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EXHIBIT 10.22
Agreement And Plan Of Reorganization
among
Micro Focus Group PLC,
Tower Merger Sub Inc.
and
Intersolv, Inc.
June 17, 1998
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Table of Contents
Page
----
I. Plan of Reorganization 1
1.1 The Merger 1
1.2 Fractional Shares 2
1.3 Stock Options; Warrants 2
1.4 Effects of the Merger 4
1.5 Further Assurances 4
1.6 Tax-Free Reorganization 4
1.7 Accounting Treatment 4
II. Representations and Warranties of the Company
4
2.1 Organization and Good Standing; Title 5
2.2 Power, Authorization and Validity 5
2.3 Capitalization 6
2.4 Subsidiaries 7
2.5 No Conflicts 7
2.6 Litigation 7
2.7 SEC Documents; Financial Statements 7
2.8 Taxes 8
2.9 Title to Properties 9
2.10 Absence of Certain Changes 9
2.11 Agreements and Commitments 10
2.12 Intellectual Property 11
2.13 Compliance with Laws 12
2.14 Certain Transactions and Agreements 12
2.15 Employees 12
2.16 Corporate Documents 14
2.17 No Brokers 14
2.18 Restrictions on Business Activities 14
2.19 F-4; Prospectus/Proxy Statement 15
2.20 Books and Records 15
2.21 Insurance 15
2.22 Environmental Matters 16
2.23 Customers and Suppliers 16
2.24 Accounts Receivable 17
2.25 Predecessor Entity 17
2.26 Board Approval; State Takeover Statutes;
Charter; Rights Agreement 17
2.27 Accounting Treatment 18
2.28 Opinion of Financial Advisor 18
2.29 Representations Complete 18
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III. Representations and Warranties of Parent and Newco 18
3.1 Organization; Title 18
3.2 Power, Authorization and Validity 18
3.3 Capitalization 19
3.4 Subsidiaries 20
3.5 No Conflicts 20
3.6 Litigation 20
3.7 SEC Documents; Financial Statements 21
3.8 Title to Properties 21
3.9 Absence of Certain Changes 22
3.10 Agreements and Commitments 22
3.11 Intellectual Property 23
3.12 Compliance with Laws 23
3.13 Certain Transactions and Agreements 24
3.14 Corporate Documents 24
3.15 No Brokers 24
3.16 Restrictions on Business Activities 24
3.17 F-4; Prospectus/Proxy Statement 24
3.18 Books and Records 25
3.19 Insurance 25
3.20 Environmental Matters 25
3.21 Customers and Suppliers 26
3.22 Board Approval 26
3.23 Accounting Treatment 26
3.24 Opinion of Financial Advisor 26
3.25 Taxes 26
3.26 Accounts Receivable 26
3.27 Representations Complete 27
IV. Conduct Prior to the Effective Time 27
4.1 Conduct of Business 27
4.2 No Other Negotiations 29
4.3 Parent Dividends Restricted 30
V. Additional Agreements 30
5.1 Registration on FormF-4.... 30
5.2 Stockholders Meetings; Parent Approvals 31
5.3 Access to Information 31
5.4 Satisfaction of Conditions Precedent; Further Assurances 32
5.5 Regulatory Approvals; Consents 32
5.6 Pooling Accounting 33
5.7 Business Acquisitions and Dispositions 33
5.8 Auditors Letters 33
5.9 Stock Exchange Listings 34
5.10 Board of Directors 34
5.11 Nasdaq Quotation 34
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5.12 Employee Matters 34
5.13 Takeover Statutes; Rights Agreement 34
5.14 Public Announcement 34
5.15 Confidentiality 35
5.16 Directors' and Officers' Insurance 36
VI. Closing; Exchange of Certificates 36
6.1 The Closing 36
6.2 Exchange Fund 36
6.3 Exchange Procedures 36
6.4 Distributions with Respect to Unexchanged Shares 37
6.5 No Further Ownership Rights in Company Common Stock 37
6.6 Termination of Exchange Fund 38
6.7 No Liability 38
6.8 Investment of Exchange Fund 38
6.9 Lost Certificates 38
6.10 Withholding Rights 38
6.11 Stock Transfer Books 38
VII. Conditions Precedent 39
7.1 Conditions to Obligations of Each Party 39
7.2 Conditions to Obligations of the Company 40
7.3 Conditions to Obligations of Parent and Newco 41
VIII. Termination 42
8.1 Termination 42
8.2 Effect of Termination 43
8.3 Expenses and Termination Fees 43
IX. General Provisions 44
9.1 Non-Survival 44
9.2 Governing Law 44
9.3 Assignment; Successors and Assigns 44
9.4 Severability 44
9.5 Counterparts 45
9.6 Other Remedies 45
9.7 Amendment and Waivers 45
9.8 No Waiver 45
9.9 Notices 45
9.10 Interpretation of Agreement 46
9.11 No Joint Venture 46
9.12 Further Assurances 46
9.13 Absence of Third Party Beneficiary Rights 46
9.14 Entire Agreement 46
9.15 Submission to Jurisdiction 47
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Exhibits
Exhibit A Form of Certificate of Merger
Exhibit B Form of Officer Certificates
Exhibit C Form of Affiliate Agreements
Exhibit D Form of Opinions of Counsel to Parent
Exhibit E Form of Opinion of Counsel to the Company
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Agreement and Plan of Reorganization
This Agreement and Plan of Reorganization (the "Agreement") is entered
into as of June 17, 1998, by and among Micro Focus Group PLC, a public limited
company organized under the laws of England and Wales ("Parent"), Tower Merger
Sub Inc., a Delaware corporation ("Newco") and wholly-owned subsidiary of
Parent, and Intersolv, Inc., a Delaware corporation (the "Company").
Recitals
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Newco will merge with and into the Company in a reverse
triangular merger (the "Merger"), with the Company to be the surviving
corporation of the Merger, all pursuant to the terms and conditions of this
Agreement, a Certificate of Merger substantially in the form of Exhibit A (the
"Certificate of Merger") and the provisions of applicable law. Upon the
effectiveness of the Merger, all of the outstanding common stock of the
Company, par value $0.01 per share ("Company Common Stock"), will be converted
into the right to receive ordinary shares of Parent represented by American
Depositary Shares of Parent ("Parent ADSs") each representing five Parent
ordinary shares of 2p each ("Ordinary Shares") and evidenced by American
Depositary Receipts ("Parent ADRs") and cash, in the manner and on the basis
determined herein and as provided in the Certificate of Merger.
B. The Merger is intended to be treated as a tax-free reorganization
pursuant to the provisions of Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"), by virtue of the provisions of Section
368(a)(2)(E) of the Code. The Merger is intended to be treated as a "pooling
of interests" for accounting purposes.
C. Prior to the execution and delivery of this Agreement, the Boards of
Directors of Parent and the Company each have approved, and believe it is in
the best interests of their respective companies and the stockholders of their
respective companies to approve, the Merger, this Agreement, the Certificate of
Merger and the transactions provided for herein and therein.
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties hereto agree
as follows:
I. Plan Of Reorganization
1.1 The Merger. The Certificate of Merger will be filed with the
Secretary of State of the State of Delaware as soon as practicable after the
closing of the transactions contemplated by this Agreement (the "Closing").
The effective time of the Merger as specified in the Certificate of Merger (the
"Effective Time") will occur upon filing of the Certificate of Merger, or on
such other date upon which the parties hereto may mutually agree. Subject to
the terms and conditions of this Agreement and the Certificate of Merger, at
the Effective Time, Newco will be merged with and into the Company in a
statutory merger pursuant to the Certificate of Merger and in accordance with
applicable
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provisions of the General Corporation Law of the State of Delaware (the
"Delaware Law") as follows:
1.1.1 Conversion of Company Shares. Subject to Section
1.1.2, each share of Company Common Stock (and the associated Rights (as
defined in Section 2.3)) that is issued and outstanding immediately prior to
the Effective Time will, by virtue of the Merger and at the Effective Time, and
without further action on the part of any holder thereof, be converted into
that number of fully paid and nonassessable Parent ADSs obtained by multiplying
each such share of Company Common Stock by 0.55 (the "Exchange Ratio").
1.1.2 Adjustments for Capital Changes. If prior to the
Effective Time, Parent (i) recapitalizes either through a split-up of its
outstanding Ordinary Shares and/or Parent ADSs into a greater number, or
through a combination of its outstanding Ordinary Shares and/or Parent ADSs
into a lesser number, (ii) reorganizes, reclassifies or otherwise changes its
outstanding Ordinary Shares and/or Parent ADSs into the same or a different
number of shares of other classes (other than through a split-up or combination
of shares provided for in the previous clause), or (iii) declares a dividend on
its outstanding Ordinary Shares and/or Parent ADSs payable in Ordinary Shares
and/or Parent ADSs or securities convertible into Ordinary Shares and/or Parent
ADSs, the calculation of the Exchange Ratio shall be appropriately adjusted in
order to fairly and equitably preserve, as far as practicable, the rights and
ownership of the Ordinary Shares and/or Parent ADSs of the holders of Company
Common Stock hereunder as if the Effective Time had occurred immediately prior
to such extraordinary action.
1.1.3 Cancellation of Company Shares held by Parent and the
Company. Each share of Company Common Stock held by the Company as treasury
stock, if any, and each share of Company Common Stock held by Parent, Newco or
any subsidiary of either of them immediately prior to the Effective Time will,
by virtue of the Merger and at the Effective Time, and without further action
on the part of any holder thereof, be canceled and extinguished without any
conversion thereof.
1.1.4 Conversion of Newco Shares. Each share of Newco
common stock, par value $0.01 per share ("Newco Common Stock"), that is issued
and outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without further action on the part of the sole stockholder of Newco,
be converted into and become one share of Company Common Stock that is issued
and outstanding immediately after the Effective Time, and the shares of Company
Common Stock into which the share of Newco Common Stock are so converted shall
be the only shares of Company Common Stock that are issued and outstanding
immediately after the Effective Time. Such share of Company Common Stock shall
be issued to Parent in exchange for the Parent ADSs issued in the Merger.
1.2 Fractional Shares. No fractional Parent ADSs will be issued
in connection with the Merger, but in lieu thereof, the holder of any shares of
Company Common Stock (aggregating all of such holder's shares of Company Common
Stock) who would otherwise be entitled to receive a fraction of a Parent ADS
will receive from Parent, promptly after the Effective Time, an amount of cash
equal to the average closing sale price
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of a Parent ADS for the twenty trading days ending with and including the third
trading day immediately preceding the Effective Time, as reported on the Nasdaq
National Market (the "Closing Price"), multiplied by the fraction of a Parent
ADS to which such holder would otherwise be entitled.
1.3 Stock Options; Warrants. (a) At the Effective Time, each of
the then outstanding Company Options shall, by virtue of the Merger and the
provisions hereinafter set forth in this Section 1.3, and without any further
action on the part of any holder thereof, be converted into an option to
purchase that number of Parent ADSs (a "Parent Option") obtained by multiplying
the number of shares of Company Common Stock issuable upon exercise of each
such Company Option by the Exchange Ratio, and Parent will assume all of the
obligations of the Company and its subsidiaries under the Stock Plans. If the
foregoing calculation results in a Parent Option being exercisable for a
fraction of a Parent ADS, then the number of Parent ADSs subject to such option
shall be rounded down to the nearest whole number of Parent ADSs. The exercise
price of each Parent Option shall be equal to the exercise price of the Company
Option from which such Parent Option was converted divided by the Exchange
Ratio, rounded to the nearest whole cent. The term and vesting schedule,
status as an "incentive stock option" under Section 422 of the Code, if
applicable, and all other terms and conditions of Company Options will, to the
extent permitted by law and the pooling rules, be unchanged. An optionholder's
continuous employment with the Company shall be credited as employment with
Parent for purposes of vesting of the Parent Options. The Company and Parent
will take, or cause to be taken, all actions which are necessary, proper or
advisable under the Stock Plans to make effective the transactions contemplated
by this Section 1.3.
"Company Option" means any option or right granted, and not exercised or
expired, to a current or former employee, director or independent contractor of
the Company or any of its subsidiaries or any predecessor thereof to purchase
Company Common Stock pursuant to any stock option, stock bonus, stock award or
stock purchase plan, program or arrangement of the Company or any of its
subsidiaries or any predecessor thereof or any other contract or agreement
entered into by the Company or any of its subsidiaries (collectively, the
"Stock Plans").
(b) Parent shall take all corporate action necessary to reserve
for issuance a sufficient number of Ordinary Shares such that there are a
sufficient number of Parent ADSs for delivery pursuant to the terms set forth
in this Section 1.3. Parent shall promptly cause the Parent ADSs issuable upon
exercise of the Parent Options to be registered, or to be issued pursuant to a
then effective registration statement on Form S-8 promulgated by the United
States Securities and Exchange Commission ("SEC") and shall use its reasonable
best efforts to maintain the effectiveness of such registration statement or
registration statements for so long as such Parent Options remain outstanding,
and so long as the Ordinary Shares of Parent are listed on the London Stock
Exchange ("LSE"), Parent will ensure that the Ordinary Shares will be admitted
to and maintained on the Official List of the LSE.
(c) At the Effective Time, each of the then outstanding warrants,
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exchangeable or convertible securities or other rights or agreements to
purchase or otherwise acquire any Company Common Stock ("Company Warrants")
shall by virtue of the Merger, and without any further action on the part of
any holder thereof, be assumed by Parent and converted into a warrant or like
security or agreement ("Parent Warrants") to purchase that number of Parent
ADSs obtained by multiplying the number of shares of Company Common Stock
underlying each such Company Warrant by the Exchange Ratio, and Parent shall
assume all of the obligations of the Company under such Company Warrants. If
the foregoing calculation results in a Parent Warrant being exercisable for a
fraction of a Parent ADS, then the number of Parent ADSs subject to such
warrant shall be rounded down to the nearest whole number of Parent ADSs. The
exercise price of each Parent Warrant shall be equal to the exercise price of
the Company Warrant from which such Parent Warrant was converted divided by the
Exchange Ratio, rounded to the nearest whole cent. The exercisability period
and other terms and conditions of Company Warrants will be unchanged.
1.4 Effects of the Merger. At the Effective Time: (a) the
separate existence of Newco will cease and Newco will be merged with and into
the Company and the Company will be the surviving corporation pursuant to the
terms of the Certificate of Merger; (b) the Certificate of Incorporation and
Bylaws of the Company will become the Certificate of Incorporation and Bylaws
of the surviving corporation; (c) each share of Company Common Stock
outstanding immediately prior to the Effective Time will be converted as
provided in this Article I; (d) each share of Newco Common Stock outstanding
immediately prior to the Effective Time will be converted as provided in this
Article I; (e) ▇▇▇▇▇ ▇. ▇▇▇▇▇ will become a director of the Company and the
other directors will be appointed by Parent, and the officers of Newco
immediately prior to the Effective Time will become the officers of the
Company; and (f) the Merger will, at and after the Effective Time, have all of
the effects provided by applicable law.
1.5 Further Assurances. The Company agrees that if, at any time
after the Effective Time, Parent considers or is advised that any further
deeds, assignments or assurances are reasonably necessary or desirable to vest,
perfect or confirm Parent's rights as provided herein, Parent and any of its
officers are hereby authorized by the Company to execute and deliver all such
proper deeds, assignments and assurances and do all other things necessary or
desirable to carry out the purposes of this Agreement.
1.6 Tax-Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code, by virtue
of the provisions of Section 368(a)(2)(E) of the Code. The Parent ADSs issued
in the Merger will be issued solely in exchange for the issued and outstanding
shares of Company Common Stock pursuant to this Agreement, and no other
transaction other than the Merger represents, provides for or is intended to be
an adjustment to the consideration paid for Company Common Stock. Except for
cash paid in lieu of fractional shares, no consideration that could constitute
"other property" within the meaning of Section 356 of the Code will be paid by
Parent for shares of Company Common Stock in the Merger. The representations
and warranties of Parent and Newco, and the Company set forth in Exhibits
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B-1 and B-2, respectively, are incorporated in this Agreement as if fully set
forth herein.
1.7 Accounting Treatment. The parties intend that the Merger be
treated as a "pooling of interests" for accounting purposes under United States
generally accepted accounting principles ("US GAAP"). The parties intend that
the Merger be treated as a "merger" for accounting purposes under United
Kingdom generally accepted accounting principles ("UK GAAP").
