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EXHIBIT 2.1
Agreement and Plan of Merger
By and Among
Applied Digital Solutions, Inc.
Digital ▇▇▇▇▇.▇▇▇ Inc.
and
Destron Fearing Corporation
April 24, 2000
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ARTICLE I THE MERGER..............................................................................................1
1.1 The Merger.............................................................................1
1.2 Closing................................................................................1
1.3 Effective Time.........................................................................1
1.4 Conversion of Shares...................................................................2
1.5 Exchange of Certificates Representing Company Common Stock.............................4
1.6 Adjustment of Exchange Ratio...........................................................6
1.7 Stock Options and Warrants.............................................................6
1.8 Tax Consequences.......................................................................7
1.9 Dissenters' Rights.....................................................................7
1.10 Taking of Necessary Action; Further Action.............................................7
ARTICLE II CERTAIN MATTERS RELATING TO THE SURVIVING CORPORATION..................................................8
2.1 Certificate of Incorporation of the Surviving Corporation..............................8
2.2 By-Laws of the Surviving Corporation...................................................8
2.3 Officers and Directors of the Surviving Corporation....................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ADS AND MERGER SUB..................................................8
3.1 Organization, Standing and Qualification...............................................8
3.2 Authorization of Agreement and Other Documents.........................................9
3.3 No Violation...........................................................................9
3.4 SEC Documents.........................................................................10
3.5 No Undisclosed Liabilities............................................................11
3.6 No Brokers............................................................................11
3.7 ADS Common Stock......................................................................11
3.8 Capitalization........................................................................12
3.9 Material Adverse Change...............................................................12
3.10 Disclosure Documents..................................................................12
3.11 Tax Reorganization....................................................................13
3.12 Compliance with Laws..................................................................13
3.13 Litigation............................................................................14
3.14 Taxes.................................................................................14
3.15 Affiliated Transactions...............................................................16
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................16
4.1 Organization, Standing and Qualification..............................................16
4.2 Capitalization........................................................................17
4.3 Subsidiaries..........................................................................17
4.4 Ownership Interests...................................................................18
4.5 Stock Records.........................................................................18
4.6 Authorization of Agreement and Other Documents........................................18
4.7 No Violation..........................................................................18
4.8 Compliance with Laws..................................................................19
4.9 Books and Records.....................................................................20
4.10 SEC Documents.........................................................................20
4.11 Adequacy of Properties................................................................21
4.12 Real Estate...........................................................................23
4.13 Contracts.............................................................................23
4.14 Intellectual Property. ..............................................................25
4.15 Year 2000 Compliance and Security.....................................................27
4.16 Distributors and Customers............................................................28
4.17 Insurance.............................................................................28
4.18 Litigation............................................................................28
4.19 Warranties............................................................................29
4.20 Products Liability....................................................................29
4.21 Taxes.................................................................................29
4.22 ERISA.................................................................................31
4.23 Labor Matters.........................................................................33
4.24 Environmental Matters.................................................................34
4.25 Interim Conduct of Business...........................................................36
4.26 Affiliated Transactions...............................................................37
4.27 Material Adverse Change...............................................................37
4.28 Inappropriate Payments................................................................37
4.29 Absence of Indemnifiable Claims, etc..................................................38
4.30 No Undisclosed Liabilities............................................................38
4.31 No Brokers............................................................................38
4.32 Tax Reorganization....................................................................38
4.33 Opinion of Financial Advisor..........................................................38
4.34 Information Supplied..................................................................38
4.35 No Existing Discussions...............................................................39
4.36 Takeover Statutes.....................................................................39
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ARTICLE V COVENANTS..............................................................................................39
5.1 Alternative Proposals.................................................................39
5.2 Interim Operations....................................................................40
5.3 Meetings of Stockholders..............................................................43
5.4 Filings; Other Action.................................................................43
5.5 Inspection of Records.................................................................43
5.6 Publicity.............................................................................44
5.7 Registration Statement; Proxy Statement...............................................44
5.8 Further Action........................................................................45
5.9 Affiliate Letters.....................................................................46
5.10 Expenses..............................................................................46
5.11 Tax Treatment of Merger...............................................................46
5.12 Indemnification of Directors and Officers.............................................46
5.13 Voting Agreement - Company............................................................47
5.14 Confidentiality.......................................................................47
5.15 Defense of Litigation.................................................................48
5.16 Actions by Merger Sub.................................................................48
5.17 Takeover Statutes.....................................................................48
5.18 NASDAQ Listing........................................................................48
5.19 Termination of Confidentiality and Secrecy Agreements.................................48
5.20 Employee Benefit Plans................................................................48
5.21 Issuance of Options in the Surviving Corporation......................................48
5.22 Section 16 Matters....................................................................49
ARTICLE VI CONDITIONS............................................................................................49
6.1 Conditions to Each Party's Obligation to Effect the Merger............................49
6.2 Conditions to Obligation of the Company to Effect the Merger..........................50
6.3 Conditions to Obligation of ADS and Merger Sub
to Effect the Merger...............................................................51
ARTICLE VII TERMINATION..........................................................................................52
7.1 Termination by Mutual Consent.........................................................52
7.2 Termination by Either ADS or the Company..............................................52
7.3 Termination by the Company............................................................53
7.4 Termination by ADS....................................................................53
7.5 Effect of Termination and Abandonment.................................................53
7.6 Extension; Waiver.....................................................................54
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ARTICLE VIII GENERAL PROVISIONS..................................................................................54
8.1 Nonsurvival of Representations, Warranties and Agreements.............................54
8.2 Notices...............................................................................54
8.3 Assignment, Binding Effect............................................................55
8.4 Entire Agreement......................................................................55
8.5 Amendment.............................................................................55
8.6 Governing Law.........................................................................56
8.7 Counterparts..........................................................................56
8.8 Headings..............................................................................56
8.9 Interpretation........................................................................56
8.10 Waivers...............................................................................56
8.11 Incorporation of Exhibits.............................................................56
8.12 Severability..........................................................................56
8.13 Enforcement of Agreement..............................................................56
EXHIBITS
Exhibit A - Form of Affiliate Letter
Exhibit B - Form of Voting Agreement
Exhibit C - Form of Employment Agreement (▇▇▇▇▇▇▇▇)
Exhibit D - Form of Employment Agreement (▇▇▇▇▇▇▇▇)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of April 24, 2000 (the
"Agreement") by and among Applied Digital Solutions, Inc., a Missouri
corporation ("ADS"), Digital ▇▇▇▇▇.▇▇▇ Inc., a Delaware corporation and a
wholly-owned subsidiary of ADS ("Merger Sub"), and Destron Fearing Corporation,
a Delaware corporation (the "Company").
WHEREAS, the Board of Directors of each of ADS and the Company have
determined that a business combination between ADS and the Company merging their
respective businesses is in the best interests of their respective companies and
their stockholders and accordingly have agreed to effect the merger provided for
herein upon the terms and subject to the conditions set forth herein; and
WHEREAS, it is the intention of the parties to this Agreement that for
federal income tax purposes, the merger provided for herein shall qualify as a
"reorganization" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.3 of this Agreement),
Merger Sub shall be merged with and into the Company in accordance with the laws
of the State of Delaware and the terms of this Agreement (the "Merger"),
whereupon the separate corporate existence of Merger Sub shall cease, and the
Company shall be the surviving corporation of the Merger (the Company, as the
surviving corporation after the Merger, is sometimes referred to herein as the
"Surviving Corporation").
1.2 CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place (a) at the offices of
Akerman, Senterfitt & ▇▇▇▇▇▇, P.A., SunTrust International Center, ▇▇▇ ▇.▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ on the date of the fulfillment of
the last of the conditions set forth in Article VI of this Agreement (other than
(i) those that are waived by the party or parties for whose benefit such
conditions exist, and (ii) any such conditions which, by their terms, are not
capable of being satisfied until the Closing Date) are satisfied; or (b) at such
other place, time, and/or date as the parties hereto may otherwise agree. The
date upon which the Closing shall occur is referred to herein as the "Closing
Date."
1.3 EFFECTIVE TIME. If all the conditions to the Merger set forth in
Article VI of this Agreement have been fulfilled or waived and this Agreement
shall not have been terminated as provided in Article VII hereof, the parties
hereto shall cause a certificate of merger (the "Certificate of Merger") to be
properly executed and filed in accordance with the laws of the State of Delaware
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and the terms of this Agreement on the Closing Date. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of Delaware or at such later time as is specified by the
parties hereto as the Effective Time in the Certificate of Merger (the
"Effective Time"). The Merger shall have the effects set forth in the relevant
provisions of the General Corporation Law of the State of Delaware (the "DGCL"),
including Section 259 thereof. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of the Company and Merger Sub.
1.4 CONVERSION OF SHARES.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of ADS, Merger Sub, the Company or the holders of common
stock, par value $.00005 per share, of Merger Sub ("Merger Sub Common Stock"),
each share of Merger Sub Common Stock outstanding immediately prior to the
Effective Time shall be converted into one share of common stock, par value
$0.01 per share, of the Surviving Corporation;
(b) Subject to Section 1.5(f), at the Effective Time, by
virtue of the Merger and without any action on the part of ADS, Merger Sub, the
Company or the holders of Company common stock, par value $.01 per share (the
"Company Common Stock"), each share of Company Common Stock outstanding
immediately prior to the Effective Time shall be converted into the right to
receive a fraction (herein called the "Exchange Ratio") of one share of common
stock, $.001 par value, of ADS ("ADS Common Stock"). The shares of ADS Common
Stock to be received as consideration pursuant hereto (together with cash in
lieu of fractional shares of ADS Common Stock as specified in Section 1.5(f)
below) are referred to herein as the "Merger Consideration."
(c)
(i) The Exchange Ratio shall be 0.75 in the event
the Average Closing Price (as defined in Section 1.4(f)) of the ADS
Common Stock is not less than $8.00 per share and not more than $16.00
per share.
(ii) If the Average Closing Price is more than $16.00
per share, then the Exchange Ratio shall be the quotient derived by
dividing $12.00 by the Average Closing Price.
(iii) If the Average Closing Price is less than $8.00
per share, then the Exchange Ratio shall be the quotient derived by
dividing $6.00 by the Average Closing Price.
(iv) If any adjustment is made to the Exchange Ratio
pursuant to this Section 1.4(c), then the adjusted Exchange Ratio shall
be rounded to four decimal places, rounding downward from 0.00005.
(d) Immediately following the Effective Time, all shares of
Company Common Stock shall cease to be outstanding and shall be canceled and
retired and shall cease to exist, and
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each holder of shares of Company Common Stock shall thereafter cease to have any
rights with respect to such shares of Company Common Stock, except for the right
to receive, without interest, the consideration set forth in this Section 1.4
(and any dividends or other distributions payable with respect thereto pursuant
to Section 1.5(d)) and cash in lieu of fractional shares of ADS Common Stock in
accordance with Section 1.5 of this Agreement upon the surrender of a
certificate representing such shares of Company Common Stock in accordance with
the provisions of this Article I.
(e) Each share of Company Common Stock held by the Company as
treasury stock or owned by ADS or any Subsidiary (as defined in Section 1.4(f)
of this Agreement) of ADS immediately prior to the Effective Time shall be
canceled, and no payment shall be made with respect thereto.
(f) For purposes of this Agreement, (i) the term "Average
Closing Price" shall mean the average of the per share last daily closing price
of ADS Common Stock as quoted on The Nasdaq National Market ("NASDAQ") (and as
reported by The Wall Street Journal or, if not reported thereby, by another
authoritative source) during the twenty (20) consecutive Trading Days which
precede the fifth trading day immediately preceding the Closing Date; (ii) the
term "Trading Day" shall mean any day on which the NASDAQ is open for trading;
(iii) the word "Subsidiary," when used with respect to any Person, means any
corporation or other organization, whether incorporated or unincorporated, of
which (A) at least fifty percent (50%) of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person or by any one or more of its Subsidiaries; or (B) such Person or
any other Subsidiary of such Person is a general partner (excluding partnerships
the general partnership interests of which held by such Person or any Subsidiary
of such Person do not have a majority of the voting interests in such
partnership), it being understood that representations and warranties of a
Person concerning any former Subsidiary of such Person shall be deemed to relate
only to the periods during which such former Subsidiary was a Subsidiary of such
Person; and (iv) the word "Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof, or any affiliate (as that term is defined in the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act")) of any of the foregoing.
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1.5 EXCHANGE OF CERTIFICATES REPRESENTING COMPANY COMMON STOCK.
(a) Florida Atlantic Stock Transfer, Inc. (or such other
exchange agent selected by ADS and reasonably acceptable to the Company) shall
act as exchange agent (the "Exchange Agent") in the Merger.
(b) As of the Effective Time and, in any event, no later than
five (5) Trading Days after the Effective Time, ADS shall deposit or cause to be
deposited with the Exchange Agent for exchange in accordance with this Article
I, certificates representing the shares of ADS Common Stock issuable pursuant to
Section 1.4 in exchange for certificates formerly representing shares of Company
Common Stock outstanding immediately prior to the Effective Time and a
sufficient amount of cash to satisfy the cash payments to be made by ADS to
certain holders of Company Common Stock pursuant to Section 1.5(f) hereof.
(c) Promptly after the Effective Time, ADS shall cause the
Exchange Agent to mail to each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock ("Certificates") whose shares were converted into the right
to receive ADS Common Stock Common Stock pursuant to Section 1.4 (i) a notice of
effectiveness of the Merger; (ii) a letter of transmittal which shall specify
that delivery shall be effected, and risk of loss and title to such Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in a form and shall have such other provisions as ADS and the Company
may reasonably specify; and (iii) instructions for use in effecting the
surrender of such Certificates in exchange for the consideration to be received
by such holder pursuant to Sections 1.4 and 1.5 hereof. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, ADS shall cause to be delivered to the person in whose name such
Certificate shall have been issued, or to such person as such person shall
direct in writing in the letter of transmittal, (A) a certificate representing
that number of whole shares of ADS Common Stock into which the shares previously
represented by the surrender of Certificates shall have been converted into the
right to receive at the Effective Time pursuant to Section 1.4; and (B) a check
representing the amount of cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, which such holder has the right to receive
in respect of the Certificate surrendered pursuant to the provisions of this
Section 1.5, in each case, after giving effect to any required withholding tax,
and the shares of Company Common Stock represented by the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash paid in lieu of fractional shares and unpaid dividends and
distributions, if any, to holders of shares of Company Common Stock who receive
shares of ADS Common Stock pursuant to Section 1.4 hereof. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, the consideration to be paid to such holder of
Company Common Stock pursuant to Sections 1.4 and 1.5 hereof may be issued to
such a transferee if the Certificate representing such Company Common Stock is
presented to ADS, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid or, alternatively, payments of such transfer tax to the Exchange Agent.
Until so surrendered, each Certificate that, at the Effective Time, represented
shares of Company Common Stock will be deemed from and after the Effective Time,
for all corporate purposes (except
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to the extent provided in Section 1.5(d) below), to evidence the consideration
to be received by the holders of Company Common Stock pursuant to Sections 1.4
and 1.5 hereof.
(d) Notwithstanding anything to the contrary contained herein,
no dividends or other distributions declared after the Effective Time on ADS
Common Stock shall be paid with respect to any shares of Company Common Stock
entitled to be converted into shares of ADS Common Stock represented by a
Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of ADS Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
payable with respect to such whole shares of ADS Common Stock and not paid, less
the amount of any withholding taxes which may be required thereon; and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole shares of ADS
Common Stock, less the amount of any withholding taxes which may be required
thereon.
(e) After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the shares of Company Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to ADS or the Surviving Corporation,
they shall be canceled and exchanged for the consideration set forth in this
Article I deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this Section 1.5. Certificates
surrendered for exchange by any person constituting an "affiliate" of the
Company for purposes of Rule 145(c) under the Securities Act of 1933, as amended
(the "Securities Act"), shall not be exchanged until ADS has received an
Affiliate Letter (as defined herein) from such person as provided in Section
5.9.
(f) No fractional shares of ADS Common Stock shall be issued
upon surrender for exchange of Certificates for Company Common Stock. In lieu of
the issuance of any fractional share of ADS Common Stock pursuant to Section
1.4, cash adjustments will be paid to holders in respect of any fractional share
of ADS Common Stock that would otherwise be issuable, and the amount of such
cash adjustment shall be equal to such fractional proportion of the Average
Closing Price of a share of ADS Common Stock.
(g) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, ADS will issue in
exchange for such lost, stolen or destroyed Certificate, the consideration to be
received by the holder of such Certificate pursuant to Sections 1.4 and 1.5
hereof.
(h) Any portion of the property delivered to the Exchange
Agent in accordance with Section 1.5(b) that remains unclaimed two years after
the Effective Time shall be delivered to ADS. Any holder of a Certificate who
has not theretofore surrendered such Certificate for exchange
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pursuant to this Section 1.5 shall thereafter look only to ADS for payment of
the consideration deliverable in respect of such Certificate determined pursuant
to this Agreement, without any interest thereon. Payment or delivery of any
shares of ADS Common Stock, any cash in lieu of fractional shares of ADS Common
Stock and any dividends, or distributions with respect to ADS Common Stock shall
be subject to applicable abandoned property, escheat and similar laws, and none
of ADS, Merger Sub, the Company, the Surviving Corporation or any other person
shall be liable to any former holder of shares of Company Common Stock for any
amount properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar laws.
1.6 ADJUSTMENT OF EXCHANGE RATIO. Excluding the increase in the number
of authorized shares of ADS Common Stock contemplated by Section 6.1(g) hereof,
if subsequent to the date of this Agreement but prior to the Effective Time, the
ADS Common Stock is recapitalized or reclassified or ADS shall effect any stock
split, reverse stock split or stock dividend of ADS Common Stock, then the
Exchange Ratio and the Average Closing Price shall be appropriately and
equitably adjusted to the kind and amount of shares of stock and other
securities and property which the holders of such shares of ADS Common Stock
would have been entitled to receive had such shares been issued and outstanding
as of the record date for determining stockholders entitled to participate in
such corporate event.
