.20. Books and Records of the Company. The books of account,
minute books, stock record books, and other records of the Company and each of
its Subsidiaries, all of which have been made available to Parent, are complete
and correct in all material respects, accurately reflect in all material
respects the transactions to which the Company or such Subsidiary is a party or
by which its properties are bound in accordance with GAAP and have been
maintained in all material respects in accordance with sound business practices
(and, with respect to the books and records of the Company, the requirements of
Section 13(b)(2) of the Exchange Act), including the maintenance of an adequate
system of internal controls. The minute books of the Company and each of its
Subsidiaries contain accurate and materially complete records of meetings held
of, and corporate action taken by, their respective shareholders, boards of
directors, and committees of such boards of directors.
Section 4.21. Customers and Suppliers. For the twelve calendar months ended
March 31, 2002, there were no customers of the Company or any of its
Subsidiaries whose purchases from the Company and its Subsidiaries together
constituted greater than 5% of the Company's consolidated revenue (or in the
case of customers with respect to which the Company receives a commission from
the publisher, greater than 5% of the Company's consolidated gross profit for
such twelve-month period). Schedule 4.21 lists each of the Company's vendors,
suppliers and publishers, the sale of whose product constituted greater than 7%
of the Company's consolidated revenue for the twelve calendar months ended March
31, 2002 (or in the case of customers with respect to which the Company receives
a commission from the publisher, the consolidated gross profit for such twelve
month period) (each a "Major Supplier") and the amount of consolidated revenue
(or consolidated gross profit, as applicable) attributable to each Major
Supplier during such twelve-month period. As of the date of this Agreement,
neither the Company nor any of its Subsidiaries is engaged in any material
dispute with any Major Supplier or since January 31, 2002, has received notice
from a Major Supplier that it intends to materially alter its relationship with
the Company or any of its Subsidiaries in a manner that would be materially
adverse to the Company and its Subsidiaries taken as a whole.
Section 4.22. Certain Payments. Since April 30, 2001, neither the Company
nor any of its Subsidiaries nor any of their respective directors, officers or,
to the Company's Knowledge, agents, Employees, Former Employees or, any other
Person associated with or
-26-
acting for or on behalf of the Company or any such Subsidiary, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any of its Subsidiaries, or (iv)
in violation of any Legal Requirement, provided that the foregoing clauses
(a)(i), (ii) and (iii) shall not be deemed to include any ordinary course
activities customarily engaged in by sales personnel in the applicable
jurisdictions in which the Company or the applicable Subsidiary operates that
comply with all applicable Legal Requirements, or (b) established or maintained
any fund or asset that has not been recorded in the books and records of the
Company.
Section 4.23. Proxy Statement. The Proxy Statement to be sent to the
Shareholders in connection with the Special Meeting, and any other schedule or
document required to be filed by the Company in connection with the Merger, will
comply as to form in all material respects with the applicable requirements of
the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is being made by the Company with respect to
statements made therein based on information supplied by Parent or Purchaser
specifically for inclusion therein. The Proxy Statement will not, at the time
the Proxy Statement (or any amendment or supplement thereto) is filed with the
Commission or first sent to Shareholders, at the time of the Special Meeting or
at the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Notwithstanding the foregoing, the Company does not
make any representation or warranty with respect to any information that has
been supplied by Parent, Purchaser or their accountants, counsel or other
authorized representatives specifically for use in any of the foregoing
documents.
Section 4.24. State Takeover Statutes Inapplicable. The Board of Directors
has approved the transactions to be effected in accordance with this Agreement
pursuant to Article 13.03A(1) of the TBCA, and determined that such approval
satisfies the requirements of Article 13.03A(1) of the TBCA and, as a result,
renders the other provisions of Article 13.03 of the TBCA inapplicable to the
Transactions and to the Subsequent Transactions.
Section 4.25. Statements True and Correct. None of the information supplied
or to be supplied by the Company or any of its Subsidiaries to any Governmental
Agency in connection with the transactions contemplated hereby will, at the
respective time such documents are supplied, be false or misleading with respect
to any 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, or omit to state any material fact necessary to correct any
statement in any earlier communication to any Governmental Agency. For purposes
of this Agreement, "Governmental Agency" means (a) any international, foreign,
federal, state, county, local or municipal government or administrative agency
or political subdivision thereof, (b) any governmental agency, authority, board,
bureau, commission, department or instrumentality, (c) any court or
administrative tribunal, (d) any non-governmental agency, tribunal or entity
that is
-27-
vested by a governmental agency with applicable jurisdiction, or (e) any
arbitration tribunal or other non-governmental authority with applicable
jurisdiction.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to the
Company as of the date of this Agreement as follows:
Section 5.1. Organization, Standing and Power. Each of Parent and Purchaser
is a corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation, has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified to do business as a
foreign corporation and in good standing to conduct business in each
jurisdiction in which the business it is conducting, or the operation, ownership
or leasing of its properties, makes such qualification necessary, other than in
such jurisdictions where the failure so to qualify would not reasonably be
expected to have a material adverse effect on Parent and its subsidiaries taken
as a whole.
Section 5.2. Authority; No Violations; Consents and Approvals.
(a) Each of Parent and Purchaser has the requisite corporate power and
authority to execute and deliver the Transaction Documents and consummate
the Transactions.
(b) The execution and delivery of the Transaction Documents by each of
Parent and Purchaser and the consummation by the each of Parent and
Purchaser of the Transactions have been duly and validly authorized by
their respective board of directors, and by the sole stockholder of
Purchaser, and no other corporate proceedings on the part of each of Parent
and Purchaser are necessary to authorize the Transaction Documents or to
consummate the Transactions.
(c) This Agreement has been, and any other Transaction Document at the
time of its execution will have been, duly and validly executed and
delivered by each of Parent and Purchaser, and (assuming this Agreement and
such Transaction Documents each constitute a valid and binding obligation
of the Company) this Agreement constitutes, and each such other Transaction
Document at the time of execution will constitute, the valid and binding
obligations of each of Parent and Purchaser, enforceable in accordance with
their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting the rights of creditors and to
general principles of equity.
(d) The execution and delivery of the Transaction Documents and the
consummation of the Transactions by each of Parent and Purchaser will not
(i) violate, conflict with or result in any breach of any provision of the
Certificate or Certificates of Incorporation or Bylaws of Parent or
Purchaser, (ii) conflict with or result in a violation
-28-
or breach of, or constitute a default (with or without due notice or lapse
of time or both) under the terms, conditions or provisions of any note,
bond, mortgage, indenture or deed of trust, or any license, lease or
agreement to which Parent or Purchaser is a party or to which any of their
assets is subject, or (iii) violate any Order or Legal Requirements
applicable to Parent or Purchaser, except with respect to clauses (ii) or
(iii) such defaults and violations which, individually or in the aggregate,
would not reasonably be expected to have a material adverse effect on the
ability of Parent or Purchaser to consummate the Transactions.
(e) No consent, approval, order or authorization of, or registration,
declaration or filing with, notice to, or permit from any Governmental
Agency, is required by or with respect to Parent, or Purchaser in
connection with the execution and delivery of this Agreement by each of
Parent and Purchaser or the consummation by each of Parent or Purchaser of
any of the Transactions, except for: (A) filings under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and any filings required to be made with any foreign antitrust
authorities; (B) the filing of the Certificates of Merger with the
Secretary of State of the States of Delaware and Texas; (C) such filings
and approvals as may be required by any applicable federal or state
securities laws; and (D) such other consents, approvals, orders,
authorizations, registrations, declarations, filings, notices or permits
the failure of which to be obtained or made would not reasonably be
expected to have a material adverse effect on the ability of Parent and
Purchaser to consummate the Transactions.
