EXHIBIT 2.1
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
OPENTV CORP.,
SONNET ACQUISITION CORP.
AND
SPYGLASS, INC.
Dated as of March 26, 2000
--------------------------------------------------------------------------------
1
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER................................................................................... 2
1.1 The Merger.................................................................................. 2
1.2 Effective Time; Closing..................................................................... 2
1.3 Effect of the Merger........................................................................ 2
1.4 Certificate of Incorporation; Bylaws........................................................ 2
1.5 Directors and Officers...................................................................... 3
1.6 Effect on Capital Stock..................................................................... 3
1.7 Surrender of Certificates................................................................... 4
1.8 No Further Ownership Rights in Company Common Stock......................................... 6
1.9 Lost, Stolen or Destroyed Certificates...................................................... 6
1.10 Tax Consequences............................................................................ 6
1.11 Taking of Necessary Action; Further Action.................................................. 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY................................................... 7
2.1 Organization and Qualification; Subsidiaries................................................ 7
2.2 Certificate of Incorporation and Bylaws..................................................... 7
2.3 Capitalization.............................................................................. 7
2.4 Authority Relative to this Agreement........................................................ 9
2.5 No Conflict; Required Filings and Consents.................................................. 9
2.6 Compliance; Permits......................................................................... 10
2.7 SEC Filings; Financial Statements........................................................... 11
2.8 No Undisclosed Liabilities.................................................................. 11
2.9 Absence of Certain Changes or Events........................................................ 12
2.10 Absence of Litigation....................................................................... 12
2.11 Employee Benefit Plans...................................................................... 12
2.12 Labor Matters............................................................................... 15
2.13 Registration Statement/Joint Proxy Statement/Prospectus..................................... 15
2.14 Restrictions on Business Activities......................................................... 16
2.15 Title to Property........................................................................... 16
2.16 Taxes....................................................................................... 16
2.17 Environmental Matters....................................................................... 18
2.18 Brokers..................................................................................... 19
2.19 Intellectual Property....................................................................... 19
2.20 Agreements, Contracts and Commitments....................................................... 22
2.21 Insurance................................................................................... 24
2.22 Opinion of Financial Advisor................................................................ 24
2.23 Board Approval.............................................................................. 24
2.24 Vote Required............................................................................... 24
2.25 State Takeover Statutes..................................................................... 24
-i-
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................................... 25
3.1 Organization and Qualification; Subsidiaries................................................ 25
3.2 Certificate of Incorporation and Bylaws..................................................... 25
3.3 Capitalization.............................................................................. 25
3.4 Authority Relative to this Agreement........................................................ 26
3.5 No Conflict; Required Filings and Consents.................................................. 26
3.6 SEC Filings; Financial Statements........................................................... 27
3.7 No Undisclosed Liabilities.................................................................. 28
3.8 Absence of Certain Changes or Events........................................................ 28
3.9 Absence of Litigation....................................................................... 28
3.10 Tax Matters................................................................................. 28
3.11 Registration Statement; Joint Proxy Statement/Prospectus.................................... 29
3.12 Brokers..................................................................................... 29
3.13 Opinion of Financial Advisor................................................................ 29
3.14 Board Approval.............................................................................. 29
3.15 Vote Required............................................................................... 29
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME......................................................... 29
4.1 Conduct of Business by Company............................................................... 29
4.2 Conduct of Business by Parent................................................................ 32
ARTICLE V ADDITIONAL AGREEMENTS........................................................................ 33
5.1 Joint Proxy Statement/Prospectus; Registration Statement.................................... 33
5.2 Stockholder Meetings........................................................................ 34
5.3 Confidentiality; Access to Information...................................................... 35
5.4 No Solicitation............................................................................. 35
5.5 Public Disclosure........................................................................... 37
5.6 Reasonable Efforts; Notification............................................................ 37
5.7 Third Party Consents........................................................................ 38
5.8 Stock Options and Warrants; 401(k) Plan..................................................... 38
5.9 Form S-8.................................................................................... 39
5.10 Indemnification............................................................................. 39
5.11 Nasdaq Listing.............................................................................. 40
5.12 Affiliates.................................................................................. 40
5.13 Regulatory Filings; Reasonable Efforts...................................................... 40
5.14 Employee Benefits........................................................................... 40
ARTICLE VI CONDITIONS TO THE MERGER.................................................................... 41
6.1 Conditions to Obligations of Each Party to Effect the Merger................................ 41
6.2 Additional Conditions to Obligations of Company............................................. 41
-ii-
TABLE OF CONTENTS
(continued)
Page
----
6.3 Additional Conditions to the Obligations of Parent and Merger Sub........................... 42
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.......................................................... 43
7.1 Termination................................................................................ 43
7.2 Notice of Termination; Effect of Termination............................................... 44
7.3 Fees and Expenses.......................................................................... 44
7.4 Amendment.................................................................................. 46
7.5 Extension; Waiver.......................................................................... 46
ARTICLE VIII GENERAL PROVISIONS........................................................................ 46
8.1 Survival of Representations and Warranties.................................................. 46
8.2 Notices..................................................................................... 46
8.3 Interpretation; Definitions................................................................. 47
8.4 Counterparts................................................................................ 48
8.5 Entire Agreement; Third Party Beneficiaries................................................. 48
8.6 Severability................................................................................ 49
8.7 Other Remedies; Specific Performance........................................................ 49
8.8 Governing Law............................................................................... 49
8.9 Rules of Construction....................................................................... 49
8.10 Assignment.................................................................................. 49
INDEX OF EXHIBITS
-----------------
Exhibit A-1 Form of Company Stockholder Agreement
Exhibit A-2 Form of Parent Stockholder Agreement
Exhibit B Form of Stockholder Lock-Up Agreement
Exhibit C Form of Affiliate Agreement
Exhibit D Form of Company Tax Representation Letter
Exhibit E Form of Parent Tax Representation Letter
-iii-
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION is made and entered
into as of March 26, 2000, among OpenTV Corp., a British Virgin Islands
corporation ("Parent"), Sonnet Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Spyglass, Inc., a Delaware
corporation ("Company").
RECITALS
--------
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the Delaware General
Corporation Law ("Delaware Law"), Parent and Company intend to enter into a
business combination transaction.
B. The Board of Directors of Company (i) has determined that the Merger
(as defined in Section 1.1) is consistent with and in furtherance of the long-
term business strategy of Company and fair to, and in the best interests of,
Company and its stockholders, (ii) has approved and declared advisable this
Agreement, and has approved the Merger (as defined in Section 1.1) and the other
transactions contemplated by this Agreement and (iii) has determined to
recommend that the stockholders of Company adopt and approve this Agreement and
approve the Merger.
C. The Board of Directors of Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and is fair to, and in the best interests of, Parent and its stockholders, (ii)
has approved this Agreement, the Merger and the other transactions contemplated
by this Agreement and (iii) has determined to recommend that the stockholders of
Parent approve the issuance of shares of Parent Common Stock (as defined below)
pursuant to the Merger (the "Share Issuance").
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, constituting all directors and executive officers of the
Company (the "Key Stockholders"), are entering into stockholder agreements in
the form attached hereto as Exhibit A-1 (the "Company Stockholder Agreements");
-----------
and as a condition and inducement to Company's willingness to enter into this
Agreement, Myriad International Holdings BV is entering into a stockholder
agreement in the form attached hereto as Exhibit A-2 (the "Parent Stockholder
-----------
Agreement").
E. Concurrently with the execution of this Agreement and as a condition
and inducement to Parent's willingness to enter into this Agreement, the Key
Stockholders have entered into stock lock-up agreements in the form attached
hereto as Exhibit B (the "Lock-Up Agreements").
---------
F. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
employees are entering into employment agreements (the "Employment Agreements").
G. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
H. NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
----------
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and Company shall continue as the surviving corporation. Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
-----------------------
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "Certificate of
Merger") (the time of such filing (or such later time as may be agreed in
writing by Company and Parent and specified in the Certificate of Merger) being
the "Effective Time") as soon as practicable on the Closing Date (as herein
defined). Unless the context otherwise requires, the term "Agreement" as used
herein refers collectively to this Agreement and Plan of Merger and
Reorganization and the Certificate of Merger. The closing of the Merger (the
"Closing") shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Professional Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, at a time and date to
be specified by the parties, which shall be no later than the second business
day after the satisfaction or waiver of the conditions set forth in Article VI,
or at such other time, date and location as the parties hereto agree in writing
(the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in this Agreement and the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws
------------------------------------
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; provided, however, that at the Effective Time the
-------- -------
Certificate of Incorporation of the Surviving Corporation shall be amended so
that the name of the Surviving Corporation shall be "Spyglass, Inc."
-2-
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
----------------------
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of this
-----------------------
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, Company or the holders of any of the following
securities, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common Stock,
----------------------------------
$0.01 par value per share, of Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Company Common Stock to be canceled pursuant to Section 1.6(b), will be canceled
and extinguished and automatically converted (subject to Sections 1.6(e) and
(f)) into the right to receive that number of Class A Ordinary Shares, $0.01 par
value per share, of Parent (the "Parent Common Stock") equal to 0.7236 (the
"Exchange Ratio"). Certificates evidencing such shares of Parent Common Stock
shall be issued upon surrender of the certificate representing such share of
Company Common Stock in the manner provided in Section 1.7 (or in the case of a
lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond,
if required) in the manner provided in Section 1.9). If any shares of Company
Common Stock outstanding immediately prior to the Effective Time are unvested or
are subject to a repurchase option, risk of forfeiture or other condition under
any applicable restricted stock purchase agreement or other agreement with the
Company, then the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take all action that may be necessary to
ensure that, from and after the Effective Time, Parent is entitled to exercise
any such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
(b) Cancellation of Parent-Owned Stock. Each share of Company Common
----------------------------------
Stock held by Company or owned by Merger Sub, Parent or any direct or indirect
wholly-owned subsidiary of Company or of Parent immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Stock Options; Employee Stock Purchase Plan. At the Effective
-------------------------------------------
Time, all options to purchase Company Common Stock and stock appreciation rights
then outstanding under Company's 1995 Stock Incentive Plan, as amended (the
"Incentive Plan"), Company's 1991 Stock Option Plan (the "Option Plan"),
Company's 1995 Director Stock Option Plan (the "Director Plan" and, together
with the Option Plan and the Incentive Plan, the "Company Option Plans"), all
outstanding warrants and each of the Company Option Plans shall be assumed by
Parent in
-3-
accordance with Section 5.8 hereof. Rights outstanding under the Company's 1995
Employee Stock Purchase Plan (the "ESPP") shall terminate in accordance with the
terms of such Plan prior to Closing.
(d) Capital Stock of Merger Sub. Each share of Common Stock, $0.01 par
---------------------------
value per share, of Merger Sub (the "Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, $0.01 par
value per share, of the Surviving Corporation. Each certificate evidencing
ownership of shares of Merger Sub Common Stock shall evidence ownership of such
shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
-----------------------------
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock), reorganization,
recapitalization, reclassification or other like change with respect to Parent
Common Stock or Company Common Stock occurring on or after the date hereof and
prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common Stock
-----------------
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock that otherwise would be received by such holder) shall, upon
surrender of such holder's Certificates(s) (as defined in Section 1.7(c))
receive from Parent an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product of (i) such fraction, multiplied by (ii)
the average closing price of Parent Common Stock for the five trading days
immediately preceding the last full trading day prior to the Effective Time, as
reported on the Nasdaq National Market System ("Nasdaq").
1.7 Surrender of Certificates
-------------------------
(a) Exchange Agent. Parent shall select a bank or trust company
--------------
reasonably acceptable to Company to act as the exchange agent (the "Exchange
Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective Time
------------------------------
(and in any event within ten business days), Parent shall make available to the
Exchange Agent for exchange in accordance with this Article I, the shares of
Parent Common Stock issuable pursuant to Section 1.6 in exchange for outstanding
shares of Company Common Stock and cash in an amount sufficient for payment in
lieu of fractional shares pursuant to Section 1.6(f) and any dividends or
distributions to which holders of shares of Company Common Stock may be entitled
pursuant to Section 1.7(d).