1.7 STOCK OPTIONS AND WARRANTS. All options and warrants to acquire
Company Common Stock (individually, a "Company Option" and collectively, the
"Company Options") outstanding at the Effective Time under the Company's 1992
Incentive Stock Option Plan, the Company's 1992 Non-Employee Directors Stock
Option Plan, the Company's 1992 Consultant Stock Option Plan or otherwise (the
"Company Stock Option Plans") shall remain outstanding following the Effective
Time. At the Effective Time, such Company Options, by virtue of the Merger and
without any further action on the part of the Company or the holder of such
Company Options, shall be assumed by ADS in such manner that ADS (a) is a
corporation (or a parent or a subsidiary corporation of such corporation)
"assuming a stock option in a transaction to which Section 424(a) applied"
within the meaning of Section 424 of the Code; or (b) to the extent that Section
424 of the Code does not apply to any such Company Options, would be such a
corporation (or a parent or a subsidiary corporation of such corporation) were
Section 424 applicable to such option. Each Company Option assumed by ADS shall
be exercisable upon the same terms and conditions as under the applicable
Company Stock Option Plan and the applicable option agreement issued thereunder,
except that (x) the unexercised portion of each such Company Option shall be
exercisable for that whole number of shares of ADS Common Stock (rounded down to
the nearest whole share) equal to the number of shares of Company Common Stock
subject to the unexercised portion of such Company Option multiplied by the
Exchange Ratio; and (y) the option exercise price per share of ADS Common Stock
shall be an amount equal to the option exercise price per share of Company
Common Stock subject to such Company Option in effect at the Effective Time
divided by the Exchange Ratio (the option price per share, as so determined,
being rounded up to the nearest full cent). No payment shall be made for
fractional interests. The term, exercisability, vesting schedule, status as an
"incentive stock option" under Section 422 of the Code, if applicable, and all
of the other terms of the Company Options shall otherwise remain unchanged
unless modified by or as a result of the transaction contemplated by this
Agreement (including, without limitation, to the extent that all outstanding
Company Options shall become vested and exercisable at the Effective Time). As
soon
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as practicable after the Effective Time, ADS shall deliver to the holders of
Company Options appropriate notices setting forth such holders' rights pursuant
to such Company Options, as amended by this Section 1.7 as well as notice of
ADS's assumption of the Company's obligations with respect thereto (which occurs
by virtue of this Agreement). ADS shall take all corporate actions necessary to
reserve for issuance such number of shares of ADS Common Stock as will be
necessary to satisfy exercises in full of all Company Options after the
Effective Time.
1.8 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 hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations promulgated under the Code.
1.9 DISSENTERS' RIGHTS. Notwithstanding any provisions of this
Agreement to the contrary, shares of Company Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by a
Company stockholder who has not approved of the Merger by written consent or by
vote at the Company Stockholder Meeting (as defined in Section 3.10) and, with
respect to which, appraisal rights shall have been duly demanded and perfected
in accordance with Section 262 of the DGCL ("Dissenting Shares") shall not be
converted into a right to receive ADS Common Stock in accordance with Section
1.4 hereof , or any cash in lieu of fractional shares of ADS Common Stock and
any dividends or distributions with respect to ADS Common Stock in accordance
with Sections 1.5(d) and 1.5(f) hereof. The holders of Dissenting Shares shall
be entitled only to such rights as are granted by Section 262 of the DGCL. Each
holder of Dissenting Shares who becomes entitled to payment for such Dissenting
Shares pursuant to Section 262 of the DGCL shall receive payment therefor from
ADS in accordance with the DGCL; provided, however, that (i) if any such holder
of Dissenting Shares shall have failed to establish its entitlement to appraisal
rights as provided in Section 262 of the DGCL, (ii) if any such holder of
Dissenting Shares shall have effectively withdrawn its demand for appraisal of
such Dissenting Shares or lost its right to appraisal and payment for its
Dissenting Shares under Section 262 of the DGCL, or (iii) if neither any holder
of Dissenting Shares nor ADS shall have filed a petition demanding a
determination of the value of all Dissenting Shares within the time provided in
Section 262 of the DGCL, such holder shall forfeit the right to appraisal of
such Dissenting Shares, and each such Dissenting Share shall be treated as if
such Share had been converted, as of the Effective Time, into a right to
receive, subject to the provisions of Sections 1.4 and 1.5 hereof, the Merger
Consideration with respect thereto, without interest thereon.
1.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of the Company,
ADS and Merger Sub will take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger as promptly as
possible in accordance with this Agreement. 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
the Company and Merger Sub, the officers and directors of the Company and Merger
Sub are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action, so long
as such action is lawful and consistent with this Agreement.
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ARTICLE II
CERTAIN MATTERS RELATING TO
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
certificate of incorporation of Merger Sub in effect at the Effective Time shall
be the certificate of incorporation of the Surviving Corporation until amended
in accordance with its terms and pursuant to applicable law.
2.2 BY-LAWS OF THE SURVIVING CORPORATION. The By-Laws of Merger Sub in
effect at the Effective Time shall be the By-Laws of the Surviving Corporation
until amended in accordance with the terms of such By-Laws and pursuant to
applicable law and the Certificate of Incorporation of the Surviving
Corporation.
2.3 OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION. The officers
and directors of Merger Sub immediately prior to the Effective Time shall be the
officers and directors of the Surviving Corporation immediately after the
Effective Time, and shall hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation and until their
successors are duly appointed or elected in accordance with applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ADS AND MERGER SUB
ADS and Merger Sub represent and warrant to the Company that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure statement delivered by ADS and Merger Sub to the Company
concurrently herewith and identified as the "ADS Disclosure Statement." All
exceptions noted in the ADS Disclosure Statement shall be numbered to correspond
to the applicable sections to which such exception refers; provided, however,
that for purposes of this Agreement and the ADS Disclosure Statement, any
disclosure set forth on any particular schedule shall be deemed disclosed in
reference to all applicable schedules.
3.1 ORGANIZATION, STANDING AND QUALIFICATION. Each of ADS, Merger Sub
and each of the Subsidiaries of ADS other than Merger Sub (each such Subsidiary
singularly "ADS Subsidiary" or collectively "ADS Subsidiaries") (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation; (ii) has all requisite
power and authority to own or lease, and operate its respective properties and
assets, and to carry on its respective businesses as now conducted and as
currently proposed to be conducted, except where the failure to have such power
and authority would not have an ADS Material Adverse Effect (as defined herein)
and to consummate the transactions contemplated hereby; (iii) is duly qualified
or licensed to do business and is in good standing in all jurisdictions in which
it owns or leases property or in which the conduct of its respective businesses
requires it to so qualify or be licensed, except where the failure to so
qualify, individually or in the aggregate, would not have an ADS Material
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Adverse Effect; and (iv) has obtained all licenses, permits, franchises and
other governmental authorizations necessary to the ownership or operation of its
respective properties or the conduct of its respective businesses, except where
the failure to have obtained such licenses, permits, franchises or
authorizations would not have an ADS Material Adverse Effect. A complete and
correct copy of ADS's and Merger Sub's Articles or Certificate of Incorporation
and By-Laws, each as amended to date, has been previously furnished to the
Company or have been made available for the Company's review and are in full
force and effect. None of ADS, Merger Sub or any ADS Subsidiary is in violation
of any provision of its Articles or Certificate of Incorporation or By-Laws. For
purposes of this Agreement, a "Material Adverse Effect" when used with respect
to any entity means (a) a material adverse effect on the business, results of
operations, financial condition or prospects of such entity and its
Subsidiaries, taken as a whole, or (b) a material impairment in the ability of
such entity or its Subsidiaries to perform any of their obligations under this
Agreement or to consummate the Merger.
3.2 AUTHORIZATION OF AGREEMENT AND OTHER DOCUMENTS. The execution and
delivery of this Agreement and the other documents executed or to be executed in
connection herewith to which ADS or Merger Sub is a party (collectively, the
"ADS Ancillary Documents"), have been duly authorized by the Board of Directors
of ADS and Merger Sub, and no other proceedings on the part of ADS or Merger Sub
are necessary to authorize the execution, delivery or performance of this
Agreement or any ADS Ancillary Document, except the approval of the Merger by
the stockholders of ADS, as provided in Section 5.3 of this Agreement, and the
increase in the number of shares of authorized ADS Common Stock contemplated by
Section 6.1(g) hereof. This Agreement is, and, as of the Closing Date, each of
the ADS Ancillary Documents will be, a valid and binding obligation of ADS
and/or Merger Sub, as the case may be, enforceable against ADS and/or Merger
Sub, as the case may be, in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting enforcement of
creditors' rights generally, and by general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity) and
subject to receipt of approval of the Merger by the ADS stockholders.
3.3 NO VIOLATION. Neither the execution and delivery by ADS and Merger
Sub of this Agreement or the ADS Ancillary Documents, nor the consummation by
ADS and Merger Sub of the transactions contemplated hereby and thereby in
accordance with their respective terms, will (a) assuming approval of the Merger
by the stockholders of ADS, conflict with or result in a breach of any
provisions of the Articles or Certificate of Incorporation or By-Laws of ADS or
Merger Sub; (b) result in a breach or violation of, a default under, or the
triggering of any payment or other material obligations pursuant to, or
accelerate vesting under, any of the ADS stock option plans, or any grant or
award made under any of the foregoing; (c) subject to obtaining the consents set
forth in the ADS Disclosure Statement, violate, conflict with, result in a
breach of any provision of, constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, result in the
termination, or in a right of termination or cancellation of, accelerate the
performance required by, result in the triggering of any payment or other
material obligations pursuant to, result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties of ADS,
Merger Sub or any of the ADS Subsidiaries, other than as disclosed in the ADS
Disclosure Statement, under, or result in being declared void, voidable, or
without
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further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any material license, franchise,
permit, lease, contract, agreement or other instrument, commitment or obligation
to which ADS, Merger Sub or any of the ADS Subsidiaries is a party, or by which
ADS, Merger Sub or any of the ADS Subsidiaries or any of their respective
properties is bound or affected, except for any of the foregoing matters which
would not have an ADS Material Adverse Effect; (d) assuming the Merger is so
approved by stockholders of ADS, and assuming all required consents and
approvals are obtained and all applicable filings are made, contravene or
conflict with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to ADS or
Merger Sub, except for any of the foregoing matters which would not have an ADS
Material Adverse Effect; or (e) other than the filings provided for in Sections
1.3 and 5.7, filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), the Exchange Act, the Securities Act, or applicable
state securities and "Blue Sky" laws or filings in connection with the
maintenance of qualification to do business in other jurisdictions
(collectively, the "Regulatory Filings"), require any material consent, approval
or authorization of, or declaration of, or filing or registration with, any
domestic governmental or regulatory authority, the failure to obtain or make
which would have an ADS Material Adverse Effect.
3.4 SEC DOCUMENTS. ADS has delivered or made available to the Company
each registration statement, report, proxy statement or information statement
(as defined in Regulation 14C under the Exchange Act) prepared by it since
December 31, 1996, which reports constitute all of the documents (other than
preliminary material) required to be filed by ADS with the Securities and
Exchange Commission ("SEC") since such date, each in the form (including
exhibits and any amendments thereto) filed with the SEC (collectively, the "ADS
Reports"). As of their respective dates, each of the ADS Reports complied and,
in the case of filings after the date hereof, will comply as to form in all
material respects with the applicable requirements of the Securities Act and/or
the Exchange Act, as the case may be, and the rules and regulations thereunder.
None of the ADS Reports contained, as of the date they were filed, any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. ADS has filed with
the SEC all reports required to be filed under Sections 13, 14 and 15(d) of the
Exchange Act since December 31, 1996. Each of the consolidated balance sheets of
ADS included in or incorporated by reference into the ADS Reports (including the
related notes and schedules) fairly present in all material respects the
consolidated financial position of ADS and the ADS Subsidiaries as of its date
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), and each of the
consolidated statements of income, retained earnings and cash flows of ADS
included in or incorporated by reference into the ADS Reports (including any
related notes and schedules) fairly present in all material respects the results
of operations, retained earnings or cash flows, as the case may be, of ADS and
the ADS Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect). Except as and to the extent reflected or reserved
against in the financial statements included in the ADS's Annual Report on Form
10-K for the year ended December 31, 1999 (the "ADS Form 10-K") or as disclosed
herein or in the ADS Disclosure Statement, neither ADS nor any of the ADS
Subsidiaries had as of such date any liability or obligation of any kind,
whether accrued, absolute, contingent, unliquidated or
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other and whether due or to become due (including any liability for breach of
contract, breach of warranty, torts, infringements, claims or lawsuits), which
was material to the business, assets, results of operations or financial
conditions of ADS and the ADS Subsidiaries taken as a whole. Except as set forth
in the ADS Disclosure Statement, since December 31, 1999, neither ADS nor any of
the ADS Subsidiaries has incurred any liability or obligation of any kind which,
in any case or in the aggregate, is material to the business, assets, results of
operations or financial condition of ADS and the ADS Subsidiaries taken as a
whole, except in the ordinary course of business. There are no extraordinary or
material non-recurring items of income or expense during the periods covered by
such financial statements, and the consolidated balance sheets of ADS included
or incorporated therein do not reflect any write-up or revaluation increasing
the book value of any assets, except in either case as specifically disclosed in
the notes thereto. The financial statements of ADS, including the notes thereto,
included in or incorporated by reference into the ADS Reports comply as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto, and have been prepared in accordance with generally
accepted accounting principles consistently applied ("GAAP") (except as may be
indicated in the notes thereto). Since December 31, 1996, there has been no
change in ADS's accounting methods or principles that would be required to be
disclosed in ADS financial statements in accordance with GAAP, except as
described in the notes to such ADS financial statements.
3.5 NO UNDISCLOSED LIABILITIES. There are no material liabilities or
obligations of any nature (whether accrued, absolute or contingent) of ADS or
the ADS Subsidiaries other than (i) liabilities disclosed or provided for in the
most recent financial statements contained in the ADS Reports; (ii) liabilities
which, individually or in the aggregate, are not material to ADS or the ADS
Subsidiaries; (iii) liabilities under this Agreement (or contemplated hereby) or
disclosed in the ADS Disclosure Statement; and (iv) liabilities incurred since
December 31, 1999 in the ordinary course of business and consistent with past
practices.
3.6 NO BROKERS. Except as set forth on the ADS Disclosure Statement,
ADS has not entered into any contract, arrangement or understanding with any
person or firm which may result in the obligation of the Company or ADS, Merger
Sub or their respective Subsidiaries to pay any finder's fee, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
3.7 ADS COMMON STOCK. Subject to obtaining the approval of the
stockholders of ADS of (i) the increase in the number of shares of authorized
ADS Common Stock contemplated by Section 6.1(g) hereof, and (ii) the issuance of
ADS Common Stock in connection with the Merger and this Agreement, the issuance
and delivery by ADS of shares of ADS Common Stock in connection with the Merger
and this Agreement have been duly and validly authorized by all necessary
corporate action on the part of ADS. The shares of ADS Common Stock to be issued
in connection with the Merger and this Agreement, when issued in accordance with
the terms of this Agreement, will be validly issued, fully paid and
nonassessable and free of preemptive rights.
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3.8 CAPITALIZATION
(a) The total authorized capital stock of ADS consists of (i)
80,000,000 shares of ADS Common Stock, $.001 par value per share, 50,398,739
shares of which are issued and outstanding as of April 15, 2000, and 2,856,193
of which are held by ADS in its treasury, and (ii) 5,000,000 shares of ADS
Preferred Stock, $10.00 par value per share, one (1) share of which is
designated as the ADS Class B Voting Preferred Stock and is issued and
outstanding as of April 15, 2000. The authorized capital stock of Merger Sub
consists of 50,000,000 shares of common stock, $.00005 par value per share,
20,000,000 shares of which, as of the date hereof, are issued and outstanding
and are held by ADS. There are no shares of capital stock of ADS or Merger Sub
of any other class authorized, issued or outstanding.
(b) Except as set forth in the ADS Disclosure Statement, there
are currently no outstanding, and as of the Closing, there will be no
outstanding (i) securities convertible into or exchangeable for any capital
stock of ADS, Merger Sub or any of the ADS Subsidiaries, (ii) options, warrants
or other rights to purchase or subscribe to capital stock of ADS, Merger Sub or
any of the ADS Subsidiaries or securities convertible into or exchangeable for
capital stock of ADS or any of the ADS Subsidiaries, or (iii) contracts,
commitments, agreements, understandings, arrangements, calls or claims of any
kind relating to the issuance of any capital stock of ADS or any of the ADS
Subsidiaries.
3.9 MATERIAL ADVERSE CHANGE. Since December 31, 1999 to the date of
this Agreement, ADS, Merger Sub and the ADS Subsidiaries, taken as a whole, have
not suffered any change in their businesses, operations, assets, liabilities,
financial condition or prospects which had or would reasonably have an ADS
Material Adverse Effect; provided, that an ADS Material Adverse Effect will not
be deemed to have occurred solely as a result of fluctuations in the trading
price of the ADS Common Stock.
3.10 DISCLOSURE DOCUMENTS. None of the information supplied or to be
supplied by ADS or any of its affiliates, directors, officers, employees, agents
or representatives, in writing specifically for inclusion or incorporation by
reference in, and which is included or incorporated by reference in, (i) the
Form S-4 (as defined in Section 5.7 of this Agreement) or any amendment or
supplement thereto, (ii) the proxy statement to be mailed to Company's
stockholders (the "Company Proxy Statement") in connection with the meeting of
Company's stockholders called to consider and vote upon the approval of the
Merger (the "Company Stockholder Meeting") or any amendment or supplement
thereto, (iii) the proxy statement to be mailed to ADS's stockholders (the "ADS
Proxy Statement") in connection with the meeting of ADS's stockholders called to
consider and vote upon the approval of the Merger (the "ADS Stockholder
Meeting"), or (iv) any other documents filed or to be filed by ADS with the SEC
or any other Governmental Authority (as defined in Section 3.12(f) hereof) in
connection with the transactions contemplated hereby, will, at the respective
times such documents are filed, and, in the case of the Form S-4 or any
amendment or supplement thereto, when the same becomes effective, at the date of
Company Stockholder Meeting and at the Effective Time, and, in the case of the
ADS Proxy Statement or any amendment or supplement thereto, at the time of
mailing to ADS stockholders or at the time of the ADS Stockholder Meeting, and
in the case of the Company Proxy Statement, or any amendment or supplement
thereto, at the time of the
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Company Stockholder Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the Company
Stockholder Meeting. The Form S-4 will comply as to form in all material
respects with the applicable provisions of the Securities Act, the Exchange Act,
and the respective rules and regulations under any such Act (except that no
representation is made as to the form of the Company Proxy Statement to be
included as the prospectus therein).
