EXHIBIT 2.09
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MEDIA 100 INC.,
DERRINGER ACQUISITION CORP.
and
DIGITAL ORIGIN, INC.
Dated as of December 28, 1999
TABLE OF CONTENTS
ARTICLE I
THE MERGER 2
SECTION 1.1 THE MERGER 2
SECTION 1.2 CONSUMMATION OF THE MERGER 2
SECTION 1.3 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION 2
SECTION 1.4 BY-LAWS OF THE SURVIVING CORPORATION 2
SECTION 1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION 2
SECTION 1.6 CLOSING 3
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES 3
SECTION 2.1 CONVERSION OF CAPITAL STOCK 3
SECTION 2.2 EXCHANGE OF CERTIFICATES 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 8
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES 8
SECTION 3.2 ARTICLES OF INCORPORATION AND BY-LAWS 9
SECTION 3.3 CAPITALIZATION 9
SECTION 3.4 AUTHORITY RELATIVE TO THIS AGREEMENT 10
SECTION 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS 11
SECTION 3.6 SEC FILINGS; FINANCIAL STATEMENTS 12
SECTION 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS 12
SECTION 3.8 NO UNDISCLOSED LIABILITIES 13
SECTION 3.9 ABSENCE OF LITIGATION 13
SECTION 3.10 AGREEMENTS, CONTRACTS AND COMMITMENTS 13
SECTION 3.11 COMPLIANCE; PERMITS 14
SECTION 3.12 EMPLOYEE BENEFIT PLANS, OPTIONS AND EMPLOYMENT AGREEMENTS 14
SECTION 3.13 LABOR MATTERS 16
SECTION 3.14 PROPERTIES; ENCUMBRANCES 17
SECTION 3.15 TAXES 17
SECTION 3.16 ENVIRONMENTAL MATTERS 19
SECTION 3.17 INTELLECTUAL PROPERTY 20
SECTION 3.18 INSURANCE 21
SECTION 3.19 RESTRICTIONS ON BUSINESS ACTIVITIES 21
SECTION 3.20 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS 22
SECTION 3.21 INTERESTED PARTY TRANSACTIONS 22
SECTION 3.22 CHANGE IN CONTROL PAYMENTS 23
SECTION 3.23 YEAR 2000 COMPLIANCE 23
SECTION 3.24 POOLING; TAX MATTERS 24
SECTION 3.25 NO EXISTING DISCUSSIONS 24
SECTION 3.26 OPINION OF FINANCIAL ADVISOR 25
SECTION 3.27 BROKERS 25
SECTION 3.28 AFFILIATES 25
SECTION 3.29 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS 25
SECTION 3.30 ABSENCE OF CERTAIN PAYMENTS 25
SECTION 3.31 FULL DISCLOSURE 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB 26
SECTION 4.1 ORGANIZATION AND QUALIFICATION 26
SECTION 4.2 CERTIFICATE OF INCORPORATION AND BY-LAWS 27
SECTION 4.3 CAPITALIZATION 27
SECTION 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT 28
SECTION 4.5 NO CONFLICT, REQUIRED FILINGS AND CONSENTS 29
SECTION 4.6 SEC FILINGS; FINANCIAL STATEMENTS 29
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS 30
SECTION 4.8 NO UNDISCLOSED LIABILITIES 30
SECTION 4.9 COMPLIANCE 31
SECTION 4.10 ABSENCE OF LITIGATION 31
SECTION 4.11 EMPLOYEE BENEFIT PLANS, OPTIONS AND EMPLOYMENT AGREEMENTS 31
SECTION 4.12 LABOR MATTERS 33
SECTION 4.13 PROPERTIES; ENCUMBRANCES 33
SECTION 4.14 TAXES 34
SECTION 4.15 ENVIRONMENTAL MATTERS 35
SECTION 4.16 INTELLECTUAL PROPERTY 35
SECTION 4.17 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS 37
SECTION 4.18 YEAR 2000 COMPLIANCE 37
SECTION 4.19 BROKERS 38
SECTION 4.20 OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES 38
SECTION 4.21 POOLING; TAX MATTERS 39
SECTION 4.22 AFFILIATES. 39
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ARTICLE V
CONDUCT OF BUSINESS 39
SECTION 5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER 39
SECTION 5.2 CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER 41
SECTION 5.3 ADVICE OF CHANGES 42
SECTION 5.4 COOPERATION 42