Section 5.3. Litigation. There are no actions, causes of action, claims,
suits, proceedings or Orders pending or, to the Knowledge of Parent, threatened
against Parent at law, in equity, in admiralty or otherwise, or before or by any
Governmental Agency, which (i) seeks to restrain or enjoin the consummation of
the Transactions or (ii) would reasonably be expected to have a material adverse
effect on Parent and its Subsidiaries, taken as a whole, or the ability of
Parent or Purchaser to consummate the Transactions.
Section 5.4. Proxy Statement. None of the information supplied by Parent,
Purchaser or any Affiliate of Parent or Purchaser specifically for inclusion in
the Proxy Statement, or in any amendments thereof or supplements thereto, will,
on the date the Proxy Statement is first mailed to Shareholders, at the time of
the Special Meeting or at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it will be made, will be
false or misleading with respect to any material fact, or will omit to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Special Meeting which has
become false or misleading.
Section 5.5. Ownership of Company Shares. To the Knowledge of Parent, none
of Parent, Purchaser or any of their respective controlled Affiliates
beneficially owns more than 100 shares of Common Stock in the aggregate.
Section 5.6. No Prior Activities; Assets of Purchaser. Purchaser was formed
solely for the purpose of the Merger and engaging in the other Transactions. As
of the date of this Agreement and the Effective Time, except for (A) obligations
or liabilities incurred in
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connection with its incorporation or organization, (B) the Transactions and
activities, agreements or arrangements in connection with the Transactions, and
(C) activities, agreements, arrangements, obligations and liabilities in
connection with Purchaser being a guarantor under Parent's senior credit
facility, Purchaser has not and will not have (i) incurred, directly or
indirectly through any of its Subsidiaries or Affiliates, any material
obligations or liabilities, (ii) engaged in any business or activities of any
type or kind whatsoever or (iii) entered into any material agreements or
arrangements with any Person.
Section 5.7. Statements True and Correct. None of the information
(including this Agreement) supplied or to be supplied by Parent or Purchaser to
any Governmental Agency connection with the Transactions will, at the respective
time such documents are supplied, be false or misleading with respect to any
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, or omit to state any material fact necessary to correct any
statement in any earlier communication to any Governmental Agency.
Section 5.8. Brokers. Neither Parent nor Purchaser nor any of their
respective officers or directors on behalf of Parent or Purchaser has employed
any financial advisor, broker or finder in a manner that would result in any
liability of the Company for any broker's fees, commissions or finder's fees in
connection with any of the Transactions or that would result in any reduction of
the consideration payable to the Shareholders.
Section 5.9. Financing. Parent has or has available to it and, subject to
the terms and conditions herein, will make available to Purchaser, all funds
necessary to consummate all of the Transactions and pay the related fees and
expenses of Parent and Purchaser.
ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of Business by the Company Pending the Merger. Except
as set forth in Schedule 6.1 or as provided for in this Agreement, during the
period from the date of this Agreement to the earliest to occur of the date of
termination of this Agreement, or the Effective Time, unless Parent shall
otherwise agree in writing:
(a) the Company shall, and shall cause each of its Subsidiaries to,
conduct its business in all material respects in the ordinary and usual
course in substantially the same manner as previously conducted and in
compliance with all applicable Legal Requirements and, to the extent
consistent therewith, shall use its reasonable best efforts to preserve its
business organization intact in all material respects, to keep available
generally the services of its present officers and employees and to
maintain in all material respects its existing relations with customers,
suppliers, creditors and business partners and other Persons having
business dealings with it;
(b) the Company shall not, directly or indirectly, amend or propose to
amend its or any of its Subsidiaries' certificate of incorporation or
bylaws or similar organizational documents;
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(c) the Company shall not, and it shall not permit its Subsidiaries
to: (i) (A) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to the Company's capital
stock or that of its Subsidiaries, other than dividends and distributions
by a direct or indirect wholly owned Subsidiary to its parent, or (B)
redeem, purchase or otherwise acquire directly or indirectly any of the
Company's capital stock (or options, warrants, calls, commitments or rights
of any kind to acquire any shares of capital stock) or that of its
Subsidiaries; (ii) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of capital stock of any class of the Company or its
Subsidiaries, other than Common Stock issued upon the exercise of Options
listed on Schedule 4.5; (iii) split, combine or reclassify the outstanding
capital stock of the Company or of its Subsidiaries; (iv) make any loan or
advance to, or payment (including with respect to outstanding Indebtedness)
for the benefit of, any direct or indirect beneficial owner of any Common
Stock or Options, other than payment of salary and benefits to Employees,
in the ordinary course of business, consistent with past practice, and
advances permitted under Section 6.1(e)), or (v) enter into or effect any
transaction with any Affiliate of or advisor to the Company in which the
cash value (measured on a transaction by transaction basis) of the goods or
services received by the Company or such Subsidiary is less than the
greater of (x) the amount which the Company or the applicable Subsidiary
would have had to pay in a comparable transaction with a Third Party
entered into on an arm's-length basis, or (y) the cash value of the goods
and services paid by the Company or such Subsidiary in such transaction.