3.11 TAX REORGANIZATION. Neither ADS nor any of the ADS Subsidiaries
has taken or failed to take any action which would prevent the Merger from
constituting a reorganization within the meaning of Section 368(a) of the Code.
3.12 COMPLIANCE WITH LAWS.
(a) ADS, Merger Sub and each of the ADS Subsidiaries hold all
permits, licenses, variances, exemptions, orders, approvals, authorizations,
certificates, filings, franchises, notices and rights of all Governmental
Authorities necessary for each of them to own, lease or operate its properties
and assets and for the lawful conduct of its business (the "Permits"), except
where the failure to hold such Permits would not have an ADS Material Adverse
Effect. None of such Permits is or will be materially impaired by the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(b) ADS, Merger Sub and each of the ADS Subsidiaries are in
compliance with the terms of its Permits in all material respects.
(c) ADS, Merger Sub and each of the ADS Subsidiaries are in
compliance with all statutes, laws, ordinances, orders, rules, or regulations of
any Governmental Authority (including, but not limited to, those related to
occupational health and safety, or employment and employment practices) that are
applicable to ADS, Merger Sub or any of the ADS Subsidiaries or that affect or
relate to this Agreement or the transactions contemplated hereby, except for any
noncompliance that would not have an ADS Material Adverse Effect.
(d) As of the date of this Agreement, and as of the Closing,
no investigation, review, inquiry or proceeding by any Governmental Authority
with respect to ADS, Merger Sub or any of the ADS Subsidiaries is, to the
knowledge of ADS, pending or threatened which, if determined unfavorably, would
have an ADS Material Adverse Effect.
(e) Neither ADS nor Merger Sub nor any of the ADS Subsidiaries
are subject to any agreement, contract, judgment, order or decree with any
Governmental Authority arising out of any current or previously existing
violations of any laws, ordinances or regulations applicable to ADS, Merger Sub
or any of the ADS Subsidiaries.
(f) For the purposes of this Agreement, "Governmental
Authority" shall mean any nation, or government, any state, regional, local or
other political subdivision thereof, and any
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entity or official exercising executive, legislative, judicial, regulatory, or
administrative functions or pertaining to government.
3.13 LITIGATION. Except as set forth in the ADS Reports filed with the
SEC prior to the date hereof or as set forth in the ADS Disclosure Statement,
(i) there is no litigation or proceeding including, without limitation, any
arbitration proceeding, in law or in equity, and there are no proceedings or
governmental investigations before any commission or other administrative
authority, pending or, to ADS's knowledge, threatened against ADS, Merger Sub or
any of the ADS Subsidiaries which, if adversely determined, is reasonably likely
to have, either individually or in the aggregate, an ADS Material Adverse
Effect; (ii) there is no judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator applicable to ADS, the Merger Sub or any of the ADS Subsidiaries
having, or which is reasonably likely to have, either individually or in the
aggregate, an ADS Material Adverse Effect; and (iii) to the knowledge of ADS,
there is no action, suit, proceeding or investigation pending or threatened
against ADS, the Merger Sub or any of the ADS Subsidiaries which seeks to
restrain, enjoin or delay the consummation of the Merger or any of the other
transactions contemplated hereby or which seeks damages in connection therewith,
and no injunction of any type referred to in Section 6.1(c) has been entered or
issued.
3.14 TAXES.
(a) As used in this Agreement, (i) the term "Taxes" means all
federal, state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatever of a nature similar to
taxes, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and the term "Tax" means any one of the
foregoing Taxes; and (ii) the term "Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect of
Taxes, and the term "Return" means any one of the foregoing Returns.
(b) There have been properly completed and filed on a timely
basis and in correct form all Returns required to be filed by ADS or any of the
ADS Subsidiaries on or before the date hereof and will be properly completed and
filed on a timely basis and in correct form all Returns required to be filed by
ADS or any of the ADS Subsidiaries with respect to any period ending with or
before, or including the period prior to, the Effective Time. The foregoing
Returns are, or will be, correct, and complete in all material respects. Except
as set forth in the ADS Disclosure Statement, an extension of time within which
to file any Return which has not been filed has not been requested or granted.
(c) With respect to all amounts in respect of Taxes imposed
upon ADS or any of the ADS Subsidiaries, or for which ADS or any of the ADS
Subsidiaries is or could be liable, whether to taxing authorities (as, for
example, under law) or to other persons or entities (as, for example, under tax
allocation agreements), with respect to all taxable periods or portions of
periods ending on or before the Effective Time, (i) all applicable tax laws and
agreements have been, or will
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be, complied with in all material respects, and (ii) all amounts required to be
paid and reported by ADS or the ADS Subsidiaries, to taxing authorities or
others, on or before the Effective Time, have been, or will be, paid and any
Taxes accrued but not due and payable as of the Effective Time have been accrued
or otherwise reserved for in financial statements contained in the most recent
ADS Report or will be reserved for in the financial statements to be prepared
with respect to the period beginning after the period covered by the most recent
ADS Report and ending with or before, or including the period prior to, the
Effective Time. No Taxes have been (or will prior to the Closing Date be)
recorded by ADS or any of the ADS Subsidiaries other than in the ordinary course
of business. There are no Liens filed against any asset of ADS or any of the ADS
Subsidiaries resulting from the failure to pay any Tax when due.
(d) No material issues have been raised (and are currently
pending) by any taxing authority in connection with any of the Returns. No
waivers of statutes of limitation with respect to the Returns have been given by
ADS or any of the ADS Subsidiaries (or with respect to any Return which a taxing
authority has asserted should have been filed by ADS or any of the ADS
Subsidiaries) which waivers are still in effect. The ADS Disclosure Statement
sets forth, for the past seven years, the years for which examinations or audits
of Florida and Missouri state taxes and federal income tax returns have been
completed, those years for which examinations or audits are presently being
conducted, and those years for which such returns will be required but are not
yet due to be filed and have not yet been filed. All deficiencies asserted or
assessments made as a result of any examinations have been fully paid, or are
fully reflected as a liability in the financial statements contained in the ADS
Report, or are being contested and an adequate reserve therefor has been
established and is fully reflected as a liability in the financial statements
contained in the most recent ADS Report. Neither ADS nor any ADS Subsidiary has
entered into any closing agreement with the Internal Revenue Service under
Section 7121 of the Code or with any state taxing authority under a similar
state tax law provision. No consent under Section 341(f) of the Code has been
filed with respect to ADS or any ADS Subsidiary. Neither ADS nor any ADS
Subsidiary has agreed to, or is required to make, any adjustment under Section
481(a) of the Code.
(e) The unpaid Taxes of ADS or any of the ADS Subsidiaries do
not materially exceed the reserve for tax liability (excluding any reserve for
deferred Taxes established to reflect timing differences between book and tax
income) set forth or included in the financial statements included in the most
recent ADS Report, as adjusted for the passage of time through the Closing. ADS
and ADS Subsidiaries will not be liable for any material amount of penalties or
interest with respect to Taxes reported or required to have been reported on any
Returns which have been filed or were required to have been filed through the
Closing.
(f) Neither ADS nor any of the ADS Subsidiaries is or at any
time has been a party to or bound by (nor will ADS or any of the ADS
Subsidiaries become a party to or bound by) any tax indemnity, tax sharing or
tax allocation agreement.
(g) All material elections with respect to Taxes affecting ADS
or any of the ADS Subsidiaries that are currently effective as of the date
hereof that are not reflected in ADS's Returns are set forth in the ADS
Disclosure Statement.
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(h) There are no challenges on appeals pending regarding the
amount of Taxes on, or the addressed valuation of, the real estate owned or
leased by ADS or any of the ADS Subsidiaries, and no special arrangements or
agreements exist with any governmental authority with respect thereto (provided,
that the representations and warranties contained in this Section 3.14(h) shall
not be deemed to be breached by any prospective general increase in real estate
taxes.)
(i) There is no assessment for Taxes (in addition to the
normal, annual general real estate tax assessment) pending against ADS or any of
the ADS Subsidiaries, or to ADS's knowledge, threatened with respect to any
portion of the real estate owned by ADS or any of the ADS Subsidiaries, or to
the extent ADS or any of the ADS Subsidiaries is liable for payment of the real
estate leased by them.
3.15 AFFILIATED TRANSACTIONS. Except as disclosed in any ADS Report
filed with the SEC prior to the date of this Agreement or as set forth in the
ADS Disclosure Statement, since December 31, 1999, neither ADS nor any of the
ADS Subsidiaries has been a party to any transactions (other than employee
compensation and other ordinary incidents of employment) with an "ADS Related
Party," For purposes of this Agreement, the term "ADS Related Party" shall mean:
any present officer or director, 10% stockholder (including any officers or
directors thereof) or present affiliate of ADS or any of the ADS Subsidiaries,
any present or former known spouse of any of the aforementioned persons or any
trust or other similar entity for the benefit of any of the foregoing persons.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to ADS and Merger Sub that the
statements contained in this Article IV are true and correct, except as set
forth in the disclosure statement delivered by the Company to ADS and Merger Sub
concurrently herewith and identified as the "Disclosure Statement." All
exceptions noted in the Disclosure Statement shall be numbered to correspond to
the applicable sections to which such exception refers; provided, however, that
for purposes of this Agreement and the Disclosure Statement, any disclosure set
forth on any particular schedule shall be deemed disclosed in reference to all
applicable schedules.
4.1 ORGANIZATION, STANDING AND QUALIFICATION. The Company and each of
its Subsidiaries (i) is a corporation duly incorporated, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation;
(ii) has all requisite power and authority to own or lease, and operate its
respective properties and assets, and to carry on its respective businesses as
now conducted and as currently proposed to be conducted, except where the
failure to have such power and authority would not have a Company Material
Adverse Effect, and to consummate the transactions contemplated hereby; (iii) is
duly qualified or licensed to do business and is in good standing in all
jurisdictions in which it owns or leases property or in which the conduct of its
respective businesses requires it to so qualify or be licensed, except where the
failure to so qualify, individually or in the aggregate, would not have a
Company Material Adverse Effect; and (iv) has
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obtained all licenses, permits, franchises and other governmental authorizations
necessary to the ownership or operation of its respective properties or the
conduct of its respective businesses, except where the failure to have obtained
such licenses, permits, franchises or authorizations would not have a Company
Material Adverse Effect. A complete and correct copy of the Company's and each
of its Subsidiaries' Articles or Certificate of Incorporation and Bylaws (or
equivalent organizational documents), each as amended to date, has been
previously furnished to ADS and are in full force and effect. None of Company or
any of its Subsidiaries is in violation of any provision of its Articles or
Certificate of Incorporation and Bylaws (or equivalent organizational
documents).
4.2 CAPITALIZATION.
(a) The total authorized capital stock of the Company consists
of (i) 20,000,000 shares of common stock, par value $0.01 per share, 13,640,772
shares of which are issued and outstanding as of April 15, 2000 and no such
shares are held by the Company in its treasury; and (ii) no shares of preferred
stock. There are no shares of capital stock of the Company of any other class
authorized, issued or outstanding.
(b) Each share outstanding of Company Common Stock is duly
authorized and validly issued, fully paid and nonassessable and free of
preemptive and similar rights.
(c) Except as set forth in the Disclosure Statement, there are
currently no outstanding, and, except as permitted pursuant to Section 5.2, as
of the Closing, there will be no outstanding (i) securities convertible into or
exchangeable for any capital stock of the Company or any of its Subsidiaries,
(ii) options, warrants or other rights to purchase or subscribe to capital stock
of the Company or any of its Subsidiaries or securities convertible into or
exchangeable for capital stock of the Company or any of its Subsidiaries, or
(iii) contracts, commitments, agreements, understandings, arrangements, calls or
claims of any kind to which the Company or any of its Subsidiaries is a party or
is bound relating to the issuance of any capital stock of the Company or any of
its Subsidiaries. The Disclosure Statement identifies, as of the date hereof,
the option holder, the number of shares subject to each option, the exercise
price, the vesting schedule and the expiration date of each outstanding option
to purchase capital stock of the Company or any of its Subsidiaries.
4.3 SUBSIDIARIES. The Company owns directly or indirectly each of the
outstanding shares of capital stock of (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to) each of the Company's Subsidiaries
indicated in the Disclosure Statement as being owned by the Company. Each of the
outstanding shares of capital stock owned by the Company of each of the
Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by the Company free and
clear of all Liens (as defined below), other than Liens imposed by local law
which are not material. The following information for each Subsidiary of the
Company is listed in the Disclosure Statement, if applicable: (a) its name and
jurisdiction of incorporation or organization, and (b) the location of its
principal executive office. "Lien" means any mortgage, pledge, security
interest, attachment, encumbrance, lien (statutory or otherwise), license,
claim, option, conditional sale agreement, right of first refusal, first offer,
termination, participation or
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purchase or charge of any kind (including any agreement to give any of the
statutory liens for Taxes, which are not yet due and payable or are being
contested in good faith by appropriate proceedings, (ii) statutory or common law
liens to secure landlords, lessors or renters under leases or rental agreements
confined to the premises rented, (iii) deposits or pledges made in connection
with, or to secure payment of, workers' compensation, unemployment insurance,
old age pension or other social security programs mandated under applicable
laws, (iv) statutory or common law liens in favor of carriers, warehousemen,
mechanics and materialmen, to secure claims for labor, materials or supplies and
other like liens, and (v) restrictions on transfer of securities imposed by
applicable state and federal securities laws.
4.4 OWNERSHIP INTERESTS. Except for the interests in the Company's
Subsidiaries, neither the Company nor any of its Subsidiaries owns any direct or
indirect interest in any corporation, joint venture, limited liability company,
partnership, association or other entity. Since December 31, 1999, the Company
has not (i) disposed of the capital stock (other than Company Common Stock) or
all or substantially all of the assets of any ongoing business, or (ii)
purchased the business and/or all or substantially all of the assets of another
person, firm or corporation (whether by purchase of stock, assets, merger or
otherwise).
4.5 STOCK RECORDS. Except as set forth on the Disclosure Statement, a
complete and correct copy of all stock records, and all corporate minute books
and records of the Company and each of its Subsidiaries, have been furnished or
made available by the Company to ADS for inspection to the extent requested by
ADS. The corporate minute books and records of the Company and its Subsidiaries
contain true and complete copies of all resolutions adopted by the stockholders
or the Board of Directors of the Company and its Subsidiaries and any other
action formally taken by them respectively as such since September 8, 1993. The
Company has provided to ADS a copy of its stock ledger as of a recent
practicable date certified by the Company's transfer agent.
4.6 AUTHORIZATION OF AGREEMENT AND OTHER DOCUMENTS. The execution and
delivery of this Agreement and the other documents executed or to be executed in
connection herewith to which the Company is a party (collectively, the
"Ancillary Documents"), have been duly authorized by the Board of Directors of
the Company, and no other proceedings on the part of the Company are necessary
to authorize the execution, delivery or performance of this Agreement or any
Ancillary Document, except the approval of the Merger by the stockholders of the
Company as provided in Section 5.3. This Agreement is, and, as of the Closing
Date, each of the Ancillary Documents will be, a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws affecting enforcement of creditors' rights generally, and by general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity) and subject to the receipt of approval of the
Merger by the Company's stockholders.
4.7 NO VIOLATION. Neither the execution and delivery of this Agreement
or the Ancillary Documents by the Company, nor the consummation by the Company
of the transactions contemplated hereby and thereby in accordance with their
respective terms, will (a) assuming approval of the Merger by the Company's
stockholders, conflict with or result in a breach of any
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provisions of the Articles or Certificate of Incorporation or By-Laws (or
equivalent organizational documents) of the Company or any of its Subsidiaries;
(b) result in a breach or violation of, a default under, or the triggering of
any payment or other material obligations pursuant to, or except as otherwise
provided in any of the individual option agreements under the Company Stock
Option Plans, accelerate vesting under, any of the Company Stock Option Plans,
or any grant or award made under any of the foregoing; (c) subject to obtaining
the consents set forth in the Disclosure Statement, violate, conflict with,
result in a breach of any provision of, constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, result
in the termination, or in a right of termination or cancellation of, accelerate
the performance required by, result in the triggering of any payment or other
obligations pursuant to, result in the creation of any lien, security interest,
charge or encumbrance upon any of the material properties of the Company or any
of its Subsidiaries other than as disclosed in the Disclosure Statement, under,
or result in being declared void, voidable, or without further binding effect,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any material license, franchise, permit, lease,
contract, agreement or other instrument, commitment or obligation to which the
Company or any of its Subsidiaries is a party, or by which the Company or any of
its Subsidiaries or any of their respective properties is bound or affected,
except for any of the foregoing matters which would not have a Company Material
Adverse Effect; (d) assuming the Merger is so approved by the Company's
stockholders, and assuming all required consents and approvals are obtained and
all applicable filings are made, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to the Company or any of its Subsidiaries,
except for any of the foregoing matters which would not have a Company Material
Adverse Effect; or (e) other than the Regulatory Filings, require any consent,
approval or authorization of, or declaration of, or filing or registration with,
any domestic governmental or regulatory authority, the failure to obtain or make
which would have a Company Material Adverse Effect.