ARTICLE VI
ADDITIONAL AGREEMENTS 42
SECTION 6.1 ACCESS TO INFORMATION; CONFIDENTIALITY 42
SECTION 6.2 NO SOLICITATION 43
SECTION 6.3 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT 46
SECTION 6.4 SHAREHOLDERS' AND STOCKHOLDERS' MEETINGS 46
SECTION 6.5 LEGAL CONDITIONS TO MERGER 47
SECTION 6.6 AGREEMENTS WITH RESPECT TO AFFILIATES 48
SECTION 6.7 TAX-FREE REORGANIZATION 48
SECTION 6.8 POOLING ACCOUNTING 48
SECTION 6.9 LETTERS OF ACCOUNTANTS 49
SECTION 6.10 PUBLIC ANNOUNCEMENTS 49
SECTION 6.11 LISTING OF PARENT SHARES 49
SECTION 6.12 OPTIONS 49
SECTION 6.13 CONSENTS 50
SECTION 6.14 INDEMNIFICATION AND INSURANCE 50
SECTION 6.15 ADDITIONAL AGREEMENTS; BEST EFFORTS 51
ARTICLE VII
CONDITIONS TO THE MERGER 51
SECTION 7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER 51
SECTION 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB 53
SECTION 7.3 ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY 54
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ARTICLE VIII
TERMINATION 54
SECTION 8.1 TERMINATION 54
SECTION 8.2 EFFECT OF TERMINATION 56
SECTION 8.3 FEES AND EXPENSES 56
ARTICLE IX
GENERAL PROVISIONS 57
SECTION 9.1 NONSURVIVAL OF REPRESENTATIONS; WARRANTIES AND AGREEMENTS 57
SECTION 9.2 NOTICES 57
SECTION 9.3 CERTAIN DEFINITIONS 58
SECTION 9.4 AMENDMENT 59
SECTION 9.5 EXTENSION; WAIVER 59
SECTION 9.6 HEADINGS 60
SECTION 9.7 SEVERABILITY 60
SECTION 9.8 ENTIRE AGREEMENT, NO THIRD PARTY BENEFICIARIES 60
SECTION 9.9 ASSIGNMENT 60
SECTION 9.10 INTERPRETATION 60
SECTION 9.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE 60
SECTION 9.12 GOVERNING LAW 61
SECTION 9.13 COUNTERPARTS 61
LIST OF EXHIBITS
Exhibit A Merger Agreement
Exhibit B Form of Company Affiliate Agreement
Exhibit C Form of Parent Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 28, 1999 (this
"Agreement"), by and among Media 100 Inc., a Delaware corporation ("Parent"),
Derringer Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and Digital Origin, Inc., a California
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have each determined that it is advisable and in the best
interests of their respective stockholders or shareholders that Parent
acquire the Company pursuant to the terms and conditions of this Agreement,
and, in furtherance of such acquisition, such Boards of Directors have
approved the merger of Merger Sub with and into the Company (the "Merger") in
accordance with the terms of this Agreement and the applicable provisions of
the California General Corporation Law (the "CGCL") and the Delaware General
Corporation Law (the "DGCL");
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that this Agreement shall be, and is hereby, adopted as a plan
of reorganization for purposes of Section 368(a) of the Code; and
WHEREAS, for accounting purposes, it is intended that the Merger
shall be accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties hereto agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER . Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with sections 1100
et seq. of the CGCL, Merger Sub shall be merged with and into the Company at
the Effective Time of the Merger. Following the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation ") and shall succeed
to and assume all the rights, properties, liabilities and obligations of
Merger Sub in accordance with the CGCL and DGCL.