(d) the Company shall not, and it shall not permit its Subsidiaries
to, acquire or agree to acquire, or dispose of or agree to dispose of, any
material assets, either by purchase, merger, consolidation, sale of shares
in any of its Subsidiaries or otherwise, except for (v) the acquisition of
furniture, equipment and other property in the ordinary course of business
in an aggregate amount not to exceed $500,000, (w) purchases of software
for resale in the ordinary course of business, consistent with past
practice, (x) purchases and sales of inventory in the ordinary course of
business, consistent with past practice, (y) sales of obsolete equipment in
the ordinary course of business, in an aggregate amount not to exceed
$50,000, and (z) sales of excess equipment in an amount in any single
transaction or series of related transactions, not to exceed $100,000;
(e) neither the Company nor its Subsidiaries shall: (i) grant any
bonuses or special compensation or any increase in the compensation payable
or to become payable by the Company or any of its Subsidiaries to any of
its officers, directors or key employees, except (x) in the case of key
employees who are not officers or directors, increases in the ordinary
course of business, or (y) pursuant to contracts or plans in effect as of
the date of this Agreement; or (ii) make or agree to make any accrual or
arrangement for or payment of bonuses or special compensation of any kind
to any Employee whose compensation is determined other than by multiplying
the number of hours worked by an hourly rate (a "Salaried Employee"), or
general increase in the salary or bonus payable or to become payable by the
Company or any of its Subsidiaries to any Employee other than Salaried
Employees (other than increases granted to individual
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employees for merit, length of service, change in position or
responsibility or other reasons applicable to specific Employees and not
generally to a class or group thereof); or (iii) (A) adopt any new, (B)
except as may be required by applicable Legal Requirements or the terms of
any Plan, grant any award under, or (C) except as required by applicable
Legal Requirements or the terms of any Plan as in effect on the date of
this Agreement, amend or otherwise increase, or accelerate the payment or
vesting of the amounts payable or to become payable under, any existing
Plan; or (iv) enter into or modify or amend any employment or severance
agreement with or, except as required by applicable Legal Requirements or
the terms of any Plan as in effect on the date of this Agreement and listed
on Schedule 6.1, grant any severance or termination rights to any officer,
director or employee of the Company or any of its Subsidiaries; or (v)
enter into any collective bargaining agreement, or (vi) except as may be
required by applicable Legal Requirements or the terms of any Plan as in
effect on the date of this Agreement, make any loan to, any director,
executive officer or employee of the Company other than advances permitted
under Section 6.1(g)(D)(2);
(f) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate in any material respect, any Material Contract or waive,
release or assign any material rights or claims thereunder, except for
modifications, amendments, terminations, waivers, releases or assignments
that do not materially increase the financial commitment of or burden on
the Company or any of its Subsidiaries under such Material Contract or the
duration of the obligations of the Company or any of its Subsidiaries
thereunder;
(g) neither the Company nor any of its Subsidiaries shall: (A) incur,
become subject to or assume or agree to incur, become subject to or assume
any material Liability (other than as expressly permitted by Section
6.1(f)) or Indebtedness other than Indebtedness with respect to working
capital in amounts consistent with past practice; (B) materially modify any
Indebtedness or other material Liability (other than as expressly permitted
by Section 6.1(f)); (C) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person (other than a Subsidiary of the Company),
other than immaterial amounts in the ordinary course of business, and other
than the endorsement of negotiable instruments for collection in the
ordinary course of business; or (D) make any loans, advances or capital
contributions to, or investments in, any other Person (other than to (1)
wholly owned Subsidiaries of the Company or (2) customary advances to
Employees in accordance with past practice and in an individual amount not
in excess of $2,500 for any individual or $25,000 in the aggregate);
(h) neither the Company nor any of its Subsidiaries shall change any
of the accounting methods, practices or policies used by it, unless
required by generally accepted accounting principles or rules and
regulations of the Commission;
(i) the Company and its Subsidiaries shall not make or agree to make
any single capital expenditure in excess of $150,000 or capital
expenditures in excess of $500,000 in the aggregate;
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(j) the Company shall not, and it shall not permit its Subsidiaries
to, make or change any material election related to Taxes (unless required
by law) or settle or compromise any material Liability related to Taxes;
(k) the Company shall not, and it shall not permit its Subsidiaries
to, (i) waive the benefits of, or agree to modify in any material manner,
any confidentiality, standstill or similar agreement to which the Company
or any of its Subsidiaries is a party, or (ii) pay, discharge or satisfy
any proceeding, other than a payment, discharge or satisfaction (A)
involving payments by the Company or its Subsidiaries of less than
$100,000, or (B) for which liabilities are reflected on or are reserved
against in the Balance Sheet, but not to exceed the reserve therefor, in
each case in complete satisfaction, and with a complete release, of such
matter with respect to all parties to such matter, of actions, suits,
proceedings or claims;
(l) the Company shall not, and it shall not permit its Subsidiaries
to, make any payments or incur any Liability or obligation for the purpose
of obtaining any consent from any third party to the Transactions, other
than (i) filing fees paid to Governmental Agencies in connection with the
Transactions and (ii) payments not in excess of $10,000 in the aggregate;
(m) the Company shall keep in full force and effect insurance
comparable in amount and scope to coverage maintained by it (or on behalf
of it) on the date of this Agreement;
(n) the Company shall not incur, and shall not permit any of its
Subsidiaries to incur any Lien on any of their assets other than Permitted
Liens;
(o) the Company shall not take any action that would reasonably be
expected to cause any of the representations and warranties made by the
Company in this Agreement not to remain materially true and materially
correct; and
(p) neither the Company nor any of its Subsidiaries shall enter into
an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to
do any of the foregoing.
Section 6.2. No Solicitation.
(a) The Company shall, and shall cause its Subsidiaries, officers,
directors, employees, counsel, investment bankers, financial advisers,
accountants, other representatives and agents (collectively, the "Company
Representatives") to immediately as of the date of this Agreement cease any
discussions or negotiations with any Persons that may be ongoing with
respect to a Takeover Proposal. The Company shall not, and shall not
authorize or permit any Company Representative to, (i) solicit, initiate or
encourage, directly or indirectly (including by way of furnishing
information), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to
lead to, any Takeover Proposal; (ii) participate in any discussions or
negotiations regarding any Takeover Proposal; or (iii)
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enter into any agreement with respect to any Takeover Proposal; provided,
however, that, if at any time prior to the Effective Time, the Board of
Directors determines in good faith, after consultation with its outside
legal counsel, that it is necessary to do so in order to comply with its
fiduciary duties under applicable Legal Requirements, the Company may, in
response to an unsolicited bona fide Superior Proposal, and subject to
compliance with Section 6.2(b), (x) furnish information concerning its
business, properties or assets to any Person pursuant to a confidentiality
agreement with terms and conditions similar to the Confidentiality
Agreement, dated April 9, 2002 (the "Confidentiality Agreement") between
the Company and Parent (provided that such confidentiality agreement may
not include any provision granting any such Person an exclusive right to
negotiate with the Company) and (y) participate in negotiations regarding
such Superior Proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding sentence
by any Company Representative shall be deemed to be a breach of this
Section 6.2(a) by the Company. The Company shall not release any Third
Party from, or waive any provision of, any such confidentiality agreement
or any other similar confidentiality or standstill agreement to which the
Company is a party. "Third Party" means any Person or group other than
Parent, Purchaser or any Affiliate thereof.
(b) In addition to the obligations of the Company set forth in
paragraph (a) of this Section 6.2, the Company shall promptly advise Parent
orally and in writing of any request for information, proposal, discussion,
negotiation or inquiry received after the date of this Agreement in
connection with any Takeover Proposal and the Company will promptly (but in
any event within one Business Day) communicate to Parent the material terms
and conditions of any such proposal, discussion, negotiation or inquiry
which it may receive (and will promptly provide to Parent copies of any
written materials received by the Company in connection with such proposal,
discussion, negotiation or inquiry) and the identity of the Person making
such proposal or inquiry or engaging in such discussions or negotiation.
The Company will promptly provide to Parent any non-public information
concerning the Company or any of its Subsidiaries provided to any other
Person which was not previously provided to Parent. The Company will keep
Parent informed of the status and material details (including amendments or
proposed amendments) of any such Takeover Proposal.
(c) If the Board of Directors or any committee thereof intends: (i) to
approve or recommend, or propose to approve or recommend, any Superior
Proposal; or (ii) to cause the Company to enter into any agreement with
respect to any Superior Proposal (other than any confidentiality agreement
as contemplated by Section 6.2(a)), (a "Competing Agreement"), then at
least five Business Days prior to taking such action: (A) the Company shall
provide Parent with written notice advising Parent that the Board of
Directors has received a Superior Proposal that it intends to accept,
specifying the material terms and conditions of such Superior Proposal and
identifying the Person or Persons making such Superior Proposal, and (B)
the Company shall, and shall cause its financial and legal advisors to,
negotiate in good faith with Parent to make such adjustments in the terms
and conditions of this Agreement as would enable the Company to proceed
with the Transactions on such adjusted terms. If following the completion
of such five Business Day period the Company and Parent have been unable to
agree upon
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such adjustment in the terms and conditions of this Agreement as would
enable the Company to proceed with the Transactions, then, after compliance
with the Escrow Procedures, the Board of Directors or any committee thereof
may: (i) approve or recommend, or propose to approve or recommend, such
Superior Proposal; or (ii) cause the Company to enter into a Competing
Agreement with respect to such Superior Proposal. So long as any Competing
Agreement expressly provides that the existence of this Agreement, the
performance by the Company of its obligations hereunder and the
consummation of the Transactions shall not constitute a breach or default
under the Competing Agreement, then the existence of the Competing
Agreement and the performance by the Company of its obligations thereunder
relating to the Superior Proposal, the consummation of the Superior
Proposal and the amendment of the Rights Plan in connection with the
Competing Agreement shall not be deemed to be a breach or default under
this Agreement. Subject to compliance with the Escrow Procedures, if
required by the second preceding sentence, nothing contained in this
Section 6.2 shall prohibit the Company or the Board of Directors from
taking and disclosing to the Shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act.