4.8 COMPLIANCE WITH LAWS.
(a) Except as set forth in the Disclosure Statement, the
Company and each of its Subsidiaries hold all permits, licenses, variances,
exemptions, orders, approvals, authorizations, certificates, filings,
franchises, notices and rights of all Governmental Authorities necessary for
each of them to own, lease or operate its properties and assets and for the
lawful conduct of its business (the "Permits"). Except as set forth in the
Disclosure Statement, none of such Permits is or will be impaired by the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(b) The Company and its Subsidiaries are in compliance with
the terms of its Permits in all material respects.
(c) The Company and its Subsidiaries are in compliance with
all statutes, laws, ordinances, orders, rules, or regulations of any
Governmental Authority (including, but not limited to, those related to
occupational health and safety, or employment and employment practices) that are
applicable to the Company or any of its Subsidiaries or that affect or relate to
this Agreement or
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the transactions contemplated hereby, except for any non-compliance that would
not have a Company Material Adverse Effect.
(d) Except as set forth on the Disclosure Statement, as of the
date of this Agreement, and as of the Closing, no investigation, review, inquiry
or proceeding by any Governmental Authority with respect to the Company or any
of its Subsidiaries is pending or, to the knowledge of the Company, threatened.
(e) Neither the Company nor any of its Subsidiaries is subject
to any agreement, contract, judgment, order or decree with any Governmental
Authority arising out of any current or previously existing violations of any
laws, ordinances or regulations applicable to the Company or any of its
Subsidiaries.
(f) The Company and each its Subsidiaries are in substantial
compliance with all Federal, foreign and state laws applicable to the
manufacture, processing, packing, testing and sale of its products to the extent
such laws are applicable to them and all rules and regulations of the U.S. Food
and Drug Administration ("FDA"), the U.S. Department of Agriculture (the
"USDA"), the U.S. Federal Communications Commission ("FCC") and the U.S.
Environmental Protection Agency ("EPA") to the extent such rules and regulations
are applicable to them.
(g) Neither the Company nor any of its Subsidiaries has
received any written notice that the FDA, USDA, FCC or EPA has commenced, or
threatened to initiate, any judicial action against the Company or any of its
Subsidiaries or to withdraw its approval or request the recall of any product of
or commenced or threatened to initiate any action to enjoin production at any
facility owned or used by the Company or any of its Subsidiaries or any other
facility at which any of products of the Company or any of its Subsidiaries are
manufactured, processed, packaged, labeled, stored, distributed, tested or
otherwise handled.
(h) The Company has made available to ADS copies of any and
all material reports of inspection observations, establishment inspection
reports, warning letters and any other material documents received from or
issued by the FDA, USDA or EPA that indicate or suggest a lack of material
compliance with the FDA, USDA or EPA regulatory requirements by the Company or
any of its Subsidiaries.
4.9 BOOKS AND RECORDS. The Company's and its Subsidiaries' books,
accounts and records are, and have been, maintained in the Company's and its
Subsidiaries usual, regular and ordinary manner, in accordance with GAAP, and
all transactions to which the Company or any of its Subsidiaries is or has been
a party are properly reflected therein.
4.10 SEC DOCUMENTS. The Company has delivered or made available to ADS
each registration statement, report, proxy statement or information statement
(as defined in Regulation 14C under the Exchange Act) prepared by it since
September 30, 1996, which reports constitute all of the documents (other than
preliminary material) required to be filed by the Company with the SEC since
such date, each in the form (including exhibits and any amendments thereto)
filed with
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the SEC (collectively, the "Company Reports"). As of their respective dates,
each of the Company Reports complied and, in the case of filings after the date
hereof, will comply as to form in all material respects with the applicable
requirements of the Securities Act and/or the Exchange Act, as the case may be,
and the rules and regulations thereunder. None of the Company Reports contained,
as of the date they were filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. The Company has filed with the SEC all reports
required to be filed under Sections 13, 14 and 15(d) of the Exchange Act since
September 30, 1996. Each of the consolidated balance sheets of the Company
included in or incorporated by reference into the Company Reports (including the
related notes and schedules) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of its
date (subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), and each of the
consolidated statements of income, retained earnings and cash flows of the
Company included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly present in all material
respects the results of operations, retained earnings or cash flows, as the case
may be, of the Company and its Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect). There are no
extraordinary or non-recurring items of income or expense during the periods
covered by such financial statements and the consolidated balance sheets of the
Company included or incorporated therein do not reflect any write-up or
revaluation increasing the book value of any assets, except in either case as
specifically disclosed in the notes thereto. Except as and to the extent
reflected or reserved against in the financial statements included in the
Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999
(the "Company Form 10-Q") or as disclosed therein or in the Disclosure
Statement, neither the Company nor any of its Subsidiaries had as of such date
any liability or obligation of any kind, whether accrued, absolute, contingent,
unliquidated or other and whether due or to become due (including any liability
for breach of contract, breach of warranty, torts, infringements, claims or
lawsuits), which was material to the business, assets, results of operations or
financial condition of the Company and its Subsidiaries taken as a whole. Except
as set forth in the Disclosure Statement, since December 31, 1999, neither the
Company nor any Company Subsidiary has incurred any liability or obligation of
any kind which, in any case or in the aggregate, is material to the business,
assets, results of operations or financial condition of the Company and its
Subsidiaries taken as a whole, except in the ordinary course of business. The
financial statements of the Company, including the notes thereto, included in or
incorporated by reference into the Company Reports comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, and have been prepared in accordance with GAAP (except as may
be indicated in the notes thereto). Since September 30, 1996, there has been no
change in the Company's accounting methods or principles that would be required
to be disclosed in the Company's financial statements in accordance with GAAP,
except as described in the notes to such Company financial statements.
4.11 ADEQUACY OF PROPERTIES.
(a) The properties and assets owned or leased by the Company
and its Subsidiaries (including, without limitation, the Real Property and
Leased Premises) are suitable and
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adequate for the conduct of their respective businesses and operations and,
except as otherwise disclosed in the Company Reports filed with the Commission
prior to the date hereof, the Company and its Subsidiaries have good and
marketable title to or valid leasehold or other contractual interests in such
properties and assets, free and clear of all Liens other than Permitted
Encumbrances.
(b) All trade receivables and notes receivables which are
reflected in the financial statements contained in the Company Reports or which
arose subsequent to December 31, 1999, whether billed or unbilled, (i) arose out
of bona fide, arm's-length transactions for the sale of goods or performance of
services (ii) are good and collectible (or have been collected) in the ordinary
course of business using normal collection practices at the aggregate recorded
amounts thereof, less the amount of applicable reserves for doubtful accounts
and for allowances and discounts, which reserves are adequate in accordance with
GAAP, and (iii) are subject to no disputes regarding the collectability of any
such trade receivables that would reasonably be expected to have a Company
Material Adverse Effect.
(c) All inventory of the Company or any of its Subsidiaries
which is held for sale or resale, materials and supplies (collectively,
"Inventory"), consists of items of a quantity and quality historically useable
and/or saleable in the normal course of their respective businesses. Since
December 31, 1999, there has not been a material change in the level of the
Inventory. All Inventory is located at the Real Estate (as defined herein) or at
the Leased Premises (as defined herein).
(d) Set forth in the Disclosure Statement is a list and
description of each item of real or tangible personal property owned by the
Company or any of its Subsidiaries which has a net book value in excess of
$10,000. The Disclosure Statement lists all properties and assets used by the
Company or any of its Subsidiaries in connection with the operation of their
respective businesses which are held under any lease or under any conditional
sale or other title retention agreement to the extent the Company's or its
Subsidiaries' remaining obligations under any such lease or agreement exceed
$5,000 and such remaining obligations extend for one year or more from the date
hereof.
(e) For purposes of this Agreement, the term "Permitted
Encumbrances" shall mean the following Liens with respect to the properties and
assets of the Company or any of its Subsidiaries: (A) Liens for Taxes,
assessments or other governmental charges or levies not at the time delinquent
or thereafter payable without penalty or being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on the Company's books; (B) Liens of carriers,
warehousemen, mechanics, materialmen and landlords incurred in the ordinary
course of business for sums not overdue or being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on the Company's books; (C) Liens incurred in the
ordinary course of business in connection with workers' compensation,
unemployment insurance or other forms of governmental insurance or benefits, or
to secure performance of tenders, statutory obligations, leases and contracts
(other than for borrowed money) entered into in the ordinary course of business
or to secure obligations on surety or appeal bonds; and (D) purchase money
security interests or Liens on property acquired or held by the Company in the
ordinary course of business to secure the purchase price of such property or to
secure indebtedness incurred solely for the purpose of financing the
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acquisition of such property, provided that the security interests permitted
under clause (D) shall not exceed $20,000 at any time outstanding and shall be
listed on the Company Disclosure Statement.
4.12 REAL ESTATE.
(a) Neither the Company nor any of its Subsidiaries owns any
real estate, or has the option to acquire any real estate, other than the
premises identified in the Disclosure Statement (the "Real Estate"). The
Disclosure Statement accurately sets forth the street addresses of the Real
Estate. The Real Estate is not subject to any leases or tenancies. None of the
improvements comprising the Real Estate or the businesses conducted or proposed
to be conducted by the Company or its Subsidiaries thereon are in material
violation of any use or occupancy restriction, limitation, condition or covenant
of record or any zoning or building law, code, ordinance or public utility
easement or any other applicable law. No material expenditures are required to
be made for the repair or maintenance of any improvements on the Real Estate or
for the Real Estate to be used for its intended purposes.
(b) Neither the Company nor any of its Subsidiaries leases or
licenses any real estate other than the premises identified in the Disclosure
Statement as being so leased or licensed (the "Leased Premises"). The Leased
Premises are leased to the Company or its Subsidiaries pursuant to written
leases, true, correct and complete copies, including all amendments thereto, of
which have been provided to ADS or its counsel. None of the improvements
comprising the Leased Premises, or the businesses conducted by the Company or
its Subsidiaries thereon, are in violation of any building line or use or
occupancy restriction, limitation, condition or covenant of record or any zoning
or building law, code or ordinance, public utility or other easements or other
applicable law. No expenditures are required to be made for the repair or
maintenance of any improvements on the Leased Premises which exceed, in the
aggregate, $20,000 per year other than routine repairs and maintenance in the
ordinary course of business. The Company or its Subsidiaries have valid
leasehold interests in the Leased Premises, which leasehold interests are free
and clear of all Liens other than Permitted Encumbrances. Neither the Company
nor its Subsidiaries are in default under any material agreement relating to the
Leased Premises nor is any other party thereto in default thereunder. All
options in favor of the Company or its Subsidiaries to purchase any of the
Leased Premises, if any, are in full force and effect.
(c) There are no condemnation proceedings pending against the
Company or, to its knowledge, threatened with respect to any portion of the Real
Estate or the Leased Premises.
(d) The buildings and other facilities located on the Real
Estate and the Leased Premises are free of any patent structural or engineering
defects or, to the Company's knowledge, any material latent structural or
engineering defects.
4.13 CONTRACTS.
(a) Neither the Company nor any of its Subsidiaries is a party
to or bound by, and neither they nor their properties are subject to, any
contracts, agreements or arrangements required
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to be disclosed in a Form 10-K, Form 10-Q or Form 8-K under the Exchange Act
which is not filed as an exhibit to one or more of the Company Reports filed and
made publicly available prior to the date of this Agreement
(b) Neither the Company nor any of its Subsidiaries is a party
to, or bound by, any undischarged written or oral: (i) agreement or arrangement
to which the Company or its Subsidiaries is a party or by which the Company or
its Subsidiaries or any of their respective assets is bound which would be
required to be filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended September 30, 1999; (ii) except as set forth in the
Disclosure Statement, any agreement or arrangement obligating the Company or its
Subsidiaries to pay or receive, or pursuant to which the Company or its
Subsidiaries has previously paid or received, an amount in excess of $20,000
(excluding purchase and sale orders entered into by the Company or its
Subsidiaries in the ordinary course of business consistent with past practices);
(iii) except as set forth in the Disclosure Statement, any employment or
consulting agreement or arrangement involving an amount in excess of $15,000;
(iv) plan or contract or arrangement providing for bonuses, severance, options,
deferred compensation, retirement payments, profit sharing, medical and dental
benefits or the like covering employees of the Company, other than Plans,
Welfare Plans and Employee Benefit Plans (in each case as defined herein)
described in the Disclosure Statement; (v) agreement restricting in any manner
the Company's right to compete with any other person or entity, the Company's
right to sell to or purchase from any other person or entity, the right of any
other party to compete with the Company, or the ability of such person or entity
to employ any of the Company's employees; (vi) secrecy or confidentiality
agreements (except for secrecy and confidentiality agreements which (A) are
terminable at will at any time by the Company, (B) do not provide for any
payment of consideration and (C) do not contain any "standstill" provision or
similar restriction on the Company's ability to negotiate an acquisition of
another entity); (vii) except as set forth in the Disclosure Statement, any
distributorship, non-employee commission or marketing agent, representative or
franchise agreement providing for the marketing and/or sale of the products or
services of the Company or any of its Subsidiaries; (viii) agreement between the
Company and any of its affiliates or other Related Parties (as herein defined)
(excluding any such agreement disclosed in the Company Form 10-K); (ix) any
guaranty, performance, bid or completion bond, or surety or indemnification
agreement (excluding (A) any such item between the Company and its Subsidiaries;
(B) any indemnification agreement entered into in the Company's and/or its
Subsidiaries' ordinary course of business with a customer of the Company (such
ordinary course of business policy is set forth in all material respects in the
general performance agreements attached to the Disclosure Statement) and (C) any
indemnification obligation the Company has with respect to its officers,
directors, employees and/or other Persons under its Certificate of Incorporation
or Bylaws and the applicable provisions of the DGCL unless set forth in the form
of an agreement, then only to the extent set forth in the Disclosure Statement;
(x) requirements contract; (xi) except as set forth in the Disclosure Statement,
loan or credit agreement, pledge agreement, note, security agreement, mortgage,
debenture, indenture, factoring agreement or letter of credit relating to
borrowed money; (xii) except as set forth in the Disclosure Statement,
agreements with respect to compliance with Environmental Laws (as defined
herein); (xiii) any agreement relating to the ownership or control of any
interest in a partnership, corporation, limited liability company, joint venture
or other entity or similar arrangement other than as otherwise disclosed herein;
(xiv) except as set forth in the Disclosure Statement, any contract or agreement
containing change of control provisions; or (xv)
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any other agreement not entered into in the ordinary course of business. Neither
the Company nor any of its Subsidiaries are currently negotiating (and have not
entered into preliminary discussions with respect to) any transaction involving
an aggregate payment by the Company or its Subsidiaries and/or receipts to the
Company or its Subsidiaries in excess of $50,000 excluding purchase and sale
orders entered into by the Company or its Subsidiaries in the ordinary course of
business consistent with past practices.
(c) All agreements, leases, subleases and other instruments
referred to in this Section 4.13, are, pursuant to their terms, in full force
and binding upon the Company or its Subsidiaries, and the other parties thereto,
assuming the valid execution thereof by such other parties, except in each case
to the extent such failure would not cause a Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is and none of the other parties
thereto are in default of a material provision under any such agreement, lease,
sublease or other instrument. Neither the Company nor any of its Subsidiaries
has been notified in writing that the Company is in default under any such lease
agreement, sublease or other instrument, and no event has occurred, and it is
not aware of the existence of a condition which, with the lapse of time, the
giving of notice, or both, or the happening of any further event or condition,
would become a default of a material provision under any such agreement, lease,
sublease or other instrument by the Company or its Subsidiaries, or the other
contracting party. Neither the Company nor any of its Subsidiaries has released
or waived any right under any such agreement, lease, sublease or other
instrument other than in the ordinary course of business consistent with past
practices.
(d) Other than the Company Stock Option Plans, immediately
after the Closing, except as contemplated by this Agreement, neither the Company
nor any of its Subsidiaries will be bound by the terms of any stock option
agreement, registration rights agreement, stockholders agreement, management
agreement, consulting agreement or any other agreement relating to the equity or
management of the Company or its Subsidiaries.
4.14 INTELLECTUAL PROPERTY.
(a) The Disclosure Statement sets forth, for the Intellectual
Property (as defined herein) owned by the Company or its Subsidiaries, a
complete and accurate list of all United States and foreign patent, copyright,
trademark, service ▇▇▇▇, trade dress, domain name and other registrations and
applications, indicating for each the applicable jurisdiction, registration
number (or application number), and date issued or filed, and all material
unregistered Intellectual Property.
(b) All registered Intellectual Property of the Company and
its Subsidiaries is currently in compliance in all material respects with all
legal requirements (including timely filings, proofs and payments of fees), is
valid and enforceable, and is not subject to any filings, fees or other actions
falling due within 90 days after the Effective Time. Except as set forth in the
Disclosure Statement, no registered Intellectual Property of the Company or its
Subsidiaries has been or is now involved in any cancellation, dispute or
litigation, and, to the knowledge of the Company, no such action is threatened.
Except as set forth in the Disclosure Statement, no patent of the Company or its
Subsidiaries has been or is now involved in any interference, reissue,
re-examination or opposition proceeding.
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(c) The Disclosure Statement sets forth a complete and
accurate list of all licenses, sublicenses, consent, royalty or other agreements
concerning Intellectual Property to which the Company or any Subsidiary is a
party or by which any of their assets are bound (other than
generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license) (collectively, "License Agreements"). All of the Company's License
Agreements are valid and binding obligations of Company or its Subsidiaries that
are parties thereto, enforceable in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors' rights generally, and there exists no
event or condition which will result in a material violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default by
the Company or any of its Subsidiaries under any such License Agreement.
(d) The Company and its Subsidiaries own or have the valid
right to use all of the Intellectual Property necessary for the conduct of the
Company's and each of its Subsidiaries' business substantially as currently
conducted or contemplated to be conducted and for the ownership, maintenance and
operation of the Company's and its Subsidiaries' properties and assets. No
royalties, honoraria or other fees are payable by the Company or its
Subsidiaries to any third parties for the use of or right to use any
Intellectual Property, except as set forth in the Disclosure Statement.