(c) Exchange Procedures. As soon as practicable after the Effective
-------------------
Time, Parent shall cause the Exchange Agent to mail to each holder of record (as
of the Effective Time) of a certificate or certificates (the "Certificates"),
which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.6, cash in lieu of any
-4-
fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.7(d), (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall contain such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock, cash in lieu of any fractional shares pursuant to
Section 1.6(f) and any dividends or other distributions pursuant to Section
1.7(d). Upon surrender of Certificates for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of Parent Common Stock into which their shares of Company Common Stock
were converted at the Effective Time, payment in lieu of fractional shares which
such holders have the right to receive pursuant to Section 1.6(f) and any
dividends or distributions payable pursuant to Section 1.7(d), and the
Certificates so surrendered shall forthwith be canceled. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes, subject to Section 1.7(d) as to the payment of
dividends, to evidence only the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6(f) and any dividends or
distributions payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest, certificates representing whole
shares of Parent Common Stock issued in exchange therefor along with payment in
lieu of fractional shares pursuant to Section 1.6(f) hereof and the amount of
any such dividends or other distributions with a record date after the Effective
Time payable with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If certificates representing shares of
----------------------
Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
representing shares of Parent Common Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) Required Withholding. Each of the Exchange Agent, Parent and the
--------------------
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any
-5-
provision of state, local or foreign tax law or under any other applicable legal
requirement. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the person to whom such amounts would otherwise have been paid.
(g) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor
any party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
---------------------------------------------------
Parent Common Stock issued in accordance with the terms hereof (together with
any cash paid in respect thereof pursuant to Section 1.6(f) and 1.7(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock represented by such Certificates were converted pursuant to Section
1.6, cash for fractional shares, if any, as may be required pursuant to Section
1.6(f) and any dividends or distributions payable pursuant to Section 1.7(d);
provided, however, that Parent may, in its discretion and as a condition
-------- -------
precedent to the issuance of such certificates representing shares of Parent
Common Stock, cash and other distributions, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
----------------
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
------------------------------------------
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the current officers and directors of
Company and Merger Sub will, to the extent reasonable, take all such lawful and
necessary action.
-6-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
As of the date hereof, Company represents and warrants to Parent and Merger
Sub as follows, subject to such exceptions as are specifically disclosed in
writing in the disclosure schedule supplied by Company to Parent dated as of the
date hereof (the "Company Schedule"). The Company Schedule shall be arranged in
sections corresponding to the numbered and lettered paragraphs contained in this
Article II and the disclosure in any section of the Company Schedule shall
qualify other paragraphs in this Article II only to the extent that it is
reasonably apparent from a reading of such disclosure that it also qualifies or
applies to such other paragraph.
2.1 Organization and Qualification; Subsidiaries
--------------------------------------------
(a) Each of Company and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each of Company and its subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Approvals") necessary
to own, lease and operate the properties it purports to own, operate or lease
and to carry on its business as it is now being conducted, except where the
failure to have such Approvals would not, individually or in the aggregate, be
material to the Company. Each of Company and its subsidiaries is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not, either individually or in the
aggregate, be material to the Company.
(b) Company has no subsidiaries except for the corporations identified
in Section 2.1(b) of the Company Schedule. Neither Company nor any of its
subsidiaries has agreed nor is obligated to make nor be bound by any written,
oral or other agreement, contract, subcontract, lease, binding understanding,
instrument, note, option, warranty, purchase order, license, sublicense,
insurance policy, benefit plan, commitment or undertaking of any nature, as of
the date hereof or as may hereafter be in effect (a "Contract") under which it
may become obligated to make, any future investment in or capital contribution
to any other entity. Neither Company nor any of its subsidiaries directly or
indirectly owns any equity or similar interest in or any interest convertible,
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business, association or
entity.
2.2 Certificate of Incorporation and Bylaws. Company has previously
---------------------------------------
furnished to Parent a complete and correct copy of its certificate of
incorporation and bylaws as amended to date (together, the "Company Charter
Documents"). Such Company Charter Documents and equivalent organizational
documents of each of its subsidiaries are in full force and effect. Company is
not in violation of any of the provisions of the Company Charter Documents, and
no subsidiary of Company is in violation of its equivalent organizational
documents.
2.3 Capitalization.
--------------
-7-
(a) The authorized capital stock of Company consists of 50,000,000
shares of Company Common Stock and 2,000,000 shares of Preferred Stock ("Company
Preferred Stock"), each having par value $0.01 per share. At the close of
business on March 22, 2000 (i) 17,210,761 shares of Company Common Stock were
issued and outstanding, all of which are validly issued, fully paid and
nonassessable; (ii) 9,714 shares of Company Common Stock were held in treasury
by Company or by subsidiaries of Company; (iii) 2,390,702 shares of Company
Common Stock were reserved for issuance upon the exercise of outstanding options
to purchase Company Common Stock under the Incentive Plan; (iv) 130,000 shares
of Company Common Stock were reserved for issuance upon the exercise of
outstanding options to purchase Company Common Stock under the Option Plan; (v)
120,000 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase Company Common Stock under the
Director Plan; (vi) 27,929 shares of Company Common Stock were reserved for
issuance upon the exercise of other outstanding options to purchase Company
Common Stock; (vii) 1,110,929 shares of Company Common Stock were available for
future grant under the Incentive Plan; (viii) no shares of Company Common Stock
were available for future grant under the Option Plan (ix) 35,500 shares of
Company Common Stock were available for future grant under the Director Plan;
and (x) 700,000 shares of Company Common Stock were reserved for future issuance
upon conversion of warrants of the Company. As of the date hereof, no shares of
Company Preferred Stock were issued or outstanding. Section 2.3(a) of the
Company Schedule sets forth the following information with respect to each
Company Stock Option (as defined in Section 5.8) outstanding as of the date of
this Agreement: (i) the name of the optionee; (ii) the particular plan pursuant
to which such Company Stock Option was granted; (iii) the number of shares of
Company Common Stock subject to such Company Stock Option; (iv) the exercise
price of such Company Stock Option; (v) the date on which such Company Stock
Option was granted; (vi) the applicable vesting schedule; and (vii) the date on
which such Company Stock Option expires. Company has made available to Parent
accurate and complete copies of all stock option plans pursuant to which the
Company has granted such Company Stock Options that are currently outstanding
and the form of all stock option agreements evidencing such Company Stock
Options. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instrument pursuant
to which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. There are no commitments or agreements of any character to
which the Company is bound obligating the Company to accelerate the vesting of
any Company Stock Option as a result of the Merger. All outstanding shares of
Company Common Stock, all outstanding Company Stock Options, and all outstanding
shares of capital stock of each subsidiary of the Company have been issued and
granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements (as defined below) and (ii) all requirements set
forth in applicable Contracts. For the purposes of this Agreement, "Legal
Requirements" means any federal, state, local, municipal, foreign or other law,
statute, constitution, principle of common law, resolution, ordinance, code,
edict, decree, rule, regulation, ruling or requirement issues, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined below) and (ii) all requirements set
forth in applicable contracts, agreements, and instruments.
(b) Except for securities Company owns free and clear of all liens,
pledges, hypothecations, charges, mortgages, security interests, encumbrances,
claims, infringements,
-8-
interferences, options, right of first refusals, preemptive rights, community
property interests or restriction of any nature (including any restriction on
the voting of any security, any restriction on the transfer of any security or
other asset, any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset) directly or indirectly through one or
more subsidiaries, and except for shares of capital stock or other similar
ownership interests of subsidiaries of the Company that are owned by certain
nominee equity holders as required by the applicable law of the jurisdiction of
organization of such subsidiaries (which shares or other interests do not
materially affect the Company's control of such subsidiaries), as of the date of
this Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of equity security of any subsidiary of the
Company, or any security exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth in Section
2.3(a), there are no subscriptions, options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which Company
or any of its subsidiaries is a party or by which it is bound obligating Company
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of the Company or any of
its subsidiaries or obligating the Company or any of its subsidiaries to grant,
extend, accelerate the vesting of or enter into any such subscription, option,
warrant, equity security, call, right, commitment or agreement. As of the date
of this Agreement, except as contemplated by this Agreement, there are no
registration rights and there is, except for the Company Stockholder Agreements,
no voting trust, proxy or rights plan to which the Company or any of its
subsidiaries is a party or by which they are bound with respect to any equity
security of any class of the Company or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
subsidiaries. Stockholders of the Company will not be entitled to dissenters'
rights under applicable state law in connection with the Merger.
2.4 Authority Relative to this Agreement. Company has all necessary
------------------------------------
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and, subject to obtaining the approval of the
stockholders of Company of the Merger, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Company and
the consummation by Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Company and no other corporate proceedings on the part of Company are necessary
to authorize this Agreement, or to consummate the transactions so contemplated
(other than, with respect to the Merger, the approval and adoption of this
Agreement by holders of a majority of the outstanding shares of Company Common
Stock in accordance with Delaware Law and the Company Charter Documents). This
Agreement has been duly and validly executed and delivered by Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
constitutes legal and binding obligations of Company, enforceable against
Company in accordance with its terms.
2.5 No Conflict; Required Filings and Consents.
------------------------------------------
-9-
(a) The execution and delivery of this Agreement by Company do not,
and the performance of this Agreement by Company shall not, (i) conflict with or
violate the Company Charter Documents or the equivalent organizational documents
of any of Company's subsidiaries, (ii) subject to obtaining the approval of
Company's stockholders of the Merger and compliance with the requirements set
forth in Section 2.5(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Company or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair Company's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Company
or any of its subsidiaries pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Company or any of its subsidiaries is a party
or by which Company or any of its subsidiaries or its or any of their respective
properties are bound or affected, except to the extent such conflict, violation,
breach, default, impairment or other effect could not in the case of clauses
(ii) or (iii), individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Company.
(b) The execution and delivery of this Agreement by Company do not,
and the performance of this Agreement by Company shall not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory authority,
domestic or foreign (a "Governmental Entity"), except (A) for applicable
requirements, if any, of the Securities Act of 1933, as amended (the "Securities
Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
state securities laws ("Blue Sky Laws"), the pre-merger notification
requirements (the "HSR Approval") of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the rules and regulations
of Nasdaq, and the filing and recordation of the Certificate of Merger as
required by Delaware Law and (B) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not have a material adverse effect on the parties' ability to consummate
the Merger or perform their obligations under this Agreement.
2.6 Compliance; Permits.
-------------------
(a) Neither Company nor any of its subsidiaries is in conflict with,
or in default or violation of, (i) any law, rule, regulation, order, judgment or
decree (each, a "Law") applicable to Company or any of its subsidiaries or by
which its or any of their respective properties is bound or affected, or (ii)
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Company or
any of its subsidiaries is a party or by which Company or any of its
subsidiaries or its or any of their respective properties is bound or affected,
except for any conflicts, defaults or violations that (individually or in the
aggregate) would not cause the Company to lose any material benefit or incur any
material liability. No investigation or review by any governmental or regulatory
body or authority is pending or, to the knowledge of Company, threatened against
Company or its subsidiaries, nor has any governmental or regulatory body or
authority indicated an intention to conduct the same, other than, in each such
case, those the outcome of which could not, individually or in the aggregate,
reasonably be expected
-10-
to have the effect of prohibiting or materially impairing any business practice
of the Company or any of its subsidiaries, any acquisition of material property
by the Company or any of its subsidiaries or the conduct of business by the
Company or any of its subsidiaries.
(b) Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to operation of the business of Company and its subsidiaries taken
as a whole (collectively, the "Company Permits"). Company and its subsidiaries
are in compliance in all material respects with the terms of the Company
Permits.
2.7 SEC Filings; Financial Statements.
---------------------------------
(a) Company has made available to Parent a correct and complete copy
of each report, schedule, registration statement and definitive proxy statement
filed by Company with the Securities and Exchange Commission ("SEC") after
January 1, 1997 (the "Company SEC Reports"), which are all the forms, reports
and documents required to be filed by Company with the SEC after January 1,
1997. The Company SEC Reports (A) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
filed on a timely basis and (B) did not at the time they were filed (and if
amended or superseded by a filing prior to the date of this Agreement then on
the date of such filing) 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 light of the circumstances under which they were
made, not misleading. None of Company's subsidiaries is required to file any
reports or other documents with the SEC.
(b) Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, for the
absence of footnotes as permitted by Form 10-Q of the Exchange Act) and each
fairly presents the consolidated financial position of Company and its
subsidiaries at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal adjustments which
were not or are not expected to be material in amount.
(c) Company has previously furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Company with the SEC pursuant to
the Securities Act or the Exchange Act.