(d) "Takeover Proposal" means any inquiry, proposal or offer from any
Third Party, whether in writing or otherwise, relating to any "Alternative
Transaction", which is defined as any one of the following transactions
with or by a Third Party: (A) merger, consolidation or similar transaction
involving the Company, (B) sale, lease or other disposition directly or
indirectly by merger, consolidation, tender offer, share exchange or
otherwise of assets of the Company or its Subsidiaries representing 10% or
more of the consolidated assets of the Company and its Subsidiaries, (C)
issue, sale, or other disposition of (including by way of merger,
consolidation, tender offer, share exchange or any similar transaction)
securities (or options, rights or warrants to purchase, or securities
convertible into, such securities) representing 10% or more of the voting
power of the Company or (D) transaction in which any Person shall acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act), or the right to acquire beneficial ownership or any "group"
(as such term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of
15% or more of the outstanding Common Stock, in each case for avoidance of
doubt, other than the transactions with Parent contemplated by this
Agreement, and except for any Person that beneficially owns more than 15%
of the outstanding Common Stock as of the date of this Agreement, unless
such Person's beneficial ownership increases by more than 1% of the
outstanding Common Stock; provided that the term "Alternative Transaction"
shall not include sales of products and services in the ordinary course of
business, and following termination of this Agreement, shall not include
any acquisition of securities by an underwriter or broker-dealer in
connection with a bona fide public offering of such securities.
(e) "Superior Proposal" means any bona fide written offer for an
Alternative Transaction (i) by a Third Party that the Board of Directors
determines in its good faith judgment has the good faith intent to proceed
with negotiations, (ii) for all outstanding shares of Common Stock, (iii)
that would provide the Shareholders the right to receive a
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higher per share consideration than the Per Share Amount, payable in cash
or marketable securities, (iv) on terms which the Board of Directors
determines in its good faith judgment (after consultation with a financial
advisor of nationally recognized reputation) are more favorable to the
Shareholders than the Merger from a financial point of view and (v) that
the Board of Directors determines in good faith judgment is reasonably
capable of being completed, taking into account all financial, regulatory,
legal and other aspects of such proposal.
(f) "Escrow Procedures" means that the Company shall have performed
the following:
(i) the Company shall have entered into an escrow agreement, in
form and substance reasonably satisfactory to Parent, with an escrow
agent reasonably satisfactory to Parent, providing for among other
things: (A) the deposit into the escrow account by the Company of $6
million, (B) the release of such escrowed funds to Parent, to the
extent Parent is entitled thereto pursuant to Section 9.3, upon notice
from Parent to the escrow agent that Parent has terminated this
Agreement pursuant to Section 9.1(e)(ii)(A) or (B)(x), and (C) the
release of such funds to the Company (or its designee) or Parent to
the extent Parent is entitled thereto pursuant to Section 9.3, upon
evidence reasonably satisfactory to the escrow agent of the
termination of this Agreement pursuant to any other provision of this
Agreement.
(ii) the Company shall have deposited $6 million with the escrow
agent.
Section 6.3. Rights Agreement. Except for the amendments contemplated by
Section 3.1(c) hereof or amendments approved in writing by Parent or Purchaser,
the Company shall not, from and after the date of this Agreement, amend the
Rights Agreement in any manner. In addition the Company covenants and agrees
that it shall not redeem the Rights unless such redemption is consented to in
writing by Parent prior to such redemption or unless it is ordered to do so by a
court of competent jurisdiction.
Section 6.4. Access and Information. From the date of this Agreement to the
Effective Time, the Company and its Subsidiaries shall (a) afford to Parent and
Purchaser and their accountants, counsel and other representatives reasonable
access at all reasonable times (and at such other times as the parties may
mutually agree) and upon reasonable notice to all of their properties, books,
contracts, commitments, records and personnel, and (b) during such period,
furnish promptly to Parent and Purchaser (i) a copy of each report, schedule and
other document filed or received by it or any of its Subsidiaries pursuant to
the requirements of federal or state securities laws, and (ii) all other
information concerning its business, properties and personnel as Parent may
reasonably request. Nothing in this Section 6.4 shall require the Company to
provide access to or disclose information where such access or disclosure would
conflict with applicable laws or result in the loss of any attorney-client
privilege; provided that, with respect to any such information subject to
attorney-client privilege, the Company shall use all reasonable efforts to
disclose or provide access to such information or to substantively equivalent or
similar information in a manner that will not result in the loss of such
privilege.
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Parent shall hold, and shall cause its employees and agents to hold, in
confidence all such information in accordance with the terms of the
Confidentiality Agreement.
Section 6.5. Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent of (i) the
occurrence, or non-occurrence of any event whose occurrence, or
non-occurrence would be likely to cause either (A) any representation or
warranty of the Company contained in this Agreement to be materially untrue
or inaccurate at any time from the date of this Agreement to the Effective
Time or (B) any condition set forth in Article VIII to be unsatisfied in
any material respect at any time from the date of this Agreement to the
Closing Date and (ii) any failure of the Company, or any of its officers,
directors, employees or agents, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
6.5(a) shall not limit or otherwise affect the remedies available hereunder
to Parent.
(b) Parent shall give prompt notice to the Company of (i) the
occurrence, or non-occurrence of any event whose occurrence, or
non-occurrence would be likely to cause any representation or warranty of
Parent and Purchaser contained in this Agreement to be materially untrue or
inaccurate at any time from the date of this Agreement to the Effective
Time or (ii) any action, proceeding, injunction or other order, decree,
judgment or ruling by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission of
competent jurisdiction applicable to Purchaser, but not to the Company, in
connection with the Merger and the Transactions and (iii) any failure of
Parent or Purchaser, or any of their respective officers, directors,
employees or agents, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 6.5(b)
shall not limit or otherwise affect the remedies available hereunder to the
Company.
Section 6.6. Employee Stock Purchase Plan. From and after the date of this
Agreement, no further purchases of Common Stock shall occur under the Company's
Second Amended and Restated Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") nor shall any issuances of rights to purchase shares of Common
Stock be granted thereunder, except for purchases made with payroll deductions
taken prior to the date of this Agreement.
ARTICLE VII.
ADDITIONAL AGREEMENTS
Section 7.1. Indemnification of Company Officers and Directors.