(e) All Intellectual Property owned by the Company and its
Subsidiaries is described in the Disclosure Statement. The Company and its
Subsidiaries exclusively own, free and clear of all Liens or obligations to
license all such owned Intellectual Property, and the Company and its
Subsidiaries have executed all necessary agreements and performed all necessary
due diligence to make the foregoing statement. The Company and its Subsidiaries
have a valid, enforceable and, subject to obtaining required consents set forth
in the Disclosure Statement, transferable right to use all their licensed
Intellectual Property. Except as disclosed in the Disclosure Statement, the
Company and its Subsidiaries have the right to use all of their owned and
licensed Intellectual Property in all jurisdictions in which they conduct or
propose to conduct their businesses.
(f) The Company and each of its Subsidiaries have taken all
reasonable steps to maintain, police and protect the Intellectual Property which
it owns, including the proper policing activities and the execution of
appropriate confidentiality agreements and intellectual property and work
product assignments and releases. Except as disclosed in the Disclosure
Statement, (i) the conduct of the Company's and its Subsidiaries' businesses as
currently conducted or planned to be conducted does not infringe or otherwise
impair or conflict with ("Infringe") any Intellectual Property rights of any
third party, and the Intellectual Property rights of the Company and its
Subsidiaries are not being Infringed by any third party; and (ii) there is no
litigation or order pending or outstanding, to the knowledge of the Company,
threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property of the
Company and its Subsidiaries and the Company's and its Subsidiaries' use of any
Intellectual Property owned by a third party, and, to the knowledge of the
Company, there is no valid basis for the same.
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(g) Except as set forth in the Disclosure Statement, the
consummation of the transactions contemplated hereby will not result in the
alteration, loss or impairment of the validity, enforceability of the Company's
or any of its Subsidiaries' right to own or use any of the Intellectual
Property, nor will such transactions require the approval of any Governmental
Authority or third party in respect of any Intellectual Property.
(h) The Disclosure Statement lists all software (i) (other
than generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license) which are owned, licensed to or by the Company or any of its
Subsidiaries, leased to or by the Company or any of its Subsidiaries, or
otherwise used by the Company or any of its Subsidiaries, and identifies which
software is owned, licensed, leased or otherwise used, as the case may be; and
(ii) which are sold, licensed, leased or otherwise distributed by the Company or
any of its Subsidiaries to any third party, and identifies which Software is
sold, licensed, leased, or otherwise distributed, as the case may be. All
software owned by the Company or any of its Subsidiaries, and all software
licensed from third parties by the Company or any of its Subsidiaries, (i) is
free from any material defect, bug, virus, or programming, design or
documentation error; (ii) operates and runs in a reasonable and efficient
business manner; and (iii) conforms in all material respects to the
specifications and purposes thereof. The Company and its Subsidiaries have taken
all reasonable steps to protect the Company's and its Subsidiaries' rights in
their confidential information and trade secrets. Except as disclosed in the
Disclosure Statement, each employee, consultant and contractor who has had
access to proprietary Intellectual Property has executed an agreement to
maintain the confidentiality of such Intellectual Property has executed
appropriate agreements that are substantially consistent with the Company's
standard forms thereof (true and complete copies of which have been delivered to
ADS). Except under confidentiality obligations, there has been no material
disclosure of any of the Company's or its Subsidiaries' confidential information
or trade secrets to any third party.
(i) "Intellectual Property" means all United States and
foreign intellectual property, including all worldwide trademarks, service
marks, trade names, URLs and Internet domain names, designs, slogans, logos, and
trade dress, together with all goodwill related to the foregoing; patents,
copyrights, computer software, technology, trade secrets and other confidential
information, customer lists, know-how, processes, formulae, algorithms, models,
user interfaces, inventions, advertising and promotional materials, and all
registrations, applications, recordings, renewals, continuations,
continuations-in-part, divisions, reissues, reexaminations, foreign
counterparts, and other legal protections and rights related to the foregoing.
4.15 YEAR 2000 COMPLIANCE AND SECURITY.
(a) The Company's and its Subsidiaries' products, software,
services, servers, systems and other computer and telecom assets and equipment
("Systems"), when used in accordance with their associated documentation will at
all times (i) record, store, process, calculate and present calendar dates
falling before, on and after (and if applicable, spans of time including)
January 1, 2000; and (ii) create, calculate, recognize, accept, display, store,
retrieve, access, compare, sort, manipulate, or process any information
dependent on or relating to dates on or after January 1, 2000 or otherwise
provide use of dates or date-dependent or date-related data, including, but not
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limited to, century recognition, day-of-the week recognition, leap years, date
values and interfaces of date functionalities, without loss of accuracy,
functionality, data integrity and performance; and (iii) respond to two-digit
input in a way that resolves ambiguity as to century in a disclosed, defined and
pre-determined manner (the foregoing ability, "Year 2000 Compliant"). All of the
Company's and all of its Subsidiaries' Systems which are material to the
operation of the business of the Company and its Subsidiaries are Year 2000
Compliant.
(b) The Company and its Subsidiaries have taken and take all
reasonable actions to maintain, protect and police the integrity and security of
their Systems, including the protection and policing against all unauthorized
use of, access to, or "hacking" into the Systems, or the introduction into the
Systems of viruses or other unauthorized, damaging or corrupting elements.
4.16 DISTRIBUTORS AND CUSTOMERS. Listed in the Disclosure Statement are
the names of all of the current distributors of the products and services of the
Company and its Subsidiaries, their annual sales of such products and services
for the fiscal year ended September 30, 1999 and any exclusivity provisions.
Listed in the Disclosure Statement are the names of the ten largest customers
(by sales revenue) of the products of the Company and its Subsidiaries, their
annual sales of such products for the fiscal year ended September 30, 1999 and
any exclusivity provisions. The Company has previously furnished to ADS all
copies of all written agreements between the Company or any of its Subsidiaries
and any such distributors and customers. Except as disclosed on the Disclosure
Statement, neither the Company nor any of its Subsidiaries has received any
written notice that any such distributor or customer has ceased or will cease
being a distributor or customer, respectively, for the Company or any of its
Subsidiaries, or has substantially reduced, or will substantially reduce, its
volume of sales or purchases of products or services of the Company or its
Subsidiaries.
4.17 INSURANCE. The Company has delivered to ADS prior to the date of
this Agreement copies of all insurance policies which are owned by the Company
or its Subsidiaries or which name the Company or any of its Subsidiaries as an
insured (or loss payee), including without limitation those which pertain to the
Company's or its Subsidiaries' assets, employees or operations. All such
insurance policies are in full force and effect, and are valid and enforceable,
and all premiums due thereunder have been paid and cover against the risks of
the nature normally insured against by entities in the same or similar lines of
business in coverage amounts typically and reasonable carried by such entities.
Neither the Company nor any of its Subsidiaries have received written notice of
cancellation of any such insurance policies.
4.18 LITIGATION. Except as set forth in the Company Reports filed with
the SEC prior to the date hereof or as set forth in the Disclosure Statement,
(i) there is no litigation or proceeding, including, without limitation, any
arbitration proceeding, in law or in equity, and there are no proceedings or
governmental investigations before any commission or other administrative
authority, pending or, to the Company's knowledge, threatened against the
Company or any of its Subsidiaries, which, if adversely determined, is
reasonably likely to have, either individually or in the aggregate, a Company
Material Adverse Effect; (ii) there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator applicable to the Company or any of its Subsidiaries having, or
which is reasonably likely to have, either individually or in the aggregate, a
Company Material Adverse Effect; and (iii) there is no action, suit,
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proceeding or investigation pending or, to the Company's knowledge, threatened
against the Company, which seeks to restrain, enjoin or delay the consummation
of the Merger or any of the other transactions contemplated hereby or which
seeks damages in connection therewith, and no injunction of any type referred to
in Section 6.1(c) has been entered or issued.
4.19 WARRANTIES. Except as set forth in the Disclosure Statement,
neither the Company nor any of its Subsidiaries has made any oral or written
warranties with respect to the quality or absence of defects of its products or
services which they have sold or performed which are in force as of the date
hereof. There are no claims pending or to the Company's knowledge, threatened
against the Company or any of its Subsidiaries with respect to the quality of or
absence of defects in such products or services nor are there any facts known to
the Company relating to the quality of or absence of defects in such products or
services which, if known by a potential claimant or governmental authority,
would reasonably give rise to a claim or proceeding. The Company's warranty
policy is generally described in the Disclosure Statement. The Company has no
knowledge of or reason to believe that the percentage of warranty claims for
products sold or services rendered by the Company and its Subsidiaries prior to
the Closing Date will exceed historical levels.
4.20 PRODUCTS LIABILITY. Neither the Company nor any of its
Subsidiaries has received any written notice relating to, nor does the Company
have knowledge of any facts or circumstances which could give rise to, any claim
involving any product manufactured, serviced, produced, distributed or sold by
or on behalf of the Company or its Subsidiaries resulting from an alleged defect
in design, manufacture, materials or workmanship, or any alleged failure to
warn, or from any breach of implied warranties or representations, any of which
would have a Company Material Adverse Effect, other than notices or claims that
have been settled or resolved by the Company or its Subsidiaries prior to the
date of this Agreement.
4.21 TAXES.
(a) There have been properly completed and filed on a timely
basis and in correct form all Returns required to be filed by the Company and/or
any of its Subsidiaries on or before the date hereof and will be properly
completed and filed on a timely basis and in correct form all Returns required
to be filed by Company and/or any of its Subsidiaries with respect to any period
ending with or before, or including the period prior to, the Effective Time. The
foregoing Returns are, or will be, correct and complete in all material
respects. Except as set forth in the Disclosure Statement, an extension of time
within which to file any Return which has not been filed has not been requested
or granted.
(b) With respect to all amounts in respect of Taxes imposed
upon the Company or any of its Subsidiaries, or for which the Company or any of
its Subsidiaries is or could be liable, whether to taxing authorities (as, for
example, under law) or to other persons or entities (as, for example, under tax
allocation agreements), with respect to all taxable periods or portions of
periods ending on or before the Effective Time, (i) all applicable tax laws and
agreements have been, or will be, complied with in all material respects, and
(ii) all amounts required to be paid and reported by the Company or its
Subsidiaries, to taxing authorities or others, on or before the Effective Time,
have been, or will be, paid and any Taxes accrued but not due and payable as of
the Effective Time
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have been accrued or otherwise reserved for in financial statements contained in
the most recent Company Report or will be reserved for in the financial
statements to be prepared with respect to the period beginning after the period
covered by the most recent Company Report and ending with or before, or
including the period prior to, the Effective Time. No Taxes have been (or will
prior to the Closing Date be) recorded by the Company or any of its Subsidiaries
other than in the ordinary course of business. There are no Liens filed against
any asset of the Company or any of its Subsidiaries resulting from the failure
to pay any Tax when due.
(c) No material issues have been raised (and are currently
pending) by any taxing authority in connection with any of the Returns. No
waivers of statutes of limitation with respect to the Returns have been given by
the Company or any of its Subsidiaries (or with respect to any Return which a
taxing authority has asserted should have been filed by the Company or any of
its Subsidiaries) which waivers are still in effect. The Disclosure Statement
sets forth, for the past seven years, the years for which examinations or audits
of Minnesota or Delaware state taxes and federal income tax returns have been
completed, those years for which examinations or audits are presently being
conducted, and those years for which such returns will be required but are not
yet due to be filed and have not yet been filed. All deficiencies asserted or
assessments made as a result of any examinations have been fully paid, or are
fully reflected as a liability in the financial statements contained in the
Company Report, or are being contested and an adequate reserve therefor has been
established and is fully reflected as a liability in the financial statements
contained in the most recent Company Report. Neither the Company nor any of its
Subsidiaries has entered into any closing agreement with the Internal Revenue
Service under Section 7121 of the Code or with any state taxing authority under
a similar state tax law provision. No consent under Section 341(f) of the Code
has been filed with respect to the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries has agreed to, or is required to make,
any adjustment under Section 481(a) of the Code.
(d) The unpaid Taxes of the Company or any of its Subsidiaries
do not materially exceed the reserve for tax liability (excluding any reserve
for deferred Taxes established to reflect timing differences between book and
tax income) set forth or included in the financial statements included in the
most recent Company Report, as adjusted for the passage of time through the
Closing. The Company and its Subsidiaries will not be liable for any material
amount of penalties or interest with respect to Taxes reported or required to
have been reported on any Returns which have been filed or were required to have
been filed through the Closing.
(e) Neither the Company nor any of its Subsidiaries is or at
any time has been a party to or bound by (nor will the Company or any of its
Subsidiaries become a party to or bound by) any tax indemnity, tax sharing or
tax allocation agreement.
(f) All material elections with respect to Taxes affecting the
Company or any of its Subsidiaries that are currently effective as of the date
hereof that are not reflected in the Company's Returns are set forth in the
Disclosure Statement.
(g) There are no challenges on appeals pending regarding the
amount of Taxes on, or the addressed valuation of, the Real Estate or, to the
Company's knowledge, the Leased
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Premises, and no special arrangements or agreements exist with any governmental
authority with respect thereto (provided, that the representations and
warranties contained in this Section 4.21(h) shall not be deemed to be breached
by any prospective general increase in real estate taxes.)
(h) There is no assessment for Taxes (in addition to the
normal, annual general real estate tax assessment) pending against the Company
or, to the Company's knowledge, threatened with respect to any portion of the
Real Estate, or to the extent the Company or its Subsidiaries is liable for
payment of the Leased Premises.
4.22 ERISA.
(a) The Disclosure Statement contains a list and brief
description of all "employee pension benefit plans" (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Pension Plans"), "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA and referred to herein as a "Welfare
Plan") and all other Benefit Plans (defined herein as any Pension Plan, Welfare
Plan and any other plan, fund, program, arrangement or agreement to provide
employees, leased employees, directors, independent contractors, officers or
agents of any Commonly Controlled Entity (as defined herein) with medical,
health, life, bonus, stock (option, ownership or purchase), deferred
compensation, severance, salary continuation, vacation, sick leave, fringe,
incentive insurance or other benefits) sponsored, maintained, or contributed to,
or required to be contributed to, by the Company or any of its Subsidiaries or
any other Person that, together with the Company at any time during the last six
years, is or was treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code (the Company and each such other Person, a "Commonly Controlled
Entity"). The Company has delivered or made available to ADS true, complete and
correct copies of (i) each Benefit Plan (or, in the case of any unwritten
Benefit Plans, descriptions thereof); (ii) the most recent annual report on Form
5500 filed with the Internal Revenue Service with respect to each Benefit Plan
(if any such report was required); (iii) the most recent summary plan
description for each Benefit Plan for which such summary plan description is
required; (iv) each trust agreement and group annuity contract relating to any
Benefit Plan; and (v) a list of all assets and liabilities of, allocated to or
accounted for separately with respect to every Benefit Plan (including insurance
contracts associated with every Benefit Plan regardless of whether any current
cash value exists). Each Benefit Plan has been established, funded, maintained
and administered in all material respects in accordance with its terms and is in
compliance with the applicable provisions of ERISA, the Code, all other
applicable laws and all applicable collective bargaining agreements except where
the failure to comply would not be reasonably expected to result in a Company
Material Adverse Effect.
(b) All Pension Plans have been the subject of favorable and
up-to-date (through any applicable remedial amendment period) determination
letters from the Internal Revenue Service, or a timely application therefor has
been or will be filed, to the effect that such Pension Plans are qualified and
exempt from federal income taxes under Section 401(a) and 501(a), respectively,
of the Code, and no such determination letter has been revoked nor has any such
Pension Plan been amended since the date of its most recent determination letter
or application therefor in any respect that would adversely affect its
qualification or increase its costs.
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(c) Except as provided in the Disclosure Statement, neither
the Company, nor any of its Subsidiaries, nor any Commonly Controlled Entity has
adopted or been obligated to contribute to any "defined benefit pension plan" as
defined in Section 3(35) of ERISA subject to Title IV of ERISA in the five years
preceding the date hereof.
(d) Neither the Company, nor any of its Subsidiaries, nor any
Commonly Controlled Entity has been required at any time within the five
calendar years preceding the date hereof or is required currently to contribute
to any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA ) or has
withdrawn from any multiemployer plan where such withdrawal has either: (i)
resulted or would result in any "withdrawal liability" (within the meaning of
Section 4201 of ERISA) that has not been fully paid; or (ii) engaged in a
transaction that might have resulted in withdrawal liability but for the
application of Section 4204 of ERISA.
(e) With respect to any Welfare Plan, (i) no such Welfare Plan
is funded through a "welfare benefits fund", as such term is defined in Section
419(e) of the Code, (ii) no such Welfare Plan is self-insured, and (iii) each
such Welfare Plan that is a "group health plan", as such term is defined in
Section 5000(b)(1) of the Code, complies with the applicable requirements of
Section 4980B(f) of the Code and the Health Insurance Portability and
Accountability Act of 1996.
(f) Neither the Company, nor any of its Subsidiaries, nor any
Commonly Controlled Entity nor any Person acting on behalf of the Company, its
Subsidiaries or any Commonly Controlled Entity has, in contemplation of any
corporate transaction involving ADS, issued any written communication to, or
otherwise made or entered into any legally binding commitment with, any
employees of the Company, any of its Subsidiaries or of any Commonly Controlled
Entity to the effect that, following the date hereof, (i) any benefits or
compensation provided to such employees under existing Benefit Plans or under
any other plan or arrangement will be enhanced, (ii) any new plans or
arrangements providing benefits or compensation will be adopted, (iii) any
Benefit Plans will be continued for any period of time or cannot be amended or
terminated at any time or for any reason, or (iv) any plans or arrangements
provided by ADS will be made available to such employees.
(g) Neither the Company, nor any of its Subsidiaries, nor any
Commonly Controlled Entity has ever promised or been obligated to provide former
employees with coverage or benefits under Benefit Plans, other than as required
by Section 4980B of the Code.