2.8 No Undisclosed Liabilities. Neither Company nor any of its
--------------------------
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
which are, individually or in the aggregate, material to the business, results
of operations or financial condition of Company and its subsidiaries taken as a
whole, except (i) liabilities provided for in Company's balance sheet as of
December 31, 1999, (ii) liabilities incurred since December 31, 1999 in the
ordinary course of business, and in amounts consistent with past practice, and
(iii) contractual and other liabilities incurred in the ordinary course of
business which are not required by GAAP to be reflected on a balance sheet.
-11-
2.9 Absence of Certain Changes or Events. Since December 31, 1999, there
------------------------------------
has not been: (i) any Material Adverse Effect on Company, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of Company's or any of its
subsidiaries' capital stock, or any purchase, redemption or other acquisition by
Company of any of Company's capital stock or any other securities of Company or
its subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from employees following their
termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of Company's
or any of its subsidiaries' capital stock, (iv) any granting by Company or any
of its subsidiaries of any increase in compensation or fringe benefits, except
for normal increases of cash compensation to non-officer employees in the
ordinary course of business consistent with past practice, or any payment by
Company or any of its subsidiaries of any bonus, except for bonuses made to non-
officer employees in the ordinary course of business consistent with past
practice, or any granting by Company or any of its subsidiaries of any increase
in severance or termination pay or any entry by Company or any of its
subsidiaries into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Company of the nature contemplated hereby, (v) entry by
Company or any of its subsidiaries into any licensing or other agreement with
regard to the acquisition or disposition of any Intellectual Property (as
defined in Section 2.19) other than licenses in the ordinary course of business
consistent with past practice or any amendment or consent with respect to any
licensing agreement filed or required to be filed by Company with the SEC, (vi)
any material change by Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (vii) any
revaluation by Company of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable or any sale of assets of the Company other than in the ordinary
course of business.
2.10 Absence of Litigation. There are no claims, actions, suits or
---------------------
proceedings pending or, to the knowledge of Company, threatened (or, to the
knowledge of Company, any governmental or regulatory investigation pending or
threatened) against Company or any of its subsidiaries or any properties or
rights of Company or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, except for any claims, actions, suits or proceedings which seek damages
of less than $250,000, do not seek injunctive relief, and do not challenge or
seek to prevent or delay the transactions contemplated by this Agreement.
2.11 Employee Benefit Plans.
----------------------
(a) All employee compensation, incentive, fringe or benefit plans,
programs, policies, commitments or other arrangements (whether or not set forth
in a written document and including, without limitation, all "employee benefit
plans" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) covering any active, former
employee, director or consultant of Company, any subsidiary of Company or any
trade or business (whether or not incorporated) which is a member of a
controlled group or which is under common control with Company within the
meaning of Section 414 of the Code (an "Affiliate"), or
-12-
with respect to which Company has or may in the future have liability, and a
list of all visas and work permits for Company employees, including the
expiration dates thereof, are listed in Section 2.11(a) of the Company Schedule
(the "Plans"). Company has provided or made available to Parent: (i) correct and
complete copies of all documents embodying each Plan, International Plan (as
defined below) and management, employment, severance, consulting, relocation,
repatriation, expatriation or other agreement, contract or material
understanding between Company and any Employee ("Employment Agreement"),
including (without limitation) all amendments thereto, all related trust
documents, and all material written agreements and contracts relating to each
such Plan; (ii) the three (3) most recent annual reports (Form Series 5500 and
all schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Plan; (iii) the most recent summary
plan description together with the summary(ies) of material modifications
thereto, if any, required under ERISA with respect to each Plan; (iv) all IRS or
DOL determination, opinion, notification and advisory letters; (v) all material
correspondence to or from any governmental agency relating to any Plan; (vi) all
COBRA forms and related notices; (vii) all discrimination tests for each Plan
for the most recent three (3) plan years; (viii) the most recent annual
actuarial valuations, if any, prepared for each Plan; (ix) if the Plan is
funded, the most recent annual and periodic accounting of Plan assets; (x) all
material written agreements and contracts relating to each Plan, including, but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; (xi) all material communications to employees or
former employees regarding in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability under any Plan or proposed Plan; (xii) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Plan; and (xiii) all registration statements, annual reports (Form 11-K and all
attachments thereto) and prospectuses prepared in connection with any Plan.
(b) Company has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and has
no knowledge of any material default or violation by any other party to, each
Plan, and each Plan has been maintained and administered in all material
respects in compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations (foreign or domestic),
including but not limited to ERISA and the Code, which are applicable to such
Plans. No suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of Plan activities) has been brought, or to the
knowledge of Company is threatened, against or with respect to any such Plan.
There are no audits, inquiries or proceedings pending or, to the knowledge of
Company, threatened by the Internal Revenue Service (the "IRS") or Department of
Labor (the "DOL") with respect to any Plans. All contributions, reserves or
premium payments required to be made or accrued as of the date hereof to the
Plans have been timely made or accrued. Any Plan intended to be qualified under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code (i) has either obtained a favorable determination,
notification, advisory and/or opinion letter, as applicable, as to its qualified
status from the IRS or still has a remaining period of time under applicable
Treasury Regulations or IRS pronouncements in which to apply for such letter and
to make any amendments necessary to obtain a favorable determination, and (ii)
incorporates or has been amended to incorporate all provisions required to
comply with the Tax Reform Act of 1986 and subsequent legislation. Company does
not have any plan or commitment to establish any new Plan, to modify any Plan
-13-
(except to the extent required by law or to conform any such Plan to the
requirements of any applicable law, in each case as previously disclosed to
Parent in writing, or as required by this Agreement), or to enter into any new
Plan. Each Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to Parent,
Company or any of its Affiliates (other than ordinary administration expenses
and liabilities for benefits accrued but not yet paid).
(c) Neither Company, any of its subsidiaries, nor any of their
Affiliates has at any time ever maintained, established, sponsored, participated
in, or contributed to any plan subject to Title IV of ERISA or Section 412 of
the Code and at no time has Company or any of its subsidiaries contributed to or
been requested to contribute to any "multiemployer plan," as such term is
defined in ERISA or to any plan described in Section 413(c) of the Code. Neither
Company, any of its subsidiaries, nor any officer or director of Company or any
of its subsidiaries is subject to any liability or penalty under Section 4975
through 4980B of the Code or Title I of ERISA. There are no audits, inquiries or
proceedings pending or, to the knowledge of Company, threatened by the IRS or
DOL with respect to any Plan. No "prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 408 of ERISA, has occurred with respect to any Plan.
(d) Neither Company, any of its subsidiaries, nor any of their
Affiliates has, prior to the Effective Time and in any material respect,
violated any of the health continuation requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), the requirements of the
Family Medical Leave Act of 1993, as amended, the requirements of the Women's
Health and Cancer Rights Act, as amended, the requirements of the Newborns' and
Mothers' Health Protection Act of 1996, as amended, or any similar provisions of
state law applicable to employees of the Company or any of its subsidiaries.
None of the Plans promises or provides retiree medical or other retiree welfare
benefits to any person except as required by applicable law, and neither Company
nor any of its subsidiaries has represented, promised or contracted (whether in
oral or written form) to provide such retiree benefits to any employee, former
employee, director, consultant or other person, except to the extent required by
statute.
(e) Neither Company nor any of its Affiliates is bound by or subject
to (and none of its respective assets or properties is bound by or subject to)
any arrangement with any labor union. No employee of Company or any of its
Affiliates is represented by any labor union or covered by any collective
bargaining agreement, and to the knowledge of Company, no campaign to establish
such representation is in progress. There is no pending or, to the knowledge of
Company, threatened labor dispute involving Company or any of its Affiliates and
any group of its employees nor has Company or any of its Affiliates experienced
any labor interruptions over the past three (3) years, and Company and its
Affiliates consider their relationships with their employees to be good. The
Company and its Affiliates are in compliance in all material respects with all
applicable material foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours.
-14-
(f) Except as disclosed in Schedule 2.11(f) of the Company Schedule,
neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby will (either alone or upon the occurrence
of any additional or subsequent events) (i) constitute an event under any
Company Employee Plan, Employee Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee; or (ii) result in any
payment or benefit which will or may be made by the Company or its Affiliates
with respect to any employee will be characterized as a "parachute payment",
within the meaning of Section 280G(b)(2) of the Code.
(g) Each International Employee Plan (as defined below) has been
established, maintained and administered in material compliance with its terms
and conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has unfunded liabilities that, as of
the Effective Time, will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent the Company or Parent
from terminating or amending any International Employee Plan at any time for any
reason without liability to the Company, Parent or any of their respective
Affiliates. For purposes of this Section "International Employee Plan" shall
mean each Plan that has been adopted or maintained by the Company or any of its
Affiliates, whether informally or formally, or with respect to which the Company
or any Affiliate will or may have any liability, for the benefit of employees
outside the United States.
2.12 Labor Matters. (i) There are no material controversies pending or,
-------------
to the knowledge of each of Company and its respective subsidiaries, threatened,
between Company or any of its subsidiaries and any of their respective
employees; (ii) as of the date of this Agreement, neither Company nor any of its
subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by Company or its subsidiaries nor
does Company or its subsidiaries know of any activities or proceedings of any
labor union to organize any such employees; and (iii) as of the date of this
Agreement, neither Company nor any of its subsidiaries has any knowledge of any
strikes, slowdowns, work stoppages or lockouts, or threats thereof, by or with
respect to any employees of Company or any of its subsidiaries. The Company and
its subsidiaries are in compliance in all material respects with all applicable
material foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours.
2.13 Registration Statement/Joint Proxy Statement/Prospectus. None of the
-------------------------------------------------------
information supplied or to be supplied by Company for inclusion or incorporation
by reference in (i) the registration statement on Form F-4 to be filed with the
SEC by Parent in connection with the issuance of the Parent Common Stock in or
as a result of the Merger (the "F-4") will, at the time the F-4 becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading; and (ii) the joint proxy
statement/prospectus to be filed with the SEC by Company pursuant to Section 5.1
hereof (the "Joint Proxy Statement/Prospectus") will, at the dates mailed to the
stockholders of Company, at the times of the stockholders meeting of Company
(the "Company
-15-
Stockholders' Meeting") in connection with the transactions contemplated hereby,
at the dates mailed to the stockholders of Parent, at the times of the
stockholders' meeting of Parent (the "Parent Stockholders' Meeting") in
connection with the Share Issuance and as of 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 are made, not misleading. The Joint
Proxy Statement/Prospectus will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated by
the SEC thereunder. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by Parent or
Merger Sub which is contained in any of the foregoing documents.
2.14 Restrictions on Business Activities. There is no agreement,
-----------------------------------
commitment, judgment, injunction, order or decree binding upon Company or its
subsidiaries or to which the Company or any of its subsidiaries is a party which
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of Company or any of its
subsidiaries, any acquisition of property by Company or any of its subsidiaries
or the conduct of business by Company or any of its subsidiaries as currently
conducted.
2.15 Title to Property. Neither Company nor any of its subsidiaries owns
-----------------
any material real property. Company and each of its subsidiaries have good and
defensible title to all of their material properties and assets, free and clear
of all liens, charges and encumbrances except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby; and all leases pursuant to which Company or any of
its subsidiaries lease from others material real or personal property are in
good standing, valid and effective in accordance with their respective terms,
and there is not, under any of such leases, any existing material default or
event of default (or any event which with notice or lapse of time, or both,
would constitute a material default and in respect of which Company or
subsidiary has not taken adequate steps to prevent such default from occurring).
All the plants, structures and equipment of Company and its subsidiaries, except
such as may be under construction, are in good operating condition and repair,
in all material respects.
2.16 Taxes.
-----
(a) For the purposes of this Agreement, "Tax" or "Taxes" refers to
any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities relating to taxes,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) (i) The Company and each of its subsidiaries have timely filed
all federal, state, local and foreign returns, estimates, information statements
and reports ("Returns") relating to Taxes required to be filed by the Company
and each of its subsidiaries with any Tax authority, except
-16-
such Returns which are not material to the Company. The Company and each of its
subsidiaries have paid all Taxes shown to be due on such Returns.
(ii) The Company and each of its subsidiaries as of the
Effective Time will have withheld with respect to its employees all federal and
state income taxes, Taxes pursuant to the Federal Insurance Contribution Act,
Taxes pursuant to the Federal Unemployment Tax Act and other Taxes required to
be withheld, except such Taxes which are not material to the Company.
(iii) Neither the Company nor any of its subsidiaries has been
delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against the Company or any of its
subsidiaries, nor has the Company or any of its subsidiaries executed any
unexpired waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(iv) To the knowledge of Company, no audit or other examination
of any Return of the Company or any of its subsidiaries by any Tax authority is
presently in progress. Neither the Company nor any of its subsidiaries has been
notified of any request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by the Company
or any of its subsidiaries has been proposed in writing formally or informally
by any Tax authority to the Company or any of its subsidiaries or any
representative thereof.