(a) The Company shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger is consummated,
indemnify, defend and hold harmless, and after the Effective Time, the
Surviving Corporation shall, to the fullest extent permitted under
applicable law, indemnify, defend and hold harmless, the present
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and former officers and directors of the Company or any of its Subsidiaries
(collectively, the "Indemnified Parties"), from and against, and pay or
reimburse the Indemnified Parties for, all losses, obligations, expenses,
claims (and involving claims by or in the right of the Company), damages or
liabilities resulting from third-party claims and including interest,
penalties, out-of-pocket expenses and attorneys' fees incurred in the
investigation or defense of any of the same or in asserting any of their
rights hereunder resulting from or arising out of actions or omissions of
such Indemnified Parties as officers or directors of the Company or any of
its Subsidiaries occurring on or prior to the Effective Time (including,
without limitation, the Transactions) to the fullest extent permitted or
required under (i)(A) the Articles of Incorporation or By-Laws of the
Company in effect on the date of this Agreement, including, without
limitation, provisions relating to advances of expenses incurred in the
defense of any action or suit, or (B) any indemnification agreement between
the Indemnified Party and the Company in effect immediately prior to the
date of this Agreement; and (ii) advance to any Indemnified Parties
expenses incurred in defending any action or suit with respect to such
matters, in each case to the extent such Indemnified Parties are entitled
to indemnification or advancement of expenses under the Company's Articles
of Incorporation and By-Laws in effect on the date of this Agreement and
subject to the terms of such Articles of Incorporation and By-Laws.
(b) Any Indemnified Party wishing to claim indemnification under
Section 7.1(a) shall provide notice to the Surviving Corporation promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and the Indemnified Party shall permit the
Surviving Corporation (at its expense) to assume the defense of any claim
or any litigation resulting therefrom; provided, however, that (i) counsel
for the Surviving Corporation who shall conduct the defense of such claim
or litigation shall be reasonably satisfactory to the Indemnified Party and
the Indemnified Party may participate in such defense at such Indemnified
Party's expense, and (ii) the omission by any Indemnified Party to give
notice as provided herein shall not relieve the Surviving Corporation of
its indemnification obligation under this Agreement, except to the extent
that such omission results in a failure of actual notice to the Surviving
Corporation, and the Surviving Corporation is actually prejudiced as a
result of such failure to give notice. In the event that the Surviving
Corporation does not accept the defense of any matter as above provided,
the Indemnified Parties may retain counsel satisfactory to them, and the
Surviving Corporation shall pay all reasonable fees and expenses of one
such counsel for all the Indemnified Parties promptly as statements
therefor are received; provided, however, that the Surviving Corporation
shall not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld); provided,
further, however, that the Surviving Corporation shall not be responsible
for the fees and expenses of more than one counsel for all of the
Indemnified Parties unless there is, under applicable standards of
professional conduct, a conflict between the positions of any two or more
Indemnified Parties, in which case each Indemnified Party with respect to
whom such a conflict exists (or group of such Indemnified Parties who among
them have no such conflict) may retain one separate law firm in each
applicable jurisdiction and the Surviving Corporation shall be responsible
for the fees and expenses of each such counsel. In any event, the
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Surviving Corporation and the Indemnified Parties shall cooperate in the
defense of any action or claim. The Surviving Corporation shall not, in the
defense of any such claim or litigation, except with the consent of the
Indemnified Party, consent to entry of any judgment or enter into any
settlement that provides for injunctive or other nonmonetary relief
affecting the Indemnified Party or that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such
claim or litigation.
(c) The articles of incorporation and by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification
set forth in the Company's Articles of Incorporation and By-Laws, which
provisions shall not be amended, modified or otherwise repealed for a
period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder as of the Effective Time of
individuals who at the Effective Time were directors or officers of the
Company, unless such modification is required after the Effective Time by
law and then only to the minimum extent required by such law.
(d) This Section 7.1 is intended for the benefit of, and to grant
third party rights to, persons entitled to indemnification under this
Section 7.1 whether or not parties to this Agreement, and each of such
persons shall be entitled to enforce the covenants contained in this
Section 7.1.
(e) The Surviving Corporation shall honor and fulfill in all respects
the obligations of the Company pursuant to indemnification agreements and
employment agreements with the Company's directors and officers existing at
or immediately prior to the Effective Time.
(f) In addition, Parent will provide, or cause the Surviving
Corporation to provide, for a period of not less than three years after the
Effective Time, the Company's current directors and officers (as defined to
mean those person insured under such policy) with an insurance and
indemnification policy that provides coverage for events occurring at or
prior to the Effective Time (the "D&O Insurance") in an aggregate amount of
at least $15,000,000, and that is in the aggregate not materially less
favorable than the existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; provided,
however, that Parent and the Surviving Corporation shall not be required to
pay an annual premium for the D&O Insurance in excess of 200% of the annual
premium currently paid by the Company for such insurance, but in such case
shall purchase as much of such coverage as possible for such amount.
Section 7.2. HSR Act; Foreign Filings. The Company and Parent shall use
their best efforts to file as soon as practicable notifications under the HSR
Act and under any applicable foreign antitrust laws in connection with the
Merger and the transactions contemplated thereby, and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission and the
Antitrust Division of the Department of Justice or any applicable foreign
governmental antitrust authority for additional information or documentation and
to respond as promptly as practicable to all inquiries and requests received
from any State Attorney General or other Governmental Agency in connection with
antitrust matters.
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Section 7.3. Additional Agreements Regarding Consents and Approvals.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable Legal Requirements to
consummate and make effective the transactions contemplated by this
Agreement, including using all reasonable best efforts to obtain all
necessary waivers, consents and approvals, to effect all necessary
registrations and filings (including, but not limited to, filings under the
HSR Act and with all applicable Governmental Agencies, including foreign
antitrust authorities) and to lift any injunction or other legal bar to the
Merger (and, in such case, to proceed with the Merger as expeditiously as
possible) subject to the appropriate vote of the Shareholders.
Notwithstanding the foregoing, (i) without Parent's prior written consent,
the Company shall not obtain any consent that will affect Parent or the
Company or any of their respective Subsidiaries to the economic detriment
of any of them in any material way (other than payments permitted pursuant
to Section 6.1(l)), including any material modification of any Material
Contract or material Permit and (ii) neither Parent nor Purchaser shall be
obligated to dispose of or forfeit material incidents of control of all or
any material portion of the business or assets of the Company or any of its
Subsidiaries, or to divest, hold separate, or place in trust all or any
portion of its assets or businesses or those of any of its Subsidiaries or
those of the Company or any of its Subsidiaries, or to incur a Prohibited
Result. Each party shall promptly inform the other party of any
communication with, and any proposed understanding, undertaking, or
agreement with, any Governmental Agency regarding any such filings or any
such transaction. Neither party shall participate in any meeting with any
Governmental Agency in respect of any such filings, investigation, or other
inquiry without giving the other party notice of the meeting and, to the
extent permitted by such Governmental Agency, the opportunity to attend and
participate.
(b) Parent and the Company shall cooperate in the preparation,
execution and filing of all returns, applications or other documents
regarding any real property transfer, stamp, recording, documentary or
other Taxes and any other fees and similar Taxes which become payable in
connection with the Merger.
Section 7.4. Efforts; Further Assurances.
(a) Parent and Purchaser on the one hand, and the Company, on the
other (i) shall not take any action that would reasonably be expected to
cause any of their respective representations and warranties in this
Agreement not to remain materially true and materially correct and (ii)
shall use their respective reasonable best efforts to cause each of their
respective representations and warranties in this Agreement to be
materially true and materially correct as of the Closing Date.
(b) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the
proper officers and/or directors of Parent and the Surviving Corporation
shall take all such necessary action.
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Section 7.5. Takeover Statutes. If any "moratorium," "control share
acquisition," "business combination," or "fair price" statute or other form of
anti-takeover statute or regulation shall become applicable to the transactions
contemplated hereby, each party hereto and the members of the Board of Directors
shall, to the extent consistent with applicable Legal Requirements, grant such
approvals and take such actions as are reasonably necessary so that the
transactions contemplated hereby and thereby may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
minimize the effects of such statute or regulations on the transactions
contemplated hereby.