(h) All contributions or premiums owed by the Company, any of
its Subsidiaries and Commonly Controlled Entities with respect to Benefit Plans
under law, contract or otherwise have been made in full and on a timely basis
and the Company, its Subsidiaries and Commonly Controlled Entities are not
obligated to contribute with respect to any Benefit Plan that involves a
retroactive contribution, assessment or funding waiver arrangement. All
administrative costs attributable to Benefit Plans have been paid when due.
(i) No Pension Plan or Welfare Plan or any "fiduciary" or
"party-in-interest" (as such terms are respectively defined by Sections 3(21)
and 3(14) of ERISA) thereto has engaged in
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a transaction prohibited by Section 406 of ERISA or 4975 of the Code for which a
valid exception is not available.
(j) There are no pending or threatened likely claims,
proceedings, disputes, lawsuits, arbitrations or audits asserted or instituted
against any Benefit Plan, any fiduciary (as defined by Section 3(21) of ERISA)
thereto, the Company, any of its Subsidiaries, any Commonly Controlled Entity or
any employee or administrator thereof in connection with the existence,
operation or administration of a Benefit Plan, other than routine claims for
benefits.
(k) Nothing in this Agreement or the transactions contemplated
hereunder will: (i) cause the termination or repricing of any insurance contract
to which the Company, any of its Subsidiaries or a Commonly Controlled Entity or
Benefit Plan is a party to the purposes of providing employee benefits; (ii)
except as described in the Disclosure Statement, trigger a right of any employee
of the Company, any of its Subsidiaries, or any Commonly Controlled Entity to
accelerate, accrue or receive any additional benefits, severance, deferred
compensation or retirement benefits; or (iii) cause any early withdrawal or
premature termination penalty with respect to any asset held in connection with
any Benefit Plan.
(l) Neither the Company, nor any of its Subsidiaries, nor any
Commonly Controlled Entity maintains any unfunded plan of deferred compensation
or post-retirement benefits.
4.23 LABOR MATTERS. Except for events that occur after the date hereof
which are disclosed in writing by the Company to ADS, (a) there is no labor
strike, dispute, slowdown, work stoppage or lockout pending or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries, and,
during the past three years, there has not been any such action; (b) except as
set forth in the Disclosure Statement, there are no union claims to represent
the employees of the Company or any of its Subsidiaries, (c) except as set forth
in the Disclosure Statement, neither the Company nor any of its Subsidiaries is
a party to or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of the Company or
any of its Subsidiaries; (d) except as set forth in the Disclosure Statement,
none of the employees of the Company or any of its Subsidiaries are represented
by any labor organization, and the Company does not have any knowledge of any
current union organizing activities among the employees of the Company or any of
its Subsidiaries, nor does any question concerning representation exist with
respect to such employees; (e) neither the Company nor any of its Subsidiaries
is delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them to the date of this Agreement or amounts required to be reimbursed to such
employees; (f) except as set forth in the Disclosure Statement, upon termination
of the employment of any of the employees of the Company or any of its
Subsidiaries after the Closing, neither the Company nor any of its Subsidiaries
will be liable to any of its employees for severance pay, except as otherwise
required by federal law; (g) except as set forth in the Disclosure Statement,
the employment of each of the Company's or its Subsidiaries' employees is
terminable at will without cost to the Company or any of its Subsidiaries except
for payments disclosed on the Disclosure Statement or required under the Plans,
Welfare Plans and Employee Benefit Plans and payment of accrued salaries or
wages and vacation pay; (h) the Disclosure
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Statement contains a true and complete list of all employees who are employed by
the Company or any of its Subsidiaries as of March 31, 2000, and said list
correctly reflects their salaries, wages and other compensation (other than
benefits under the Plans, Welfare Plans and Employee Benefit Plans).
4.24 ENVIRONMENTAL MATTERS.
(a) The Company has obtained all licenses, Permits and other
authorizations under Environmental Laws (as hereafter defined) required for the
conduct and operation of its business and is in compliance with the terms and
conditions contained therein and is in compliance with other provisions of
applicable Environmental Laws, except where the failure to obtain such licenses,
Permits and other authorizations or the non-compliance with the terms and
conditions contained therein or the non-compliance with other provisions of
applicable Environmental Laws would not individually or in the aggregate create
a Company Material Adverse Effect.
(b) To the Company's knowledge, there is no condition on any
property currently or formerly owned or leased by the Company that would create
liability for the Company under Environmental Laws, except for liability that
would not singly or in the aggregate create a Company Material Adverse Effect.
(c) To the Company's knowledge, there is no condition on any
other property owned by any third party that would create liability for the
Company under Environmental Laws, except for liability that would not singly or
in the aggregate create a Company Material Adverse Effect.
(d) There are no non-compliance orders or notices of violation
(collectively "Notices"), claims, suits, actions, judgments, penalties, fines,
or administrative or judicial investigations or proceedings (collectively
"Proceedings") pending or, to the Company's knowledge, threatened against or
involving the Company or its business, operations, properties or assets, issued
by any Governmental Authority with respect to any Environmental Laws or licenses
issued to the Company thereunder in connection with, related to or arising out
of the ownership by the Company of its properties or assets or the operation of
its business, which have not been resolved in a manner that would not impose any
obligation, burden or continuing liability on ADS or the Company in the event
that the transactions contemplated by this Agreement are consummated, or which
could have a Material Adverse Effect on the Company.
(e) The Company does not use, nor has it used, any Aboveground
Storage Tanks (as defined in clause (g) below) or Underground Storage Tanks (as
defined in clause (g) below), and there are not now any Underground Storage
Tanks beneath any real property currently owned or leased by the Company that
are required to be registered under applicable Environmental Laws.
(f) The Disclosure Statement identifies (i) all environmental
audits, assessments or occupational health studies undertaken by the Company or
its agents or undertaken by any Governmental Authority and known to the Company,
relating to the Company or any real property currently or previously owned or
leased by the Company; (ii) the results of any ground, water or soil
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monitoring undertaken by the Company or undertaken by any Governmental Authority
and known to the Company relating to the Company or any real property currently
or previously owned or leased by the Company; and (iii) all written
communications between the Company and any Governmental Authority arising under
or related to Environmental Laws.
(g) For purposes of this Section 4.24, the following terms
shall have the meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 ET SEQ., as amended, of RCRA (as defined in this
clause (g)), or any applicable state or local statute, law, ordinance, code,
rule, regulation, order ruling, or decree governing Aboveground Storage Tanks.
"Company" means the Company and its Subsidiaries.
"Environmental Laws" means all federal, state, regional or
local statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings, and changes or ordinances or judicial or administrative
interpretations thereof, or similar laws of foreign jurisdictions where the
Company conducts business, currently in existence any of which govern or relate
to pollution, protection of the environment, public health and safety, air
emissions, water discharges, hazardous or toxic substances, solid or hazardous
waste or occupational health and safety, as any of these terms are or may be
defined in such statutes, laws, rules, regulations, codes, orders, plans,
injunctions, decrees, rulings and changes or ordinances, or judicial or
administrative interpretations thereof, including, without limitation: the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C.
ss.9601, ET SEQ. (collectively "CERCLA"); the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and subsequent
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. ss.6901 ET SEQ.
(collectively "RCRA"); the Hazardous Materials Transportation Act, as amended,
49 U.S.C. ss.1801, ET SEQ.; the Clean Water Act, as amended, 33 U.S.C. ss.1311,
ET SEQ.; the Clean Air Act, as amended (42 U.S.C. ss.7401-7642); the Toxic
Substances Control Act, as amended, 15 U.S.C. ss.2601 ET SEQ.; the Federal
Insecticide, Fungicide, and Rodenticide Act as amended, 7 U.S.C. ss.136-136y
("FIFRA"); the Emergency Planning and Community Right-to-Know Act of 1986 as
amended, 42 U.S.C. ss.11001, ET SEQ. (Title III of ▇▇▇▇) ("EPCRA"); the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651, ET
SEQ. ("OSHA"); Chapters 115, 168, and 514, Minnesota Statutes; and Minnesota
common law.
"Underground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 ET SEQ., as amended, of RCRA, or any applicable state
or local statute, law, ordinance, code, rule, regulation, order ruling, or
decree governing Underground Storage Tanks.
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4.25 INTERIM CONDUCT OF BUSINESS. Except as otherwise contemplated by
this Agreement, since December 31, 1999 neither the Company nor any of its
Subsidiaries has:
(a) sold, assigned, leased, exchanged, transferred or
otherwise disposed of any portion of its assets or property, except for sales of
Inventory and cash applied in the payment of the Company's or its Subsidiaries'
liabilities in the usual and ordinary course of business in accordance with the
Company's or its Subsidiaries' past practices;
(b) written off any asset outside the ordinary course of
business which has a net book value which exceeds $25,000 in the aggregate in
value, or written off any amounts in the ordinary course of business in excess
of reserves which have been established for such purpose, which reserves are
adequate in accordance with GAAP applied on a consistent basis;
(c) suffered any casualty, damage, destruction or loss, or
interruption in use, of any asset, property or portion of Inventory (whether or
not covered by insurance), on account of fire, flood, riot, strike or other
hazard or Act of God;
(d) waived any right arising out of any agreement other than
in the ordinary course of business;
(e) made (or committed to make) capital expenditures in an
amount which exceeds $100,000 for any item or $225,000 in the aggregate;
(f) made any change in accounting methods or principles which
are required to be disclosed in the Company's financial statements in accordance
with GAAP;
(g) borrowed any money or issued any bonds, debentures, notes
or other corporate securities (other than equity securities), including without
limitation, those evidencing borrowed money;
(h) except as described in the Disclosure Statement, entered
into any transaction with, or made any payment to, or incurred any liability to,
any Related Party (as defined herein) (except for payment of salary and other
customary expense reimbursements made in the ordinary course of business to
Related Parties who are employees of the Company or its Subsidiaries);
(i) increased the compensation payable to any employee, except
for normal pay increases in the ordinary course of business consistent with past
practices;
(j) made any payments or distributions to its employees,
officers or directors except such amounts as constitute currently effective
compensation for services rendered, or reimbursement for reasonable ordinary and
necessary out-of-pocket business expenses;
(k) paid or incurred any management or consulting fees, or
engaged any consultants, except in the ordinary course of business;
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(l) hired any employee who has an annual salary in excess of
$75,000;
(m) terminated any employee having an annual salary or wages
in excess of $50,000;
(n) adopted any new Plan, Welfare Plan or Employee Benefit
Plan;
(o) issued or sold any securities of any class, except for the
exercise of options to purchase Company Common Stock under the Company Option
Plans;
(p) paid, declared or set aside any dividend or other
distribution on its securities of any class, or purchased, exchanged or redeemed
any of its securities of any class; or
(q) without limitation by the enumeration of any of the
foregoing, entered into any transaction other than in the usual and ordinary
course of business in accordance with past practices.
Notwithstanding the foregoing, the Company shall not be deemed to have breached
the terms of this Section 4.25 by entering into this Agreement or by
consummating the transactions contemplated hereby.
4.26 AFFILIATED TRANSACTIONS. Except as disclosed in any Company Report
filed with the SEC prior to the date of this Agreement and the Disclosure
Statement, since December 31, 1999, neither the Company nor any of its
Subsidiaries has been a party to any transactions (other than employee
compensation and other ordinary incidents of employment) with a "Related Party."
For purposes of this Agreement, the term "Related Party" shall mean: any present
officer or director, 10% stockholder (including any officers or directors
thereof) or present affiliate of the Company or any of its Subsidiaries, any
present or former known spouse of any of the aforementioned persons or any trust
or other similar entity for the benefit of any of the foregoing Persons. Prior
to the Closing, all amounts due and owing to or from the Company or its
Subsidiaries by or to any of the Related Parties (excluding employee
compensation and other incidents of employment) shall be paid in full.
4.27 MATERIAL ADVERSE CHANGE. Since December 31, 1999 to the date of
this Agreement, there has not been any material adverse change in the business,
operations, assets, liabilities, financial condition or prospects of the Company
or its Subsidiaries, taken as a whole; provided, that no material adverse change
will be deemed to occur solely as a result of fluctuations in the trading price
of Company Common Stock.
4.28 INAPPROPRIATE PAYMENTS. Neither the Company, its Subsidiaries nor
any of their respective officers, directors, principal stockholders, employees,
agents or representatives has made, directly or indirectly, with respect to the
Company, its Subsidiaries or their respective business activities, any bribes or
kickbacks, illegal political contributions, payments from corporate funds not
recorded on the books and records of the Company or its Subsidiaries, payments
from corporate funds to governmental officials, in their individual capacities,
for the purpose of affecting their
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action or the action of the government they represent, to obtain favorable
treatment in securing business or licenses or to obtain special concessions, or
illegal payments from corporate funds to obtain or retain business.
4.29 ABSENCE OF INDEMNIFIABLE CLAIMS, ETC. There are no pending claims
and no facts known to the Company that would reasonably entitle any director,
officer or employee of the Company or its Subsidiaries to indemnification by the
Company or its Subsidiaries under applicable law, the Articles or Certificate of
Incorporation or By-laws (or equivalent organizational documents) of the Company
or its Subsidiaries or any insurance policy maintained by the Company or its
Subsidiaries.
4.30 NO UNDISCLOSED LIABILITIES. There are no material liabilities or
obligations of any nature (whether accrued, absolute or contingent) of the
Company or its Subsidiaries other than (i) liabilities disclosed or provided for
in the most recent financial statements contained in the Company Reports; (ii)
liabilities which, individually or in the aggregate, are not material to the
Company or its Subsidiaries, taken as a whole; (iii) liabilities under this
Agreement (or contemplated hereby) or disclosed in the Disclosure Statement; and
(iv) liabilities incurred since December 31, 1999 in the ordinary course of
business and consistent with past practices.
4.31 NO BROKERS. Except as set forth in the Disclosure Statement,
Neither the Company nor any of its Subsidiaries has entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company or ADS, Merger Sub or their respective Subsidiaries to
pay any finder's fee, brokerage or agent's commissions or other like payments in
connection with negotiations leading to this Agreement or the consummation of
the transactions contemplated hereby.
4.32 TAX REORGANIZATION. Neither the Company nor any of its
Subsidiaries has taken or failed to take any action which would prevent the
Merger from constituting a reorganization within the meaning of Section 368(a)
of the Code.
4.33 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of ▇▇▇▇ Capital Partners to the effect that, as of the date of such opinion, the
Merger Consideration to be received by the stockholders of the Company pursuant
to the Merger is fair to such stockholders from a financial point of view.
4.34 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company or any of its affiliates, directors, officers,
employees, agents or representatives in writing specifically for inclusion or
incorporation by reference in, and which is included or incorporated by
reference in, (i) the Form S-4 (as defined in Section 5.7 of this Agreement) or
any amendment or supplement thereto; (ii) the Company Proxy Statement; (iii) the
ADS Proxy Statement; or (iv) any other documents filed or to be filed by the
Company with the SEC or any other Governmental Authority in connection with the
transactions contemplated hereby, will, at the respective times such documents
are filed, and, in the case of the Form S-4 or any amendment or supplement
thereto, when the same becomes effective, at the date of the Company Stockholder
Meeting and at the Effective Time, and, in the case of the Company Proxy
Statement or any amendment or supplement thereto,
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at the time of mailing of the Company Proxy Statement to Company's stockholders
or at the time of the Company Stockholder Meeting or any other meeting of the
Company's stockholders to be held in connection with the Merger, and, in the
case of the ADS Proxy Statement or any amendment or supplement thereto, at the
time of the ADS Stockholder Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the Company
Stockholder Meeting. The Form S-4 (to the extent that the Company Proxy
Statement constitutes the prospectus thereunder) and the Company Proxy Statement
will comply as to form in all material respects with the applicable provisions
of the Securities Act, the Exchange Act and the respective rules and regulations
under any such Act.
4.35 NO EXISTING DISCUSSIONS. As of the date hereof, the Company is not
engaged, directly or indirectly, in any negotiations or discussions with any
other party with respect to an Alternative Proposal (as hereinafter defined).
4.36 TAKEOVER STATUTES. The Board of Directors of the Company has
approved this Agreement and the Company Voting Agreement, and such Company
approvals are sufficient to render inapplicable to this Agreement, the Company
Voting Agreement and the transactions contemplated hereby and thereby the
provisions of Section 203 of the DGCL. No other "fair price," "moratorium," or
"control share acquisition" or other similar antitakeover, statute or regulation
enacted under state or federal laws of the United States, applicable to the
Company or any of its Subsidiaries, is applicable to the Merger or other
transactions contemplated hereby.
ARTICLE V
COVENANTS
5.1 ALTERNATIVE PROPOSALS.
(a) Prior to the Effective Time, the Company agrees that
neither it nor any of its Subsidiaries shall, and it shall direct and use its
reasonable best efforts to cause its officers, directors, employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of the Subsidiaries) not to, (i) initiate or
solicit, directly or indirectly, or encourage (including by way of furnishing
information) or take any other action to facilitate knowingly, any inquiries or
the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to the stockholders of the Company) with
respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, the Company or its Subsidiaries (any such proposal or
offer, other than a proposal or offer made by ADS, any ADS Subsidiary, or any
officer, director, employee, agent, or representative thereof, being hereinafter
referred to as an "Alternative Proposal"), (ii) engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any Person relating to an Alternative Proposal, or otherwise
facilitate any effort or attempt to make or implement an Alternative Proposal;
or (iii)
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subject to subsection (b) of this Section 5.1, enter into any agreement or
understanding with any Person other than ADS and Merger Sub with the intent to
effect any Alternative Proposal; PROVIDED that nothing contained in this Section
5.1 shall prohibit the Company or the Board of Directors of the Company (the
"Company Board"), (A) to the extent applicable, from complying with Rule 14d-9
and Rule 14e-2 promulgated under the Exchange Act with respect to an Alternative
Proposal; or (B) to the extent required by their fiduciary duties under
applicable law, from providing information to, or participating in discussions
or negotiations with, any party that makes an unsolicited inquiry with respect
to the Company if the Company Board reasonably believes such party may propose
an Alternative Proposal on terms that are superior, from a financial point of
view, to the terms of the Merger for the stockholders of the Company and that
such Alternative Proposal is reasonably capable of being completed, as
determined by the Company Board in good faith after consultation with its
financial advisers. The Company will immediately give written notice to ADS of
its receipt of any Alternative Proposal or inquiry with respect to making an
Alternative Proposal, and prior to providing any requested information or
entering into discussions or negotiations with such Person, require such Person
to enter into with the Company a confidentiality agreement no more favorable to
such Person than the Confidentiality Agreement dated March 3, 2000 between ADS
and the Company. Nothing contained herein shall be construed to prohibit the
Company or the Company Board from making any disclosure to its stockholders
which, in the judgment of the Company Board as advised by counsel, may be
required by applicable law in connection with any such proposal or offer.