II. Representations and Warranties of the Company
In this Agreement, any reference to a "Material Adverse Effect" with
respect to an entity or group of entities, means any event, change or effect
that is materially adverse to the condition (financial or otherwise),
properties, agreements, assets (including intangible assets), liabilities,
business, employee base, operations or results of operations of such entity and
its subsidiaries, taken as a whole; provided, that a "Material Adverse Effect"
shall not include (i) any adverse effect following the date of this Agreement
that is directly caused by adverse reaction by customers of such entity to the
announcement of the execution of this Agreement and the transactions
contemplated by this Agreement, (ii) any adverse effect that is caused by a
general economic downturn in the industries in which such entity operates or a
national economic downturn, or (iii) a decline in the market value of any
publicly traded securities of such entity. In any litigation or arbitration
regarding the foregoing definition, the party claiming that one of the
exclusions set forth in the proviso therein is applicable shall bear the burden
of proving that such exclusion is applicable. When used in this Agreement,
"Knowledge" means, with respect to representations and warranties made by a
party hereto, conscious awareness of the relevant facts or information upon
which such representations and warranties are based, after the exercise of
reasonable care in the ascertainment of such facts or information.
The Company has heretofore delivered to Parent a disclosure letter
(the "Company Disclosure Letter"). The Company hereby represents and warrants
to Parent and Newco, except as is set forth on the Company Disclosure Letter,
that:
2.1 Organization and Good Standing; Title. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, has the requisite corporate power and authority
to own, operate and lease its properties and to carry on its business as now
conducted and is duly qualified or licensed as a foreign corporation in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary. Each
subsidiary of the Company is a corporation or similar entity duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it was organized, has the requisite power and authority to own, operate
and lease its properties and to carry on its business as now conducted and is
duly qualified or licensed in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary. The Company has delivered to Parent true and complete
copies of its Certificate of Incorporation and Bylaws and the equivalent
charter
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documents of each of its subsidiaries as currently in effect.
2.2 Power, Authorization and Validity.
2.2.1 The Company has the corporate right, power and
authority to enter into and perform its obligations under this Agreement. The
execution and delivery of this Agreement has been duly and validly authorized
by all necessary corporate action on the part of the Company, subject only to
the approval of the Merger by the Company's stockholders.
2.2.2 No consent, filing, authorization or approval,
governmental or otherwise, is required by or with respect to the Company or any
of its subsidiaries in connection with the execution and delivery of this
Agreement, or the consummation of the transactions contemplated hereby or
thereby, except for (a) the filing of the Certificate of Merger and any other
documents required to effectuate the Merger under Delaware Law and the filing
of appropriate documents with the relevant authorities of the states in which
the Company is qualified to do business, (b) such filings as may be required to
comply with federal and applicable state securities laws and the securities
laws of any foreign country, (c) filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act") and the antitrust and competition laws of the
European Union and other jurisdictions, and (d) such other consents, filings,
authorizations or approvals which, if not obtained or made, would not have a
Material Adverse Effect on the Company or any of its subsidiaries and would not
prevent, or materially alter or delay any of the transactions contemplated by
this Agreement.
2.2.3 This Agreement has been duly executed and delivered
by the Company and constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as to the effect, if any, of (a) applicable bankruptcy and other similar
laws affecting the rights of creditors generally and (b) rules of law governing
specific performance, injunctive relief and other equitable remedies.
2.3 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock and 3,000,000 shares of
preferred stock, par value $0.10 per share (the "Preferred Stock"). As of the
close of trading on the day prior to the date of this Agreement, (i) 22,708,134
shares of Company Common Stock were issued and outstanding, including
associated Preferred Stock Purchase Rights (the "Rights") issued pursuant to
the Rights Agreement, dated as of August 29, 1989 (the "Rights Agreement")
between the Company and Sovran Bank, N.A., as Rights Agent (the "Rights
Agent"), (ii) no shares of Preferred Stock were issued or outstanding, and
(iii) no shares of Company Common Stock were held by the Company in its
treasury; and the same number of shares of Company Common Stock and Company
Preferred Stock shall be outstanding and held in the Company's treasury on the
date of this Agreement (except for additional shares of Company Common Stock
issued in connection with the exercise of Company Options and Company Warrants
outstanding as of the close of trading on the day prior to
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the date of this Agreement). All issued and outstanding shares of the capital
stock of the Company are, and all shares which may be issued pursuant to the
Stock Plans will be, when issued, duly authorized, validly issued, fully paid
and nonassessable, not subject to any preemptive rights or rights of
rescission, and have been offered, issued, sold and delivered by the Company in
compliance with all registration or qualification requirements (or applicable
exemptions therefrom) of applicable federal, state and foreign securities laws.
As of the close of trading on the day prior to the date of this Agreement, the
Company had reserved 4,853,738 shares of Company Common Stock pursuant to Stock
Plans, of which (i) 4,125,598 shares were subject to issued and outstanding
unexercised Company Options and (ii) 193,705 shares were reserved for future
grants of Company Options; and the same number of shares shall be subject to
outstanding unexercised Company Options and reserved for future grants of
Company Options on the date of this Agreement (except for shares of Company
Common Stock issued in connection with the exercise of Company Options
outstanding as of the close of trading on the day prior to the date of this
Agreement). None of the Company Options or Company Warrants are subject to any
reload or similar provision or treatment. Item 2.3 of the Company Disclosure
Letter sets forth, for each Stock Plan of the Company, the name of each holder
of Company Options under each such Stock Plan, the exercise price of such
holder's Company Options, and the number of shares of Company Common Stock
underlying such holder's Company Options which are currently vested, and
contains all information required for the calculation of (i) such holder's
Company Options which will vest in connection with the Merger, (ii) such
holder's Company Options which will be unvested immediately following the
Closing, and (iii) the vesting schedule for such holder's unvested Company
Options. Company Warrants in respect of 140,000 shares of Company Common Stock
are issued and outstanding as of the date of this Agreement. The Company has
provided to Parent true and complete copies of all Stock Plans. Other than as
set forth in this Section, there are no other stock appreciation rights,
options, warrants, exchangeable or convertible securities, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
or otherwise acquire any of the Company's authorized but unissued capital
stock; there is no liability for dividends or distributions declared or accrued
but unpaid; and, there are no voting agreements, registration rights, rights of
redemption or repurchase, rights of first refusal or other restrictions (other
than normal restrictions on transfer under applicable federal and state
securities laws) applicable to any of the Company's outstanding securities.
Other than the Company Options which shall become vested and exercisable
pursuant to acceleration provisions not entered into in contemplation of the
Merger, no Company Options or Company Warrants shall become vested or
exercisable solely as a result of the Merger. There are no bonds, debentures,
notes or other indebtedness of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters as to which shareholders of the Company may vote.
2.4 Subsidiaries. Item 2.4 of the Company Disclosure Letter is a
true, correct and complete list of each subsidiary of the Company and its
respective jurisdiction of organization. All of the issued and outstanding
shares of capital stock of each such subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable and are owned by the Company,
free and clear of all pledges, claims, liens, leases, licenses, charges,
encumbrances and security interests of any kind or nature whatsoever
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("Liens") and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock). Except for the capital stock of its subsidiaries, the Company does not
own, directly or indirectly, any equity interest in any corporation,
partnership, joint venture or other business entity.
2.5 No Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions provided for herein, will
conflict with, or (with or without notice or lapse of time, or both) result in
a termination, acceleration, breach, impairment or violation of, (i) any
provision of the Certificate of Incorporation, Bylaws or similar charter
documents of the Company or any of its subsidiaries as currently in effect,
(ii) any note, bond, lease, mortgage, indenture, lease, license, franchise,
permit, agreement or other instrument or obligation applicable to the Company
or any of its subsidiaries or their respective properties or assets (iii) any
federal, state, local or foreign judgment, writ, decree, order, statute, rule
or regulation applicable to the Company or any of its subsidiaries or of their
respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts, breaches, impairments or violations that
individually or in the aggregate would not (A) have a Material Adverse Effect,
(B) impair the ability of the Company to perform its obligations under this
Agreement or (C) prevent or materially delay consummation of any of the
transactions contemplated by this Agreement. The consummation of the Merger
will not require the consent of any third party and will not adversely affect
any of the rights, licenses, franchises, leases or agreements of the Company or
any of its subsidiaries pursuant to their terms, other than where the failure
to obtain such consents or where such adverse effects would not constitute,
individually or in the aggregate, a Material Adverse Effect.
2.6 Litigation. There is no suit, action, proceeding or
investigation pending or, to the Knowledge of the Company or any of its
subsidiaries, threatened against the Company or any of its subsidiaries before
any court or administrative agency, foreign or domestic, that, individually or
in the aggregate, would (i) have a Material Adverse Effect, (ii) impair the
ability of the Company to perform its obligations under this Agreement or (iii)
prevent or materially delay the Merger or the consummation of the transactions
contemplated by this Agreement, nor is there any judgment, injunction, decree,
writ, rule or order of any governmental entity or arbitrator outstanding
against the Company or any of its subsidiaries having or which would have, any
such effect. Item 2.6 of the Company Disclosure Letter sets forth, with
respect to any suit, action, proceeding or investigation to which the Company
or any of its subsidiaries is a party and which involves claims which if
adversely determined would exceed $100,000, the forum, the parties thereto, the
subject matter and current status thereof and the amount of damages claimed.
2.7 SEC Documents; Financial Statements. The Company has filed
all required reports, schedules, forms, statements and other documents with the
SEC since July 1, 1995 (the "Company SEC Documents"). As of their respective
dates, the Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act")
or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the
case may be, applicable to such SEC Documents, and none of the Company SEC
Documents contained any untrue statement of a material fact
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or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in (i) the Company SEC Documents (the "Company Financial Statements")
and (ii) the preliminary financial statements of the Company for the fiscal
year ended April 30, 1998 (the "Preliminary Financial Statements" with April
30, 1998 being the "Balance Sheet Date") previously delivered by the Company to
Parent comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared according to US GAAP (except (x) in the case of
unaudited statements, as permitted by Form 10-Q under the Exchange Act and (y)
in the case of the Preliminary Financial Statements, there are no footnotes or
statement of cash flows) applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end
adjustments). There has been no material change in the Company's accounting
policies except as described in the notes to the Company Financial Statements.
For the purposes of this Agreement, all financial statements referred to in
this paragraph shall include any notes or schedules to such financial
statements. Except as set forth in the Company Financial Statements or the
Preliminary Financial Statements, neither the Company nor any of its
subsidiaries has any material debt, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to
become due (other than matters that would ordinarily be included in notes to
audited financial statements, which notes will not be materially different from
comparable notes to the Company Financial Statements), and there is no existing
condition, situation or set of circumstances which are required by US GAAP to
be set forth on a consolidated balance sheet of the Company and its
consolidated subsidiaries or in the notes thereto (other than matters that
would ordinarily be included in notes to audited financial statements, which
notes will not be materially different from comparable notes to the Company
Financial Statements), except as incurred in the ordinary course of business
since the Balance Sheet Date..
2.8 Taxes. For the purposes of this Agreement, the terms "tax"
and "taxes" include all federal, state, local and foreign income, gains,
franchise, excise, property, sales, use, employment, license, payroll,
occupation, recording, value added or transfer taxes, governmental charges,
fees, levies or assessments (whether payable directly or by withholding), and,
with respect to such taxes, any estimated tax, interest and penalties or
additions to tax and interest on such penalties and additions to tax. The
Company and each of its subsidiaries have filed all federal, state, local and
foreign tax and information returns and reports required to be filed, and have
paid all taxes required to be paid in respect of all periods for which such
returns have been filed, have made all necessary estimated tax payments, and
have no liability for such taxes materially in excess of the amount paid,
except to the extent adequate reserves have been established in the Company
Financial Statements. All such returns and reports filed by the Company and
each of its subsidiaries were true, correct and complete in all material
respects. True, correct and complete copies of all such tax and information
returns for the fiscal years ended April 30,
15
1993, 1994, 1995, 1996, 1997 and all other years for which the applicable
statute of limitations period has not expired have been provided by the Company
to Parent. There are no material Liens on any assets of the Company or any of
its subsidiaries that arose in connection with any failure (or alleged failure)
to pay any tax. Neither the Company nor any of its subsidiaries is delinquent
in the payment of any tax or in the filing of any tax returns, and no
deficiencies for any tax have been threatened, claimed, proposed or assessed
which have not been settled or paid. No tax return of the Company or any of
its subsidiaries has been or is being audited or examined by the Internal
Revenue Service or any state or other national taxing agency or authority,
neither the Company nor any of its subsidiaries has Knowledge of, or has
received notice that, any such authority intends to assess any additional taxes
against the Company or any of its subsidiaries for any period for which tax
returns have been filed, and no material dispute or claim concerning any tax
liability of the Company or any of its subsidiaries has been proposed or
claimed by any such authority. Neither the Company nor any of its subsidiaries
has waived any statute of limitations or similar statute or right in respect of
taxes or agreed to any extension of time with respect to a tax assessment or
deficiency. Neither the Company nor any of its subsidiaries has filed a
consent pursuant to Section 341(f) of the Code. Neither the Company nor any of
its subsidiaries is a party to any tax indemnity, tax allocation, tax sharing
agreement, or similar agreement, arrangement or practice with respect to taxes,
nor does the Company or any of its subsidiaries owe any amount under any such
agreement or arrangement. Neither the Company nor any of its subsidiaries is a
party to any agreement, contract or arrangement that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by reason of Sections 280G or 404 of the Code.
2.9 Title to Properties. The Company and its subsidiaries have
good and marketable title to, or a valid leasehold interest in, as applicable,
all of the assets reflected on the Preliminary Financial Statements as of the
Balance Sheet Date, free and clear of all Liens, except (i) Liens for current
taxes not yet due and payable and (ii) Liens reflected on the Company Financial
Statements not in excess of $100,000 and which do not materially detract from
or interfere with the use of the properties subject thereto or affected thereby
or otherwise impair the business operations conducted thereon. The Company's
and its subsidiaries' assets (A) are in all material respects in good operating
condition and repair, normal wear and tear excepted, and (B) constitute all of
the properties, interests, assets and rights held for use or used in connection
with the business of the Company and constitute all those necessary to continue
to operate the business of the Company consistent with current practice. All
leases of real or personal property to which the Company or any of its
subsidiaries is a party are fully effective and afford the Company or such
subsidiary peaceful and undisturbed possession of the subject matter of the
lease. Item 2.9 of the Company Disclosure Letter sets forth a list and brief
description of all real property leased by the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries owns any real
property. To the Company's and its subsidiaries' Knowledge, neither the
Company nor any of its subsidiaries is in violation of any material zoning,
building, safety or environmental ordinance, regulation or requirement or other
law or regulation applicable to the operation of owned or leased properties,
and neither the Company nor any of its subsidiaries has received any notice of
such violation with which it has not complied or had waived.
16
2.10 Absence of Certain Changes. Since the Balance Sheet Date, the
Company has carried on its business in the ordinary course consistent with past
practice and there has not been with respect to the Company or any of its
subsidiaries: (i) any change, event or condition (whether or not covered by
insurance) that would result in a Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend on, or the making of any
other distribution in respect of, the capital stock of the Company or any of
its subsidiaries, any split, stock dividend, combination or recapitalization of
the capital stock of the Company or any of its subsidiaries or any direct or
indirect redemption, purchase or other acquisition by the Company or any of its
subsidiaries of the capital stock of the Company or any of its subsidiaries;
(iii) any purchase or sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any material
properties or assets other than in the ordinary course of business consistent
with past practice, but in no event representing properties, assets or
commitments or arrangements in excess of $250,000 in any one transaction or
$500,000 in the aggregate; (iv) any contingent liability incurred as guarantor
or surety with respect to the obligations of others; (v) any Lien placed on any
of its properties or assets other than in the ordinary course of business
consistent with past practice but in no event more than $250,000 in any one
transaction or $500,000 in the aggregate; (vi) any material obligation or
liability (whether absolute, accrued, contingent or otherwise, and whether due
or to become due) incurred other than in the ordinary course of business
consistent with past practice (including obligations under customer contracts
and current obligations); (vii) any damage, destruction or loss, whether or not
covered by insurance, materially affecting its properties, assets or business;
(viii) any labor dispute or claim of material unfair labor practices, any
change in the compensation payable or to become payable to any of the Company's
or any of its subsidiaries' officers, employees or agents, or any bonus payment
or arrangement made to or with any of such officers, employees or agents
(except as previously disclosed in writing to and approved in writing by
Parent) other than normal annual raises in accordance with past practice, or
any bonus payment or arrangement made to or with any of such officers,
employees or agents other than normal bonuses or compensation increases or
other arrangements made in accordance with past practices; (ix) any material
change with respect to its management, supervisory, development or other key
personnel; (x) any payment or discharge of a material Lien or liability which
was not either (A) shown on the balance sheet as of the Balance Sheet Date
included in the Preliminary Financial Statements or (B) incurred in the
ordinary course of business consistent with past practice after the Balance
Sheet Date; (xi) any obligation or liability incurred by the Company or any of
its subsidiaries to any of its officers, directors or shareholders, or any
loans or advances made to any of its officers, directors, shareholders or
affiliates, except normal compensation and expense allowances payable to
officers; (xii) any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of value to the Company or any of its
subsidiaries in excess of $250,000 in any one transaction or $500,000 in the
aggregate; (xiii) any payment, discharge or satisfaction of any material claim
or obligation, except in the ordinary course of business consistent with past
practice but in no event more than $250,000 in any one transaction or $500,000
in the aggregate; (xiv) any agreement or action not otherwise referred to in
items (i) through (xiii) above entered into or taken that is material to the
Company and its subsidiaries, taken as a whole; or (xv) any agreement,
17
whether in writing or otherwise, to take any of the actions specified in the
foregoing items (i) through (xiv).