Section 7.6. Initial Transactions.
(a) Upon the request of Parent, the Company shall furnish to Parent
its reasonable, good faith estimate of the amount that the Company will be
required to pay pursuant to Section 7.6(b)(i) and (ii) and of cash on hand
of the Company and its Subsidiaries on the Closing Date.
(b) At such time as all of the conditions set forth in Article VIII,
other than Section 8.2(f), shall have been satisfied or irrevocably waived
by Parent (the "Initial Transaction Time"), the Company shall:
(i) repay all Indebtedness for borrowed money of the Company and
its Subsidiaries (other than Vendor Excluded Indebtedness), including
such Indebtedness under Contracts set forth on Schedule 4.12, and
terminate all of its obligations under the Contracts governing such
Indebtedness which if not terminated would cause a default under
Parent's senior credit facility upon the occurrence of the Effective
Time;
(ii) cash collateralize all outstanding letters of credit on
terms and conditions reasonably satisfactory to Parent;
(iii) contribute to a newly formed entity, formed in a non-U.S.
jurisdiction reasonably acceptable to Parent, which has timely elected
to be treated as a disregarded entity in accordance with United States
Treasury Regulation Section 301.7701-3 for United States federal
income tax purposes and that is wholly owned by the Company ("New
LLC") all of the outstanding capital stock of each of the Company's
Subsidiaries listed in Schedule 7.6(b)(iii) (the "Foreign Subsidiary
Stock"), such that immediately following such contribution all of the
Company's Subsidiaries that are organized in a jurisdiction outside of
the United States shall be wholly owned, directly or indirectly, by
New LLC.
(iv) sell to Purchaser all of the membership interests in New LLC
for their book value (the "New LLC Purchase Price"), subject to the
requirement that the Surviving Corporation purchase all of the Foreign
Subsidiary Stock from New LLC immediately following the Effective Time
for a purchase price equal to the New LLC Purchase Price, plus
interest thereon from and after the Foreign Subsidiary Sale at the
rate of eight percent (8%) per annum. The Company shall deliver to
Purchaser such documents as Purchaser shall reasonably request
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relating to the contribution of the Subsidiaries referenced in clause
(iii) of this paragraph (b), and such instruments of transfer of all
of the membership interests in New LLC as Purchaser shall reasonably
request.
(c) Prior to the Initial Transaction Time, Parent may designate one or
more Contracts related to Indebtedness for borrowed money extended by
publishers who supply the Company as "Vendor Excluded Indebtedness." The
Company shall use its reasonable best efforts to have the Vendor Excluded
Indebtedness amended to delete any provisions contained therein that would,
if not so amended or deleted, cause a default under Parent's senior credit
facility upon the occurrence of the Effective Time. Parent shall cooperate
with the Company in seeking such amendments or deletions. If,
notwithstanding the Company's reasonable best efforts, the provisions are
not so amended or deleted as of the Initial Transaction Time, such
Contracts shall no longer be deemed to be Vendor Excluded Indebtedness, and
shall be repaid as provided in Section 7.6(b)(i).
(d) At the Initial Transaction Time, Parent shall extend a loan to the
Company in an amount equal to (i) the amount necessary to make the payments
required by Section 7.6(b)(i) and (ii), plus (ii) $10 million, minus (iii)
the Company's estimate of the cash on hand at the Closing Date provided
pursuant to paragraph (a) above. In exchange therefor, the Company shall
execute and deliver to Parent a promissory note in the form of Exhibit B
hereto.
(e) The transactions described in Section 7.6(b)(iii) and (iv) are
referred to collectively herein as the "Foreign Subsidiary Sale." To the
extent requested by Parent, the parties to this Agreement shall either (i)
abandon and not undertake the Foreign Subsidiary Sale, or (ii) restructure
the Foreign Subsidiary Sale in a manner not materially adverse to the
Shareholders and which will not reduce the Per Share Amount or delay the
consummation of the Merger.
(f) The transactions described in this Section 7.6 are referred to
collectively herein as the "Initial Transactions".
Section 7.7. Employee Matters.
(a) Any Employee whose employment is terminated by the Company or any
of its Subsidiaries without cause during the period beginning on the
Closing Date and ending three months thereafter, shall be entitled to
severance benefits on a basis no less favorable than those described on
Schedule 6.1(e); and shall be entitled to participate on a fair and
equitable basis in the job opportunity and employment placement programs
offered by Parent or any of its Subsidiaries (including the Surviving
Corporation, as applicable) for which they are eligible.
(b) For a period beginning on the Closing Date through December 31,
2002, Parent shall cause each Salaried Employee whose employment is not
terminated in accordance with subsection (a) above, to be provided with
benefits no less favorable, taken as a whole, than those provided from time
to time to employees of Parent's
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Subsidiaries engaged in the telecommunications business ("Telecom
Employees"), provided that any employee benefit plan may be amended prior
to December 31, 2002, in accordance with its terms in such a way that does
not cause the benefits extended to the Employees to be less favorable,
taken as a whole, than those provided to Telecom Employees. With respect to
any Foreign Plans, the principles set forth above shall apply to the extent
the application of such principles does not violate applicable Legal
Requirements. This paragraph (b) shall not apply with respect to Employees
who are paid by the hour.
(c) Parent shall cause each Employee to be given full credit for all
service with the Company and its Subsidiaries before the Closing Date for
all purposes under any employee benefit plan, practice or arrangement in
which the Employee participates on or after the Closing Date (except to the
extent necessary to avoid the duplication of benefits or for the purpose of
benefit accrual under any defined benefit pension plan).
(d) For purposes of determining the terms and conditions of an
Employee's participation on and after the Closing Date in any employee
benefit plan, practice or arrangement that is an employee welfare benefit
plan, Parent shall, and shall cause its Subsidiaries to, (i) waive all
limitations as to pre-existing condition exclusions and waiting periods
with respect to the Employee or his or her dependents under such plans,
other than to the extent limitations or waiting periods that are already in
effect with respect to the Employee or his or her dependents have not been
satisfied as of the Closing Date, and (ii) provide each Employee with full
credit for any copayments and deductibles paid in any plan year under a
predecessor plan in satisfying any deductible or out-of-pocket requirements
under any successor plan (on a pro-rata basis in the event of a difference
in plan years).
(e) The Company shall take all actions necessary to terminate its
long-term incentive program (the "LTIP") effective as of April 30, 2002,
subject to the consummation of the Merger, provided that the Company will
be permitted to make payments for the award cycle ending April 30, 2003, on
a pro-rated basis equal to amounts previously accrued for performance
achieved under the LTIP through April 30, 2002, and the Company may pay
such awards as soon as practicable after April 30, 2002.
(f) All management continuity agreements between the Company and
Employees in effect immediately before the Closing Date set forth on
Schedule 4.15, shall be honored after the Closing Date, in accordance with
their terms, until such time as amended or terminated, in accordance with
their terms.
(g) Nothing contained in this Section 7.7 shall be deemed to create
any legally enforceable rights in favor of any Person not a party to this
Agreement.
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ARTICLE VIII.
CONDITIONS PRECEDENT
Section 8.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) The waiting period under the HSR Act and under any applicable
foreign antitrust law shall have expired or been terminated with respect to
the Transactions.
(b) No preliminary or permanent injunction or other Order by, or Legal
Requirement of, any federal or state court in the United States which
prevents the consummation of the Merger shall have been issued and remain
in effect (each party agreeing to use its reasonable best efforts to have
any such injunction lifted).