(b) Except as set forth in this Section 5.1, the Company Board
shall not approve or recommend, or cause the Company to enter into any agreement
with respect to, any Alternative Proposal. Notwithstanding the foregoing, if the
Company Board, after consultation with and based upon the advice of independent
legal counsel, determines in good faith that it is necessary to do so in order
to comply with its fiduciary duties to stockholders under applicable law, the
Company Board may approve or recommend a Superior Proposal (as defined below) or
cause the Company to enter into an agreement with respect to, a Superior
Proposal, but in each case only after providing prompt written notice to ADS
advising that the Company Board has determined to approve or recommend, or
authorize the Company to enter into an agreement with respect to, a Superior
Proposal. For purposes of this Agreement, a "Superior Proposal" means an
Alternative Proposal on terms which the Company Board determines in its good
faith judgment to be more favorable to the Company's stockholders than the
Merger.
5.2 INTERIM OPERATIONS.
(a) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, except as set forth in the Disclosure Statement, or unless ADS
has consented in writing thereto (which consent shall not be unreasonably
withheld), the Company shall, and shall cause each of its Subsidiaries to:
(i) conduct their respective operations according to
their usual, regular and ordinary course in substantially the same
manner as heretofore conducted;
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(ii) to the extent consistent with their respective
businesses, use commercially reasonable efforts to preserve intact
their respective business organizations and goodwill, keep available
the services of their respective officers and employees and maintain
satisfactory relationships with those persons having business
relationships with them;
(iii) not amend their respective Articles or
Certificates of Incorporation or By-Laws or comparable governing
instruments;
(iv) promptly notify ADS of any Company Material
Adverse Effect, any litigation or governmental complaints,
investigations or hearings (or communications indicating that the same
may be contemplated), or the breach of any representation or warranty
contained herein;
(v) promptly deliver to ADS true and correct copies
of any report, statement or schedule filed by the Company with the SEC
subsequent to the date of this Agreement;
(vi) not (A) except pursuant to the exercise of
options, warrants, conversion rights and other contractual rights
existing on the date hereof and disclosed pursuant to this Agreement,
issue any shares of its capital stock, effect any stock split or
otherwise change its capitalization as it existed on the date hereof;
(B) grant, confer or award any option, warrant, conversion right or
other right not existing on the date hereof to acquire any shares of
its capital stock; (C) increase any compensation or enter into or amend
any employment agreement with any of its present or future officers,
directors or employees; (D) grant any severance or termination package
to any employee or consultant, except to the extent consistent with
past practices; (E) hire any new employee who shall have, or terminate
the employment of any employee who has, an annual salary in excess of
$50,000; or (F) adopt any new employee benefit plan (including any
stock option, stock benefit or stock purchase plan) or amend any
existing employee benefit plan in any material respect, except for
changes which are less favorable to participants in such plans;
(vii) not (A) declare, set aside or pay any dividend
or make any other distribution or payment with respect to any shares of
its capital stock or other ownership interests; or (B) directly or
indirectly, redeem, purchase or otherwise acquire any shares of its
capital stock, or make any commitment for any such action;
(viii) not enter into any agreement or transaction, or
agree to enter into any agreement or transaction, outside the ordinary
course of business, including, without limitation, any transaction
involving a merger, consolidation, joint venture, license agreement,
partial or complete liquidation or dissolution, reorganization,
recapitalization, restructuring or a purchase, sale, lease or other
disposition of a portion of assets or capital stock;
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(ix) not incur any indebtedness for borrowed money or
guarantee any such indebtedness except in the ordinary course of
business consistent with past practice or issue or sell any debt
securities or warrants or rights to acquire any debt securities of
others;
(x) continue to make regularly scheduled payments on
its existing indebtedness, leases and other obligations;
(xi) not make any loans, advances or capital
contributions to, or investments in, any other Person in excess of
$10,000;
(xii) except as described in the Disclosure Statement,
not make or commit to made any capital expenditures in excess of
$100,000 individually or $225,000 in the aggregate;
(xiii) not apply any of its assets to the direct or
indirect payment, discharge, satisfaction or reduction of any amount
payable directly or indirectly to or for the benefit of any affiliate
or Related Party or enter into any transaction with any affiliate or
Related Party (except for payment of salary and other customary expense
reimbursements made in the ordinary course of business to Related
Parties who are employees, directors or consultants of the Company or
its Subsidiaries);
(xiv) not voluntarily elect to alter the manner of
keeping its books, accounts or records, or change in any manner the
accounting practices therein reflected, except for changes in
accounting laws which affect all companies in the business of the
Company generally and those indicated by good accounting practices;
(xv) not grant or make any mortgage or pledge or
subject itself or any of its properties or assets to any Lien, charge
or encumbrance of any kind; and
(xvi) maintain insurance on its tangible assets and
its businesses in such amounts and against such risks and losses as are
currently in effect.
(b) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, except as set forth in the Disclosure Statement, or unless the
Company has consented in writing thereto (which consent shall not be
unreasonably withheld), ADS shall, and shall cause each of its Subsidiaries to:
(i) conduct their respective operations according to
their usual, regular and ordinary course in substantially the same
manner as heretofore conducted;
(ii) promptly deliver to the Company true and correct
copies of any report, statement or schedule filed by ADS with the SEC
subsequent to the date of this Agreement;
(iii) promptly notify the Company of any ADS Material
Adverse Effect, any litigation or governmental complaints,
investigations or hearings (or communications
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indicating that the same may be contemplated), or the breach of any
representation or warranty contained herein;
(iv) not take any action that would result in a
failure to maintain the trading of ADS Common Stock on the NASDAQ;
(v) with respect to ADS only (and not its
Subsidiaries), not (A) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its
capital stock or other ownership interests; or (B) directly or
indirectly, redeem, purchase or otherwise acquire any shares of its
capital stock, or make any commitment for any such action; and
(vi) to the extent consistent with their respective
businesses, use commercially reasonable efforts to preserve intact
their respective business organizations and goodwill.
5.3 MEETINGS OF STOCKHOLDERS. Each of ADS and the Company will take all
action necessary in accordance with applicable law and its Articles or
Certificate of Incorporation and Bylaws to convene the ADS Stockholder Meeting
and the Company Stockholder Meeting as promptly as practicable to consider and
vote upon the approval of the Merger, this Agreement and the transactions
contemplated hereby. The Board of Directors of ADS and the Company Board
(subject in the case of the Company Board to Section 5.1(b)) shall recommend
such approval, and each of ADS and the Company shall take all lawful action to
solicit such approval, including, without limitation, timely mailing the ADS
Proxy Statement and the Company Proxy Statement.
5.4 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, the Company and ADS shall: (a) promptly make their respective filings
and thereafter make any other required submissions under the HSR Act with
respect to the Merger; (b) use all reasonable efforts to cooperate with one
another in (i) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby; and (ii) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations; (c) use commercially reasonable efforts to obtain all
consents under or with respect to, any Permit, contract, lease, agreement,
purchase order, sales order or other instrument, where the consummation of the
transactions contemplated hereby would be prohibited or constitute an event of
default, or grounds for acceleration or termination, in the absence of such
consent; and (d) take, or cause to be taken, all other commercially reasonable
actions as are reasonably necessary, proper or appropriate to consummate and
make effective the transactions contemplated by this Agreement.
5.5 INSPECTION OF RECORDS. From the date hereof to the Effective Time,
the Company shall (a) allow all officers, attorneys, accountants and other
representatives designated by ADS reasonable access at all reasonable times to
the offices, records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
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position, or otherwise pertaining to the business and affairs of the Company and
its Subsidiaries; (b) furnish to ADS, its counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and other
information as such persons may reasonably request; and (c) instruct the
employees, counsel and financial advisors of the Company and its Subsidiaries to
cooperate with ADS and its investigation of the business of the Company and its
Subsidiaries. From the date hereof to the Effective Time, ADS shall (a) furnish
to the Company, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
persons may reasonably request, and (b) instruct the officers, counsel and
financial advisors of ADS to cooperate with the Company in its investigation of
the business of ADS and its Subsidiaries. All information disclosed by the
Company to ADS and its representatives or by ADS to the Company and its
representatives shall be subject to the terms of that certain Confidentiality
Agreement (the "Confidentiality Agreement") dated as of March 3, 2000 between
ADS and the Company.
5.6 PUBLICITY. Neither party hereto shall make any press release or
public announcement with respect to this Agreement, the Merger or the
transactions contemplated hereby without the prior written consent of the other
parties hereto (which consent shall not be unreasonably withheld); provided,
however, that each party hereto may make any disclosure or announcement which
such party, in the opinion of its legal counsel, is obligated to make pursuant
to applicable law or regulation of the NASDAQ, in which case the party desiring
to make the disclosure shall consult with the other party hereto prior to making
such disclosure or announcement.
5.7 REGISTRATION STATEMENT; PROXY STATEMENT.
(a) ADS and the Company shall cooperate and promptly prepare
and file with the SEC as soon as practicable (i) the Company Proxy Statement,
(ii) the ADS Proxy Statement and (iii) a Registration Statement on Form S-4 (the
"Form S-4") under the Securities Act, with respect to the ADS Common Stock
issuable in the Merger, and a portion of which Registration Statement shall also
serve as the Company Proxy Statement. The respective parties will cause the
Company Proxy Statement, the ADS Proxy Statement and the Form S-4 to comply as
to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder. ADS shall use all reasonable efforts, and the Company will cooperate
with ADS, to cause the Form S-4 to be declared effective by the SEC as promptly
as practicable and to continue to be effective as of the Effective Time. ADS
shall use its reasonable efforts to obtain, prior to the effective date of the
Form S-4, all necessary state securities law or "Blue Sky" permits or approvals
required to carry out the transactions contemplated by this Agreement and will
pay all expenses incident thereto. No amendment or supplement to the Company
Proxy Statement, the ADS Proxy Statement or the Form S-4 will be made by ADS or
the Company without the approval of the other party, which approval shall not be
unreasonably withheld. ADS will advise the Company, promptly after it receives
notice thereof, of the time when the Form S-4 has become effective, the issuance
of any stop order of any Governmental Authority, or the suspension of the
qualification of the ADS Common Stock issuable in connection with the Merger for
offering or sale in any jurisdiction.
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(b) Each of ADS and the Company shall notify the other party
promptly after receipt by such first party of any comments of the SEC on, or of
any request by the SEC for amendments or supplements to, the Company Proxy
Statement, the ADS Proxy Statement or the Form S-4. Each of ADS and the Company
shall supply the other party with copies of all correspondence between such
party or any of its representatives and the SEC with respect to any of the
foregoing filings. If at any time prior to the ADS Stockholder Meeting any event
shall occur relating to the Company or any of its Subsidiaries or any of their
respective officers, directors or affiliates which should be described in an
amendment to the ADS Proxy Statement, the Company shall inform ADS promptly
after becoming aware of such event. If at any time prior to the Effective Time,
any event shall occur relating to the Company or any of its Subsidiaries or any
of their respective officers, directors or affiliates which should be described
in an amendment or supplement to the Company Proxy Statement or the Form S-4,
the Company shall inform ADS promptly after becoming aware of such event. If at
any time prior to the Company Stockholder Meeting, any event shall occur
relating to ADS or any of its Subsidiaries or any of their respective officers,
directors or affiliates which should be described in an amendment or supplement
to the Company Proxy Statement, ADS shall inform the Company promptly after
becoming aware of such event. Whenever the Company or ADS learns of the
occurrence of any event which should be described in an amendment of, or
supplement to, the ADS Proxy Statement, the Company Proxy Statement or the Form
S-4, the parties shall cooperate to promptly cause such amendment or supplement
to be prepared, filed with and cleared by the SEC and, if required by applicable
law, disseminated to the persons and in the manner required.
5.8 FURTHER ACTION. Subject to the terms and conditions of this
Agreement and applicable law, each of the parties hereto shall use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement as
soon as reasonably practicable, including such actions or things as any other
party hereto may reasonably request in order to cause any of the conditions to
such other party's obligation to consummate such transactions specified in
Article VI to be fully satisfied. Without limiting the generality of the
foregoing, the parties shall (and shall cause their respective Subsidiaries, and
use their reasonable efforts to cause their respective affiliates, directors,
officers, employees, agents, attorneys, accountants and representatives, to)
consult and fully cooperate with and provide reasonable assistance to each other
in (i) the preparation and filing with the SEC of the Form S-4, the Company
Proxy Statement, the ADS Proxy Statement, and any necessary amendments or
supplements to any thereof; (ii) seeking to have each such proxy statement
cleared, and the Form S-4 declared effective, by the SEC as soon as reasonably
practicable after filing; (iii) taking such actions as may be required under
applicable state securities or blue sky laws in connection with the issuance of
the ADS Common Stock pursuant to the Merger; (iv) obtaining all necessary
consents, approvals, waivers, licenses, permits, authorizations, registrations,
qualifications, or other permissions or actions by, and giving all necessary
notices to and making all necessary filings with and applications and
submissions to, any Governmental Authority or other Person or entity; (v)
lifting any permanent or preliminary injunction or restraining order or other
similar order issued or entered by any court or governmental entity of any type
referred to in Section 6.1(c), or lifting any stop order of any Governmental
Authority, or the suspension of the qualification of the ADS Common Stock
issuable in connection with the Merger for offer or sale in any jurisdiction;
(vi) obtaining the tax opinions referred to in
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Sections 6.2(f) and 6.3(h); (vii) providing all such information about such
party, its Subsidiaries and its officers, directors and affiliates and making
all applications and filings as may be necessary or reasonably requested in
connection with any of the foregoing; and (viii) in general, consummating and
making effective the transactions contemplated hereby.
5.9 AFFILIATE LETTERS. At least 10 days prior to the Closing Date, the
Company shall deliver to ADS a list of names and addresses of those persons who
were or will be, in the Company's judgment, at the record date for its
stockholders' meeting to approve the Merger, "affiliates" (each such person, an
"Affiliate") of the Company within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act. The Company shall deliver or
cause to be delivered to ADS, prior to the Closing Date, from each of the
Affiliates of the Company identified in the foregoing list, an Affiliate Letter
in substantially the form attached hereto as EXHIBIT A. ADS shall be entitled to
place legends as specified in such Affiliate Letters on the certificates
evidencing any ADS Common Stock to be received by such Affiliates pursuant to
the terms of this Agreement, and to issue appropriate stop transfer instructions
to the transfer agent for the ADS Common Stock, consistent with the terms of
such Affiliate Letters.
5.10 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
(a) as otherwise expressly provided for herein; (b) as otherwise provided in
Section 7.5(a); and (c) the expenses incurred in connection with printing and
mailing the Form S-4 and the Company Proxy Statement and the HSR Act filing fees
in connection with the Merger shall be shared equally by the Company and ADS.
5.11 TAX TREATMENT OF MERGER. From and after the date hereof and until
the Effective Time, neither ADS nor the Company nor any of their respective
Subsidiaries or other Affiliates shall (a) knowingly take any action, or
knowingly fail to take any action, that would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code; or
(b) enter into any contract, agreement, commitment or arrangement with respect
to the foregoing. After the Effective Time, ADS shall not take or fail to take
(and shall cause the Surviving Corporation not to take or fail to take) any
action that is reasonably likely to jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
5.12 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Until six years from the Effective Time, unless otherwise
required by Law, the certificate of incorporation and by-laws of the Surviving
Corporation shall contain provisions no less favorable with respect to the
elimination of liability of directors and the indemnification of (and
advancement of expenses to) directors, officers, employees and agents that are
set forth in the Certificate of Incorporation and By-Laws of the Company, as in
effect on the date hereof.
(b) From and after the Effective Time, ADS and the Surviving
Corporation shall, jointly and severally, indemnify, defend and hold harmless
each Person who is now, or has been at any time prior to the date of this
Agreement or who becomes prior to the Effective Time, an officer, director,
employee or agent of the Company or any of its Subsidiaries (collectively, the
"Indemnified
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Parties") against all losses, reasonable expenses (including reasonable
attorneys' fees), claims, damages, liabilities or amounts that are paid in
settlement of, or otherwise in connection with, any threatened or actual claim,
action, suit, proceeding or investigation (a "Claim"), based in whole or in part
on or arising in whole or in part out of the fact that the Indemnified Party (or
the Person controlled by the Indemnified Party) is or was a director, officer,
employee or agent of the Company or any of its Subsidiaries and pertaining to
any matter existing or arising out of actions or omissions occurring at or prior
to the Effective Time, including, without limitation, any Claim arising out of
this Agreement or any of the transactions contemplated hereby), whether asserted
or claimed prior to, at or after the Effective Time, in each case to the fullest
extent permitted under applicable law, and shall pay any expenses, as incurred,
in advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under applicable law. Without
limiting the foregoing, if any such Claim is brought against any of the
Indemnified Parties, (i) such Indemnified Parties may retain counsel (including
local counsel) satisfactory to them and which shall be reasonably satisfactory
to ADS and the Surviving Corporation, and ADS and the Surviving Corporation
shall pay, jointly and severally, all reasonable fees and expenses of such
counsel for such Indemnified Parties; and (ii) ADS and the Surviving Corporation
shall use all reasonable efforts to assist in the defense of any such Claim,
provided that ADS and the Surviving Corporation shall not be liable for any
settlement effected without their written consent, which consent, however, shall
not be unreasonably withheld. Notwithstanding the foregoing, nothing contained
in this Section 5.13 shall be deemed to grant any right to any Indemnified Party
which is not permitted to be granted to an officer, director, employee or agent
of the Company under Delaware law, assuming for such purposes that the Company's
Certificate of Incorporation and By-Laws provide for the maximum indemnification
permitted by law.