2.11 Agreements and Commitments. Neither the Company nor any of
its subsidiaries is a party or subject to:
(i) Any agreement, obligation or commitment (other than
those identified with respect to clauses (ii) through (viii) of this Section
2.11) providing for future payments by or to the Company or any of its
subsidiaries in an aggregate amount of $500,000 or more, within three years of
the date of this Agreement;
(ii) Any agreement, obligation or commitment to encumber,
license, transfer or sell rights in or with respect to any the
Company's Intellectual Property (as defined in Section 2.12)
other than in the ordinary course of business consistent with
past practice;
(iii) Any agreement for the sale or lease of real or
personal property (other than equipment leases in the ordinary course of
business consistent with past practice) involving more than $100,000 in any
year or per year;
(iv) Any joint venture or partnership agreement or
arrangement or any other agreement that involves a sharing of profits with
other persons or the payment of royalties to any other person;
(v) Any instrument evidencing indebtedness for borrowed
money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise, except for trade
indebtedness or any advance to any employee of the Company or any of its
subsidiaries incurred or made in the ordinary course of business consistent
with past practice;
(vi) Any agreement, obligation or commitment containing
covenants purporting to limit or which effectively limit the Company's or any
of its subsidiaries' freedom to compete in any line of business or in any
geographic area or which would so limit the Company or any of its subsidiaries
after the Effective Time;
(vii) Any union contract, or any employment, consulting,
severance, termination or indemnification agreement, written or oral, providing
for future payments to any current or former director, officer, employee,
consultant or other agent of the Company or any of its subsidiaries which
exceed $150,000 per annum or requires total payments over the life of such
agreement in excess of $150,000;
(viii) Any agreement, obligation or commitment entered
into other than in the ordinary course of business that is otherwise material
to the Company and its subsidiaries, taken as a whole.
The Company has provided Parent with true and correct copies of
18
each of the agreements set forth in Item 2.11 of the Company Disclosure Letter
(collectively, the "Company Agreements"). All Company Agreements are valid,
binding and enforceable against the parties thereto and are in full force and
effect in all material respects. Neither the Company nor, to the Knowledge of
the Company or its subsidiaries, any other party, is in breach of or default
under any material term of any such Company Agreement.
2.12 Intellectual Property.
2.12.1 The Company and its subsidiaries own all right, title
and interest in, or have the right to use, all patent
applications, patents, trademark applications, trademarks,
service marks, trade names, copyright applications,
copyrights, trade secrets, know-how, technology and other
intellectual property and proprietary rights ("Intellectual
Property") used in or necessary to the conduct of the
Company's business as presently conducted, except to the
extent that the failure to have such rights has not had and
would not have a Material Adverse Effect. The Company has
taken all reasonable measures to protect all of the Company's
Intellectual Property, and, to the Company's Knowledge, no
other person is infringing or violating any of the Company's
Intellectual Property. Item 2.12.1 of the Company Disclosure
Letter is a true and complete list of all copyright, mask work
and trademark registrations and applications and all patents
and patent applications for the Company's Intellectual
Property owned by the Company or any of its subsidiaries. To
the Company's Knowledge, there has been no material loss,
cancellation, termination or expiration of any such
registration or patent or application. Neither the Company
nor any of its subsidiaries is, or as a result of the
execution, delivery or performance of this Agreement will be,
in material violation of any license, sublicense or other
agreement relating to, or lose any material rights in respect
of, the Intellectual Property of the Company or any third
party.
2.12.2 The business of the Company as conducted as of the date
hereof does not cause the Company or any of its subsidiaries
to infringe or violate any of the patents, trademarks, service
marks, trade names, mask works, copyrights, trade secrets,
proprietary rights or other intellectual property of any other
person, and none of the Company or its subsidiaries has
received any written or oral claim or notice of infringement
or potential infringement of the intellectual property of any
other person. The Company has the unrestricted right to
reproduce, manufacture, sell, license and distribute all of
its products ("Products"), offer and sell its services, and
the right to use all of its registered user lists, and is not
using any confidential information or trade secrets of any
former employer of any past or present employees in the
countries in which its Products are currently sold, and, to
the Knowledge of the Company and its subsidiaries, in any
other country.
19
2.12.3 The Company possesses copies of the source code for
each of the Products and none of such source code has been
provided to any third party, other than to an escrow agent
pursuant to customary source code escrow agreements, copies of
which have been provided to Parent. None of the Products
contains any significant defect (including, without
limitation, in connection with processing data containing
dates in leap years or in the year 2000 and any preceding or
following years) or a material difference between the
functionality of such Product and its current end-user
documentation or warranties.
2.13 Compliance with Laws. The Company and each of its
subsidiaries has complied and is in compliance with, is not in violation of,
and has not received any notices of violation with respect to, any laws,
ordinances, regulations and rules, and all orders, writs, injunctions, awards,
judgments and decrees, applicable to the Company or such subsidiary or to its
assets, properties and business, except for such violations or failures to
comply as would not have a Material Adverse Effect. The Company and each of
its subsidiaries has received all licenses, permits and approvals from, and has
made all filings with, third parties, including government agencies and
authorities, necessary to conduct its business as presently conducted, except
where the failure to obtain such licenses or make such filings would not have a
Material Adverse Effect.
2.14 Certain Transactions and Agreements. No person who is an
officer, director, employee or agent of the Company or any of its subsidiaries
has any direct or indirect interest in any agreement or informal arrangement
with the Company or any of its subsidiaries, including, without limitation, any
loan arrangements, except for compensation for services as an officer, director
or employee of the Company and except for the normal rights of a shareholder.
None of such officers, directors, employees or agents has any direct or
indirect interest in any property, real or personal, tangible or intangible,
including, without limitation, Intellectual Property, used in the business of
the Company or its subsidiaries, and there have been with respect to such
persons no transactions of the type required to be disclosed under the Exchange
Act or similar law or regulation.
2.15 Employees.
2.15.1 Neither the Company nor any of its subsidiaries has
any employment contract or consulting agreement currently in effect that is not
terminable at will without penalty or payment of compensation by the Company or
such subsidiary (except to the extent that applicable foreign laws may require
the payment of severance compensation), and each officer, employee, agent or
consultant of the Company and each of its subsidiaries has executed the
Company's standard form of noncompetition, nondisclosure of proprietary
information and assignment of copyright and other intellectual property rights
to the Company, copies of which have been provided to Parent. The Company has
delivered to Parent a list of all employees, officers and development
consultants of the Company and its subsidiaries and their current compensation
and benefits as of the date of this Agreement.
20
2.15.2 Neither the Company nor any of its subsidiaries (i)
has, to the Knowledge of the Company and its subsidiaries, ever been or is now
subject to a union organizing effort, (ii) is subject to any collective
bargaining agreement with respect to any of its employees, (iii) is subject to
any other contract, written or oral, with any trade or labor union, employees'
association or similar organization, and (iv) has any current labor dispute,
except for disputes with individual employees arising in the ordinary course of
business consistent with past practice. The Company and each of its
subsidiaries has good labor relations, and neither the Company nor its
subsidiaries has Knowledge of any facts indicating that the consummation of the
transactions provided for herein (i) will have an adverse effect on its labor
relations, or (ii) that any of its key employees intends to leave its employ.
2.15.3 Item 2.15.3 of the Company Disclosure Letter contains
a list of all pension, retirement, disability, medical, dental or other health
plans, life insurance or other death benefit plans, profit sharing, deferred
compensation agreements, stock, option, bonus or other incentive plans or
policies, vacation, sick, holiday or other paid leave plans, severance plans or
other similar employee benefit plans or policies maintained by the Company and
each of its subsidiaries (the "Employee Plans"), including, without limitation,
all "employee benefit plans" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Company has
delivered true and complete copies or descriptions of all the Employee Plans to
Parent. Each of the Employee Plans, and its operation and administration, is,
in all material respects, in compliance with all applicable, federal, state,
local and other governmental laws and ordinances, orders, rules and
regulations, including the requirements of ERISA and the Code, as well as the
terms of such Employee Plans. All such Employee Plans that are "employee
pension benefit plans" (as defined in Section 3(2) of ERISA) which are intended
to qualify under Section 401(a) of the Code have received favorable
determination letters that such plans satisfy the qualification requirements of
the Tax Reform Act of 1986. The Company has delivered a true and complete copy
of the most recent determination letter issued with respect to each Employee
Plan intended to qualify under Section 401 (a) of the Code. No Employee Plan
is subject to Title IV of ERISA. The Company and its subsidiaries have no
unfunded liability under Section 412 of the Code. All contributions due from
the Company and its subsidiaries with respect to any of the Employee Plans have
been made or accrued on the Company Financial Statements. Neither the Company
nor any of its subsidiaries has ever been a participant in any "prohibited
transaction" within the meaning of Section 406 of ERISA with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) which the
Company or such subsidiary sponsors as employer or in which the Company or such
subsidiary participates as an employer, which was not otherwise exempt pursuant
to Section 408 of ERISA (including any individual exemption granted under
Section 408(a) of ERISA), or which could result in an excise tax under the
Code. The group health plans, as defined in Section 4980B(g) of the Code, that
benefit employees of the Company and its subsidiaries are in compliance with
the continuation coverage requirements of Section 4980B of the Code. There are
no outstanding violations of Section 4980B of the Code with respect to any
Employee Plan, covered employees or qualified beneficiaries.
21
2.15.4 To the Company's Knowledge, no employee of the Company
or any of its subsidiaries is in material violation of any term of any
employment contract, patent disclosure agreement or noncompetition agreement or
any other contract or agreement, or any restrictive covenant, relating to the
right of any such employee to be employed by the Company or such subsidiary or
to use trade secrets or proprietary information of others, and the employment
of any employee of the Company or any of its subsidiaries does not subject the
Company or such subsidiary to any liability to any third party.
2.15.5 Neither the Company nor any of its subsidiaries is a
party to any (a) agreement or commitment with any executive officer or other
key employee (i) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company in the nature of any of the transactions contemplated by this
Agreement, (ii) providing any term of employment or compensation guarantee or
(iii) providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such termination of
employment, or (b) agreement, commitment or plan, including, without
limitation, any Stock Plan, any of the benefits of which will be materially
increased, or the vesting of benefits of which will be materially accelerated,
by the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement. The Company is not
obligated to make any excess parachute payment, as defined in Section
280G(b)(1) of the Code, nor will any excess parachute payment be deemed to have
occurred as a result of or arising out of the Merger.
2.16 Corporate Documents. The Company has made available to Parent
for examination all documents and information listed in the Company Disclosure
Letter or other exhibits called for by this Agreement or which have been
requested by Parent, including, without limitation, the following: (a) copies
of the Company's and each of its subsidiaries' Certificate of Incorporation and
Bylaws or similar charter documents as currently in effect; (b) the Company's
and each of its subsidiaries' minute book containing all records of all
proceedings, consents, actions and meetings of its directors and shareholders;
(c) each of the Company's subsidiaries' stock ledger, journal and other records
reflecting all stock issuances and transfers; (d) the May 1998 ▇▇▇▇▇▇ Group
analysis of the Company's shareholders; and (e) all currently effective
permits, orders and consents issued by any regulatory agency with respect to
the Company and each of its subsidiaries, or any securities of the Company and
each of its subsidiaries, and all applications for such permits, orders and
consents.
2.17 No Brokers. Other than ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, whose fees and
expenses will be paid by the Company (and a copy of whose engagement letter and
a calculation of the fees that would be due thereunder has been provided to
Parent), the Company is not obligated for the payment of fees or expenses of
any investment banker, financial advisor, broker or finder in connection with
the origin, negotiation or execution of this Agreement or in connection with
any transaction provided for herein. Assuming
22
consummation of the Merger, no such engagement letter obligates the Company to
continue to use such person's services or pay fees or expenses in connection
with any future transaction.
2.18 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon the Company or
any of its subsidiaries which has the effect of prohibiting or materially
impairing any current or future business practice of the Company or any of its
subsidiaries, any acquisition of property or right by the Company or any of its
subsidiaries or the conduct of business by the Company or any of its
subsidiaries as currently conducted by the Company or any of its subsidiaries.
2.19 F-4; Prospectus/Proxy Statement.
2.19.1 The information supplied and to be supplied by the
Company that is included in the Form F-4 Registration
Statement to be submitted to the SEC in connection with the
issuance of Parent ADSs in the Merger (the "Form F-4") shall
not at the time the Form F-4 (including any amendments or
supplements thereto) is declared effective by the SEC contain
any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
contained therein, in light of the circumstances under which
such statements were made, not misleading. The information
supplied and to be supplied by the Company that is included in
the prospectus/proxy statement (the "Prospectus/Proxy
Statement") included in the Form F-4 related to the meeting of
the Company's stockholders to consider the Merger (the
"Company Stockholders Meeting") shall not on the date such
Prospectus/Proxy Statement is first mailed to the Company's
stockholders, and, together with any amendments or supplements
thereto, at the time of the Company Stockholders Meeting and
at the Effective Time, contain any untrue statement, which, at
such time, is false or misleading with respect to any material
fact or omit to state any material fact necessary in order to
make the statements contained therein, in light of the
circumstances under which such statements were made, not
misleading; or omit to state any material fact necessary to
correct any statement in any earlier communication with
respect to the solicitation of proxies for the Company
Stockholders Meeting which has become false or misleading.
2.19.2 The information supplied and to be supplied by the
Company that is included in the Super Class 1 Shareholder
Circular (comprising listing particulars under Part IV of the
Financial Services ▇▇▇ ▇▇▇▇ of the United Kingdom, as amended
(the "FSA")) (the "Parent Disclosure Document") will, on the
date the Parent Disclosure Document is first mailed to
shareholders of Parent and, together with any supplementary
listing particulars published under
23
Part IV of the FSA, at the time of the meeting of the holders
of Ordinary Shares for the purpose of voting on the
transactions contemplated by this Agreement (the "Parent
Shareholders Meeting") and at the Effective Time, include all
such information within the Knowledge of each of the directors
of the Company (or which it would be reasonable for them to
obtain by making inquiries) as investors and their
professional advisors reasonably require and expect to find,
for the purpose of making an informed assessment of the assets
and liabilities, financial position, profits and losses and
prospects of Parent and of the rights attaching to the
securities to which the Parent Disclosure Document relates.
2.19.3 Notwithstanding the foregoing, the Company makes no
representation, warranty or covenant with respect to any
information supplied by Parent or Newco which is contained in
any of the foregoing documents.
2.20 Books and Records. The books, records and accounts of the
Company (a) are in all material respects true and complete, (b) have been
maintained in accordance with reasonable and proper business and corporate
governance practices on a basis consistent with prior years, (c) are stated in
reasonable detail and accurately and fairly reflect the transactions and
dispositions of the assets of the Company and (d) accurately and fairly reflect
the basis for the Company Financial Statements.
2.21 Insurance. The Company and each of its subsidiaries have
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting business or owing assets similar to those of the Company
and its subsidiaries. There is no material claim pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies have been paid and the Company and its subsidiaries are
otherwise in compliance in all material respects with the terms of such
policies and bonds. Neither the Company nor its subsidiaries has any Knowledge
of any threatened termination of, or material premium increase with respect to,
any of such policies.
2.22 Environmental Matters.
2.22.1 During the period that the Company and its
subsidiaries have leased the premises currently occupied by them and those
premises occupied by them since the date of their respective organizations,
there have been no disposals, releases or threatened releases of Hazardous
Materials (as defined below) on any such premises in violation of law. Neither
the Company nor its subsidiaries has any Knowledge of any presence, disposals,
releases or threatened releases of Hazardous Materials on or from any of such
premises, which may have occurred prior to the Company or any of its
subsidiaries having taken possession of any of such premises, in violation of
law. For purposes of this Agreement, the terms "disposal," "release," and
"threatened release" have the definitions
24
assigned thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA")
and "Hazardous Materials" means any hazardous or toxic substance, material or
waste which is or becomes prior to the Closing Date regulated under, or defined
as a "hazardous substance," "pollutant," "contaminant," "toxic chemical,"
"hazardous material," "toxic substance" or "hazardous chemical" under (i)
CERCLA; (ii) the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Section 11001 et seq.; (iii) the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq.; (iv) the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; (v) the Occupational Safety and Health Act of 1970, 29
U.S.C. Section 651 et seq.; (vi) regulations promulgated under any of the above
statutes; or (vii) any applicable state or local statute, ordinance, rule or
regulation that has a scope or purpose similar to those identified above.