(c) The Merger shall have been approved and adopted by the affirmative
vote of Shareholders owning at least two-thirds of the outstanding Common
Stock.
Section 8.2. Conditions for the Obligation of Parent and Purchaser. The
obligations of Parent and Purchaser to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) The representations and warranties of the Company contained in the
Agreement which are qualified as to Prohibited Effect are true and correct,
and the other representations and warranties of the Company contained in
the Agreement are true and correct in all material respects, in either
case, on and as of the Closing Date, with the same force and effect as if
made on and as of the Closing Date. Parent and Purchaser shall have
received a certificate of the President or Chief Executive Officer or a
Vice President of the Company to the foregoing effects.
(b) The Company shall have performed all material obligations and
complied with all material agreements and material covenants to be
performed or complied with by it under the Agreement (without giving effect
to any materiality qualification or standard contained in any such
agreements or covenants). Parent and Purchaser shall have received a
certificate of the President or Chief Executive Officer or a Vice President
of the Company to the foregoing effects.
(c) There shall not be in effect an Order or Legal Requirement by a
Governmental Agency nor shall a Legal Requirement have been promulgated or
enacted by a Governmental Agency which in any such case (i) restrains or
prohibits the consummation of the Merger, (ii) either (x) prohibits or
materially restricts the ownership or operation by Parent (or any of its
Affiliates or Subsidiaries) of any portion of its or the Company's (or any
of their respective Subsidiaries) business or assets which is material to
the business of the Company and its Subsidiaries taken as a whole (and
which injunction, order, decree, judgment or ruling in the case of Parent
was entered or granted in connection with this Agreement or the
Transactions), or (y) compels Parent (or any of
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its Affiliates or Subsidiaries) to dispose of or hold separate any portion
of its business that is in the same line of business as the Company or the
Company's (or any of its Subsidiaries) business or assets which is material
to such line of business of Parent or to the business of the Company and
its Subsidiaries taken as a whole, or (iii) imposes any material
limitations on the ability of Parent or any of its affiliates or
Subsidiaries effectively to control in any material respect the business
and operations of the Company and its Subsidiaries (each of clauses (i)
through (iii) being referred to as a "Prohibited Result").
(d) No action or a proceeding shall have been commenced under federal
or state antitrust laws or any other applicable Legal Requirement before
any Governmental Agency which would reasonably be expected to result in a
Prohibited Result.
(e) There shall not have occurred (i) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), or (ii) any limitation (whether or not
mandatory) by any United States governmental authority on the extension of
credit generally by banks or other financial institutions.
(f) The Initial Transactions shall have been consummated in accordance
with Section 7.6 other than those set forth in Section 7.6(d) which shall
not be a condition.
ARTICLE IX.
TERMINATION AND FEES
Section 9.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
Shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any Governmental Agency shall
have issued an Order or taken any other action (which Order or other action
each party hereto shall use its reasonable best efforts to have vacated or
reversed), in each case permanently restraining, enjoining or otherwise
prohibiting the Transactions, and such Order or other action shall have
become final and non-appealable.
(c) by either Parent or the Company if the Shareholders fail to
approve the Merger upon the taking of a vote at a duly held meeting of the
Shareholders or any adjournment thereof.
(d) after September 3, 2002, by either Parent or the Company if the
Merger shall not have been consummated by such date for any reason;
provided that in such case the terminating party is not in material breach
of its representations, warranties, covenants or agreements under this
Agreement; and provided further, if the Company enters into a Competing
Agreement, such date shall be extended (but not shortened) to the earlier
of (x) one (or if the requisite Shareholder vote in favor of the Merger is
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obtained at the Special Meeting, five) Business Day following the Special
Meeting, or (y) unless the requisite Shareholder vote in favor of the
Merger shall have been obtained, the termination of the Competing
Agreement.
(e) by Parent, if any of the following shall have occurred:
(i) any Person (other than Parent or any Subsidiary of Parent)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), a tender offer or exchange offer to purchase any Common
Stock or securities convertible into such shares such that, upon
consummation of such offer, such person would own or control
thirty-three percent (33%) or more of the then outstanding Common
Stock, and the Board of Directors within ten Business Days after such
tender or exchange offer shall have been so commenced, fails to
recommend against acceptance of such tender or exchange offer by its
Shareholders; or
(ii) (A) the Company shall have entered into an agreement with
respect to an Alternative Transaction (other than a confidentiality
agreement permitted by Section 6.2), or (B) the Board of Directors
shall have (x) authorized, recommended or publicly announced an
intention to authorize or recommend an Alternative Transaction,
including pursuant to the last sentence of Section 6.2(c), or (y)
withdrawn or modified in a manner adverse to Parent the recommendation
of the Board of Directors that the Shareholders approve this Agreement
and the Merger (an "Adverse Recommendation"), it being understood and
agreed that any communication by the Company or the Board of Directors
to the Shareholders that the Board of Directors had determined not to
withdraw or modify such recommendation, in whole or in part, because
such action would or might give rise to a right on the part of Parent
to terminate this Agreement and/or obligate the Company to pay the
Termination Fee and/or the Expense Reimbursement shall nevertheless be
deemed to be an Adverse Recommendation.
(f) by Parent if: (i) any of the representations and warranties of the
Company contained in this Agreement which are qualified as to Prohibited
Effect shall not be true and correct, (ii) any of the other representations
and warranties of the Company contained in this Agreement shall not be true
and correct in all material respects, (iii) the Company shall have failed
to comply with the provisions of Section 6.2 hereof, or (iv) the Company
shall have failed to perform any material obligation or to comply with any
material agreement or material covenant to be performed or complied with by
it under this Agreement (without giving effect to any materiality
qualification or standard contained in any such agreements or covenants),
subject to (A) in the case of clauses (i), (ii) or (iv) which breach is not
cured by the earlier of (x) the day prior to the Special Meeting, and (y)
five (5) Business Days following written notice to the Company and (B) in
the case of clause (iii), only with respect to breaches arising from
isolated, discrete actions taken by non-executive employees of the Company
or its Subsidiaries without the actual Knowledge of the Company which
breach is not cured within one (1) Business Day following the Company
obtaining actual Knowledge of such breach; or
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(g) by the Company if (i) any of the representations and warranties of
Parent or Purchaser contained in this Agreement which are qualified as to
material adverse effect shall not be true and correct, (ii) any of the
other representations and warranties of Parent or Purchaser contained in
this Agreement shall not be true and correct in all material respects, or
(iii) Parent or Purchaser shall have failed to perform any material
obligation or to comply with any material agreement or material covenant to
be performed or complied with by it under this Agreement (without giving
effect to any materiality qualification or standard contained in any such
agreements or covenants), and in any case which breach is not cured
following written notice to Parent by the earlier of (x) the day prior to
the Special Meeting, and (y) within five (5) Business Days following
written notice to Parent, except for such breaches which, individually or
in the aggregate, would not reasonably be expected to have a material
adverse effect on the ability of Parent and Purchaser to consummate the
Transactions.