SECTION 1.2 CONSUMMATION OF THE MERGER . Upon the terms and subject
to the conditions set forth in this Agreement and the Agreement of Merger
between Merger Sub and the Company together with the related officers'
certificates required by section 1103 of the CGCL, in the form attached to
this Agreement as EXHIBIT A (the "Merger Agreement "), the parties hereto
shall file the Merger Agreement with the Secretary of State of the State of
California, whereupon Merger Sub shall be merged with and into the Company
pursuant to sections 1100 et seq. of the CGCL. The parties hereto shall make
all other filings, recordings or publications required by the CGCL and DGCL
in connection with the Merger. The Merger shall become effective at the time
specified in the Merger Agreement (the "Effective Time ").
SECTION 1.3 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION .
At and after the Effective Time, the Articles of Incorporation attached as
ANNEX I to the Merger Agreement, shall be the Articles of Incorporation of
the Surviving Corporation, until amended in accordance with the CGCL.
SECTION 1.4 BY-LAWS OF THE SURVIVING CORPORATION . At and after the
Effective Time, the By-laws of the Company, as in effect immediately prior to
the Effective Time, shall be the By-laws of the Surviving Corporation, until
amended in accordance with the CGCL.
SECTION 1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION .
(a) The directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation and shall
hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Articles of Incorporation or By-laws of the Surviving Corporation or as
otherwise provided by law. In furtherance thereof, the
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Company shall secure, at the Effective Time, such resignations of its
incumbent directors as are necessary to enable the designees of Parent to be
elected or appointed to the Board of Directors of the Company.
(b) The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation and shall
hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Articles of Incorporation or By-laws of the Surviving Corporation or as
otherwise provided by law.
SECTION 1.6 CLOSING . Subject to satisfaction of the conditions set
forth in this Agreement, the closing of the Merger (the "Closing") shall take
place at 10:00 a.m., E.S.T., at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇
& ▇▇▇▇ LLP, One Beacon Street, Boston, Massachusetts on a date to be
specified by Parent and the Company which shall be no later than the second
business day after satisfaction or waiver of each of the conditions set forth
in Article VII or on such other date and at such other time and place as
Parent and the Company shall agree. The date on which the Closing shall occur
is referred to herein as the "Closing Date."
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES
SECTION 2.1 CONVERSION OF CAPITAL STOCK . At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of the common stock, no par value, of the Company (the "Company Common
Stock") or capital stock of Merger Sub:
(a) COMPANY COMMON STOCK. Subject to this Article II, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive 0.5347, (the
"Exchange Ratio") of a share of common stock, par value $.01 per share, of
Parent (the "Parent Common Stock"), payable upon the surrender of the
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates") that are to
be converted, pursuant to this Section 2.1(a), into the right to receive
shares of Parent Common Stock. All such shares of Company Common Stock, when
so converted, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist and each holder of a
Certificate representing any such shares shall cease to have any rights with
respect thereto, except (i) dissenters' rights, if any, as described in
Section 2.1.(c), or (ii) the right to receive the shares of Parent Common
Stock pursuant to this Section 2.1(a), any dividends or other distributions
payable pursuant to Section 2.2(c) and any cash in lieu of fractional shares
payable pursuant to Section 2.2(d), all to be issued or paid in consideration
therefor upon the surrender of such Certificates in accordance with Section
2.2(b), without interest (collectively, the "Merger Consideration").
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Notwithstanding the foregoing, the Exchange Ratio shall be adjusted to
reflect fully the effect of any stock split, reverse split, reclassification,
stock dividend, reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock occurring after the
date hereof and prior to the Effective Time.
(b) COMPANY WARRANTS. The (i) warrant to purchase up to 60,000
shares of Company Common Stock at $10.00 per share dated September 13, 1996
issued by the Company to IBM Credit Corporation, (ii) warrant to purchase up
to 5,000 shares of Company Common Stock at $10.00 per share dated October 13,
1996 issued by the Company to Mitsubishi Electronics America, Inc., and (iii)
warrant to purchase up to 50,000 shares of Company Common Stock at $1.50 per
share dated November 23, 1998 issued by the Company to Post Digital Software,
Inc. (collectively, the "Company Warrants"), in each case to the extent
issued and outstanding immediately prior to the Effective Time, shall be
converted into the right to purchase Parent Common Stock in accordance with
their respective terms.