(vi) Neither the Company nor any of its subsidiaries has any
liability for any material unpaid Taxes which has not been accrued for or
reserved on the Company balance sheet dated September 30, 1999 in accordance
with GAAP, whether asserted or unasserted, contingent or otherwise, which is
material to the Company, other than any liability for unpaid Taxes that may have
accrued since September 30, 1999 in connection with the operation of the
business of the Company and its subsidiaries in the ordinary course.
(vii) There is no contract, agreement, plan or arrangement to
which the Company or any of its subsidiaries is a party as of the date of this
Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or any of its
subsidiaries that, individually or collectively, would reasonably be expected to
give rise to the payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Code. There is no contract, agreement, plan
or arrangement to which the Company or any of its subsidiaries is a party or by
which it is bound to compensate any individual for excise taxes paid pursuant to
Section 4999 of the Code.
(viii) Neither the Company nor any of its subsidiaries has filed
any consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company or any of its
subsidiaries.
(ix) Neither Company nor any of its subsidiaries is party to or
has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement.
-17-
(x) None of Company's or its subsidiaries' assets are tax
exempt use property within the meaning of Section 168(h) of the Code.
(xi) Company has not distributed the stock of any corporation
in a transaction satisfying the requirements of Section 355 of the Code. No
Company stock has been distributed in a transaction satisfying the requirements
of Section 355 of the Code.
(c) To Company's knowledge, Parent satisfies the substantiality test
contained in Treasury Regulation Section 1.367(a)-3(c)(3).
2.17 Environmental Matters. Company (i) has obtained all applicable
---------------------
permits, licenses and other authorizations that are required under Environmental
Laws the absence of which would have a Material Adverse Effect on Company; (ii)
is in compliance in all material respects with all material terms and conditions
of such required permits, licenses and authorizations, and also is in compliance
in all material respects with all other material limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in such laws or contained in any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder; and (iii) as of the date hereof, has no knowledge of and
has not received notice of any event, condition, circumstance, activity,
practice, incident, action or plan that is reasonably likely to interfere with
or prevent continued compliance or that would give rise to any common law or
statutory liability, or otherwise form the basis of any Environmental Claim with
respect to Company or any person or entity whose liability for any Environmental
Claim Company has retained or assumed either contractually or by operation of
law, except to the extent such non-compliance, liability or Environmental Claim
could not reasonably be expected to have a Material Adverse Effect on Company.
No Hazardous Materials are present in, on or under any properties owned, leased
or used at any time (including both land and improvements thereon) by Company,
so as to give rise to any liability or corrective or remedial obligation under
any Environmental Laws. For the purposes of this Section 2.17, "Environmental
Claim" means any notice, claim, act, cause of action or investigation by any
person alleging potential liability (including potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (i) the presence, or release into the
environment, of any Hazardous Materials or (ii) any violation, or alleged
violation, of any Environmental Laws. "Environmental Laws" means all Federal,
state, local and foreign laws and regulations relating to pollution of the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata) or the protection of human health and worker safety,
including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials. "Hazardous Materials"
means chemicals, pollutants, contaminants, wastes, toxic substances, radioactive
and biological materials, asbestos-containing materials, hazardous substances,
petroleum and petroleum products or any fraction thereof, excluding, however,
Hazardous Materials contained in products typically used for office and
janitorial purposes properly and safely maintained in accordance with
Environmental Laws.
-18-
2.18 Brokers. Except for fees payable to FleetBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------
pursuant to an engagement letter dated March 6, 2000, a copy of which has been
provided to Parent (the "Engagement Letter"), Company has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby
2.19 Intellectual Property. For the purposes of this Agreement, the
---------------------
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States
and foreign patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof ("Patents"); (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and
all documentation relating to any of the foregoing; (iii) all copyrights,
copyright registrations and applications therefor and all other rights
corresponding thereto throughout the world; (iv) all semiconductor and
semiconductor circuit designs; (v) all rights to all mask works and
reticles, mask work registrations and applications therefor; (vi) all
industrial designs and any registrations and applications therefor
throughout the world; (vii) all trade names, logos, common law trademarks
and service marks; trademark and service ▇▇▇▇ registrations and
applications therefor and all goodwill associated therewith throughout the
world; (viii) all databases and data collections and all rights therein
throughout the world; (ix) all computer software including all source code,
object code, firmware, development tools, files, records and data, all
media on which any of the foregoing is recorded, all Web addresses, sites
and domain names; (x) any similar, corresponding or equivalent rights to
any of the foregoing; and (xi) all documentation related to any of the
foregoing
"Company Intellectual Property" shall mean any Intellectual Property that
is owned by or exclusively licensed to the Company or any of its
subsidiaries. Without in any way limiting the generality of the foregoing,
Company Intellectual Property includes all Intellectual Property owned or
exclusively licensed to the Company related to the Company's products,
including without limitation all rights in any design code, documentation,
and tooling for packaging of semiconductors in connection with all current
products and products in design and development.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and
applications for copyright registration; (iv) any mask work registrations
and applications to register mask works; and (v) any other Company
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded
by, any state, government or other public legal authority
-19-
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company or any
of its subsidiaries.
(a) Section 2.19(a) of the Company Schedule is a complete and
accurate list of all Company Registered Intellectual Property and specifies,
where applicable, the jurisdictions in which each such item of Company
Registered Intellectual Property has been issued or registered and lists any
proceedings or actions before any court, tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any of the Company Registered Intellectual Property.
(b) Section 2.19(b) of the Company Schedule is a complete and
accurate list (by name and version number) of all software products offerings of
the Company or any of its current subsidiaries ("Company Products") that have
been distributed or provided in the three (3)-year period preceding the date
hereof or which the Company or any of its subsidiaries intends to distribute or
provide in the future, including any products or service offerings under
development.
(c) No Company Intellectual Property or Company Product is subject to
any proceeding or outstanding decree, order, judgment, contract, license,
agreement, or stipulation restricting in any manner the use (in accordance with
Company's current practices), transfer, or licensing thereof by Company or any
of its subsidiaries, or which may adversely affect the validity, use (in
accordance with Company's current practices) or enforceability of such Company
Intellectual Property or Company Product.
(d) Each material item of Company Registered Intellectual Property is
valid and subsisting, all necessary registration, maintenance and renewal fees
currently due in connection with such Company Registered Intellectual Property
have been made and all necessary documents, recordations and certificates in
connection with such Company Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Company Registered Intellectual Property.
(e) Company owns and has good and exclusive title to, or exclusively
licenses, each material item of Company Intellectual Property free and clear of
any lien or encumbrance (excluding non-exclusive licenses and related
restrictions granted in the ordinary course). Without limiting the foregoing:
(i) Company is the exclusive owner of all trademarks and trade names used in
connection with the operation or conduct of the business of Company and its
subsidiaries, including the sale, distribution or provision of any Company
Products by Company or its subsidiaries; (ii) Company owns exclusively, and has
good title to, all copyrighted works that are Company Products or which Company
or any of its subsidiaries otherwise purports to own; and (iii) to the extent
that any Patents would be infringed by any Company Products, Company is the
exclusive owner of such Patents.
(f) To the extent that any material technology, software or
Intellectual Property has been developed or created independently or jointly by
a third party for Company or any of its subsidiaries or is incorporated into any
of the Company Products, Company has a written agreement with such third party
with respect thereto and Company thereby either (i) has obtained ownership of,
-20-
and is the exclusive owner of, or (ii) has obtained a perpetual, non-terminable
(except for breach) license (sufficient for the conduct of its business as
currently conducted and as proposed to be conducted) to all such third party's
Intellectual Property in such work, material or invention by operation of law or
by valid assignment.
(g) Neither Company nor any of its subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Company Intellectual Property, to any third
party, or permitted Company's rights in such material Company Intellectual
Property to lapse or enter the public domain.
(h) Section 2.19(h) of the Company Schedule lists all material
contracts, licenses and agreements to which Company or any of its subsidiaries
is a party: (i) with respect to Company Intellectual Property licensed or
transferred to any third party (other than end-user licenses in the ordinary
course); or (ii) pursuant to which a third party has licensed or transferred any
material Intellectual Property to Company.
(i) All contracts, licenses and agreements relating to either (i)
Company Intellectual Property (other than end-user licenses in the ordinary
course) or (ii) Intellectual Property of a third party licensed to Company or
any of its subsidiaries, are in full force and effect. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination or suspension of such
contracts, licenses and agreements. Each of Company and its subsidiaries is in
material compliance with, and has not materially breached any term of any such
contracts, licenses and agreements and, to the knowledge of Company, all other
parties to such contracts, licenses and agreements are in compliance with, and
have not materially breached any term of, such contracts, licenses and
agreements. Following the Closing Date, the Surviving Corporation will be
permitted to exercise all of Company's rights under such contracts, licenses and
agreements to the same extent Company and its subsidiaries would have been able
to had the transactions contemplated by this Agreement not occurred and without
the payment of any additional amounts or consideration other than ongoing fees,
royalties or payments which Company would otherwise be required to pay. Neither
this Agreement nor the transactions contemplated by this Agreement will (as a
result of agreements or commitments to which Company or a subsidiary is a party)
result in (i) either Parent's or the Merger Sub's granting to any third party
any right to or with respect to any material Intellectual Property right owned
by, or licensed to, either of them, (ii) either the Parent's or the Merger Sub's
being bound by, or subject to, any non-compete or other material restriction on
the operation or scope of their respective businesses, or (iii) either the
Parent's or the Merger Sub's being obligated to pay any royalties or other
material amounts to any third party in excess of those payable by Parent or
Merger Sub, respectively, prior to the Closing.
(j) The operation of the business of the Company and its subsidiaries
as such business currently is conducted, including (i) Company's and its
subsidiaries' design, development, manufacture, distribution, reproduction,
marketing or sale of the products or services of Company and its subsidiaries
(including Company Products) and (ii) the Company's use of any product, device
or process, has not, does not infringe or misappropriate the Intellectual
Property of any third party or constitute unfair competition or trade practices
under the laws of any jurisdiction.
-21-
(k) Neither Company nor any of its subsidiaries has received notice
from any third party that the operation of the business of Company or any of its
subsidiaries or any act, product or service of Company or any of its
subsidiaries, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
(l) To the knowledge of Company, no person has or is infringing or
misappropriating any Company Intellectual Property.
(m) Company and each of its subsidiaries has taken reasonable steps
to protect Company's and its subsidiaries' rights in Company's confidential
information and trade secrets that it wishes to protect or any trade secrets or
confidential information of third parties provided to Company or any of its
subsidiaries, and, without limiting the foregoing, each of Company and its
subsidiaries has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in the
form provided to Parent and all current and former employees and contractors of
Company and any of its subsidiaries have executed such an agreement, except
where the failure to do so is not reasonably expected to be material to Company.
(n) All of the Company Products (i) will record, store, process,
calculate and present calendar dates falling on and after (and if applicable,
spans of time including) January 1, 2000, and will calculate any information
dependent on or relating to such dates in the same manner, and with the same
functionality, data integrity and performance, as the products record, store,
process, calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates (collectively,
"Year 2000 Compliant") and (ii) will lose no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
All of the Company's or its subsidiaries' Information Technology (as defined
below) is Year 2000 Compliant in all material respects, and will not cause an
interruption in the ongoing operations of the Company's or any of its
subsidiaries' business on or after January 1, 2000. For purposes of the
foregoing, the term "Information Technology" shall mean and include all
software, hardware, firmware, telecommunications systems, network systems,
embedded systems and other systems, components and/or services (other than
general utility services including gas, electric, telephone and postal) that are
owned or used by the Company or any of its subsidiaries in the conduct of their
business, or purchased by the Company or any of its subsidiaries from third-
party suppliers.