Section 9.2. Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 9.1, this
Agreement shall forthwith become void and of no further force and effect;
provided, however, that (a) each of the parties shall be entitled to pursue,
exercise and enforce any and all remedies, rights, powers and privileges
available to it at law or in equity for any breach of any covenant, agreement or
other obligation under this Agreement which occurred prior to such termination
(but not for breach of any representation or warranty), provided that if the
Company pays to Parent the Termination Fee and Expense Reimbursement pursuant to
Section 9.3(c)(ii)(A)(y) or 9.3(c)(ii)(B), including any subsequent payment due
pursuant to Section 9.3(d), such amounts shall be deemed satisfaction in full
for any and all damages incurred by Parent or Purchaser in connection with any
breaches of the Company giving rise to such termination, and (b) Sections 9.2,
9.3, 10.3, 10.4, 10.6, 10.8, 10.10 and 10.12 shall survive the termination.
Section 9.3. Fees and Expenses.
(a) Except as provided in paragraphs (b), (c) and (d) below, whether
or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses (including
broker's or finders fees and the expenses of its representatives).
Notwithstanding the preceding sentence, Parent shall pay one-half and the
Company shall pay one-half of the HSR Act filing fee.
(b) If any of the conditions set forth in paragraphs (c) or (d) below
are satisfied, then the Company shall, subject to and in accordance with
such paragraphs (c) and (d), pay to Parent, by wire transfer of immediate
available funds to an account specified by Parent, (i) an amount equal to
$5,000,000 (the "Termination Fee") plus (ii) all of Parent's reasonable
documented out-of-pocket expenses incurred in connection with the
Transactions and the Transaction Documents, up to a maximum aggregate
amount of $1,000,000 (the "Expense Reimbursement").
(c) The Company shall be obligated to pay the Termination Fee (or the
portion thereof described below) and the Expense Reimbursement as follows:
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(i) if Parent terminates this Agreement pursuant to the
provisions of Section 9.1(e)(ii)(A) or (B)(x), or if either party
terminates this Agreement at a time when Parent had the right to
terminate pursuant to Section 9.1(e)(ii)(A) or (B)(x) the Company
shall, within 2 (two) Business Days following such termination, pay
the Termination Fee and the Expense Reimbursement; or
(ii) if (A) Parent has terminated this Agreement pursuant to (x)
any of the other provisions of Section 9.1(e) or (y) Section 9.1(f) or
(B) the Company terminates this Agreement other than pursuant to
Section 9.1(g) and, at the time of such termination, Parent had the
right to terminate pursuant to Section 9.1(f) (without giving effect
to any notice and cure right in favor of the Company) but not pursuant
to Section 9.1(e)(ii)(A) or (B)(x) (which shall be governed by Section
9.3(c)(i)), the Company shall, within 2 (two) Business Days following
such termination, pay (A) one half of the Termination Fee (i.e., an
amount equal to $2,500,000) and (B) the Expense Reimbursement; or
(iii) if a Takeover Proposal is publicly disclosed after the date
of this Agreement, and thereafter Parent or the Company terminates
this Agreement pursuant to Section 9.1(c) or (d), the Company shall,
within 2 (two) Business Days following such termination, pay (A) one
half of the Termination Fee (i.e., an amount equal to $2,500,000) and
(B) the Expense Reimbursement.
(d) In the event of a termination to which clauses (ii) or (iii) of
paragraph (c) above is applicable, and, within nine (9) months following
such termination, the Company enters into a definitive agreement providing
for, or consummates, an Alternative Transaction, the Company shall, upon
consummation of such Alternative Transaction, pay the remaining portion of
the Termination Fee not previously paid pursuant to such clauses (ii) or
(iii), as applicable. For the purpose of this Section 9.3(d), "Alternative
Transaction" shall have the meaning assigned to such term in Section 6.2,
except that references to "10%" or "15%" in such definition shall be deemed
to be references to 33%.
(e) The Company shall be discharged from its obligation to pay the
Termination Fee and Expense Reimbursement to the extent that Parent
actually receives such amounts pursuant to the escrow agreement established
pursuant to the Escrow Procedures.
ARTICLE X.
GENERAL PROVISIONS
Section 10.1. Non-Survival of Representations, Warranties and Agreements.
All representations and warranties set forth in this Agreement shall terminate
at the Effective Time. All covenants and agreements set forth in this Agreement
shall survive in accordance with their terms.
Section 10.2. Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective boards of directors,
at any time before or after
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approval hereof by the Shareholders of the Company, but, after such approval, no
amendment shall be made which changes the Per Share Amount or which in any way
materially adversely affects the rights of such Shareholders or which by
applicable law requires the approval of such Shareholders, without the further
approval of such Shareholders. Notwithstanding any other provision of this
Agreement, this Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
Section 10.3. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given (a) when delivered
personally to the recipient, (b) when sent to the recipient by telecopy (receipt
electronically confirmed by sender's telecopy machine) if during normal business
hours of the recipient, otherwise on the next Business Day, or (c) one Business
Day after the date when sent to the recipient by reputable same or next day
courier service (charges prepaid). Such notices, demands and other
communications shall be sent to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
If to the Company:
Software Spectrum, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Chairman of Board and Chief Executive Officer
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President of Strategic Relationships and
General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Parent or Purchaser:
▇▇▇▇▇ ▇ Communications, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.4. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction without the necessity of posting a bond,
this being in addition to any other remedy to which they are entitled at law or
in equity.
Section 10.5. Publicity. Each party's initial press release with respect to
the execution of this Agreement has been previously approved by the other
parties. Following such initial press releases, so long as this Agreement is in
effect, neither the Company, Parent nor any of their respective Affiliates shall
issue or cause the publication of any press release or other public announcement
with respect to the Merger, this Agreement or the other transactions between the
parties contemplated hereby without the prior consultation of the other parties,
except as may be required by Legal Requirement or by any listing agreement with
a national securities exchange or trading market.
Section 10.6. Interpretation. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party. Any
references to any federal, state, local or foreign statute or law shall also
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Unless the context otherwise requires: (a) a term has the
meaning assigned to it by this Agreement; (b) including means "including but not
limited to"; (c) "or" is disjunctive but not exclusive; (d) words in the
singular include the plural, and in the plural include the singular; (e)
provisions apply to successive events and transactions; (f) "$" means the
currency of the United States of America; and (g) "Knowledge" of any Person that
is an entity means the actual knowledge of its executive officers after
reasonable inquiry of the subordinates for the relevant matter. When a reference
is made in this Agreement to Sections, such reference shall be to a Section of
this Agreement unless otherwise indicated.
Section 10.7. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 10.8. Entire Agreement; No Third Party Beneficiaries. This
Agreement and the Confidentiality Agreement (including the documents and the
instruments referred to herein and therein): (a) constitute the entire agreement
and supersede all prior agreements and
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understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) other than the provisions of Section 7.1 hereof,
nothing expressed or implied in this Agreement is intended or will be construed
to confer upon or give to any Person other than the parties hereto any rights or
remedies under or by reason of this Agreement or any Transaction.
Section 10.9. Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall
be added as a part of this Agreement a provision as similar in terms and intent
to such invalid or unenforceable provision as may be possible and be valid and
enforceable.
Section 10.10. Governing Law. This Agreement and the legal relations
between the parties hereto will be governed by and construed in accordance with
the laws of the State of New York, without giving effect to the choice of law
principles thereof.
Section 10.11. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
direct or indirect wholly owned Subsidiary of Parent, but no such assignment
shall relieve Purchaser of any of its obligations under this Agreement. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
Section 10.12. Descriptive Headings. The descriptive headings of the
several sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
LEVEL 3 COMMUNICATIONS, INC.
/s/ ▇▇▇▇▇ ▇▇▇▇▇
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By: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
ELDORADO ACQUISITION THREE, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Group Vice President
SOFTWARE SPECTRUM, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇
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By: ▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
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