(c) APPRAISAL RIGHTS. Holders of all shares of the outstanding
capital stock of the Company for which dissenters' rights, if any, shall have
been perfected under section 1300 et seq. of the CGCL (the "Dissenting Shares")
shall have those rights, but only those rights, of holders of "dissenting
shares" under section 1300 et seq. of the CGCL. The Company shall give Parent
prompt notice of any demand, purported demand or other communication received
by the Company with respect to any Dissenting Shares or shares claimed to be
Dissenting Shares and Parent shall have the right to participate in all
negotiations and proceedings with respect to such shares.
(d) CAPITAL STOCK OF MERGER SUB. Each common share, par value $.01
per share, of Merger Sub ("Merger Sub Common Shares") issued and outstanding
immediately prior to the Effective Time shall be converted into and become
one fully paid and nonassessable common share, par value $.01 per share, of
the Surviving Corporation.
(e) STOCK OPTIONS. Options to purchase shares of Company Common
Stock (i) granted under (x) the Company's 1994 Directors' Stock Option Plan,
the Company's 1990 Directors' Stock Option Plan, the Company's 1995 Stock
Option Plan, the 1988 SuperMac Option Plan or the Company's 1986 Stock Option
Plan (collectively, the "Company Stock Option Plans"), or (y) the Company's
1999 Employee Stock Purchase Plan (the "Company ESPP") or (ii) granted to
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Other Company
Options") shall be treated in the manner set forth in Section 6.12.
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SECTION 2.2 EXCHANGE OF CERTIFICATES .
(a) EXCHANGE AGENT. Prior to the Closing Date, Parent shall
designate a bank or trust company to act as Exchange Agent hereunder (the
"Exchange Agent"). As soon as practicable after the Effective Time, Parent
shall deposit with or for the account of the Exchange Agent stock
certificates representing the number of shares of Parent Common Stock
issuable pursuant to Section 2.1(a) in exchange for outstanding shares of
Company Common Stock, which shares of Parent Common Stock shall be deemed to
have been issued at the Effective Time.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, Parent will instruct the Exchange Agent to mail to each holder of
record of a Certificate or Certificates (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 proper delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other provisions
as Parent may specify that are not inconsistent with the terms of this
Agreement) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter
of transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall
be entitled to receive in exchange therefor (i) certificates evidencing that
number of whole shares of Parent Common Stock which such holder has the right
to receive in accordance with Section 2.1(a) in respect of the shares of
Company Common Stock formerly evidenced by such Certificate, (ii) any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(c) and (iii) any cash in lieu of any fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.2(d),
after giving effect to any tax withholdings, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of shares of Company Common Stock which is not registered in the
transfer records of the Company as of the Effective Time, a certificate
representing the proper number of shares of Parent Common Stock may be issued
to a transferee if the Certificate evidencing such Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer pursuant to this Section 2.2(b) and by
evidence that any applicable stock transfer taxes have been paid. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, to represent only (i) the right
to exercise dissenters rights, if any, as described in Section 2.1(c), or
(ii) the right to receive upon surrender the Merger Consideration.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED PARENT SHARES. No
dividends or other distributions with respect to shares of Parent Common
Stock for which the record date is after the Effective Time shall be paid to
the holder of any
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unsurrendered Certificate with respect to the shares of Parent Common Stock
they are entitled to receive until the holder of such Certificate surrenders
such Certificate. Following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock. Promptly following the date which is six
months after the Effective Time, the Exchange Agent shall deliver to Parent
all cash, certificates and other documents in its possession relating to the
transactions described in this Agreement, and any holders of Company Common
Stock who have not theretofore complied with this Article II shall look
thereafter only to Parent for the shares of Parent Common Stock, any
dividends or distributions thereon, and any cash in lieu of fractional shares
thereof to which they are entitled pursuant to this Article II.