2.20 Agreements, Contracts and Commitments. Neither Company nor any of
-------------------------------------
its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer or director or higher level employee or member of Company's
Board of Directors, other than those that are terminable by Company or any of
its subsidiaries on no more than thirty (30) days' notice without liability or
financial obligation to the Company;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased,
-22-
or the vesting of benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(c) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or license
of software products or services in the ordinary course of business;
(d) any agreement, contract or commitment containing any covenant
limiting in any respect the right of Company or any of its subsidiaries to
engage in any line of business or to compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by Company or any of its subsidiaries after
the date of this Agreement of a material amount of assets not in the ordinary
course of business or pursuant to which Company or any of its subsidiaries has
any material ownership interest in any corporation, partnership, joint venture
or other business enterprise other than Company's subsidiaries;
(f) any dealer, distributor, joint marketing or development agreement
currently in force under which Company or any of its subsidiaries have
continuing material obligations to jointly market any product, technology or
service and which may not be canceled without penalty upon notice of ninety (90)
days or less, or any material agreement pursuant to which Company or any of its
subsidiaries have continuing material obligations to jointly develop any
intellectual property that will not be owned, in whole or in part, by Company or
any of its subsidiaries and which may not be canceled without penalty upon
notice of ninety (90) days or less;
(g) any agreement, contract or commitment currently in force to
provide source code to any third party for any product or technology that is
material to Company and its subsidiaries taken as a whole;
(h) any agreement, contract or commitment currently in force to
license any third party to manufacture or reproduce any Company product, service
or technology or any agreement, contract or commitment currently in force to
sell or distribute any Company products, service or technology except agreements
with distributors or sales representative in the normal course of business
cancelable without penalty upon notice of ninety (90) days or less and
substantially in the form previously provided to Parent;
(i) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
(j) any material settlement agreement entered into within five (5)
years prior to the date of this Agreement; or
-23-
(k) any other agreement, contract or commitment under which Company
or a subsidiary is contractually obligated to make or entitled to receive
payments of $250,000 or more individually.
Neither Company nor any of its subsidiaries, nor to Company's knowledge any
other party to a Company Contract (as defined below), is in breach, violation or
default under, and neither Company nor any of its subsidiaries has received
written notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which Company or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Company Schedule (any such agreement,
contract or commitment, a "Company Contract") in such a manner as would permit
any other party to cancel or terminate any such Company Contract, or would
permit any other party to seek material damages or other remedies (for any or
all of such breaches, violations or defaults, in the aggregate).
2.21 Insurance. Company maintains insurance policies and fidelity bonds
---------
covering the assets, business, equipment, properties, operations, employees,
officers and directors of Company and its subsidiaries (collectively, the
"Insurance Policies") which are of the type and in amounts customarily carried
by persons conducting businesses similar to those of Company and its
subsidiaries. There is no material claim by Company or any of its subsidiaries
pending under any of the material Insurance Policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds.
2.22 Opinion of Financial Advisor. Company has been advised in writing by
----------------------------
its financial advisor, FleetBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, that in its opinion, as
of the date of this Agreement, the Exchange Ratio is fair to the stockholders of
Company from a financial point of view.
2.23 Board Approval. The Board of Directors of Company has, as of the
--------------
date of this Agreement, unanimously (i) approved and declared advisable this
Agreement and has approved the Merger and the other transactions contemplated
hereby, (ii) determined that the Merger is consistent with and in furtherance of
the long-term business strategy of Company and fair to, and in the best
interests of, Company and its stockholders and (iii) determined to recommended
that the stockholders of Company adopt and approve this Agreement and approve
the Merger.
2.24 Vote Required. The affirmative vote of the holders of a majority of
-------------
the outstanding shares of Company Common Stock entitled to vote with respect to
the Merger is the only vote of the holders of any class or series of Company's
capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
2.25 State Takeover Statutes. The Board of Directors of the Company has
-----------------------
approved the Merger, the Merger Agreement, the Company Stockholder Agreement,
and the transactions contemplated hereby and thereby, and such approval is
sufficient to render inapplicable to the Merger, the Merger Agreement, the
Company Stockholder Agreements and the transactions contemplated hereby and
thereby the provisions of Section 203 of the Delaware Law to the extent, if any,
such section is applicable to the Merger, the Merger Agreement, the Company
Stockholder Agreements and the transactions contemplated hereby and thereby. No
other state takeover statute or
-24-
similar statute or regulation applies to or purports to apply to the Merger, the
Merger Agreement, the Company Stockholder Agreements or the transactions
contemplated hereby and thereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
Company, subject to such exceptions as are specifically disclosed in writing in
the disclosure schedule supplied by Parent to Company dated as of the date
hereof (the "Parent Schedule") as follows. The Parent Schedule shall be arranged
in sections corresponding to the numbered and lettered paragraphs contained in
this Article III and the disclosure in any section of the Parent Schedule shall
qualify other paragraphs in this Article III only to the extent that it is
reasonably apparent from a reading of such disclosure that it also qualifies or
applies to such other paragraph.
3.1 Organization and Qualification; Subsidiaries. Each of Parent and its
--------------------------------------------
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Parent and its subsidiaries is in possession of all Approvals necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted, except where the failure to
have such Approvals would not, individually or in the aggregate, be material to
Parent. Each of Parent and its subsidiaries is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on Parent.
3.2 Certificate of Incorporation and Bylaws. Parent has previously made
---------------------------------------
available to Company complete and correct copies of its Memorandum and Articles
of Association as amended to date (together, the "Parent Charter Documents").
Such Parent Charter Documents and equivalent organizational documents of each of
its subsidiaries are in full force and effect. Parent is not in violation of any
of the provisions of the Parent Charter Documents, and no subsidiary of Parent
is in violation of any of its equivalent organizational documents.
3.3 Capitalization. The authorized capital stock of Parent consists of
--------------
(i) 500,000,000 shares of Parent Common Stock, (ii) 200,000,000 Parent Class B
Ordinary Shares, $0.01 par value per share ("Parent Series B Common Stock"), and
(iii) 500,000,000 Class C Preference Shares, $0.01 par value per share ("Parent
Preferred Stock"). At the close of business on March 20, 2000, (i) 16,913,866
shares of Parent Common Stock were issued and outstanding, (ii) 30,631,746
shares of Parent Series B Common Stock were issued and outstanding, (iii) no
shares of Parent Common Stock or Parent Series B Common Stock were held in
treasury by Parent or by subsidiaries of Parent, (iv) 620,000 shares of Parent
Common Stock were reserved for future issuance pursuant to Parent's 1999
Employee Share Purchase Plan, (v) 6,794,014 shares of Parent Common Stock were
reserved for issuance upon the exercise of outstanding options ("Parent
Options") to purchase Parent Common Stock and (vi) 5,429,728 shares of Parent
Common Stock were reserved for future issue
-25-
upon the exercise of outstanding warrants to purchase Parent Common Stock. As of
the date hereof, no shares of Parent Preferred Stock were issued or outstanding.
The authorized capital stock of Merger Sub consists of 1,000 shares of common
stock, par value $0.01 per share, all of which, as of the date hereof, are
issued and outstanding. All of the outstanding shares of Parent's and Merger
Sub's respective capital stock have been duly authorized and validly issued and
are fully paid and nonassessable. All shares of Parent Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall, and the shares of
Parent Common Stock to be issued pursuant to the Merger will be, duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock (other than directors' qualifying shares) of each of
Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares) are
owned by Parent or another subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations in Parent's voting rights,
charges or other encumbrances of any nature whatsoever. Except as set forth in
this Section 3.3, as of the date hereof, there are no options, warrants or other
rights (including preemptive rights) obligating Parent or any of its
subsidiaries to issue or sell any shares of capital stock or equity interests of
Parent or any of its subsidiaries. As of the date hereof, Myriad International
Holdings BV is the owner of shares representing approximately 95% of the votes
represented by the outstanding voting stock of Parent.
3.4 Authority Relative to this Agreement. Each of Parent and Merger Sub
------------------------------------
has all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Sub, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement, or to consummate the transactions so contemplated,
subject only to the approval of the Share Issuance by Parent's stockholders.
This Agreement has been duly and validly executed and delivered by Parent and
Merger Sub and, assuming the due authorization, execution and delivery by
Company, constitutes legal and binding obligations of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms.
3.5 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by Parent and Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub shall
not, (i) conflict with or violate the Certificate of Incorporation, Bylaws or
equivalent organizational documents of Parent or any of its subsidiaries, (ii)
subject to compliance with the requirements set forth in Section 3.5(b) below,
conflict with or violate any Law applicable to Parent or any of its subsidiaries
or by which it or their respective properties are bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or impair Parent's or any
such subsidiary's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Parent or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease,
-26-
license, permit, franchise or other instrument or obligation to which Parent or
any of its subsidiaries is a party or by which Parent or any of its subsidiaries
or its or any of their respective properties are bound or affected, except to
the extent such conflict, violation, breach, default, impairment or other effect
could not in the case of clauses (ii) or (iii), individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Parent.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub shall
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Entity except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws,
the pre-merger notification requirements of the HSR Act, the rules and
regulations of Nasdaq, and the filing and recordation of the Certificate of
Merger as required by Delaware Law and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not have a material adverse effect on the parties' ability
to consummate the Merger or perform their obligations under this Agreement.
3.6 SEC Filings; Financial Statements.
---------------------------------
(a) Parent has made available to Company a correct and complete copy
of each report, schedule, registration statement and definitive proxy statement
filed by Parent with the SEC after November 23, 1999 (the "Parent SEC Reports"),
which are all the forms, reports and documents required to be filed by Parent
with the SEC on or after November 23, 1999. The Parent SEC Reports (A) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and filed on a timely basis and (B) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) 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 light of
the circumstances under which they were made, not misleading. None of Parent's
subsidiaries is required to file any reports or other documents with the SEC.
(b) Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, for the absence of footnotes as permitted by Form
10-Q of the Exchange Act) and each fairly presents the consolidated financial
position of Parent and its subsidiaries at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal adjustments which were not or are not expected to be material in amount.
(c) Parent has previously furnished to Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
-27-
3.7 No Undisclosed Liabilities. Neither Parent nor any of its
--------------------------
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
which are, individually or in the aggregate, material to the business, results
of operations or financial condition of Parent and its subsidiaries taken as a
whole, except (i) liabilities provided for in Parent's balance sheet as of
September 30, 1999, (ii) liabilities incurred since September 30, 1999 in the
ordinary course of business and in amounts consistent with past practice, and
(iii) contractual and other liabilities incurred in the ordinary course of
business which are not required by GAAP to be reflected on a balance sheet.
3.8 Absence of Certain Changes or Events. Since September 30, 1999, there
------------------------------------
has not been: (i) any Material Adverse Effect on Parent, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of Parent's or any of its
subsidiaries' capital stock, or any purchase, redemption or other acquisition by
Parent of any of Parent's capital stock or any other securities of Parent or its
subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from employees following their
termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of Parent's
or any of its subsidiaries' capital stock, (iv) any material change by Parent in
its accounting methods, principles or practices, except as required by
concurrent changes in GAAP, or (v) any revaluation by Parent of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable or any sale of assets of
the Parent other than in the ordinary course of business. Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
3.9 Absence of Litigation. There are no claims, actions, suits or
---------------------
proceedings pending or, to the knowledge of Parent, threatened (or, to the
knowledge of Parent, any governmental or regulatory investigation pending or
threatened) against Parent or any of its subsidiaries or any properties or
rights of Parent or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, except for any claims, actions, suits or proceedings which seek damages
of less than $250,000, do not seek injunctive relief, and do not challenge or
seek to prevent or delay the transactions contemplated by this Agreement.
3.10 Tax Matters.
-----------
(a) Parent will have been engaged in an active trade or business
outside of the United States, within the meaning of Treasury Regulation Section
1.367(a)-2T(b)(2) and (3), for the entire 36-month period immediately before the
Effective Time. Parent does not have any intention, and will not have an
intention at the Effective Time, to substantially dispose of or discontinue such
trade or business. Parent satisfies the substantiality test contained in
Treasury Regulation Section 1.367(a)-3(c)(3).
(b) Parent is not a passive investment company within the meaning of
Section 1296(a) of the Code.
(c) Parent is not a controlled foreign corporation within the meaning
of Section 957 of the Code.
-28-
3.11 Registration Statement; Joint Proxy Statement/Prospectus. None of
--------------------------------------------------------
the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in (i) the F-4 will, at the time the F-4 becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading; and (ii) the Joint Proxy
Statement/Prospectus will, at the dates mailed to the stockholders of Company
and of Parent, at the time of the Company Stockholders' Meeting, the time of the
Parent Stockholders' Meeting and as of 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 are made, not misleading. The F-4 will comply
as to form in all material respects with the provisions of the Securities Act
and the rules and regulations promulgated by the SEC thereunder. Notwithstanding
the foregoing, Parent makes no representation or warranty with respect to any
information supplied by the Company which is contained in any of the foregoing
documents.