2.22.2 During the time that the Company or its subsidiaries
have leased such premises, none of the premises currently leased by the Company
or its subsidiaries or any premises previously occupied by the Company or its
subsidiaries is in violation of any federal, state or local law, ordinance,
regulation or order relating to industrial hygiene or to the environmental
conditions in such premises.
2.22.3 During the time that the Company and its subsidiaries
have leased the premises currently or previously occupied by them, (i) neither
the Company, its subsidiaries nor, to the Company's or any subsidiaries'
Knowledge, any third party, has used, generated, manufactured or stored in such
premises or transported to or from such premises any Hazardous Materials in
violation of law, (ii) there has been no litigation, proceeding or
administrative action brought or threatened in writing against the Company or
any of its subsidiaries, or any settlement reached by the Company or any of its
subsidiaries with, any party or parties alleging the presence, disposal,
release or threatened release of any Hazardous Materials on, from or under any
of such premises, and (iii) no Hazardous Materials have been transported from
such premises to any site or facility now listed or proposed for listing on the
National Priorities List, at 40 C.F.R. Part 300, or any list with a similar
scope or purpose published by any state authority.
2.23 Customers and Suppliers. As of the date of this Agreement, no
customer which individually accounted for more than $1,000,000 of the Company's
gross revenues during the twelve months preceding the date of this Agreement
has indicated to the Company that it will stop, or materially decrease the rate
of, buying products or services from the Company, or has since April 30, 1997
materially decreased its usage of the Company's products or services. As of
the date of this Agreement, no material supplier of the Company has indicated
that it will stop, or materially decrease the rate of supplying materials,
products or services to the Company.
2.24 Accounts Receivable. The unpaid accounts and notes receivable
owing to the Company and its subsidiaries on the balance sheet included in the
Preliminary Financial Statements (after taking into account reserves which are
reflected therein) are, and all receivables generated from the date of the
Preliminary Financial Statements through the Closing Date shall be, collectible
in the ordinary course of business consistent with past practice, except for
such accounts and notes receivable, the failure of which to be
25
collectible, would not cause a Material Adverse Effect. No such account has
been assigned or pledged to any other person, firm or corporation and no
defense or setoff to any such account has been asserted by the account obligor,
except for such assignments, pledges, defenses or setoffs which would not cause
a Material Adverse Effect.
2.25 Predecessor Entity. To the Company's or any of its
subsidiaries' Knowledge, none of the representations or warranties made herein
with respect to the Company is materially untrue or incorrect with respect to
any predecessor of the Company, the effect of which would subject the Company
to material obligation or liability.
2.26 Board Approval; State Takeover Statutes; Charter; Rights
Agreement.
2.26.1 The Board of Directors of the Company has (i) approved the
Merger and this Agreement, (ii) determined that the Merger is in the best
interests of the stockholders of the Company and is on terms that are fair to
such stockholders and (iii) determined to recommend that the stockholders of
the Company approve this Agreement and the consummation of the Merger, and such
approval is sufficient to render inapplicable to the Merger, this Agreement and
the other transactions contemplated hereby and thereby, the provisions of
Section 203 of the Delaware Law. No other "fair price," "moratorium," "control
share acquisition," or other anti-takeover statute or similar statute or
regulation applies or purports to apply to the Merger, this Agreement or any of
the other transactions contemplated hereby or thereby.
2.26.2 A majority of the "Disinterested Directors" (as such term is
defined in the Company's Certificate of Incorporation) have approved the Merger
and this Agreement, and such approval is sufficient to render inapplicable to
the Merger, this Agreement and the other transactions contemplated hereby and
thereby, the provisions of Article Eighth of the Company's Certificate of
Incorporation. The affirmative vote of the holders of a majority of the shares
of Company Common Stock outstanding on the record date set for the Company
Stockholders Meeting is the only vote of the holders of any of the Company's
capital stock necessary to approve the Merger, this Agreement, or any of the
other transactions contemplated hereby.
2.26.3 The Company has taken, and as soon as possible after the date
of this Agreement (but in no event later than two business days after the date
of this Agreement), the Rights Agent will take, all actions necessary or
appropriate to amend the Rights Agreement to ensure that the execution and
delivery of this Agreement, the Merger and the other transactions contemplated
by this Agreement will not cause Parent, Newco or any of their affiliates to be
considered an "Acquiring Person," the occurrence of a "Distribution Date," a
"Stock Acquisition Date," or a "Triggering Event" (as each such term is defined
in the Rights Agreement) or the separation of the Rights from the underlying
shares of Company Common Stock, and will not give the holders thereof the right
to acquire securities of any party to this Agreement.
2.27 Accounting Treatment. Neither the Company nor its
subsidiaries, nor, to the Knowledge of the Company or its subsidiaries, any of
their respective directors, officers, stockholders or "affiliates" (within the
meaning of the Securities Act), has taken any action that would prevent Parent
from accounting for the Merger as a pooling of interests pursuant to US GAAP.
2.28 Opinion of Financial Advisor. The Company has been advised in
writing by its financial advisor, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, that in such
advisor's opinion,
26
as of the date of this agreement, the consideration to be received in the
Merger is fair to the stockholders of the Company, from a financial point
of view.
2.29 Representations Complete. None of the representations or
warranties made by the Company in this Agreement, its exhibits and
schedules, and any of the certificates or documents to be delivered
by the Company to Parent under this Agreement, taken together,
contains or will contain at the Effective Time any untrue statement
of a material fact or omits or will omit at the Effective Time to
state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
III. Representations and Warranties of Parent and Newco
Parent has heretofore delivered to the Company a disclosure letter
(the "Parent Disclosure Letter").
Parent and Newco hereby represent and warrant to the Company,
except as is set forth on Parent Disclosure Letter, that:
3.1 Organization; Title. Parent is a public limited company
duly organized and validly existing under the laws of England and Wales, has
the requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and is duly qualified
or licensed as a foreign corporation in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary. Parent has delivered to the Company true
and complete copies of its Memorandum of Association and Articles of
Association as currently in effect. Newco is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, has the
requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted. Newco has delivered
to the Company true and complete copies of its Certificate of Incorporation and
Bylaws as currently in effect. Parent owns all of the issued and outstanding
capital stock of Newco.
3.2 Power, Authorization and Validity.
3.2.1 Each of Parent and Newco has the corporate right,
power and authority to enter into and perform their obligations under this
Agreement. The execution and delivery of this Agreement have been duly and
validly authorized by all necessary corporate action on the part of Parent and
Newco, subject only to the approval of Parent's shareholders of (i) the
Merger, (ii) the granting of authority to allot securities of Parent pursuant
to Section 80 Companies ▇▇▇ ▇▇▇▇ of the United Kingdom (the "Companies Act"),
(iii) an increase in the share capital of Parent, and (iv) an increase in the
number of Ordinary Shares available to satisfy Parent's obligations under
Section 1.3 of this Agreement.
3.2.2 No consent, filing, authorization or approval,
governmental or otherwise, is required by or with respect to Parent or Newco in
connection with the
27
execution and delivery of this Agreement, or the consummation of the
transactions contemplated hereby or thereby, except for (a) the filing of the
Certificate of Merger and any other documents required to effectuate the Merger
under Delaware Law and the filing of appropriate documents with the relevant
authorities of the states in which the Company is qualified to do business, (b)
such filings as may be required to comply with federal and applicable state
securities laws and the securities laws of any foreign country, (c) filings
required under the HSR Act and the antitrust and competition laws of the
European Union and other jurisdictions, (d) appropriate filings with, and
approvals of, the London Stock Exchange Limited ("LSE") and the Nasdaq National
Market, (e) filings required under the Companies Act and the FSA, (f) the
consent of H.M. Treasury pursuant to Section 765(1)(C) of the Income and
Corporation Taxes ▇▇▇ ▇▇▇▇, and (g) such other consents, filings,
authorizations or approvals which, if not obtained or made, would not have a
Material Adverse Effect on Parent and would not prevent, or materially alter or
delay any of the transactions contemplated by this Agreement.
3.2.3 This Agreement has been duly executed and delivered by
Parent and constitute valid and binding obligations of Parent enforceable
against Parent in accordance with their respective terms, except as to the
effect, if any, of (a) applicable bankruptcy and other similar laws affecting
the rights of creditors generally and (b) rules of law governing specific
performance, injunctive relief and other equitable remedies. This Agreement
has been duly executed and delivered by Newco and constitutes a valid and
binding obligation of Newco enforceable against Newco in accordance with its
terms, except as to the effect, if any, of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally and (b) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.3 Capitalization.
3.3.1 The authorized share capital of Parent consists of
112,500,000 Ordinary Shares. As of the close of trading on
the day prior to the date of this Agreement, 80,171,795 of
those Ordinary Shares were issued and the balance were
unissued; and the same number of Ordinary Shares shall be
outstanding on the date of this Agreement (except for
additional Ordinary Shares which are issued in connection with
exercises of options and conversion of convertible securities
outstanding as of close of trading on the day prior to this
Agreement). All issued shares in the capital of Parent are,
and all shares which may be issued in the Merger or pursuant
to any stock option, stock bonus, stock award or stock
purchase plan, program or arrangement of Parent ("Parent Stock
Plans") will be, when issued, duly authorized, validly issued
and fully paid and not subject to any preemptive rights
(except as provided by Section 89 Companies Act), and have
been or will be offered, issued, sold and delivered by Parent
in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of
applicable securities laws. As of the close of trading on the
day prior to date of this Agreement, 10,666,157 Ordinary
Shares were subject to issued and outstanding unexercised
grants of options pursuant to Parent Stock Plans; and the same
number of Ordinary Shares shall be subject to issued and
outstanding unexercised grants of options pursuant to Parent
Stock Plans on the date of this Agreement (except for Ordinary
Shares issued in connection with exercises of options pursuant
to Parent Stock Plans outstanding as of the close of trading
on the day prior to the date of
28
this Agreement). Parent has provided to the Company true and
complete copies of all Parent Stock Plans. Other than as set
forth in this Section, there are no other stock appreciation
rights, options, warrants, exchangeable or convertible
securities, conversion privileges or preemptive or other
rights or agreements outstanding to purchase or otherwise
acquire any of Parent's authorized but unissued share capital;
there is no liability for dividends accrued but unpaid; and
there are no voting agreements, registration rights, rights of
redemption or repurchase, rights of first refusal or other
restrictions (other than normal restrictions on transfer under
applicable securities laws) applicable to any of Parent's
outstanding securities. There are no bonds, debentures, notes
or other indebtedness of Parent having the right to vote (or
convertible into, or exchangeable for, securities having the
right to vote) on any matters which shareholders of Parent may
vote.
3.3.2 Each Parent ADS represents five Ordinary Shares
deposited with The Bank of New York, Parent's United States
depositary (the "ADR Depositary") pursuant to the Deposit
Agreement, as amended and restated as of March 16, 1998 (the
"Deposit Agreement"), among Parent, the ADR Depositary and the
owners and holders of Parent ADRs, a copy of which has been
previously provided to the Company. Each Parent ADR is, and
each Parent ADR issued in connection with the Merger will be,
issued pursuant to the Deposit Agreement and represent one
Parent ADS. The Deposit Agreement is valid, binding and
enforceable against the parties thereto and is in full force
and effect.
3.3.3 The authorized capital stock of Newco consists of 100
shares of Newco Common Stock, all of which are issued and
outstanding, have been duly authorized and validly issued, are
fully paid and nonassessable and are owned by Parent, free and
clear of all Liens.
3.4 Subsidiaries. All of the issued and outstanding shares of
capital stock of each subsidiary of Parent have been duly authorized and
validly issued, are fully paid and nonassessable and are owned by Parent, free
and clear of all Liens and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock). Except for the capital stock of its subsidiaries, Parent
does not own, directly or indirectly, any equity interest in any corporation,
29
partnership, joint venture or other business entity.
3.5 No Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation by Parent and Newco of the transactions
provided for herein or therein, will conflict with, or (with or without notice
or lapse of time, or both) result in a termination, acceleration, breach,
impairment or violation of, (i) any provision of the Memorandum of Association
or Articles of Association of Parent as currently in effect, (ii) any note,
bond, lease, mortgage, indenture, lease, license, franchise, permit, agreement
or other instrument or obligation applicable to Parent or any of its
subsidiaries or their respective properties or assets (iii) any federal, state,
local or foreign judgment, writ, decree, order, statute, rule or regulation
applicable to Parent or any of its subsidiaries or of their respective
properties or assets, other than, in the case of clause (ii) or (iii), any such
conflicts, breaches, impairments or violations that individually or in the
aggregate would not have (A) a Material Adverse Effect, (B) impair the ability
of Parent to perform its obligations under this Agreement or (C) prevent or
materially delay consummation of any of the transactions contemplated by this
Agreement. The consummation of the Merger will not require the consent of any
third party and will not adversely affect any of the rights, licenses,
franchises, leases or agreements of Parent or any of its subsidiaries pursuant
to their terms, other than where the failure to obtain such consents or where
such adverse effects would not constitute, individually or in the aggregate, a
Material Adverse Effect.
3.6 Litigation. There is no suit, action, proceeding or
investigation pending or, to the Knowledge of Parent or any of its
subsidiaries, threatened against Parent or any of its subsidiaries before any
court or administrative agency, foreign or domestic, that, individually or in
the aggregate, would (i) have a Material Adverse Effect, (ii) impair the
ability of Parent or Newco to perform its obligations under this Agreement or
(iii) prevent or materially delay the Merger or the consummation of the
transactions contemplated by this Agreement, nor is there any judgment,
injunction, decree, writ, rule or order of any governmental entity or
arbitrator outstanding against Parent or any of its subsidiaries having or
which would have, any such effect. Item 3.6 of the Parent Disclosure Schedule
sets forth, with respect to any suit, action, proceeding or investigation to
which Parent or any of its subsidiaries is a party and which involves claims
which if adversely determined would exceed $100,000, the forum, the parties
thereto, the subject matter and current status thereof and the amount of
damages claimed.
3.7 SEC Documents; Financial Statements. Parent has filed all
required reports, schedules, forms, statements and other documents with the SEC
since July 1, 1995 (the "Parent SEC Documents"). As of their respective dates,
the Parent SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
applicable to such SEC Documents, and none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Parent included in the Parent SEC
Documents (the "Parent Financial Statements") comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have
30
been prepared according to US GAAP or UK GAAP, as the case may be, applied on a
basis consistent throughout the periods indicated and consistent with each
other (except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end adjustments). There has been no material change in Parent's
accounting policies except as described in the notes to the Parent Financial
Statements. For the purposes of this Agreement, all financial statements
referred to in this paragraph shall include any notes or schedules to such
financial statements. Except as set forth in Parent Financial Statements or
Parent's balance sheet dated April 30, 1998, neither Parent nor any of its
subsidiaries has any material debt, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to
become due, and there is no existing condition, situation or set of
circumstances which are required by US GAAP or UK GAAP, as the case may be, to
be set forth on a consolidated balance sheet of Parent and its consolidated
subsidiaries or in the notes thereto (other than matters that would ordinarily
be included in notes to audited financial statements, which notes will not be
materially different from comparable notes to Parent Financial Statements),
except as incurred in the normal course of business since April 30, 1998.
3.8 Title to Properties. Parent and its subsidiaries have good
and marketable title to, or a valid leasehold interest in, as applicable, all
of the assets reflected on Parent's audited balance sheet as of January 31,
1998, free and clear of all Liens, except (i) Liens for current taxes not yet
due and payable and (ii) Liens reflected on the Parent Financial Statements not
in excess of $100,000 and which do not materially detract from or interfere
with the use of the properties subject thereto or affected thereby or otherwise
impair the business operations conducted thereon. Parent's and its
subsidiaries' assets (A) are in all material respects in good operating
condition and repair, normal wear and tear excepted, and (B) constitute all of
the properties, interests, assets and rights held for use or used in connection
with the business of Parent and constitute all those necessary to continue to
operate the business of Parent consistent with current practice. All leases of
real or personal property to which Parent or any of its subsidiaries is a party
are fully effective and afford Parent or such subsidiary peaceful and
undisturbed possession of the subject matter of the lease.