(d) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
Certificates pursuant to this Article II; no dividend, stock split or
other change in the capital structure of Parent shall relate to any
fractional security; and such fractional interests shall not entitle
the owner thereof to vote or to any rights of a security holder.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent will determine the excess of (A) the number of whole
shares of Parent Common Stock delivered to the Exchange Agent by Parent
pursuant to Section 2.2(a) over (B) the aggregate number of whole
shares of Parent Common Stock to be distributed to holders of Company
Common Stock pursuant to Section 2.2(b) (such excess being herein
called the "Excess Shares"). Following the Effective Time, the Exchange
Agent will, on behalf of former shareholders of the Company, sell the
Excess Shares at then-prevailing prices on the Nasdaq National Market
(the "NASDAQ").
(iii) The Exchange Agent will use reasonable efforts to complete the
sale of the Excess Shares as promptly following the Effective Time as,
in the Exchange Agent's sole judgment, is practicable consistent with
obtaining the best execution of such sales in light of prevailing
market conditions. Until the net proceeds of such sale or sales have
been distributed to the holders of Company Common Stock, the Exchange
Agent will hold such proceeds in trust (the "Common Shares Trust").
Parent shall be entitled to any interest earned on such proceeds until
such proceeds have been distributed to the former holders of Company
Common Stock. The Surviving Corporation will
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pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the
Exchange Agent incurred in connection with such sale of the Excess
Shares. The Exchange Agent will determine the portion of the Common
Shares Trust to which each former holder of Company Common Stock is
entitled, if any, by multiplying the amount of the aggregate net
proceeds comprising the Common Shares Trust by a fraction, the
numerator of which is the amount of the fractional share interest to
which such former holder of Company Common Stock is entitled (after
taking into account all shares of Company Common Stock held at the
Effective Time by such holder) and the denominator of which is the
aggregate amount of fractional share interests to which all holders of
Company Common Stock are entitled. For purposes of this Section
2.2(d), shares of Company Common Stock of any former holder
represented by two or more Certificates shall be aggregated and in no
event shall any holder be paid an amount of cash in respect of more
than one share of Parent Common Stock.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to the former holders of Company Common Stock
with respect to any fractional share interests, the Exchange Agent will
hold such cash amounts for the benefit of, and pay such cash amounts
to, such former holders of Company Common Stock subject to and in
accordance with the terms of Section 2.2(b).
(e) NO LIABILITY. Neither Parent, Merger Sub nor the Company shall
be liable to any holder of Company Common Stock or Parent Common Stock, as
the case may be, for such shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law following the passage of time specified
therein.
(f) WITHHOLDING RIGHTS. Parent or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of Company Common Stock such
amounts as Parent or the Exchange Agent is required 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. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of the shares of Parent Common Stock in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
(g) CLOSING OF SHARE TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there
shall be no further registration of transfers on the stock transfer books of
the Company or the Surviving Corporation of the shares of Company Common
Stock which were outstanding
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immediately prior to such time. If, after such time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article II.
(h) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof the Merger
Consideration as provided in this Article II; PROVIDED, HOWEVER, that Parent
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificates to deliver
an agreement of indemnification in form satisfactory to Parent, or a bond in
such sum as Parent may direct as indemnity against any claim that may be made
against Parent or the Exchange Agent with respect to the Certificates alleged
to have been lost, stolen or destroyed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that
the statements contained in this Article III are true and correct, except as
set forth in the Company Disclosure Schedule, dated as of the date hereof,
prepared by the Company and delivered to Parent in connection herewith (the
"Company Disclosure Schedule"). The Company Disclosure Schedule is arranged
in sections corresponding to the numbered and lettered sections contained in
this Article III and shall qualify only the corresponding Section in this
Article III.