3.12 Brokers. Except for fees payable to ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ &
-------
▇▇▇▇▇ Incorporated, Parent has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.13 Opinion of Financial Advisor. Parent's Board of Directors has
----------------------------
received an opinion from ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated,
dated as of the date hereof, to the effect that as of the date hereof, the
Exchange Ratio is fair to Parent from a financial point of view.
3.14 Board Approval. The Board of Directors of Parent has, as of the date
--------------
of this Agreement, unanimously (i) has determined that the Merger is consistent
with and in furtherance of the long-term business strategy of Parent and is fair
to, and in the best interests of, Parent and its stockholders, (ii) has approved
this Agreement, the Merger and the other transactions contemplated by this
Agreement and (iii) has determined to recommend that the stockholders of Parent
approve the Share Issuance.
3.15 Vote Required. The affirmative vote of a majority of the shares of
-------------
Parent Common Stock and Parent Class B Common Stock, voting together as a single
class, that cast votes regarding the Share Issuance in person or by proxy at the
Parent Stockholders' Meeting is the only vote of the holders of any class or
series of Parent's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company. During the period from the date of
------------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business, in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted and in compliance with all
applicable laws
-29-
and regulations, pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, pay or perform other material obligations when due,
and use its commercially reasonable efforts consistent with past practices and
policies to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and employees and (iii) preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
and others with which it has business dealings.
In addition, except as expressly permitted by the terms of this Agreement,
without the prior written consent of Parent, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company shall not do any
of the following and shall not permit its subsidiaries to do any of the
following:
(a) Waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or policies existing, on the
date hereof and as previously disclosed in writing or made available to Parent,
or adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Company Intellectual Property, or enter into
grants to transfer or license to any person future patent rights other than in
the ordinary course of business consistent with past practices, provided that in
no event shall Company license on an exclusive basis or sell any Company
Intellectual Property;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing with respect to, any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into other agreements or
commitments of any character obligating it to issue any such shares or
convertible securities, other than (x) the issuance delivery and/or sale of (i)
shares of Company Common Stock pursuant to the exercise of stock options or
warrants outstanding as of the date of this Agreement or granted pursuant to
clause (y) hereof, and (ii) shares of Company Common Stock issuable to
participants in the ESPP consistent with the terms thereof and (y) the granting
of stock options to new hires in the ordinary
-30-
course of business and consistent with past practice, after consulting with
Parent, in an amount not to exceed options to purchase 200,000 shares in the
aggregate (none of which options (other than those granted to new hires employed
by the Company on the data hereof) shall provide for acceleration based upon the
transactions contemplated hereby);
(g) Cause, permit or propose any amendments to the Company Charter
Documents (or similar governing instruments of any of its subsidiaries); Acquire
or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets (other than non-material acquisitions in the ordinary course of business)
or enter into any joint ventures, strategic partnerships or alliances, except as
disclosed in Section 4.1 of the Company Schedule;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except sales of inventory and the grant of end-user
licenses in the ordinary course of business consistent with past practice,
except for the sale, lease or disposition (other than through licensing) of
property or assets which are not material, individually or in the aggregate, to
the business of Company and its subsidiaries;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Company, enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of any of the
foregoing other than in connection with the financing of ordinary course trade
payables consistent with past practice;
(k) Adopt or amend any employee benefit plan, policy or arrangement,
any employee stock purchase or employee stock option plan, or enter into any
employment contract or collective bargaining agreement (other than offer letters
and letter agreements entered into in the ordinary course of business consistent
with past practice with employees who are terminable "at will"), pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates (except for increases in the ordinary course of business
for non-officer employees) or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants; provided
that the Company shall terminate the ESPP in accordance with its terms;
(l) (i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) other than the payment, discharge, settlement or satisfaction, in the
ordinary course of business consistent with past practice or in accordance with
their terms, or liabilities recognized or disclosed in the most recent
consolidated financial statements (or the notes thereto) of Company included in
the Company SEC Reports or incurred since the date of such financial statements,
or (ii) waive the benefits of, agree to modify in any manner, terminate, release
any person from or fail to enforce any confidentiality or similar agreement to
which
-31-
Company or any of its subsidiaries is a party or of which Company or any of its
subsidiaries is a beneficiary;
(m) Make any individual or series of related payments outside of the
ordinary course of business (including payments to financial, legal, accounting
or other professional service advisors) in excess of $250,000, except as
disclosed in Section 4.1 of the Company Schedule;
(n) Except in the ordinary course of business consistent with past
practice, modify, amend or terminate any material contract or agreement to which
Company or any subsidiary thereof is a party or waive, delay the exercise of,
release or assign any material rights or claims thereunder;
(o) Enter into or materially modify any contracts, agreements, or
obligations relating to the distribution, sale, license or marketing by third
parties of Company's products or products licensed by Company;
(p) Revalue any of its assets or, except as required by GAAP, make
any change in accounting methods, principles or practices;
(q) Incur or enter into any agreement, contract or commitment outside
of the ordinary course of business requiring payments to or by Company or a
subsidiary in excess of $250,000 individually;
(r) Engage in any action that could cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code whether or not
otherwise permitted by the provisions of this Article IV;
(s) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement;
(t) Make any tax election that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the tax liability
or tax attributes of Company or any of its subsidiaries or settle or compromise
any material income tax liability; or
(u) Agree in writing or otherwise to take any of the actions
described in Section 4.1 (a) through (t) above.
4.2 Conduct of Business by Parent. During the period from the date of
-----------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Parent and each of its
subsidiaries shall, except to the extent that Company shall otherwise consent in
writing, use its commercially reasonable efforts consistent with past practices
and policies to (i) preserve intact its present business organization and (ii)
keep available the services of its present officers and employees.
-32-
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Parent shall not do any of the following and shall not permit
its subsidiaries to do any of the following:
(a) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock, other than dividends or distributions by
any of Parent's subsidiaries to Parent or any of Parent's subsidiaries;
(b) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Parent or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(c) Cause, permit or propose any amendments to the Parent Charter
Documents (or similar governing instruments of any of its subsidiaries);
(d) Revalue any of its assets or, except as required by GAAP, make
any change in accounting methods, principles or practices;
(e) Engage in any action that could cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code, whether or not
otherwise permitted by the provisions of this Article IV;
(f) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement; or
(g) Agree in writing or otherwise to take any of the actions
described in Section 4.2 (a) through (f) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Joint Proxy Statement/Prospectus; Registration Statement.
--------------------------------------------------------
(a) As promptly as practicable after the execution of this Agreement,
Parent and Company shall jointly prepare and Parent shall file with the SEC the
F-4, which shall include a document or documents that will constitute (i) the
prospectus forming part of the registration statement on the F-4 and (ii) the
Joint Proxy Statement/Prospectus. Each of the parties hereto shall use all
reasonable efforts to cause the F-4 to become effective as promptly as
practicable after the date hereof, and, prior to the effective date of the F-4,
the parties hereto shall take all action required under any applicable Laws in
connection with the issuance of shares of Parent Common Stock pursuant to the
Merger. Parent or Company, as the case may be, shall furnish all information
concerning Parent or Company as the other party may reasonably request in
connection with such actions and the preparation of the F-4 and the Joint Proxy
Statement/Prospectus. As promptly as
-33-
practicable after the effective date of the F-4, the Joint Proxy
Statement/Prospectus shall be mailed to the stockholders of Company and of
Parent. Each of the parties hereto shall cause the Joint Proxy
Statement/Prospectus to comply as to form and substance with respect to such
party in all material respects with the applicable requirements of (i) the
Exchange Act, (ii) the Securities Act, (iii) the rules and regulations of the
Nasdaq.
(b) The Joint Proxy Statement/Prospectus shall (i) solicit the
approval of this Agreement and the Merger and include the recommendation of the
Board of Directors of Company to Company's stockholders that they vote in favor
of approval of this Agreement and the Merger, subject to the right of the Board
of Directors of the Company to withdraw its recommendation and recommend a
Superior Proposal determined to be such in compliance with Section 5.4 of this
Agreement, and (ii) include the opinion of FleetBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
referred to in Section 2.23; provided, however, that the Board of Directors of
-------- -------
Company shall submit this Agreement to Company's stockholders whether or not at
any time subsequent to the date hereof such board determines that it can no
longer make such recommendation. The Joint Proxy Statement/Prospectus shall (A)
solicit the approval of the Share Issuance and include the recommendation of the
Board of Directors of Parent to Parent's stockholders that they vote in favor of
approval of the Share Issuance, and (B) include the opinion of ▇▇▇▇▇▇▇ Lynch,
Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated referred to in Section 3.12. If Company has
not breached Section 5.4, then nothing contained in this Agreement shall prevent
the Board of Directors of Company from complying with Rule 14d-9 and Rule 14e-2
under the Exchange Act.
(c) Each of Parent and Company shall promptly amend or supplement the
Joint Proxy Statement/Prospectus to the extent required by law to do so. No
amendment or supplement to the Joint Proxy Statement/Prospectus or the F-4 shall
be made without the approval of Parent and Company, which approval shall not be
unreasonably withheld or delayed. Each of the parties hereto shall advise the
other parties hereto, promptly after it receives notice thereof, of the time
when the F-4 has become effective or any supplement or amendment has been filed,
of the issuance of any stop order, of the suspension of the qualification of the
Parent Common Stock issuable in connection with the Merger for offering or sale
in any jurisdiction, or of any request by the SEC for amendment of the Joint
Proxy Statement/Prospectus or the F-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
5.2 Stockholder Meetings. Company shall call and hold the Company
--------------------
Stockholders' Meeting and Parent shall call and hold the Parent Stockholders'
Meeting as promptly as practicable after the date hereof for the purpose of
voting upon the approval of this Agreement and the Merger or the Share Issuance,
as the case may be, pursuant to the Joint Proxy Statement/Prospectus, and
Company and Parent shall use all reasonable efforts to hold the Parent
Stockholders' Meeting and the Company Stockholders' Meeting on the same day and
as soon as practicable after the date on which the F-4 becomes effective.
Nothing herein shall prevent Company or Parent from adjourning or postponing the
Company Stockholders' Meeting or the Parent Stockholders' Meeting, as the case
may be, if there are insufficient shares of Company Common Stock or Parent
Common Stock, as the case may be, necessary to conduct business at their
respective meetings of the stockholders. Unless Company's Board of Directors has
withdrawn its recommendation of this Agreement and the Merger in compliance with
Section 5.4, Company shall use all reasonable efforts to solicit from its
-34-
stockholders proxies in favor of the approval of this Agreement and the Merger
pursuant to the Joint Proxy Statement/Prospectus and shall take all other action
necessary or advisable to secure the vote or consent of stockholders required by
Delaware Law or applicable stock exchange requirements to obtain such approval.
Parent shall use all reasonable efforts to solicit from its stockholders proxies
in favor of the Share Issuance pursuant to the Joint Proxy Statement/Prospectus
and shall take all other action necessary or advisable to secure the vote or
consent of stockholders required by the International Business Companies Act of
the British Virgin Islands or applicable stock exchange requirements to obtain
such approval. Each of the parties hereto shall take all other action reasonably
necessary or advisable to promptly and expeditiously secure any vote or consent
of stockholders required by applicable Law and such party's certificate of
incorporation and bylaws to effect the Merger. Company shall call and hold the
Company Stockholders' Meeting for the purpose of voting upon the approval of
this Agreement and the Merger whether or not Company's Board of Directors at any
time subsequent to the date hereof determines that this Agreement is no longer
advisable or recommends that Company's stockholders reject it.
5.3 Confidentiality; Access to Information.
--------------------------------------
(a) The parties acknowledge that Company and Parent have previously
executed a Confidentiality Agreement, dated as of March 6, 2000 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
(b) Each of the Company and Parent will afford the other and the
other's accountants, counsel and other representatives reasonable access to its
properties, books, records and personnel during the period prior to the
Effective Time to obtain all information concerning its business as such other
party may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 5.3 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 No Solicitation.