5.13 VOTING AGREEMENT - COMPANY. On the date hereof, each of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇, acting solely in
their capacity as securityholders of the Company, shall enter into a voting
agreement in the form attached hereto as EXHIBIT B.
5.14 CONFIDENTIALITY. Each party shall, and shall use its reasonable
efforts to cause its officers, employees and authorized representatives to, (i)
hold in confidence all confidential information obtained by it or them from any
other party or any of such other party's officers, employees or authorized
representatives pursuant to this Agreement (unless such information is or
becomes publicly available or readily ascertainable from public or published
information or trade sources through no wrongful act of such first party), and
(ii) use all such data and information solely for the purpose of consummating
the transactions contemplated hereby, except, in either case, as may be
otherwise required by law or legal process or as may be necessary or appropriate
in connection with the enforcement of, or any litigation concerning, this
Agreement. If this Agreement is terminated, each party shall promptly return, if
so requested by any other party, all nonpublic documents obtained from such
other party in connection with the transactions contemplated hereby and any
copies thereof which may have been made by such first party and shall use its
reasonable efforts to cause its officers, employees and authorized
representatives to whom such documents were furnished promptly to return such
documents and any copies thereof any of them may have made.
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5.15 DEFENSE OF LITIGATION. Each of the parties agrees to vigorously
defend against all actions, suits or proceedings in which such party is named as
a defendant which seek to enjoin, restrain or prohibit the transactions
contemplated hereby or seek damages with respect to such transactions. No party
shall settle any such action, suit or proceeding or fail to perfect on a timely
basis any right to appeal any judgment rendered or order entered against such
party therein without the consent of the other parties (which consent shall not
be withheld unreasonably). Each of the parties further agrees to use its
reasonable efforts to cause each of its Affiliates, directors and officers to
vigorously defend any action, suit or proceeding in which such Affiliate,
director or officer is named as a defendant and which seeks any such relief to
comply with this Section to the same extent as if such person were a party
hereto.
5.16 ACTIONS BY MERGER SUB. In its capacity as sole stockholder of
Merger Sub, ADS shall cause Merger Sub to approve and adopt the Merger and to
take all corporate action necessary on its part to consummate the Merger and the
transactions contemplated hereby.
5.17 TAKEOVER STATUTES. If any "fair price", "moratorium", "control
share acquisition" or other form of anti-takeover statute or regulation shall
become applicable to the transactions contemplated hereby, each of the Company,
ADS and Merger Sub and the respective members of their Boards of Directors shall
grant such approvals to take such actions as are necessary so that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated herein and otherwise act to eliminate or
minimize the effects of such statute or regulation on the transactions
contemplated herein.
5.18 NASDAQ LISTING. ADS agrees to use its reasonable efforts to cause
the ADS Common Stock to be issued to the stockholders of the Company to have
been authorized for trading on the NASDAQ, subject only to official notice of
listing.
5.19 TERMINATION OF CONFIDENTIALITY AND SECRECY AGREEMENTS. The Company
shall terminate all exchange of information provisions contained in all
confidentiality agreements and secrecy agreements to which it and any of it
Subsidiaries are a party relating to the exchange of information for purposes of
evaluating potential acquisitions of any entity, other than the Confidentiality
Agreement dated as of March 3, 2000 by and between ADS and the Company.
5.20 EMPLOYEE BENEFIT PLANS. To the extent the existing benefit plans
and arrangements provided by the Company to its employees are terminated, such
employees who remain employees of the Surviving Corporation and meet the
necessary eligibility requirements shall be entitled to participate in all
benefit plans and arrangements that are available and subsequently become
available to ADS' employees on the same basis as ADS' employees in similar
positions are eligible to participate. The Company, ADS and Merger Sub will take
all reasonable and lawful action before and after the Closing to effect such
participation.
5.21 ISSUANCE OF OPTIONS IN THE SURVIVING CORPORATION. On the Closing
Date, Merger Sub shall issue options to purchase its common stock to certain
officers of the Company in such amount and on such terms and conditions to be
agreed to by the parties hereto.
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5.22 SECTION 16 MATTERS. Prior to the Effective Time, ADS and the
Company shall take all such steps, including obtaining the appropriate board
approvals, as may be required to cause any dispositions of Company Common Stock
(including derivative securities with respect to Company Common Stock) or
acquisitions of ADS Common Stock (including derivative securities with respect
to ADS Common Stock) resulting from the transactions contemplated by Article I
or Article II of this Agreement by each individual who is subject to the
reporting requirements of Section 16(a) of the Exchange Act with respect to ADS,
to be exempt under Rule 16b-3 promulgated under the Exchange Act, such steps to
be taken in accordance with the No-Action Letter dated January 12, 1999 issued
by the SEC to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions (unless waived by each of the parties hereto in accordance with the
provisions of Section 7.6 hereof):
(a) This Agreement and the Merger and other transactions
contemplated hereby shall have been approved and adopted by the requisite vote
of the stockholders of ADS and the Company.
(b) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
Merger or changes the terms or conditions of this Agreement shall have been
issued and remain in effect. If any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts to have any such
injunction lifted.
(d) The Form S-4 shall have become effective under the
Securities Act and shall be effective at the Effective Time, and no stop order
suspending the effectiveness of the Form S-4 shall have been issued and be
continuing, no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness thereof shall have been initiated and be continuing, and all
necessary approvals under state securities laws relating to the issuance or
trading of the ADS Common Stock to be issued to the stockholders of the Company
in connection with the Merger shall have been received.
(e) The parties shall have obtained all material consents,
authorizations, orders and approvals of (or filings or registrations with) any
governmental commission, board or other regulatory body required in connection
with the execution, delivery and performance of this Agreement, except for
filings in connection with the Merger and any other documents required to
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be filed after the Effective Time and except where the failure to obtain such
consent or approval is not reasonably likely to have a Surviving Corporation
Material Adverse Effect or is not reasonably likely to prevent or materially
burden or materially impair the ability of the parties to consummate the
transactions contemplated by this Agreement.
(f) The ADS Common Stock to be issued to the stockholders of
the Company in connection with the Merger shall have been authorized for trading
on the NASDAQ, subject only to official notice of issuance.
(g) The stockholders of ADS shall have approved and adopted an
amendment to the Articles of Incorporation of ADS increasing the number of
authorized ADS Common Stock from 80,000,000 to a number sufficient to satisfy
ADS' obligations under this Agreement.
6.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date each of the following conditions
(unless waived by the Company in accordance with the provisions of Section 7.6
hereof):
(a) Each of ADS and Merger Sub shall have performed, in all
material respects, all of its agreements contained herein that are required to
be performed by ADS on or prior to the Closing Date, and the Company shall have
received a certificate of the Chairman or President of ADS, dated the Closing
Date, certifying to such effect.
(b) The representations and warranties of ADS and Merger Sub
contained in this Agreement and in any document delivered in connection herewith
shall be true and correct in all material respects, as of the Closing (except to
the extent such representations and warranties speak of a specified earlier date
and except as specifically contemplated by this Agreement), and the Company
shall have received a certificate of the President of ADS, dated the Closing
Date, certifying to such effect.
(c) The Company shall have received from ADS certified copies
of the resolutions of ADS's and Merger Sub's Boards of Directors and
stockholders approving and adopting this Agreement, the ADS Ancillary Documents
and the transactions contemplated hereby and thereby.
(d) From the date of this Agreement through the Effective
Time, there shall not have occurred any event that has had an ADS Material
Adverse Effect; provided, that such an event will not be deemed to have occurred
solely as a result of fluctuations in the trading price of the ADS Common Stock
or solely as a result of changes in the industry which generally impact on all
companies in ADS's business (other than specifically on ADS).
(e) The fairness opinion of ▇▇▇▇ Capital Partners, to the
effect that the Merger or Merger Consideration, as the case maybe, is fair to
the stockholders of the Company from a financial point of view, as described in
Section 4.33, has not been withdrawn; provided, however, that such withdrawal
shall permit the Company not to fulfill its obligations to effect the Merger
only
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if the withdrawal of such opinion is a result of a material adverse change in
the financial condition, business, operations or prospects of ADS and its
Subsidiaries, taken as a whole.
(f) The Company shall have received, prior to the earlier of
the date the Company Proxy Statement is first mailed to the Company's
stockholders and the effective date of the S-4, the opinion of Winthrop &
Weinstine, P.A., counsel to the Company, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that the Company and ADS will each be a party
to that reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinion, counsel shall be entitled to rely upon, among other
things, reasonable assumptions as well as representations and covenants of ADS,
Merger Sub and the Company.
(g) The Company shall have received the opinion of Akerman,
Senterfitt & ▇▇▇▇▇▇, P.A. to such matters as the Company or its counsel shall
reasonably request.
(h) ADS and Merger Sub shall have executed and delivered such
other documents and taken such other actions as the Company shall reasonably
request.
6.3 CONDITIONS TO OBLIGATION OF ADS AND MERGER SUB TO EFFECT THE
MERGER. The obligations of ADS and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of each of the
following conditions (unless waived by ADS in accordance with the provisions of
Section 7.6 hereof):
(a) The Company shall have performed, in all material
respects, all of its agreements contained herein that are required to be
performed by the Company on or prior to the Closing Date, and ADS shall have
received a certificate of the Chairman or President of the Company, dated the
Closing Date, certifying to such effect.
(b) The representations and warranties of the Company
contained in this Agreement and in any document delivered in connection herewith
shall be true and correct, in all material respects, as of the Closing (except
to the extent such representations and warranties speak as of a specified
earlier date and except as specifically contemplated by this Agreement), and ADS
shall have received a certificate of the Chairman or President of the Company,
dated the Closing Date, certifying to such effect.
(c) ADS shall have received from the Company certified copies
of the resolutions of the Company's Board of Directors and stockholders
approving and adopting this Agreement, the Ancillary Documents and the
transactions contemplated hereby and thereby.
(d) ADS shall have received the opinion of Winthrop &
Weinstine, P.A. to such matters as ADS or ADS's counsel shall reasonably
request.
(e) From the date of this Agreement through the Effective
Time, there shall not have occurred any event that has had a Company Material
Adverse Effect; provided, that such an event will not be deemed to have occurred
solely as a result of fluctuations in the trading price of
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the Company Common Stock or solely as a result of changes in the industry which
generally impact on all companies in the Company's business (other than
specifically on the Company).
(f) The Company shall have received all necessary consents
with respect to any contract, lease, purchase order, sales order, license
agreement, Permit, Environmental Permit and license which are required as a
result of a change of control of the Company except in those instances where
failure to receive any such consent would not have a Company Material Adverse
Effect.
(g) ADS shall have received, prior to the earlier of the date
the Company Proxy Statement is first mailed to the Company's stockholders and
the effective date of the S-4, the opinion of Akerman, Senterfitt & ▇▇▇▇▇▇,
P.A., counsel to ADS, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that the Company and ADS will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. In rendering
such opinion, counsel shall be entitled to rely upon, among other things,
reasonable assumptions as well as representations and covenants of ADS, Merger
Sub and the Company.
(h) Each of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall
have executed and delivered an Employment Agreement in the form attached hereto
as EXHIBIT C and EXHIBIT D, respectively.
(i) The Company shall have executed and delivered such other
documents and taken such other actions as ADS shall reasonably request.
ARTICLE VII
TERMINATION
7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of ADS and the Company,
by the mutual written consent of ADS and the Company.
7.2 TERMINATION BY EITHER ADS OR THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned by action of either the Company Board
or the Board of Directors of ADS if (a) the Merger shall not have been
consummated by September 30, 2000; provided, however, that the right to
terminate this Agreement under this Section 7.2(a) will not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Merger to occur on or before such
date; (b) the approval of the stockholders of ADS and the Company required by
Section 6.1(a) shall not have been obtained at meetings duly convened therefor
or at any adjournment thereof; provided, however, that neither party shall have
the right to terminate this Agreement under this Section 7.2(b) if the other
party has caused (directly or indirectly) or aided in the failure to obtain such
approval; provided, however, that the Company shall
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not be deemed to have caused or aided in the failure to obtain such approval if
the Company Board withdraws its recommendation to the Company's stockholders in
accordance with Section 5.3 by accepting or recommending a Superior Proposal;
(c) a court of competent jurisdiction or a governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action either (i) permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement; or (ii)
compelling ADS, Merger Sub or the Surviving Corporation to dispose of or hold
separate all or a material portion of the respective businesses or assets of ADS
and the Company, or sell or license any material product of ADS or the Company,
and such order, decree, ruling or other action shall have become final and
non-appealable; (d) the Average Closing Price as determined in accordance with
Section 1.4(f) hereof (for the purposes hereof, substituting the Meeting Date
for the Closing Date) of ADS Common Stock is less than $6.00 per share or more
than $24.00 per share; provided, that such termination shall be effective only
if notice thereof is delivered by the terminating party to the other not later
than 6:00 pm Eastern time on the Trading Day prior to the earlier to occur of
the date for the Company Stockholder Meeting or the ADS Stockholder Meeting
("Meeting Date") or; (e) 5% or more of the issued and outstanding shares of
Company Common Stock shall have duly demanded and perfected dissenters' rights
of appraisal in accordance with Section 1.9 of this Agreement and Section 262 of
the DGCL.
7.3 TERMINATION BY THE COMPANY. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the adoption and approval by the stockholders of the Company or
ADS, by action of the Company Board, if (a) there has been a breach by ADS or
Merger Sub of any representation or warranty contained in this Agreement which
would have an ADS Material Adverse Effect; or (b) there has been a material
breach of any of the covenants or agreements set forth in this Agreement on the
part of ADS, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by the Company to ADS.
7.4 TERMINATION BY ADS. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
adoption and approval by the stockholders of the Company or ADS, by action of
the Board of Directors of ADS, if (a) the Company Board shall have recommended a
Superior Proposal to the stockholders of the Company; (b) there has been a
breach by the Company of any representation or warranty contained in this
Agreement which would have a Company Material Adverse Effect; or (c) there has
been a breach of any of the covenants or agreements set forth in this Agreement
on the part of the Company, which breach is not curable or, if curable, is not
cured within 30 days after written notice of such breach is given by ADS to the
Company.
7.5 EFFECT OF TERMINATION AND ABANDONMENT.
(a) If this Agreement is terminated by ADS pursuant to Section
7.4(a), then the Company shall pay to ADS no later than five (5) Trading Days
after the Effective Date of such termination by wire transfer of same day funds
a fee in an amount equal to $2,000,000 (the "Termination Expenses"). The parties
acknowledge that the agreements contained in this Section 7.5(a) are an integral
part of the transactions contemplated by this Agreement, and that,
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without these agreements, ADS would not enter into this Agreement. Accordingly,
if the Company fails to pay the amounts pursuant to this Section 7.5(a) when
due, and, in order to obtain such payment, ADS commences a suit which results in
a final, non-appealable judgment against the Company for the amounts set forth
in this Section 7.5(a), the Company shall pay to ADS its costs and expenses
(including attorneys' fees) incurred in connection with such suit, together with
interest on the amount of the fee at the rate of 12% per annum.
(b) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 7, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this Section 7.5 and the provisions of Sections 5.6, 5.10, 5.15 and 5.16,
which obligations shall survive the termination of this Agreement , and neither
the Company nor ADS shall be relieved or released from any liabilities or
damages arising out of its willful material breach of this Agreement.
7.6 EXTENSION; WAIVER. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto; (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto; and (c) 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. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except that the agreements contained in Sections
1.4, 1.5, 1.6, 1.7, 1.9, 1.10, 5.10, 5.11, 5.13, 5.20, 5.21 and 5.22 and
Articles II and VIII and the agreements delivered pursuant to this Agreement
shall survive the Merger.
8.2 NOTICES. All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three (3) business days after being deposited in the
United States mail, postage prepaid, registered or certified mail. Notices
delivered by hand, by facsimile, or by nationally recognized private carrier
shall be deemed given on the day following receipt; provided, however, that a
notice delivered by facsimile shall be effective only if such notice is also
delivered by hand, or deposited in the United States mail, postage prepaid,
registered or certified mail, on or before two (2) Trading Days after its
delivery by facsimile. All notices shall be addressed as follows:
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If to ADS or Merger Sub: If to the Company:
Applied Digital Solutions, Inc. Destron Fearing Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ South St. ▇▇▇▇, Minnesota
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer President and Chief Executive Officer
With copies to: With copies to:
Akerman, Senterfitt & ▇▇▇▇▇▇ P.A. Winthrop & Weinstine, P.A.
One S.E. 3rd Avenue ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq. Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
8.3 ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 1.4, 1.5, 1.6, 2.3 and 5.13, nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
8.4 ENTIRE AGREEMENT. This Agreement, the Exhibits, the Disclosure
Statement, the ADS Disclosure Statement, the Ancillary Documents, the ADS
Ancillary Documents, and any other documents delivered by the parties in
connection herewith constitute the entire agreement among the parties with
respect to the subject matters hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
8.5 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of each of the Company and ADS, but after any such
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stockholder approval, no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
8.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws.
8.7 COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
8.8 HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
8.9 INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders, and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.11 INCORPORATION OF EXHIBITS. The Disclosure Statement, the ADS
Disclosure Statement and any and all Exhibits attached hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
8.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur if any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
APPLIED DIGITAL SOLUTIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chairman and Chief Executive Officer
DIGITAL ▇▇▇▇▇.▇▇▇ INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chairman
DESTRON FEARING CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
President and Chief Executive Officer
[Signature Page of Agreement and Plan of Merger]
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