3.9 Absence of Certain Changes. Since April 30, 1998, Parent
has carried on its business in the ordinary course consistent with
past practice and there has not been with respect to Parent or any of
its subsidiaries: (i) any change, event or condition (whether or not
covered by insurance) that would result in a Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, the capital stock
of Parent or any of its subsidiaries, any split, stock dividend,
combination or recapitalization of the capital stock of Parent or any
of its subsidiaries or any direct or indirect redemption, purchase or
other acquisition by Parent or any of its subsidiaries of the capital
stock of Parent or any of its subsidiaries; (iii) any purchase or
sale or other disposition, or any agreement or other arrangement for
the purchase, sale or
31
other disposition, of any material properties or assets other than in
the ordinary course of business consistent with past practice, but in
no event representing properties, assets or commitments or
arrangements in excess of $250,000 in any one transaction or $500,000
in the aggregate; (iv) any contingent liability incurred as guarantor
or surety with respect to the obligations of others; (v) any Lien
placed on any of its properties or assets other than in the ordinary
course of business consistent with past practice but in no event more
than $250,000 in any one transaction or $500,000 in the aggregate;
(vi) any material obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred
other than in the ordinary course of business consistent with past
practice (including obligations under customer contracts and current
obligations); (vii) any damage, destruction or loss, whether or not
covered by insurance, materially affecting its properties, assets or
business; (viii) any labor dispute or claim of material unfair labor
practices, any change in the compensation payable or to become
payable to any of Parent's or any of its subsidiaries' officers,
employees or agents, or any bonus payment or arrangement made to or
with any of such officers, employees or agents other than normal
annual raises in accordance with past practice, or any bonus payment
or arrangement made to or with any of such officers, employees or
agents other than normal bonuses or compensation increases or other
arrangements made in accordance with past practices; (ix) any
material adverse change with respect to its management, supervisory,
development or other key personnel; (x) any payment or discharge of a
material Lien or liability which was not either (A) shown on Parent's
balance sheet as of April 30, 1998 or (B) incurred in the ordinary
course of business consistent with past practice after April 30,
1998; (xi) any obligation or liability incurred by Parent or any of
its subsidiaries to any of its officers, directors or shareholders,
or any loans or advances made to any of its officers, directors,
shareholders or affiliates, except normal compensation and expense
allowances payable to officers; (xii) any cancellation of any debts
or claims or any amendment, termination or waiver of any rights of
value to Parent or any of its subsidiaries in excess of $250,000 in
any one transaction or $500,000 in the aggregate; (xiii) any payment,
discharge or satisfaction of any material claim or obligation, except
in the ordinary course of business consistent with past practice but
in no event more than $250,000 in any one transaction or $500,000 in
the aggregate; (xiv) any agreement or action not otherwise referred
to in items (i) through (xiii) above entered into or taken that is
material to Parent and its subsidiaries, taken as a whole; or (xv)
any agreement, whether in writing or otherwise, to take any of the
actions specified in the foregoing items (i) through (xiv).
3.10 Agreements and Commitments. Neither Parent nor any of its
subsidiaries is a party or subject to:
32
(i) Any agreement, obligation or commitment (other than
those identified with respect to clauses (ii) through (vi) of this Section 3.10
or in the ordinary course of the Company's business consistent with past
practice) providing for future payments by or to Parent or any of its
subsidiaries in an aggregate amount of $500,000 or more, within three years of
the date of this Agreement;
(ii) Any agreement, obligation or commitment to encumber,
license, transfer or sell rights in or with respect to any of
Parent's Intellectual Property (as defined in Section 3.11)
other than in the ordinary course of business consistent with
past practice;
(iii) Any joint venture or partnership agreement;
(iv) Any agreement, obligation or commitment containing
covenants purporting to limit or which effectively limit Parent's or any of its
subsidiaries' freedom to compete in any line of business or in any geographic
area or which would so limit Parent or any of its subsidiaries after the
Effective Time;
(v) Any union contract, or any employment, consulting,
severance, termination or indemnification agreement which will require Parent
or any of its subsidiaries to make any excess parachute payment, as defined in
Section 280G(b)(1) of the Code, as a result of the Merger; or
(vi) Any agreement, obligation or commitment entered into
other than in the ordinary course of business consistent with
past practice that is otherwise material to Parent and its
subsidiaries, taken as a whole.
Parent has provided the Company with true and correct copies
of each of the agreements set forth in Item 3.10 of the Parent Disclosure
Letter (collectively, the "Parent Agreements"). All Parent Agreements are
valid, binding and enforceable against the parties thereto and are in full
force and effect in all material respects. Neither the Parent nor, to the
Knowledge of Parent or its subsidiaries, any other party, is in breach of or
default under any material term of any such Parent Agreement.
3.11 Intellectual Property.
3.11.1 Parent and its subsidiaries own all right, title and
interest in, or have the right to use, all Intellectual
Property used in or necessary to the conduct of Parent's
business as presently conducted, except to the extent that the
failure to have such rights have not and would not have a
Material Adverse Effect. The business of Parent as conducted
as of the date hereof does not cause Parent or any of its
subsidiaries to infringe or violate any of the patents,
trademarks, service marks, trade names, mask works,
copyrights, trade secrets, proprietary rights or other
intellectual property of any other person.
3.11.2 Parent possesses copies of the source code for each of
its
33
products and none of such source code has been provided to any
third party, other than to an escrow agent pursuant to
customary source code escrow agreements, copies of which have
been provided to the Company. None of the Parent's products
contains any significant defect (including, without
limitation, in connection with processing data containing
dates in leap years or in the year 2000 and any preceding or
following years) or a material difference between the
functionality of such Product and its current end-user
documentation or warranties.
3.12 Compliance with Laws. Parent and each of its
subsidiaries have complied and is in compliance with, are not
in violation of, and have not received any notices of
violation with respect to, any laws, ordinances, regulations
and rules, and all orders, writs, injunctions, awards,
judgments and decrees, applicable to Parent or such subsidiary
or to their assets, properties and business, except for such
violations or failures to comply as would not have a Material
Adverse Effect. Parent and each of its subsidiaries has
received all licenses, permits and approvals from, and has
made all filings with, third parties, including government
agencies and authorities, necessary to conduct its business as
presently conducted, except where the failure to obtain such
licenses or make such filings would not have a Material
Adverse Effect.
3.13 Certain Transactions and Agreements. No person who is
an officer, director, employee or agent of Parent or any of its subsidiaries
has any direct or indirect interest in any agreement or informal arrangement
with Parent or any of its subsidiaries, including, without limitation, any loan
arrangements, except for compensation for services as an officer, director or
employee of Parent, of the type required to be disclosed under the Exchange Act
or similar law or regulation. None of such officers, directors, employees or
agents has any direct or indirect interest in any property, real or personal,
tangible or intangible, including, without limitation, Intellectual Property,
used in the business of Parent or its subsidiaries, and there have been with
respect to such persons no transactions of the type required to be disclosed
under the Exchange Act or similar law or regulation.
3.14 Corporate Documents. Parent has made available to the
Company for examination all documents and information listed in the Parent
Disclosure Letter or other exhibits called for by this Agreement or which have
been requested by the Company, including, without limitation, the following:
(a) copies of the Parent's Memorandum of Association and Articles of
Association as currently in effect; and (b) Parent's minute book containing all
records of all proceedings, consents, actions and meetings of its directors and
shareholders.
3.15 No Brokers. Other than ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation and SBC Warburg Dillon Read, whose fees and expenses
will be paid by Parent, Parent is not obligated for the payment of fees or
expenses of any investment banker, financial advisor, broker or finder in
connection with the origin, negotiation or execution of this Agreement or in
connection with any transaction provided for herein.
34
3.16 Restrictions on Business Activities. There is no
material agreement, judgment, injunction, order or decree binding upon Parent
or any of its subsidiaries which has the effect of prohibiting or materially
impairing any current or future business practice of Parent or any of its
subsidiaries, any acquisition of property or right by Parent or any of its
subsidiaries or the conduct of business by Parent or any of its subsidiaries as
currently conducted by Parent or any of its subsidiaries.
3.17 F-4; Prospectus/Proxy Statement.
3.17.1 The information supplied and to be supplied by
Parent that is included in the Form F-4 shall not at
the time the Form F-4 (including any amendments or
supplements thereto) is declared effective by the SEC
contain any untrue statement of a material fact or
omit to state a material fact necessary in order to
make the statements contained therein, in light of the
circumstances under which such statements were made,
not misleading. The information supplied and to be
supplied by Parent that is included in the
Prospectus/Proxy Statement shall not on the date such
Prospectus/Proxy statement is first mailed to the
Company's stockholders, and, together with any
amendments or supplements thereto, at the time of the
Company Stockholders Meeting and at the Effective
Time, contain any untrue statement, which, at such
time, is false or misleading with respect to any
material fact or omit to state any material fact
necessary in order to make the statements contained
therein, in light of the circumstances under which
such statements were made, not misleading; or omit to
state any material fact necessary to correct any
statement in any earlier communication with respect to
the solicitation of proxies for the Company
Stockholders Meeting which has become false or
misleading.
3.17.2 The information supplied and to be supplied by
Parent for inclusion in the Parent Disclosure Document
will, on the date the Parent Disclosure Document is
first mailed to shareholders of Parent and, together
with any amendments or supplements thereto, at the
time of the Parent Shareholders Meeting and at the
Effective Time, comply with the provisions of Section
146 of the FSA and of the Listing Rules of the LSE.
3.17.3 Notwithstanding the foregoing, Parent makes no
representation, warranty or covenant with respect to
any information supplied by the Company which is
contained in any of the foregoing documents.
3.18 Books and Records. The books, records and accounts of
Parent (a) are in all material respects true and complete, (b) have been
maintained in accordance with
35
reasonable and proper business and corporate governance practices on a basis
consistent with prior years, (c) are stated in reasonable detail and accurately
and fairly reflect the transactions and dispositions of the assets of Parent
and (d) accurately and fairly reflect the basis for the Parent Financial
Statements.
3.19 Insurance. Parent and each of its subsidiaries have
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting business or owing assets similar to those of Parent and
its subsidiaries. There is no material claim pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds.
3.20 Environmental Matters.
3.20.1 During the period that Parent and its
subsidiaries have leased the premises currently occupied by them and those
premises occupied by them since the date of their respective organizations,
there have been no disposals, releases or threatened releases of Hazardous
Materials on any such premises in violation of law. Neither Parent nor its
subsidiaries has any Knowledge of any presence, disposals, releases or
threatened releases of Hazardous Materials on or from any of such premises,
which may have occurred prior to Parent or any of its subsidiaries having taken
possession of any of such premises.
3.20.2 During the time that Parent or its
subsidiaries have leased such premises, none of the premises currently leased
by Parent or its subsidiaries or any premises previously occupied by Parent or
its subsidiaries is in violation of any federal, state or local law, ordinance,
regulation or order relating to industrial hygiene or to the environmental
conditions in such premises.
3.20.3 During the time that Parent and its
subsidiaries have leased the premises currently or previously occupied by them,
(i) neither Parent, its subsidiaries nor, to the Parent's or any subsidiaries'
Knowledge, any third party, has used, generated, manufactured or stored in such
premises or transported to or from such premises any Hazardous Materials in
violation of law, (ii) there has been no litigation, proceeding or
administrative action brought or threatened in writing against Parent or any of
its subsidiaries, or any settlement reached by Parent or any of its
subsidiaries with, any party or parties alleging the presence, disposal,
release or threatened release of any Hazardous Materials on, from or under any
of such premises in violation of law, and (iii) no Hazardous Materials have
been transported from such premises to any site or facility now listed or
proposed for listing on the National Priorities List, at 40 C.F.R. Part 300, or
any list with a similar scope or purpose published by any state authority.
3.21 Customers and Suppliers. As of the date of this
Agreement, no customer which individually accounted for more than $1,000,000 of
Parent's gross revenues during the twelve months preceding the date of this
Agreement has indicated to Parent that it will stop, or materially decrease the
rate of, buying products or services from Parent, or has since April 30, 1997
materially decreased its usage of the Parent's products
36
or services. As of the date of this Agreement, no material supplier of Parent
has indicated that it will stop, or materially decrease the rate of supplying
materials, products or services to Parent.
3.22 Board Approval. The Board of Directors of Parent has
(i) approved the Merger, and this Agreement, (ii) determined
that the Merger is in the best interests of the shareholders
of Parent and is on terms that are fair to such shareholders
and (iii) determined to recommend that the shareholders of
Parent approve the transactions contemplated by this Agreement
which require the approval of Parent's shareholders. The
affirmative vote of a majority of those shareholders of Parent
present and voting at the Parent Shareholders Meeting are the
only votes of the holders of any of Parent's share capital
necessary to approve the transactions contemplated by this
Agreement.
3.23 Accounting Treatment. Neither Parent nor its
subsidiaries, nor, to the Knowledge of Parent or its subsidiaries, any of their
respective directors, officers, stockholders or "affiliates" (within the
meaning of the Securities Act), has taken any action that would prevent Parent
from accounting for the Merger as a pooling of interests pursuant to US GAAP.
3.24 Opinion of Financial Advisor. Parent has been
advised in writing by ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation, that
in such advisor's opinion, as of the date of this agreement, the consideration
to be paid in the Merger is fair to the stockholders of Parent, from a
financial point of view.
3.25 Taxes. Parent and each of its subsidiaries have
filed all income tax and related information returns and
reports required to be filed, and have paid all taxes required
to be paid in respect of all periods for which such returns
have been filed, have made all necessary estimated tax
payments, and have no liability for such taxes materially in
excess of the amount paid, except to the extent adequate
reserves have been established in the Parent Financial
Statements. All such returns and reports filed by Parent and
each of its subsidiaries were true, correct and complete in
all material respects. No tax return of Parent or any of its
subsidiaries has been or is being audited or examined by the
Internal Revenue Service or the U.K. Inland Revenue.
3.26 Accounts Receivable. The unpaid accounts and notes
receivable owing to Parent and its subsidiaries on the most
recent balance sheet included in the Parent Financial
Statements (after taking into account appropriate reserves
which are reflected therein) are, and all receivables
generated from the date of such balance sheet through the
Closing Date shall be, collectible in the ordinary course of
business consistent with past practice, except for such
accounts and notes receivable, the failure of which to be
collectible, would not cause a Material Adverse Effect. No
such account has been assigned or pledged to any other person,
firm or corporation and no defense or setoff to any such
account has been asserted by the account obligor, except for
such assignments, pledges, defenses or
37
setoffs which would not cause a Material Adverse Effect. 3.27
Representations Complete. None of the representations or
warranties made by Parent in this Agreement, its exhibits and
schedules, and any of the certificates or documents to be
delivered by Parent to the Company under this Agreement, taken
together, contains or will contain at the Effective Time any
untrue statement of a material fact or omits or will omit at
the Effective Time to state a material fact necessary in order
to make the statements contained herein and therein, in light
of the circumstances under which such statements were made,
not misleading.
IV. Conduct Prior to the Effective Time
4.1 Conduct of Business. During the period from the date
of this Agreement and continuing until the earlier of the
Effective Time or the termination of this Agreement according
to its terms, the Company agrees (except to the extent
expressly contemplated by this Agreement or as consented to in
writing by Parent), to carry on its and its subsidiaries'
business in the usual, regular and ordinary course of business
consistent with past practice, to pay and cause its
subsidiaries to pay debts and taxes when due, to pay and
perform other obligations when due, and to use all reasonable
efforts to preserve intact its and its subsidiaries' present
business organizations, use its reasonable efforts to keep
available the services of its and its subsidiaries' present
officers and key employees and use its reasonable efforts to
preserve its and its subsidiaries' relationships with
customers, suppliers, distributors, licensors, licensees and
others having business dealings with it or its subsidiaries,
to the end that its and its subsidiaries' goodwill and ongoing
businesses shall be unimpaired at the Effective Time. The
Company agrees to promptly notify Parent of any event or
occurrence not in the ordinary course of its or its
subsidiaries' business consistent with past practice, and of
any event which could reasonably be expected to have a
Material Adverse Effect on the Company. Without limiting the
foregoing, except as expressly contemplated by this Agreement
or as set forth in Item 4.1 of Company Disclosure Letter,
neither the Company nor any of its subsidiaries shall do,
cause or permit any of the following, without the prior
written consent of Parent:
(a) borrow any money, other than in the ordinary
course of business consistent with past practice;
(b) enter into any transaction not in the
ordinary course of business consistent with past practice or enter into any
transaction or make any commitment involving an expense or capital expenditure
in excess of $250,000;
(c) except for the Merger, merge, consolidate or
reorganize with, or acquire any entity;
(d) dispose of any of its material assets except
in the ordinary course of business consistent with past practice;
(e) enter into any material lease or contract for
the purchase or sale of any property, real or personal, tangible or intangible,
or enter into any agreement of the types described in Section 2.11, except in
the ordinary course of business consistent
38
with past practice;
(f) terminate the employment of any employee who
(i) is in a management position and who has an annual salary equal to or more
than $80,000, (ii) has an annual salary equal to or more than $100,000, or
(iii) is a software developer (or occupies a similar position/role) on whom any
material project (including any software, product or service) is substantially
dependent.