---------------
(a) From and after the date of this Agreement until the Effective
Time or termination of this Agreement pursuant to Article VII, Company and its
subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly, (i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal (as defined below), (ii) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes or may reasonably be
expected to lead to, any Acquisition Proposal, (iii) engage in discussions with
any person with respect to any Acquisition Proposal, (iv) approve, endorse or
recommend any Acquisition Proposal or (v) enter into any letter of intent or
similar document or any contract, agreement or commitment contemplating or
otherwise relating to any Acquisition Transaction (as defined below); provided,
--------
however, that nothing contained in this Section 5.4 shall prohibit the Board of
-------
Directors of Company in response to an unsolicited, bona fide written
Acquisition Proposal that Company's Board of Directors reasonably
-35-
concludes constitutes a Superior Offer (as defined below), engaging in
discussions with and furnishing information to the party making such Acquisition
Proposal to the extent (A) the Board of Directors of the Company determines in
good faith, after considering the advice of its outside legal counsel that its
fiduciary obligations under applicable law require it to do so, (B) (x) at least
two business days prior to furnishing any such nonpublic information to, or
entering into discussions or negotiations with, such party, Company gives Parent
written notice of Company's intention to furnish nonpublic information to, or
enter into discussions or negotiations with, such party and (y) Company receives
from such party an executed confidentiality agreement containing customary
limitations on the use and disclosure of all nonpublic written and oral
information furnished to such party by or on behalf of Company, (C)
contemporaneously with furnishing any such nonpublic information to such party,
Company furnishes such nonpublic information to Parent (to the extent such
nonpublic information has not been previously furnished by the Company to
Parent) and (D) Company has otherwise acted in full compliance with Section 5.4.
Company and its subsidiaries will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in this Section 5.4
by any officer, director or employee of Company or any of its subsidiaries or
any investment banker, attorney or other advisor or representative of Company or
any of its subsidiaries shall be deemed to be a breach of this Section 5.4 by
Company.
For purposes of this Agreement, (A) "Acquisition Proposal" shall mean any
offer or proposal (other than an offer or proposal by Parent) relating to any
Acquisition Transaction. For the purposes of this Agreement; (B) "Acquisition
Transaction" shall mean any transaction or series of related transactions other
than the transactions contemplated by this Agreement involving: (A) any
acquisition or purchase from the Company by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 5% interest in the total outstanding voting
securities of the Company or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 5% or more of the total outstanding voting
securities of the Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such
transaction hold less than 95% of the equity interests in the surviving or
resulting entity of such transaction; (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition of more than 5% of the
assets of the Company; or (C) any liquidation, dissolution, recapitalization or
other significant corporate reorganization of the Company; and (C) "Superior
Offer" shall mean an Acquisition Proposal proposing the acquisition of all of
the outstanding voting securities of the Company (x) that if any cash
consideration is involved, is not subject to any financing contingency, (y) with
respect to which Company's Board of Directors shall have determined (after
considering the advice of Company's independent financial advisors) that the
acquiring party is capable of consummating the proposed Acquisition Transaction
on the terms proposed, and (z) that Company's Board of Directors shall have
determined provides greater value to the stockholders of Company than the Merger
(after considering the advice of Company's independent financial advisors that
such Acquisition Transaction is superior to the Merger from a financial point of
view).
-36-
(b) In addition to the obligations of Company set forth in paragraph
(a) of this Section 5.4, Company as promptly as practicable, and in any event
within 24 hours, shall advise Parent orally and in writing of any request for
information which Company reasonably believes would lead to an Acquisition
Proposal or of any Acquisition Proposal, or any inquiry with respect to or which
Company reasonably should believe would lead to any Acquisition Proposal, the
material terms and conditions of such request, Acquisition Proposal or inquiry,
and the identity of the person or group making any such request, Acquisition
Proposal or inquiry. Company will keep Parent informed in all material respects
of the status and details (including material amendments or proposed amendments)
of any such request, Acquisition Proposal or inquiry. In addition to the
foregoing, Company shall (i) provide Parent with at least 48 hours prior notice
(or such lesser prior notice as provided to the members of Company's Board of
Directors but in no event less than eight hours) of any meeting of Company's
Board of Directors at which Company's Board of Directors is reasonably expected
to consider a Superior Offer and (ii) provide Parent with at least two business
days prior notice (or such lesser prior notice as provided to the members of
Company's Board of Directors, but in no event less than eight hours) of a
meeting of Company's Board of Directors at which Company's Board of Directors is
reasonably expected to recommend a Superior Offer to its stockholders and
together with such notice a copy of the definitive documentation relating to
such Superior Offer.
5.5 Public Disclosure. Parent and Company will consult with each other
-----------------
and agree before issuing any press release or otherwise making any public
statement with respect to the Merger, this Agreement or an Acquisition Proposal
and will not issue any such press release or make any such public statement
prior to such agreement, except as may be required by law or any listing
agreement with a national securities exchange, in which case reasonable efforts
to consult with the other party will be made prior to any such release or public
statement. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
5.6 Reasonable Efforts; Notification.
--------------------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in Article VI to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (v) the execution or
delivery of any additional
-37-
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. In connection with and without
limiting the foregoing, Company and its Board of Directors shall, if any state
takeover statute or similar statute or regulation is or becomes applicable to
the Merger, this Agreement or any of the transactions contemplated by this
Agreement, use all reasonable efforts to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this Agreement
and the transactions contemplated hereby. Notwithstanding anything herein to the
contrary, nothing in this Agreement shall be deemed to require Parent or Company
or any subsidiary or affiliate thereof to agree to any divestiture by itself or
any of its affiliates of shares of capital stock or of any business, assets or
property, or the imposition of any material limitation on the ability of any of
them to conduct their business or to own or exercise control of such assets,
properties and stock.
(b) Company shall give prompt notice to Parent of any representation
or warranty made by it contained in this Agreement becoming untrue or
inaccurate, or any failure of Company to comply with or satisfy in any respect
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement, in each case, such that the conditions set forth in
Section 6.3(a) or 6.3(b) could reasonably be expected to not be satisfied;
provided, however, that no such notification shall affect the representations,
-------- -------
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
(c) Parent shall give prompt notice to Company of any representation
or warranty made by it or Merger Sub contained in this Agreement becoming untrue
or inaccurate, or any failure of Parent or Merger Sub to comply with or satisfy
in any respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.2(a) or 6.2(b) could reasonably be expected to not be
satisfied; provided, however, that no such notification shall affect the
------- -------
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.7 Third Party Consents. As soon as practicable following the date
--------------------
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
5.8 Stock Options and Warrants; 401(k) Plan. (a) At the Effective Time,
---------------------------------------
each outstanding option to purchase shares of Company Common Stock (each, a
"Company Stock Option"), whether or not vested, and each outstanding warrant to
purchase shares of Company Common Stock (each, a "Warrant") shall by virtue of
the Merger be assumed by Parent. Each Company Stock Option and Warrant so
assumed by Parent under this Agreement will continue to have, and be subject to,
the same terms and conditions of such options and warrants immediately prior to
the Effective Time (including, without limitation, any repurchase rights or
vesting provisions), except that (i) each Company Stock Option and Warrant will
be exercisable (or will become exercisable in accordance with its terms) for
that number of whole shares of Parent Common
-38-
Stock equal to the product (rounded down to the nearest whole number of shares
of Parent Common Stock) of the number of shares of Company Common Stock that
were issuable upon exercise of such Company Stock Option or Warrant immediately
prior to the Effective Time multiplied by the Exchange Ratio and (ii) the per
share exercise price for the shares of Parent Common Stock issuable upon
exercise of such assumed Company Stock Option or Warrant will be equal to the
quotient (rounded up to the nearest whole cent) determined by dividing the
exercise price per share of Company Common Stock at which such Company Stock
Option or Warrant was exercisable immediately prior to the Effective Time by the
Exchange Ratio. Parent shall reserve a sufficient number of shares of Parent
Common Stock for issuance upon exercise of the assumed Company Stock Options and
Warrants.
(b) Company agrees to terminate its 401(k) plan immediately prior to
Closing, unless the Parent, in its sole and absolute discretion, agrees to
sponsor and maintain such plan by providing Company with written notice of such
election at least three (3) days before the Effective Time. Unless the Parent
provides such notice to the Company, the Parent shall receive from Company
evidence that Company's 401(k) plan has been terminated pursuant to resolutions
of Company's Board of Directors, effective as of the day immediately preceding
the Closing Date.
5.9 Form S-8. Parent agrees to file, if available for use by Parent, a
--------
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Stock Options as soon as is reasonably
practicable after the Effective Time and agrees to use commercially reasonable
efforts to keep such registration statement effective for so long as any such
options remain outstanding
5.10 Indemnification.
---------------
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
Company pursuant to any indemnification agreements between Company and its
directors and officers in effect immediately prior to the Effective Time and any
indemnification provisions under the Company Charter Documents as in effect on
the date hereof. The Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the indemnified parties
thereunder (the "Indemnified Parties") as those contained in the Company Charter
Documents as in effect on the date hereof, which provisions will not be amended,
repealed or otherwise modified for a period of six years from the Effective Time
in any manner that would adversely affect the rights thereunder of the
Indemnified Parties, unless such modification is required by law.
(b) For a period of six years after the Effective Time, Parent will
cause the Surviving Corporation to use its commercially reasonable efforts to
maintain in effect, if available, directors' and officers' liability insurance
covering those persons who are currently covered by the Company's directors' and
officers' liability insurance policy on terms comparable to those applicable to
the current directors and officers of the Company; provided, however, that in
-------- -------
no event will Parent or the Surviving Corporation be required to expend an
annual premium for such coverage in excess of 150% of the annual premium
currently paid by the Company.
-39-
5.11 Nasdaq Listing. Parent agrees to use reasonable efforts to cause and
--------------
maintain the authorization for listing on Nasdaq the shares of Parent Common
Stock issuable, and those required to be reserved for issuance, in connection
with the Merger, upon official notice of issuance.
5.12 Affiliates. Set forth in Section 5.12 of the Company Schedule is a
----------
list of those persons who may be deemed to be, in Company's reasonable judgment,
affiliates of Company within the meaning of Rule 145 promulgated under the
Securities Act (each, a "Company Affiliate"). Company will provide Parent with
such information and documents as Parent reasonably requests for purposes of
reviewing such list. Company will use its commercially reasonable efforts to
deliver or cause to be delivered to Parent, as promptly as practicable on or
following the date hereof, from each Company Affiliate an executed affiliate
agreement in substantially the form attached hereto as Exhibit C (the "Affiliate
---------
Agreement"), each of which will be in full force and effect as of the Effective
Time. Parent will be entitled to place appropriate legends on the certificates
evidencing any Parent Common Stock to be received by a Company Affiliate
pursuant to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the Parent Common Stock, consistent with
the terms of the Affiliate Agreement.
5.13 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
--------------------------------------
practicable, Company and Parent each shall file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report Forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. Company and Parent each shall promptly (a) supply the other with any
information which may be required in order to effectuate such filings and (b)
supply any additional information which reasonably may be required by the FTC,
the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate; provided,
--------
however, that Parent shall not be required to agree to any divestiture by Parent
-------
or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or of the Company, its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
5.14 Employee Benefits. Each employee of Company or its subsidiaries who
-----------------
continues to be employed by Company or its subsidiaries immediately following
the Effective Time and who becomes a participant in or subject to employee
benefit plans or policies of Parent or its affiliates following the Effective
Time shall, to the extent permitted by Law, the terms of such plans or policies
and applicable tax qualification requirements, and subject to any applicable
break in service or similar rules, receive credit for purposes of eligibility to
participate and vesting under such plans and policies for the length of time
such employees were employed by Company or its subsidiaries.
5.15 Tax Filings. From and after the Effective Time, Parent will cause
-----------
Company to comply with all applicable reporting requirements set forth in
Treasury Regulations under Section 367 of the Code, including, without
limitation, Regulation Section 1.367(a)-3(c)(6).
-40-
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Stockholder Approvals. This Agreement shall have been approved
---------------------
and adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law, by the stockholders of Company. The Share Issuance shall
have been approved by the requisite vote under applicable Nasdaq rules by the
stockholders of Parent.
(b) Registration Statement Effective. The SEC shall have declared the
--------------------------------
F-4 effective. No stop order suspending the effectiveness of the F-4 or any part
thereof shall have been issued and no proceeding for that purpose, and no
similar proceeding in respect of the Joint Proxy Statement/Prospectus, shall
have been initiated or threatened in writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted,
-----------------
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby shall have expired or terminated early and all foreign
antitrust approvals required to be obtained prior to the Merger in connection
with the transactions contemplated hereby shall have been obtained.