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES . The
Company and each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority necessary
to own, lease and operate the properties it purports to own, lease or operate
and to carry on its business as it is now being conducted or presently
proposed to be conducted. The Company and each of its Subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that could not be expected to have
a Company Material Adverse Effect. A true, complete and correct list of all
of the Company's Subsidiaries, together with the jurisdiction of
incorporation of each Subsidiary, the authorized capitalization of each
Subsidiary, and the percentage of each Subsidiary's outstanding capital stock
owned by the Company or another Subsidiary, is set forth in Section 3.1 of
the Company Disclosure Schedule. The Company does not directly
8
or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity, excluding securities in any publicly traded company
held for investment by the Company and comprising less than one percent of
the outstanding stock of such company. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party
or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which are held by such
party or any Subsidiary of such party that do not have a majority of the
voting interest in such partnership), (ii) such party or any Subsidiary of
such party owns in excess of a majority of the outstanding equity or voting
securities or (iii) at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly appointed or controlled by such party
or by any one or more of its Subsidiaries. The term "Company Material Adverse
Effect" means any change, effect or circumstance that, individually or when
taken together with all other changes, effects or circumstances that have
occurred or reasonably could be expected to occur prior to the date of
determination of the occurrence of the Company Material Adverse Effect, (i)
is materially adverse to the business, prospects, assets (including
intangible assets), condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole or (ii)
could materially delay or prevent the consummation of the transactions
contemplated hereby. Changes in economic or market conditions affecting the
software industry generally, changes in the Company's stock price, failure to
meet the Company's revenue projections for the second quarter of fiscal year
2000 (except as set forth below) or any loss of a supplier, customer or
employee resulting from the Merger or its announcement to the extent so
resulting will be deemed not to constitute a Company Material Adverse Effect;
revenue of 25% or more below the amount set forth in Section 3.1 of the
Company Disclosure Schedule for the second quarter of fiscal year 2000 will
be deemed to constitute a Company Material Adverse Effect.
SECTION 3.2 ARTICLES OF INCORPORATION AND BY-LAWS . The Company has
heretofore furnished to Parent a true, complete and correct copy of its
Articles of Incorporation, as amended to date (the "Company Charter"), and
By-Laws, as amended to date (the "Company By-Laws"), and the charter and
by-laws (or equivalent organizational documents), as amended to date, of each
of its Subsidiaries (the "Subsidiary Documents"). Such Company Charter,
Company By-Laws and Subsidiary Documents are in full force and effect.
Neither the Company nor any of its Subsidiaries is in violation of any of the
provisions of the Company Charter, Company By-Laws or Subsidiary Documents,
as the case may be.
SECTION 3.3 CAPITALIZATION .
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(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock, and 2,000,000 shares of preferred
stock, no par value per share (the "Company Preferred Stock"). As of December
13, 1999: (i) 5,611,048 shares of Company Common Stock are issued and
outstanding, 836,250 shares of Company Common Stock are reserved for issuance
upon exercise of options granted pursuant to the Company Stock Option Plans,
122,568 (as of commencement of the current purchase period ending on February
29, 2000) shares of Company Common Stock are reserved for issuance upon
exercise of options granted under the Company ESPP, 415,785 shares of Company
Common Stock are reserved for issuance upon exercise of the Other Company
Options, 115,000 shares of Company Common Stock are reserved for issuance
upon exercise of the Company Warrants, and no shares of Company Common Stock
are issued and held in the treasury of the Company; and (ii) no shares of
Company Preferred Stock are issued and outstanding. All outstanding shares of
Company Common Stock are, and all shares of Company Common Stock subject to
issuance as specified above, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be,
duly authorized, validly issued, fully paid and nonassessable and not subject
to or issued in violation of any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right under any
provision of the CGCL, the Company Charter or the Company By-Laws or any
agreement to which the Company is a party or is otherwise bound. No material
change in such capitalization has occurred since December 13, 1999. All of
the outstanding shares of capital stock of each of the Company's Subsidiaries
are duly authorized, validly issued, fully paid and nonassessable, and all
such shares are owned by the Company free and clear of all security
interests, liens, claims, pledges, agreements, limitations in voting rights,
charges or other encumbrances of any nature whatsoever (collectively,
"Liens"). There are no accrued and unpaid dividends with respect to any
outstanding shares of capital stock of the Company or any of its Subsidiaries.