(g) pay any bonus (except for customary and
reasonable sales-related SPIF programs), royalty, increased salary (except for
reasonable salary increases in connection with annual reviews consistent with
past practices) or special remuneration to any officer, employee or consultant
(except pursuant to existing arrangements heretofore disclosed in writing to
Parent) or enter into any new employment or consulting agreement with any such
person, or enter into any new agreement or plan of the type described in
Section 2.15.3;
(h) change accounting methods;
(i) declare, set aside or pay any cash or stock
dividend or other distribution in respect of capital stock, or redeem or
otherwise acquire any of its capital stock;
(j) amend or terminate any contract, agreement or
license to which it is a party except those amended or terminated in the
ordinary course of business, consistent with past practice, and which are not
material in amount or effect;
(k) lend any amount to any person or entity,
other than advances for travel and expenses which are incurred in the ordinary
course of business consistent with past practice, not material in amount, which
travel and expenses shall be documented by receipts for the claimed amounts;
(l) guarantee or act as a surety for any
obligation except for the endorsement of checks and other negotiable
instruments in the ordinary course of business, consistent with past practice;
(m) waive or release any material right or claim
except in the ordinary course of business, consistent with past practice;
(n) issue or sell any shares of its capital stock
of any class or any other of its securities (except pursuant to Company
Options, Company Warrants or Stock Plans outstanding on the date hereof), or
issue or create any warrants, obligations, subscriptions, options, convertible
securities, stock appreciation rights or other commitments to issue shares of
capital stock, or accelerate the vesting of any outstanding option or other
security (except pursuant to the terms and conditions of Company Options,
Company Warrants or Stock Plans as in effect on the date hereof);
(o) split or combine the outstanding shares of
its capital stock of any class or enter into any recapitalization affecting the
number of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(p) amend its Certificate of Incorporation or
Bylaws or other charter documents;
(q) agree to any material audit assessment by any
tax authority;
(r) license any of the Company's technology or
any of the Company's Intellectual Property, except in the ordinary course of
business consistent with past practice, or take any action which could have the
effect of placing any of the Company's Intellectual Property in the public
domain;
39
(s) materially change any insurance coverage; or
(t) agree to do any of the things described in
the preceding clauses 4.1(a) through 4.1(s).
4.2 No Other Negotiations.
(a) From the date hereof until the earlier of the
Effective Time or the termination of this Agreement
according to its terms, the Company will not, and
will not authorize or permit any officer, director,
employee, agent or affiliate of the Company, or any
other person, directly or indirectly, to (i) solicit,
initiate, encourage, approve or accept any
Acquisition Proposal (as defined below), or (ii)
except as required by the fiduciary duties of the
Board of Directors of the Company under applicable
law, as advised in writing by Arent Fox ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC, counsel to the Company, engage
in negotiations with, or disclose any nonpublic
information relating to the Company or any of its
subsidiaries or afford access to the properties,
books or records of the Company or any of its
subsidiaries to, any person that has advised the
Company or otherwise publicized the fact that such
person may be considering making, or that has made,
an Acquisition Proposal; provided, nothing herein
shall prohibit the Company's Board of Directors from
taking or disclosing to the Company's stockholders a
position with respect to a tender offer pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange
Act. The Company will promptly notify Parent after
receipt of any Acquisition Proposal or any notice
that any person is considering making an Acquisition
Proposal with respect to the Company or any request
for nonpublic information relating to the Company or
any of its subsidiaries or for access to the
properties, books or records of the Company or any of
its subsidiaries by any person that has advised the
Company or otherwise publicized the fact that such
person may be considering making, or that has made,
an Acquisition Proposal and will keep Parent informed
of the status and details of any such Acquisition
Proposal, indication or request.
(b) From the date hereof until the earlier of the
Effective Time or the termination of this Agreement
in accordance with its terms, Parent will not, and
will not authorize or permit any officer, director,
employee, agent or affiliate of Parent, or any other
person, directly or indirectly, to, solicit or
initiate any Acquisition Proposal (as defined below).
Parent will promptly notify the Company after receipt
of any Acquisition Proposal or any notice that any
person is considering making an Acquisition Proposal
with respect to Parent or any request for nonpublic
information relating to Parent or for access to the
properties, books or records of Parent by any person
40
that has advised Parent or otherwise publicized the
fact that such person may be considering making, or
that has made, an Acquisition Proposal and will keep
the Company informed of the status and details of any
such Acquisition Proposal, indication or request.
Notwithstanding anything to the contrary in this
Section 4.2(b), Parent shall be free to respond in
any manner it determines appropriate to any
Acquisition Proposal which is not initiated or
solicited by Parent.
(c) For the purposes of this Agreement with
respect to the Company, "Acquisition Proposal" means
any offer, inquiry or proposal received from any
party other than Parent, concerning the possible
disposition of all or any significant portion of the
Company's or any of its subsidiaries' business,
assets or capital stock by merger, sale or any other
means or any other transaction that would involve a
change in control of the Company or any of its
subsidiaries (other than the Merger and the other
transactions contemplated by this Agreement).
(d) For purposes of this Agreement with respect
to Parent, "Acquisition Proposal" means any offer,
inquiry or proposal received from any party other
than the Company concerning the possible disposition
of all or substantially all of the Parent's business,
assets or capital stock by merger, sale or any other
means, or any other transaction that would involve a
change in control of the Parent.
4.3 Parent Dividends Restricted. During the period from
the date of this Agreement and continuing until the earlier of the Effective
Time or the termination of this Agreement according to its terms, Parent agrees
(except as consented to in writing by the Company) that it shall not declare,
set aside or pay any cash or stock dividend or other distribution in respect of
capital stock, or redeem or otherwise acquire any of its capital stock.
V. Additional Agreements
5.1 Registration on Form F-4. As promptly as practicable
after the execution of this Agreement, the Company shall, in cooperation with
Parent, prepare and submit to the SEC on a confidential basis the
Prospectus/Proxy Statement and Parent shall, in cooperation with the Company
prepare and submit to the SEC on a confidential basis the Form F-4, in which
the Prospectus/Proxy Statement will be included as Parent's prospectus,
together with any other documents required by the Securities Act or the
Securities Exchange Act in connection with the Merger. Each of Parent and the
Company will notify the other promptly upon the receipt of any comments by the
SEC or its staff and of any request by the SEC or its staff or any other
governmental officials for amendments or supplements to the Form F-4 or the
Prospectus/Proxy Statement or for additional information, and will promptly
supply the other with copies of all correspondence between
41
such party or any of its representatives, on the one hand, and the SEC, its
staff or such other governmental officials, on the other hand, with respect to
the Form F-4, the Prospectus/Proxy Statement or the Merger. Subject to the
provisions of Section 5.2.2 regarding the fiduciary duties of the Board of
Directors of the Company, the Prospectus/Proxy Statement shall include the
recommendation of the Board of Directors of the Company in favor of the Merger.
Parent and the Company each shall use all reasonable efforts to have the Form
F-4 declared effective under the Securities Act as promptly as practicable;
provided, that Parent shall have no obligation to agree to account for the
Merger as a "purchase" in order to cause the Form F-4 to be declared effective.
The Company shall mail the Prospectus/Proxy Statement to the Company's
stockholders as promptly as practicable after the Form F-4 is declared
effective under the Securities Act and, if necessary, after the
Prospectus/Proxy Statement shall have been so mailed, promptly circulate
amended, supplemental or supplemented proxy material, and, if required in
connection therewith, resolicit proxies. Parent shall also, as promptly as
practicable, use all reasonable efforts to cause the ADR Depositary to file
with the SEC a registration statement on Form F-6 (the "Form F-6") with respect
to the Parent ADRs to be issued in connection with the Merger under the
Securities Act and use all reasonable efforts to have the Form F-6 declared
effective as soon as practicable after such filing. Parent shall also take any
action required to be taken under any applicable state securities laws in
connection with the issuance of the Parent ADSs in the Merger. The Company and
Parent shall each furnish the other with all information as may be reasonably
requested in connection with any action contemplated by this Section 5.1 or
Section 5.2. If at any time prior to the Effective Time any event or
information should be discovered by either the Company or Parent which should
be set forth in an amendment to the F-4 or a supplement to the Prospectus/Proxy
Statement, the discovering party shall promptly inform the other party.
5.2 Stockholders Meetings; Parent Approvals. The Company
shall, as soon as practicable following the date of this Agreement and the
effectiveness of the Form F-4, duly call, give notice of, convene and hold the
Company Stockholders Meeting.
5.2.1 Subject to the provisions of Section 5.2.2
regarding the fiduciary duties of the Board of
Directors of the Company, the Board of Directors of
the Company shall recommend adoption of this
Agreement and approval of the Merger by the Company's
stockholders and take all lawful action to solicit
such adoption and approval. Parent shall, as soon as
practicable following the date of this Agreement
(subject to coordination with the date of the Company
Stockholders Meeting), convene and hold the Parent
Shareholders Meeting. Subject to the provisions of
Section 5.2.2 regarding the fiduciary duties of the
Board of Directors of Parent, the Board of Directors
of Parent shall recommend approval of the
transactions contemplated by this Agreement and take
all lawful action to solicit such approval. To the
extent required by applicable law, Parent shall, as
soon as practicable after the date of this Agreement
and in accordance with the listing rules of the LSE,
in cooperation with the Company prepare and submit to
the LSE for approval the Parent Disclosure Document,
Parent shall notify the
42
Company reasonably promptly upon receipt of any
material comments from the LSE and shall keep the
Company informed of all material stages of the
preparation of the Parent Disclosure Document.
Parent shall use all reasonable efforts to have the
Parent Disclosure Document formally approved by the
LSE and shall thereafter publish the Parent
Disclosure Document, file it with the Registrar of
Companies in England and mail the same to its
shareholders in compliance with all legal
requirements applicable to the Parent Shareholders
Meeting and the listing rules of the LSE and, if
necessary, after the Parent Disclosure Document has
been so posted, promptly circulate amended,
supplemental or supplemented materials and, if
required in connection therewith, resolicit votes.
If at any time prior to the Effective Time any event
or information should be discovered by either the
Company or Parent which should be set forth in a
supplement to the Parent Disclosure Document, the
discovering party shall promptly inform the other
party.
5.2.2 The Board of Directors of Monument or Tower,
as the case may be, may withhold, withdraw or modify
its recommendation that its shareholders approve the
transactions contemplated by this Agreement only if,
after receiving advice from its legal counsel and
financial adviser, the Board of Directors concludes
in good faith that its fiduciary duties require such
withholding, withdrawal or modification. In the
event of any dispute concerning such withholding,
withdrawal or modification, the party whose Board of
Directors withheld, withdrew or modified its
recommendation shall have the burden of proof of
compliance with the standard set forth in the
preceding sentence.
5.3 Access to Information. During the period from the
date of this Agreement and continuing until the earlier of the Effective Time
or the termination of this Agreement according to its terms, the Company agrees
to provide Parent and its agents with reasonable access to the files, books,
records and offices of the Company, including, without limitation, any and all
information relating to the Company's taxes, commitments, contracts, leases,
licenses, real, personal and intangible property, and financial condition. The
Company will use its best efforts to cause its accountants to cooperate with
Parent and its agents in making available all financial information reasonably
requested, including, without limitation, the right to examine all working
papers pertaining to all financial statements prepared or audited by such
accountants. During the period from the date of this Agreement and continuing
until the earlier of the Effective Time or the termination of this Agreement
according to its terms, Parent agrees to provide the Company and its agents
with reasonable access to the files, books, records and offices of Parent,
including, without limitation, any and all information relating to Parent's
taxes, commitments, contracts, leases, licenses, real, personal and intangible
property, and financial condition. Parent will use its best efforts to cause
its accountants to cooperate with the Company and its agents in making
available all financial information reasonably requested, including, without
43
limitation, the right to examine all working papers pertaining to all financial
statements prepared or audited by such accountants.
5.4 Satisfaction of Conditions Precedent; Further
Assurances. Each of Parent and the Company will use their respective reasonable
best efforts to satisfy or cause to be satisfied promptly all the conditions
precedent to this Agreement, and each of Parent and the Company will use their
respective reasonable best efforts to cause the transactions provided for in
this Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties, to make
all filings, give all notices, execute and deliver such documents and
instruments and perform such other acts and things that may be necessary or
reasonably required on its part in order to effect the Merger, this Agreement
and the transactions provided for hereby and thereby.
5.5 Regulatory Approvals; Consents.
5.5.1 Each of Parent and the Company shall
promptly apply for or otherwise seek, and use all
reasonable efforts to obtain, all consents and
approvals required to be obtained by it for the
consummation of the Merger, including those required
under HSR, and shall use all reasonable efforts to
obtain all necessary consents, waivers and approvals
under any of its material contracts in connection
with the Merger for the assignment thereof or
otherwise, except where the failure to obtain such
consents under material contracts would not have a
Material Adverse Effect on the Company or Parent. The
parties hereto will consult and cooperate with one
another, and consider in good faith the views of one
another, in connection with any analyses,
appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted
by or on behalf of any party hereto in connection
with proceedings under or relating to HSR or any
other federal, state or foreign antitrust or fair
trade law.
5.5.2 Each of Parent and the Company shall use all
reasonable efforts to resolve such objections, if
any, as may be asserted by any government entity with
respect to the transactions contemplated by this
Agreement under HSR, the ▇▇▇▇▇▇▇ Act, as amended, the
▇▇▇▇▇▇▇ Act, as amended, the Federal Trade Commission
Act, as amended, and any other federal, national,
state, European Union or foreign statutes, rules,
regulations, orders or decrees that are designed to
prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of
trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or
judicial action or proceeding is instituted (or
threatened to be instituted) challenging any
transaction contemplated by this Agreement as
violative of any Antitrust Law, each of Parent and
the Company shall cooperate and use all reasonable
efforts vigorously to contest and resist any such
action or proceeding and to have vacated, lifted,
reversed, or overturned any decree, judgment,
injunction or other order, whether temporary,
preliminary or permanent (each an "Order"), that is
in effect and that prohibits, prevents, or restricts
44
consummation of the Merger or any such other
transactions, unless by mutual agreement Parent and
the Company decide that litigation is not in their
respective best interests. Notwithstanding the
provisions of the immediately preceding sentence, it
is expressly understood and agreed that neither the
Company nor Parent shall have any obligation to
litigate or contest any administrative or judicial
action or proceeding or any Order beyond the date of
a ruling preliminarily enjoining the Merger issued by
a court of competent jurisdiction. Each of Parent
and the Company shall use all reasonable efforts to
take such action as may be required to cause the
expiration of the notice periods under the HSR or
other Antitrust Laws with respect to such
transactions as promptly as possible after the
execution of this Agreement. 5.5.3 Notwithstanding
anything to the contrary in Section 5.5.1 or 5.5.2,
(i) neither Parent nor any of it subsidiaries shall
be required to divest any of their respective
businesses, product lines or assets, or to take or
agree to take any other action or agree to any
limitation, that could reasonably be expected to have
a Material Adverse Effect on Parent or on Parent
combined with the Company after the Effective Time
and (ii) neither the Company nor its subsidiaries
shall be required to divest any of their respective
businesses, product lines or assets, or to take or
agree to take any other action or agree to any
limitation, that could reasonably be expected to have
a Material Adverse Effect on the Company or on the
Company combined with Parent after the Effective
Time.
5.6 Pooling Accounting.
5.6.1 Each of Parent and the Company shall use their
reasonable best efforts to cause the Merger to be
accounted for as a pooling of interests. Each of
Parent and the Company shall use their reasonable
best efforts to have each person who is an
"Affiliate" within the meaning of Rule 145
promulgated under the Securities Act ("Rule 145") not
to take any action that would prevent Parent from
accounting for the Merger as a pooling of interests.
5.6.2 Schedule 5.6.2 sets forth those persons who
may be deemed "Affiliates" of the Company within the
meaning of Rule 145. The Company shall provide
Parent with such information as Parent shall
reasonably request for purposes of reviewing such
list. The Company shall use its best efforts to
deliver or cause to be delivered to Parent,
concurrently with the execution of this Agreement
(and in each case at least thirty days prior to the
Effective Time) from each of the Affiliates of the
Company, an executed Affiliate Agreement in the form
attached hereto as Exhibit C-1. Parent shall be
entitled to place, or cause to be placed, legends (as
specified in such Affiliate Agreements) on the
certificates evidencing Parent ADRs to be received by
such Affiliates of the Company and to issue stop
transfer orders to the transfer agent for Parent ADRs
consistent with the
45
terms of such Affiliate Agreements.
5.6.3 Schedule
5.6.3 sets forth those persons who may be deemed
"Affiliates" of Parent within the meaning of Rule
145. Parent shall provide the Company with such
information as the Company shall reasonably request
for purposes of reviewing such list. Parent shall use
its best efforts to deliver or cause to be delivered
to Parent, concurrently with the execution of this
Agreement (and in each case at least thirty days
prior to the Effective Time) from each of the
Affiliates of Parent, an executed Affiliate Agreement
in the form attached hereto as Exhibit C-2.
5.7 Business Acquisitions and Dispositions. Parent
agrees that it will advise and consult with the Company prior
to entering into any agreement for the acquisition of a
business or the disposition of a significant portion of
Parent's business that would prevent the Merger from being
consummated on or before September 30, 1998.