(d) Tax Opinions. Parent and Company shall each have received written
------------
opinions from their respective tax counsel (▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Professional Corporation, and ▇▇▇▇ and ▇▇▇▇ LLP, respectively), in form and
substance reasonably satisfactory to them, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code and
such opinions shall not have been withdrawn; provided, however, that if the
-------- -------
counsel to either Parent or Company does not render such opinion, this condition
shall nonetheless be deemed to be satisfied with respect to such party if
counsel to the other party renders such opinion to such party. Each of Company
and Parent agrees to make the representations substantially in the form set
forth in the forms attached hereto as Exhibit D and Exhibit E, respectively, for
--------- ---------
the purpose of such counsel rendering such opinions.
(e) Nasdaq Listing. The shares of Parent Common Stock issuable to the
--------------
stockholders of Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on Nasdaq upon official notice of issuance.
6.2 Additional Conditions to Obligations of Company. The obligation of
-----------------------------------------------
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Company:
-41-
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Merger Sub contained in this Agreement (i) shall have
been true and correct in all material respects as of the date of this Agreement
and (ii) shall be true and correct on and as of the Closing Date with the same
force and effect as if made on the Closing Date except for those representations
and warranties which address matters only as of a particular date (which
representations shall have been true and correct in all material respects as of
such particular date) and except, in all such cases, where the failure to be so
true and correct (without regard to any materiality standards contained
therein), individually or in the aggregate, have not had, and are not reasonably
likely to have, a Material Adverse Effect on Parent (it being understood that
for purposes of determining the accuracy of such representations and warranties,
any update of or modification to the Parent Schedule made or purported to have
been made after the date of this Agreement shall be disregarded). Company shall
have received a certificate with respect to the foregoing signed on behalf of
Parent by the Chief Executive Officer and Chief Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
------------------------
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and Company shall have received a certificate to such
effect signed on behalf of Parent by the Chief Executive Officer and Chief
Financial Officer of Parent.
(c) Legal Opinion. Company shall have received a legal opinion from
-------------
British Virgin Islands counsel to Parent, in form and substance reasonably
satisfactory to Company, as to the due incorporation and good standing of Parent
and the due authorization of the transactions contemplated by this Agreement by
all necessary corporate action on the part of Parent.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
-----------------------------------------------------------------
The obligations of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. Each representation and warranty
------------------------------
of Company contained in this Agreement (i) shall have been true and correct in
all material respects as of the date of this Agreement and (ii) shall be true
and correct on and as of the Closing Date with the same force and effect as if
made on and as of the Closing Date except for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and correct in all material respects as of
such particular date) and except, in all such cases, where the failure to be so
true and correct (without regard to any materiality standards contained
therein), individually or in the aggregate, have not had, and are not reasonably
likely to have, a Material Adverse Effect on Company (it being understood that,
for purposes of determining the accuracy of such representations and warranties,
any update of or modification to the Company Schedule made or purported to have
been made after the date of this Agreement shall be disregarded). Parent shall
have received a certificate with respect to the foregoing signed on behalf of
Company by the Chief Executive Officer and the Chief Financial Officer of the
Company.
-42-
(b) Agreements and Covenants. Company shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer and the Chief Financial Officer
of Company.
(c) Employment Agreements. The Employment Agreements shall remain in
---------------------
full force and effect.
(d) Consents. Company shall have obtained all consents, waivers and
--------
approvals required in connection with the consummation of the transactions
contemplated hereby in connection with the agreements, contracts, licenses or
leases set forth on Schedule 6.3(d).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after the requisite approval of the
stockholders of Company or Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by December 31, 2000 (the "Outside Date") for any reason; provided,
--------
however, that the right to terminate this Agreement under this Section 7.1(b)
-------
shall not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement;
(c) by either Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and nonappealable;
(d) by either Company or Parent if (i) the required approval of the
stockholders of Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
Company stockholders duly convened therefor or at any adjournment therefor or
(ii) the required approval by the stockholders of Parent of the Share Issuance
required under applicable Nasdaq rules shall not have been obtained by reason of
the failure to obtain the required vote at a meeting of Parent stockholders duly
convened therefor or at any adjournment thereof; provided, however, that the
-------- -------
right to terminate this Agreement under this Section 7.1(d) shall not be
available to any party whose action or failure to act has been a principal cause
or resulted in the failure to obtain such stockholder approval and such action
or failure to act constitutes a breach of this Agreement;
(e) by Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of
-43-
Parent shall have become untrue, in either case such that the conditions set
forth in Section 6.2(a) or Section 6.2(b) would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall have
become untrue, provided, that if such inaccuracy in Parent's representations and
--------
warranties or breach by Parent is curable by Parent, then Company may not
terminate this Agreement under this Section 7.1(e) for thirty (30) days after
delivery of written notice from Company to Parent of such breach, provided
Parent continues to exercise best efforts to cure such breach (it being
understood that Company may not terminate this Agreement pursuant to this
paragraph (e) if such breach by Parent is cured during such thirty (30)-day
period);
(f) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of Company set forth in this Agreement, or if
any representation or warranty of Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
--------
inaccuracy in Company's representations and warranties or breach by Company is
curable by Company, then Parent may not terminate this Agreement under this
Section 7.1(f) for thirty (30) days after delivery of written notice from Parent
to Company of such breach, provided Company continues to exercise best efforts
to cure such breach (it being understood that Parent may not terminate this
Agreement pursuant to this paragraph (f) such breach by Company is cured during
such thirty (30)-day period); or
(g) by Parent, if (i) the Board of Directors of Company withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to Parent or its stockholders, (ii) the Board of Directors of
Company shall have recommended to the stockholders of Company an Acquisition
Proposal, (iii) the Company fails to comply with Section 5.4, (iv) an
Acquisition Proposal shall have been announced or otherwise become publicly
known and the Board of Directors of Company shall have (A) failed to recommend
against acceptance of such by Company's stockholders (including by taking no
position, or indicating its inability to take a position, with respect to the
acceptance by its stockholders of an Acquisition Proposal involving a tender
offer or exchange offer) or (B) failed to reconfirm its approval and
recommendation of this Agreement and the transactions contemplated hereby within
five business days after a written request by Parent to do so, (v) for any
reason Company fails to call and hold the Company Stockholders' Meeting by the
date which is one business day prior to the Outside Date or (vi) the Board of
Directors of Company resolves to take any of the actions described above.
7.2 Notice of Termination; Effect of Termination. Any termination of this
--------------------------------------------
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto
(or such later time as may be required by Section 7.1). In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, and the parties hereto shall have no further
liability hereunder, except (i) as set forth in this Section 7.2, Section
5.3(a), Section 7.3 and Article VIII, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for fraud in connection with, or any willful breach of, this
Agreement.
7.3 Fees and Expenses.
-----------------
-44-
(a) General. Except as set forth in this Section 7.3, all fees and
-------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and Company
-------- -------
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred (i) in relation to the printing and filing of the
Joint Proxy Statement/Prospectus (including any preliminary materials related
thereto) and the F-4 (including financial statements and exhibits) and any
amendments or supplements thereto or (ii) for the premerger notification and
report forms under the HSR Act.
(b) Termination Fee.
---------------
(i) In the event that (A) Parent shall terminate this Agreement
pursuant to Section 7.1(g), or (B) this Agreement shall be terminated (x)
pursuant to Section 7.1(b) or (y) pursuant to Section 7.1(d)(i) and, in the case
of clause (x), (1) at or prior to such termination, there shall exist or have
been proposed an Acquisition Proposal, (2) Parent shall have terminated, or been
entitled to terminate, this Agreement pursuant to Section 7.1(b), (3) Company
shall not have delivered an unconditional notice of breach pursuant to Section
7.1(e) and been entitled to terminate this Agreement pursuant to Section 7.1(e)
but for the failure of the 30-day cure period set forth therein to expire prior
to the Outside Date and (4) within 12 months after such termination, Company
shall enter into a definitive agreement with respect to any Company Acquisition
or any Company Acquisition shall be consummated, or, in the case of clause (y),
Company shall not have delivered an unconditional notice of breach pursuant to
Section 7.1(e) and been entitled to terminate this Agreement pursuant to Section
7.1(e) but for the failure of the 30-day cure period set forth therein to expire
prior to the stockholder vote on this Agreement by the stockholders of Company,
then, in the case of (A) and (B)(y), promptly after such termination, or in the
case of (B)(x), immediately prior to the execution of a definitive agreement
with respect to, or the consummation of, as applicable, such Company
Acquisition, Company shall pay to Parent an amount in cash equal to $74 million
(the "Termination Fee").
(ii) In the event that Parent shall terminate this Agreement
pursuant to Section 7.1(f), then Company shall promptly reimburse Parent for
Parent's costs and expenses in connection with this Agreement and the
transactions contemplated hereby ("Parent's Expenses"), and if, within twelve
months of such termination of this Agreement, Company shall enter into a
definitive agreement with respect to any Company Acquisition or any Company
Acquisition involving Company shall be consummated, then immediately prior to
the execution of a definitive agreement with respect to, or the consummation of,
as applicable, such Company Acquisition, then Company shall pay to Parent an
amount in cash equal to the amount by which the Termination Fee exceeds the
amount of Parent's Expenses previously reimbursed by Company pursuant hereto.
(iii) The Company acknowledges that the agreements contained in
this Section 7.3(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not enter into
this Agreement; accordingly, if the Company fails to pay in a timely manner the
amounts due pursuant to this Section 7.3(b) and, in order to obtain such
payment, Parent makes a claim that results in a judgment against the Company for
the amounts set forth in this Section 7.3(b), the Company shall pay to Parent
its costs and expenses (including
-45-
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts set forth in this Section 7.3(b) at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
Payment of the fees described in this Section 7.3(b) shall not be in lieu of
damages incurred in the event of fraud or willful breach of this Agreement. For
the purposes of this Agreement, "Company Acquisition" shall mean any of the
following transactions (other than the transactions contemplated by this
Agreement): (i) a merger, consolidation, business combination, recapitalization
or similar transaction involving the Company pursuant to which the stockholders
of the Company immediately preceding such transaction hold less than 70% of the
aggregate equity interests in the surviving, resulting or acquiring entity of
such transaction, (ii) a sale or other disposition by the Company of assets
representing in excess of 50% of the aggregate fair market value of the
Company's business immediately prior to such sale or (iii) the acquisition by
any person or group (including by way of a tender offer or an exchange offer or
issuance by the Company), directly or indirectly, of beneficial ownership or a
right to acquire beneficial ownership of shares representing in excess of 50% of
the voting power of the then outstanding shares of capital stock of the Company.
7.4 Amendment. Subject to applicable law, this Agreement may be amended
---------
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Parent, Merger Sub and Company.
7.5 Extension; Waiver. At any time prior to the Effective Time, any party
-----------------
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of Company, Parent and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
-46-
(a) if to Parent or Merger Sub, to:
OpenTV Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Company, to:
Spyglass, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation; Definitions.
---------------------------
-47-
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all direct
and indirect subsidiaries of such entity.
(b) For purposes of this Agreement:
(i) the term "knowledge" means with respect to a party hereto,
with respect to any matter in question, knowledge of the executive officers of
such party after reasonable inquiry;
(ii) the term "Material Adverse Effect" when used in connection
with an entity means any change, event, violation, inaccuracy, circumstance or
effect that is materially adverse to the business, assets, liabilities,
financial condition, prospects or results of operations of such entity and its
subsidiaries taken as a whole; provided, however, that in no event shall (A) a
-------- -------
decrease in such entity's stock price in and of itself constitute a Material
Adverse Effect or (B) any change, event, violation, inaccuracy, circumstance or
effect that results from (x) the public announcement or pendency of the
transactions contemplated hereby, (y) changes affecting the interactive
television or internet industry generally (which changes do not
disproportionately affect such entity) or (z) changes affecting the United
States economy generally, constitute a Material Adverse Effect;
(iii) the term "person" shall mean any individual, corporation
(including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm
or other enterprise, association, organization, entity or Governmental Entity.
8.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
-------------------------------------------
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Schedule
and the Parent Disclosure Schedule (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies
-48-
hereunder, except that the provisions of Section 5.10 are intended for the
benefit of the persons referred to therein and may be enforced by such persons.
8.6 Severability. In the event that any provision of this Agreement, or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
------------------------------------
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. 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 seek 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, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
----------
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
*****
-49-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
OPENTV CORP.
By: /s/ Jan Steenkamp
-------------------------------------
Name: Jan Steenkamp
-----------------------------------
Title: CEO
----------------------------------
SONNET ACQUISITION CORP.
By: /s/ Jan Steenkamp
-------------------------------------
Name: Jan Steenkamp
-----------------------------------
Title: President
----------------------------------
SPYGLASS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Title: CEO
----------------------------------