5.8 Auditors Letters. Each of Parent and the Company
shall use all reasonable efforts to cause to be delivered to
the other party and such party's directors a letter of its
independent auditors, dated the date on which the Form F-4
shall become effective, in form and substance customary for
"comfort" letters delivered by independent public accountants
in connection with registration statements similar to the Form
F-4.
5.9 Stock Exchange Listings. Parent shall prepare and
submit to the LSE a listing application covering the Ordinary Shares to be
represented by the Parent ADSs to be issued in the Merger, and shall use all
reasonable efforts to obtain, prior to the Effective Time, agreement by the LSE
for the admission of such Ordinary Shares to the Official List of the LSE, and
the Company shall cooperate with Parent with respect to such listing. Parent
shall submit to the Nasdaq National Market a listing application covering the
Parent ADSs to be issued in the Merger, and shall use all reasonable efforts to
obtain, prior to the Effective Time, approval for the listing of such Parent
ADSs, subject to official notice of issuance, and the Company shall cooperate
with Parent with respect to such listing.
5.10 Board of Directors. Promptly after the Effective
Time, Parent shall take such actions as are necessary to (i) set the number of
directors of Parent at seven, (ii) appoint two directors of Parent nominated by
the Company after consulting in good faith with Parent, (iii) appoint or retain
two directors of Parent who are neither members of the management of Parent nor
of the Company, after seeking the recommendation of the Company with respect to
one such director, and after consulting in good faith with the Company with
respect to both such directors, and (iv) appoint or retain three directors of
Parent selected in the sole discretion of Parent. From and after the Effective
Time, Parent shall take such actions as are necessary to appoint ▇▇▇▇▇ ▇. ▇▇▇▇▇
as a director of the Company.
5.11 Nasdaq Quotation. Parent and the Company agree to
continue the quotation of Parent ADSs and Company Common Stock, respectively,
on the Nasdaq National Market during the term of this Agreement in order that
appraisal rights will not be available to the Company's stockholders under
Section 262 of the Delaware Law.
5.12 Employee Matters. Parent will provide employees of
the Company
46
retained by Parent following the Closing with employee benefits in the
aggregate no less favorable than those benefits provided to similarly situated
employees of Parent; provided, that Parent shall be under no obligation to
retain any employee or group of employees of the Company or to continue any
existing program or plan for any employee or group of employees. The Company
will promptly notify Parent if any of the Company's officers becomes aware that
any of the Company's or any of its subsidiaries' key employees intends to leave
its employ. To the extent permitted by terms of the Company's 1992 Employee
Stock Purchase Plan ("Purchase Plan") and the pooling rules, the Company shall
use reasonable best efforts to terminate the Purchase Plan prior to or as of
the Effective Time, or take such other action with respect to the Purchase Plan
as may be agreed.
5.13 Takeover Statutes; Rights Agreement. If any "fair
price," "moratorium," "control share acquisition," or other anti-takeover
statute or similar statute or regulation, or any provision of the Company's
Certificate of Incorporation, Bylaws or other constitutive documents shall
become applicable to the Merger, this Agreement or any of the other
transactions contemplated hereby or thereby, the Company and its Board of
Directors shall take all action necessary to ensure that the Merger, this
Agreement and the other transactions contemplated hereby and thereby may be
consummated as promptly as practicable and otherwise to minimize the effect of
such statute, regulation or provision on the Merger, this Agreement and the
other transactions contemplated hereby and thereby. Except as otherwise
provided in Section 2.26.3, the Company shall not redeem the Rights or amend or
terminate the Rights Agreement prior to the Effective Time unless required to
do so by a court of competent jurisdiction.
5.14 Public Announcement. Parent and the Company will
issue a press release approved by both parties announcing the Merger as soon as
practicable following the execution of this Agreement. Each party shall
consult with the other before issuing any press release or otherwise making any
other public or non-confidential disclosure regarding the terms of this
Agreement and the transactions contemplated hereby, and neither shall issue any
such press release or make any such statement or disclosure without the prior
approval of the other (which approval shall not be unreasonably withheld),
except as may be required by law, court process, securities exchange listing
agreement or the rules of the LSE or the National Association of Securities
Dealers ("NASD"). Each party will take all reasonable precautions to prevent
any trading in the securities of the other by officers, directors, employees
and agents of such party having knowledge of any material information regarding
the other party provided hereunder until the information in question has been
publicly disclosed.
5.15 Confidentiality. Except as expressly authorized by
Parent in writing, the Company will not directly or indirectly divulge to any
person or entity or use any Parent Confidential Information, except as required
for the performance of its duties under this Agreement. Except as expressly
authorized by the Company in writing, Parent will not directly or indirectly
divulge to any person or entity or use any Company Confidential Information,
except as required for the performance of its duties under this Agreement. As
used herein, "Parent Confidential Information" consists of (a) any information
designated by Parent as confidential whether developed by Parent or disclosed
to Parent by a third party, (b) the source code to any Parent software and any
trade secrets relating to any of the foregoing, (c) any information relating to
Parent's product plans, product designs, product costs, product prices, product
names, finances, marketing plans,
47
business opportunities, personnel, research development or know-how, (d) any
information contained in Parent's HSR Act filing in connection herewith and (e)
items and matters set forth in any disclosure letter by Parent in connection
herewith. As used herein, "Company Confidential Information" consists of (v)
any information designated by the Company as confidential whether developed by
the Company or disclosed to the Company by a third party, (w) the source code
to any the Company software, and any trade secrets related to any of the
foregoing, and (x) any information relating to the Company's product plans,
product designs, product costs, product prices, product names, finances,
marketing plan, business opportunities, personnel, research, development or
know-how, (y) any information contained in the Company's HSR Act filing in
connection herewith and (z) items and matters set forth in the Company
Disclosure Letter. "Parent Confidential Information" and "Company Confidential
Information" also include the terms and conditions of this Agreement, except as
disclosed in accordance with Section 5.14. The foregoing restrictions will not
apply to information that (i) has become publicly known through no wrongful act
of the receiving party, (ii) has been rightfully received from a third party
authorized by the party which is the owner, creator or compiler to make such
disclosure without restriction, (iii) has been approved or released by written
authorization of the party which is the owner, creator or compiler, (iv) is
being or has theretofore been disclosed pursuant to a valid law, court process,
securities exchange listing agreement or the rules of the LSE or NASD after a
reasonable attempt has been made to notify the party which is the owner,
creator or compiler, or (v) is already in the possession of the receiving
party, without restriction, or is independently developed by the receiving
party, in each case, not in violation of this Agreement. Each party hereto
agrees that the disclosure of Parent Confidential Information or Company
Confidential Information to the other shall not impair the right of the other
to make, procure or market products or services now or in the future which may
be competitive with those offered by the other party. Each party shall be free
to use the information which may be retained in intangible form in the minds of
those employees of such party who have had access to the Parent Confidential
Information or Company Confidential Information, as the case may be, for any
purpose, including their use in the development, manufacture, marketing and
maintenance of such receiving party's products and services; provided, however,
that this sentence shall not be deemed to permit the receiving party to
infringe any of the disclosing party's trade secrets or disclose any Parent
Confidential Information or Company Confidential Information, as the case may
be, to third parties in breach of this Section 5.15. This Section 5.15 shall
survive termination of this Agreement for a period of two years from the date
of such termination. This Section 5.15 supersedes, replaces and terminates the
Mutual Non-Disclosure Agreement, dated as of April 10, 1998, between Parent and
the Company.
5.16 Directors' and Officers' Insurance.
(a) Parent shall not modify or terminate the
policy of directors' and officers' liability
insurance that is currently maintained by the Company
until earlier of (i) the expiration of the current
term for such insurance, or (ii) three years from the
date hereof. (b) Parent shall not cause, or permit,
any changes in the Company's Certificate of
Incorporation or Bylaws with respect to the
indemnification of its former or their present
directors, officers, employees or agents, or any
indemnification obligations of the
48
Company given pursuant to such Certificate of
Incorporation or Bylaws, and Parent hereby guarantees
the obligations of the Company pursuant to such
indemnification provisions following the Effective
Time.
VI. Closing; Exchange of Certificates
6.1 The Closing. Subject to termination of this
Agreement as provided in Article VIII below, the Closing will take place at the
offices of Fenwick & West, Two Palo Alto Square, Palo Alto, California as soon
as practicable after the satisfaction or waiver of each of the conditions set
forth in Articles VII or at such other time as the parties hereto may agree
(the "Closing Date"). Prior to or concurrently with the Closing, the
Certificate of Merger and such officers' certificates or other documents as may
be required to effectuate the Merger will be filed in the office of the
Secretary of State of the State of Delaware. Accordingly, the Merger will
become effective at the Effective Time.
6.2 Exchange Fund. At the Effective Time, (i) Parent
shall issue to and deposit with the ADR Depositary, for the
benefit of the holders of shares of Company Common Stock
converted in accordance with Article I, Ordinary Shares in an
amount sufficient to permit the ADR Depositary to issue Parent
ADRs representing the number of Parent ADSs issuable pursuant
to Section 1.1 and (ii) Parent shall deposit with such bank or
trust company as may be designated by Parent and be reasonably
acceptable to Company (the "Exchange Agent") cash in lieu of
fractional Parent ADSs. Parent shall cause the ADR Depositary
to issue upon the instructions of the Exchange Agent, for the
benefit of the holders of shares of Company Common Stock
converted in accordance with Article I, through the Exchange
Agent, Parent ADRs representing the number of Parent ADSs
issuable pursuant to Section 1.1, as soon as practicable after
the Effective Time, and the Exchange Agent shall deliver cash
in lieu of fractional Parent ADSs pursuant to Section 1.2
(such cash and Parent ADRs representing Parent ADSs, together
with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") in
exchange for outstanding shares of Company Common Stock.
Parent shall pay any stamp duties in connection with the
transfer of shares of Company Common Stock to the ADR
Depositary.
6.3 Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall
mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (and the associated
Rights) (the "Certificates") that were converted into the
right to receive Parent ADSs pursuant to Section 1.1, (i) a
letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the
Exchange Agent, and which shall be in such form and have such
other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for Parent ADRs. 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, and such other
documents as may
49
reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange
therefor (A) one or more Parent ADRs representing, in the
aggregate, the whole number of Parent ADSs that such holder
has the right to receive pursuant to the provisions of Article
I (after taking into account all shares of Company Common
Stock then held by such holder) and (B) a check in the amount
equal to the cash that such holder has the right to receive in
lieu of any fractional Parent ADSs pursuant to Section 1.2,
and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Company
Common Stock that is not registered in the transfer records of
the Company, one or more Parent ADRs evidencing, in the
aggregate, the proper number of Parent ADSs may be issued, a
check in the proper amount of cash in lieu of any fractional
Parent ADSs and any dividends or other distributions to which
such holder is entitled pursuant to Section 6.4 may be paid to
a person other than the person in whose name the Certificate
so surrendered is registered if the Certificate representing
such Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect
such transfer and evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by
this Article VI, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to
receive upon surrender the Merger consideration with respect
to the shares of Company Common Stock formerly represented
thereby to which such holder is entitled pursuant to Section
1.1, cash in lieu of any fractional Parent ADSs to which such
holder is entitled pursuant to Section 1.2 and any dividends
or other distributions to which such holder is entitled
pursuant to Section 6.4. No interest will be paid or will
accrue on any cash payable in lieu of any traditional Parent
ADSs payable pursuant to Section 1.2 or any dividends or other
distributions payable pursuant to Section 6.4.
6.4 Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made with respect
to Ordinary Shares with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate
with respect to the Parent ADSs that such holder would be
entitled to receive upon surrender of such Certificate and no
cash payment in lieu of fractional Parent ADSs shall be paid
to any such holder pursuant to Section 1.2 until such holder
shall surrender such Certificate in accordance with Section
6.3. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the
holder of Parent ADSs issued in exchange therefor, without
interest, (a) promptly after the time of such surrender, the
amount of any cash payable in lieu of fractional Parent ADSs
to which such holder is entitled pursuant to Section 1.2 and
the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to
such whole Parent ADSs, and (b) at the appropriate payment
date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender
payable
50
with respect to such Parent ADSs.
6.5 No Further Ownership Rights in Company Common Stock.
All Parent ADRs (and the Parent ADSs represented by such
Parent ADRs) issued and cash paid upon conversion of shares of
Company Common Stock in accordance with the terms of Article I
and this Article VI (including any cash paid pursuant to
Sections 1.2 or 6.4) shall be deemed to have been issued or
paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock (and the Rights associated
therewith).
6.6 Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of
Certificates for twelve months after the Effective Time shall
be delivered to Parent or otherwise on the instruction of the
Parent, and any holders of the Certificates who have not
theretofore complied with this Article VI shall thereafter
look only to Parent for the Merger consideration with respect
to the shares of Company Common Stock formerly represented
thereby to which such holders are entitled pursuant to Section
6.3, any cash in lieu of fractional Parent ADSs to which such
holders are entitled pursuant to Section 1.2 and any dividends
or distributions with respect to Parent ADSs to which such
holders are entitled pursuant to Section 6.4. Any such former
portion of the Exchange Fund remaining unclaimed by holders of
shares of Company Common Stock five years after the Effective
Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of
any governmental entity) shall, to the extent permitted by
applicable law, become the property of Parent free and clear
of any claims or interest of any person previously entitled
thereto.
6.7 No Liability. None of Parent, Newco, the Company,
the ADR Depositary or the Exchange Agent shall be liable to
any person in respect of any Parent ADSs (or dividends or
distributions with respect to Parent ADSs) or cash from the
Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
6.8 Investment of Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund as
directed by Parent on a daily basis. Any interest and other
income resulting from such investments shall promptly be paid
to Parent.
6.9 Lost Certificates. 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 Parent,
the posting by such person of a bond in such reasonable amount
as Parent may direct as indemnity against any claim that may
be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost, stolen
or destroyed Certificate the applicable consideration with
respect to the shares of Company Common Stock formerly
represented thereby, pursuant to this Agreement.
6.10 Withholding Rights. Parent shall be entitled to
deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required
51
to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or
foreign tax law, including the tax laws of the United Kingdom.
To the extent that amounts are so withheld by Parent, such
withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and
withholding was made by Parent.
6.11 Stock Transfer Books. At the close of business on
the day the Effective Time occurs, the stock transfer books of
Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock
thereafter on the records of Company. From and after the
Effective Time, the holders of Certificates shall cease to
have any rights with respect to such shares of Company Common
Stock formerly represented thereby, except as otherwise
provided herein or by law. On or after the Effective Time,
any Certificates presented to the Exchange Agent or Parent for
any reason shall be converted into Parent ADSs with respect to
the shares of Company Common Stock formerly represented
thereby, any cash in lieu of fractional Parent ADSs to which
the holders thereof are entitled pursuant to Section 1.2 and
any dividends or other distributions to which the holders
thereof are entitled pursuant to Section 6.4.
VII. Conditions Precedent
7.1 Conditions to Obligations of Each Party. The
respective obligations of each party under this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the fulfillment or satisfaction, on and as of the Closing, of each of the
following conditions, any one or more of which may be waived, in writing, by
agreement of all of the parties hereto:
(a) Stockholder Approvals. (i) The Company shall have
obtained all approvals of holders of shares of capital stock of the Company
necessary to approve this Agreement and the transactions contemplated hereby,
and (ii) Parent shall have obtained all approvals of holders of share capital
of Parent necessary to approve this Agreement and the transactions contemplated
hereby.
(b) Registration Statements. The SEC shall have declared
each of the Form F-4 and the Form F-6 effective. No stop order suspending the
effectiveness of the Form F-4 or the Form F-6 shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the
Prospectus/Proxy Statement, shall have been initiated or threatened by the SEC.
(c) Government Consents. All material consents, orders,
permits or authorizations of, or declarations or filings with, or expiration of
waiting periods (including under the HSR Act) imposed by, any governmental
entity necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement shall have been filed, expired or been obtained,
other than those, that, individually or in the aggregate, the failure to be
filed, expired or obtained would not, in the reasonable opinion of Parent and
the Company, have a Material Adverse Effect on Parent or the Company. Each of
Parent and the Company shall be reasonably satisfied that (a) neither the
Merger nor any matter arising therefrom shall be referred to the U.K.
Monopolies and Mergers Commission, and
52
that (b) the European Union Mergers Commission will not either initiate
proceeding under Article 6(1)(c) of Council Regulation (EEC) 4064/89, as
amended, or make a referral to a competent authority of the U.K. under Article
9(1) of that regulation.
(d) No Injunctions; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by a court or
other governmental entity of competent jurisdiction shall be in effect and have
the effect of (i) making the Merger illegal or otherwise prohibiting
consummation of the Merger, or (ii) limiting or restricting Parent's conduct or
operation of the business of the Company and its subsidiaries. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable efforts to have such injunction or other order lifted.
(e) Tax Opinions. Parent and the Company shall have
received substantially identical opinions of Fenwick & West LLP, counsel to
Parent, and Arent Fox ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC, counsel to the Company,
respectively, in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinions, counsel shall be
entitled to rely upon, among other things, reasonable assumptions as well as
representations of Parent, Newco and the Company.
(f) Pooling Letters. The Parent shall have received a
letter from Ernst & Young LLP, independent auditors, confirming concurrence
with Parent's Management's conclusion that the Merger qualifies for pooling of
interests accounting treatment under APB Opinion No. 16 if consummated in
accordance with this Agreement, such letters in forms reasonably satisfactory
to the Parent and customary in scope and substance for letters delivered by
independent public accountants in connection with transactions of this type.
The Company shall have received a letter from Coopers & ▇▇▇▇▇▇▇ LLP,
independent auditors, confirming that they concur with the conclusions of
Company's management that no conditions exist with respect to Company which
would preclude Company from being a party to a merger accounted for as a
pooling of interests, such letter in a form reasonably satisfactory to the
Parent and customary in scope and substance for letters delivered by
independent public accountants in connection with transactions of this type.
(g) Listing of Shares. The LSE shall have agreed to
admit to the Official List (subject to allotment) the Ordinary Shares to be
issued in connection with the Merger and such agreement shall not have been
withdrawn, and the Parent ADSs to be issued in the Merger shall have been
authorized for listing on the Nasdaq National Market.
(h) U.K. Treasury Consent. H.M. Treasury shall have
consented pursuant to Section 765(1)(C) of the Income and Corporation Taxes ▇▇▇
▇▇▇▇, or H.M. Treasury shall have confirmed that no such consent is required,
in connection with the transactions contemplated hereby.
7.2 Conditions to Obligations of the Company. The
Company's obligations under this Agreement to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions, any one or more of which may be waived, in writing, by the Company:
(a) Representations and Warranties. The representations
and warranties of Parent and Newco set forth in this Agreement shall be true
and correct on and as of the date hereof and as of the Effective Time as if
made on and as of the Effective Time, except for such inaccuracies as
individually or in the aggregate that would not have a Material
53
Adverse Effect on Parent, and the Company shall have received a certificate to
such effect executed on behalf of Parent by its Chief Financial Officer.
(b) Covenants. Parent and Newco shall have performed and
complied in all material respects with all covenants, obligations, conditions
and agreements required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and the Company shall have received a
certificate to such effect executed on behalf of Parent by its Chief Financial
Officer.
(c) No Material Adverse Effect. There shall not have
occurred any Material Adverse Effect with respect to Parent.
(d) Opinion of Parent's Counsel. The Company shall have
received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., UK counsel to Parent, and Fenwick & West
LLP, US counsel to Parent, opinions as to the matters set forth in Exhibit D,
which opinion shall be reasonably acceptable to the Company and its counsel.
(e) Consents. The Company shall have received all
written consents, assignments, waivers, authorizations or other certificates
contemplated by this Agreement or the Parent Disclosure Letter or reasonably
deemed necessary by the Company's legal counsel to provide for the continuation
in full force and effect of any and all material contracts and leases of Parent
and for the Company to consummate the transactions contemplated hereby, each in
form and substance satisfactory to the Company, except where the failure to
obtain such consents, assignments, waivers, authorizations or other certificate
would not have a Material Adverse Effect on Parent.
(f) Officer's Certificate. The Chief Financial Officer
of Parent shall have executed and delivered a certificate in substantially the
form of Exhibit B-1.
7.3 Conditions to Obligations of Parent and Newco. The
obligations of Parent and Newco under this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions, any one or more of which may be waived, in writing, by Parent:
(a) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement shall be true and
correct on and as of the date hereof and as of the Effective Time as if made on
and as of the Effective Time, except for such inaccuracies as individually or
in the aggregate that would not have a Material Adverse Effect on the Company,
and Parent shall have received a certificate to such effect executed on behalf
of the Company by its President.
(b) Covenants. The Company shall have performed and
complied in all material respects with all covenants, obligations, conditions
and agreements required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and Parent shall have received a
certificate to such effect executed on behalf of the Company by its President.
(c) No Material Adverse Effect. There shall not have
occurred any Material Adverse Effect with respect to the Company.
(d) Opinion of the Company's Counsel. Parent shall have
received from Arent Fox ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC, counsel to the Company,
an opinion as to the matters set forth in Exhibit E, which opinion shall be
reasonably acceptable to the Company and its counsel.
(e) Consents. Parent shall have received all written
consents,
54
assignments, waivers, authorizations or other certificates contemplated by this
Agreement or the Company Disclosure Letter or reasonably deemed necessary by
Parent's legal counsel to provide for the continuation in full force and effect
of any and all material contracts and leases of the Company and for Parent to
consummate the transactions contemplated hereby, each in form and substance
satisfactory to Parent, except where the failure to obtain such consents,
assignments, waivers, authorizations or other certificate would not have a
Material Adverse Effect on the Company.
(f) Officer's Certificate. The Chief Executive Officer
or Chief Financial Officer of the Company shall have executed and delivered a
certificate in substantially the form of B-2.
(g) Affiliate Agreements. Parent shall have received
from each Affiliate of the Company under Rule 145 a duly executed Affiliate
Agreement in the form of Exhibit E.
(i) Resignations. Parent shall have received the
resignations of each of the directors, other than ▇▇▇▇▇ ▇. ▇▇▇▇▇, and each of
the officers, of the Company.
VIII. Termination
8.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of
the matters presented in connection with the Merger by the
stockholders of the Company or the shareholders of Parent:
(a) by the mutual written agreement authorized by
the Board of Directors of each of Parent and the Company;
(b) at any time after January 31, 1999, by either
Parent or the Company if the Closing shall not have occurred on or
before such date and such failure to consummate is not caused by a
breach of this Agreement by the party seeking to terminate this
Agreement;
(c) by Parent or the Company, if a permanent
injunction or other order by any federal, state or foreign court of
competent jurisdiction which would make illegal or otherwise restrain
or prohibit the consummation of the Merger will have been issued and
will have become final and nonappealable.
(d) by the Company, if there has been a breach by
Parent of any representation, warranty, covenant or agreement set
forth in this Agreement on the part of Parent, or if any
representation of Parent shall have become untrue, in either case
which has or can reasonably be expected to have a Material Adverse
Effect on Parent and which Parent fails to cure within a reasonable
time, not to exceed 20 days, after written notice thereof;
(e) by Parent, if there has been a breach by the
Company of any representation, warranty, covenant or agreement set
forth in this Agreement on the part of the Company, or if any
representation of the Company will have become untrue, in either case
which has or can reasonably be expected to have a Material Adverse
Effect on the Company and which the Company fails to cure within a
reasonable time, not to exceed 20 days, after written notice thereof;
(f) by Parent or the Company, if the required
approval of the shareholders of Parent of the transactions
contemplated by this Agreement is not obtained at a duly held meeting
of such shareholders or at any adjournment thereof;
55
(g) by Parent or the Company, if the required
approval of the stockholders of the Company of the transactions
contemplated by this Agreement is not obtained at a duly held meeting
of such stockholders or at any adjournment thereof;
(h) by Parent, if the Board of Directors of the
Company shall have, other than in connection with the occurrence of a
Trigger Event or an Acquisition Proposal pursuant to Section 8.1(j),
withheld, withdrawn or modified in a manner adverse to Parent its
recommendation of this Agreement or the Merger, or shall have resolved
to do any of the foregoing, as permitted by Section 5.2.2;
(i) by the Company, if the Board of Directors of
Parent shall have withheld, withdrawn or modified in a manner adverse
to the Company its recommendation of this Agreement and the
transactions contemplated hereby, or shall have resolved to do any of
the foregoing, as permitted by Section 5.2.2; or
(j) by Parent or the Company, if a Trigger Event
or Acquisition Proposal shall have occurred and the Board of Directors
of the Company in connection therewith, after receiving the written
advice of its legal counsel and its financial advisors, withholds,
withdraws or modifies its approval and recommendation of this
Agreement and the Merger, determining in good faith that to cause the
Company to proceed with the transactions contemplated by this
Agreement would not be consistent with the fiduciary duty of the Board
of Directors to the stockholders of the Company. A "Trigger Event"
shall occur if any person acquires securities representing 20% or
more, or commences a tender or exchange offer following the successful
consummation of which the offeror and its affiliates would
beneficially own securities representing 20% or more, of the voting
power of the Company.
Any termination of this Agreement under this Section 8.1 will
be effective by the delivery of written notice of the terminating
party to the other party hereto.
8.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 8.1, such termination shall be without liability
or obligation of either party (or any shareholder, director, officer, employee,
agent, consultant or representative of such party) to the other party to this
Agreement, except to the extent provided in Section 8.3. The provisions of
Section 5.15, 8.2, 8.3, 9.2 and 9.15 shall survive any termination of this
Agreement.
8.3 Expenses and Termination Fees.
8.3.1 Except as otherwise provided in this Section
8.3, all costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or
expense.
8.3.2 The Company agrees to pay to Parent $1
million in immediately available funds, promptly, but in no
event later than two business days after the termination of
this Agreement pursuant to Section 8.1(e) for breach by the
Company, which payment is intended to reimburse Parent for its
expenses incurred in connection with the transactions
contemplated by this Agreement but shall not be deemed to be
liquidated damages and shall not limit Parent's remedies or
recovery against the Company for willful breach of this
Agreement. In no event, however, shall the Company's total
liability to Parent for breach of this Agreement exceed a
56
total of $20 million, inclusive of all amounts payable under
this Section 8.3.
8.3.3 Parent agrees to pay to the Company $1
million in immediately available funds, promptly, but in no
event later than two business after the termination of this
Agreement pursuant to Section 8.1(d) for breach by Parent,
which payment is intended to reimburse the Company for its
expenses incurred in connection with the transactions
contemplated by this Agreement but shall not be deemed to be
liquidated damages and shall not limit the Company's remedies
or recovery against Parent for willful breach of this
Agreement. In no event, however, shall Parent's total
liability to the Company for breach of this Agreement exceed a
total of $20 million, inclusive of all amounts payable under
this Section 8.3.
8.3.4 The Company agrees to pay to Parent a fee of
$15 million in immediately available funds, promptly,
but in no event later than two business days, after
the termination of this Agreement pursuant to Section
8.1(j).
8.3.5 Parent agrees to pay the Company a fee of $1
million in immediately available funds, promptly, but
in no event later than two business days after the
termination of this Agreement pursuant to Section
8.1(f) or (i). Such payment is intended to reimburse
the Company for its expenses incurred in connection
with the transactions contemplated by this Agreement
and shall be the Company's exclusive remedy for the
matters giving rise to such termination.
8.3.6 The Company agrees to pay to Parent a fee of
$1 million in immediately available funds, promptly, but in no
event later than two business days, after the termination of
this Agreement pursuant to Section 8.1(g) or (h). Such
payment is intended to reimburse Parent for its expenses
incurred in connection with the transactions contemplated by
this Agreement and shall be Parent's exclusive remedy for the
matters giving rise to such termination, except as provided in
Section 8.3.7 below.
8.3.7 If, during the 12 month period commencing on
the date on which this Agreement is terminated
pursuant to Section 8.1(e), (g), (h) or (j), the
Company shall have entered into a binding agreement
with respect to an Acquisition Proposal with any
third party with whom the Company had any discussions
concerning an Acquisition Proposal within 6 months of
the date on which this Agreement is terminated, upon
consummation of the transaction contemplated by such
Acquisition Proposal (whether or not such
consummation shall occur with such 12 month period),
the Company agrees to pay to Parent an additional fee
equal to $20 million less the total of all other
amounts theretofore paid by the Company to Parent
under this Section 8.3, in immediately available
funds, promptly, but in no event later than two
business days, after the date of such consummation;
provided, however, that the additional fee shall
equal $5 million less the total of all amounts
theretofore paid by the
57
Company to Parent under this Section 8.3 in the case
of a disposition of any portion of the Company's
business that represented less than 25% of the
Company's total revenues for the fiscal year ended
April 30, 1998. In the case of any termination
pursuant to Section 8.1(g) or (h), no additional fee
will be payable under this Section 8.3.7 with respect
to any transaction that constitutes a spinoff of
assets or securities by dividend or other
distribution to the stockholders of the Company and
is not followed by a transaction contemplated by an
Acquisition Proposal with respect to such assets or
securities for which a binding agreement is entered
into within the time frame specified above in this
Section 8.3.7.
IX. General Provisions
9.1 Non-Survival. None of the representations or
warranties in this Agreement or in any certificate, document
or instrument delivered pursuant hereto shall survive the
Effective Time. This Section 9.1 shall not limit any covenant
or agreement of the parties which by its terms contemplates
performance after the Effective Time.
9.2 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of
Delaware, without regard to conflicts of laws principles.
9.3 Assignment; Successors and Assigns. No party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other parties hereto. Any purported assignment not permitted by
this Section shall be void. This Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
9.4 Severability. If any provision of this Agreement, or
the application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of the void or unenforceable provision.
9.5 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, bear the signatures of all parties
reflected hereon as signatories.
9.6 Other Remedies. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by
law on such party, and the exercise of any one remedy will not preclude the
exercise of any other.
9.7 Amendment and Waivers. Any term or provision of this
Agreement may be amended only by a writing signed by Parent, Newco and the
Company. This
58
Agreement may be amended by the parties hereto at any time before or after
approval of the shareholders of Parent and/or the stockholders of the Company;
provided, that following any such approval, no amendment shall be made which by
law or in accordance with the rules of any relevant stock exchange requires
further approval by such shareholders or stockholders without such further
approval. The observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof
will not be deemed to constitute a waiver of any other default or any
succeeding breach or default.
9.8 No Waiver. The failure of any party to enforce any
of the provisions hereof will not be construed to be a waiver of the right of
such party thereafter to enforce such provisions. The waiver by any party of
the right to enforce any of the provisions hereof on any occasion will not be
construed to be a waiver of the right of such party to enforce such provision
on any other occasion.
9.9 Notices. Any notice or other communication required
or permitted to be given under this Agreement will be in writing, will be
delivered personally, by mail or express delivery, postage prepaid, or telecopy
(confirmed in writing) and will be deemed given upon actual delivery or, if
mailed by registered or certified mail, on the third business day following
deposit in the mails, addressed as follows:
(i) If to Parent or Newco:
Micro Focus Group PLC
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(ii) If to the Company:
Intersolv, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 9.9.
9.10 Interpretation of Agreement. The language hereof
will not be construed for or against either party. A reference to an article,
section or exhibit will mean an article or section in, or an exhibit to, this
Agreement, unless otherwise explicitly set
59
forth. The titles and headings in this Agreement are for reference purposes
only and will not in any manner limit the interpretation of this Agreement.
For the purposes of such interpretation, this Agreement will be considered as a
whole.
9.11 No Joint Venture. Nothing contained in this
Agreement will be deemed or construed as creating a joint venture or
partnership between the parties hereto. No party is by virtue of this
Agreement authorized as an agent, employee or legal representative of any other
party. No party will have the power to control the activities and operations
of any other, and the parties' status is, and at all times, will continue to
be, that of independent contractors with respect to each other. No party will
have any power or authority to bind or commit any other. No party will hold
itself out as having any authority or relationship in contravention of this
Section.
9.12 Further Assurances. Each party agrees to cooperate
fully with the other parties and to execute such further instruments, documents
and agreements and to give such further written assurances as may be reasonably
requested by the other parties to evidence and reflect the transactions
provided for herein and to carry into effect the intent of this Agreement.
9.13 Absence of Third Party Beneficiary Rights. No
provisions of this Agreement are intended, nor will be interpreted, to provide
or create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, partner or employee of any party hereto or any
other person or entity, unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely among the
parties to this Agreement.
9.14 Entire Agreement. This Agreement and the exhibits
and schedules hereto constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and supersede all
prior and contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between the parties with
respect to the subject matter hereof. The express terms hereof control and
supersede any course of performance or usage of trade inconsistent with any of
the terms hereof.
9.15 Submission to Jurisdiction. Each of Parent, Newco
and the Company irrevocably agrees that any legal action or proceeding with
respect to this Agreement or any of the transactions contemplated hereby or
thereby, or for recognition or enforcement of any judgment in respect hereof or
thereof may be brought and determined in any federal or state court sitting in
Wilmington, Delaware, and irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of said courts. Each
party irrevocably waives any objection that such party may now or hereafter
have to the laying of venue of any such proceeding in any such court and any
claim that such proceeding brought in any such court has been brought in an
inconvenient forum.
In witness whereof, the parties hereto have executed this
Agreement as of the date first above written.
Micro Focus Group PLC
By:
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60
Name:
Title:
Tower Merger Sub Inc.
By:
----------------------------------
Name:
Title:
Intersolv, Inc.
By:
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Name:
Title:
[Signature Page to the Agreement and Plan of Reorganization]