(b) Except as described in Section 3.3(a) of this Agreement, there
are no equity securities of any class of the Company or any of its
Subsidiaries or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. Except as described
in Section 3.3(a) of this Agreement, there are no options, warrants, calls,
rights, commitments or agreements of any character to which the Company or
any of its Subsidiaries is a party, or by which the Company or any of its
Subsidiaries is bound, obligating the Company or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of the Company or any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to grant, extend or
accelerate the vesting of or enter into any such option, warrant, call,
right, commitment or agreement. There are no voting trusts, proxies or other
similar agreements or understandings with respect to the shares of capital
stock of the Company or any of
10
its Subsidiaries. There are no obligations, contingent or otherwise, of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its Subsidiaries or to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity.
SECTION 3.4 AUTHORITY RELATIVE TO THIS AGREEMENT . Subject only to
the approval of the Company's shareholders described below, the Company has
all necessary corporate power and authority to execute and deliver this
Agreement and each instrument required hereby to be executed and delivered by
it (the "Company Merger Documents") at the Closing and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of the Company
Merger Documents and the consummation of the transactions contemplated by the
Company Merger Documents have been duly and validly authorized by all
necessary corporate action on the part of the Company, subject only to the
approval of this Agreement and the Merger by the Company's shareholders (the
"Company Voting Proposal") under the CGCL and the Company Charter by the
affirmative vote of the holders of a majority of the voting power of the
outstanding shares of Company Common Stock. This Agreement has been duly and
validly executed and delivered by the Company and constitutes, and when
executed and delivered by the Company each of the other Company Merger
Documents will constitute, assuming the due authorization, execution and
delivery by Parent and Merger Sub, as applicable, the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights and by general equitable
principles (regardless of whether enforceability is considered in a
proceeding in equity or at law). The Board of Directors of the Company has
determined that it is advisable and in the best interests of the Company's
shareholders for the Company to enter into a business combination with Parent
upon the terms and subject to the conditions of this Agreement, and has
recommended that the Company's shareholders approve the Company Voting
Proposal.
SECTION 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS .
(a) The execution and delivery of the Company Merger Documents does
not, and the performance of the Company Merger Documents by the Company will
not, (i) conflict with or violate the Company Charter or Company By-Laws,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its Subsidiaries or by which its
or any of their respective properties is bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default), or impair the Company's or any
of its Subsidiaries' rights or alter the rights
11
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Company or any
of its Subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or its or any of their
respective properties is bound or affected; other than such conflicts,
breaches, defaults, impairments or other effects under (iii) of this Section
3.5(a) that have not had and could not reasonably be expected to have a
Company Material Adverse Effect.
(b) The execution and delivery of this Agreement or any instrument
required hereby to be executed and delivered by the Company at the Closing
does not, and the performance of this Agreement by the Company or its
Subsidiaries will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any court, administrative or
regulatory agency or commission or other governmental authority or
instrumentality (whether domestic or foreign, a "Governmental Entity"),
except (i) the filing of the pre-merger notification report under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of a Registration Statement on Form S-4 (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") in accordance with the Securities Act of 1933, as amended (the
"Securities Act"), and the filing of the Proxy Statement/Prospectus with the
SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and
state securities laws and the laws of any foreign country and (iv) the filing
and recordation of the Merger Agreement or other documents as required by the
CGCL.
SECTION 3.6 SEC FILINGS; FINANCIAL STATEMENTS .
(a) The Company has timely filed all forms, reports, schedules,
statements and other documents, including any exhibits thereto, required to
be filed by the Company with the SEC, since September 30, 1998 (collectively,
the "Company SEC Reports"). The Company SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required
to be stated in such Company SEC Reports or necessary in order to make the
statements in such Company SEC Reports, in light of the circumstances under
which they were made, not misleading. None of the
12
Company's Subsidiaries are required to file any forms, reports, schedules,
statements or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes), contained in the Company SEC Reports,
including any Company SEC Reports filed after the date of this Agreement
until the Closing, complied, as of its respective date, in all material
respects with all applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, was prepared in accordance
with generally accepted accounting principles ("GAAP") (except as may be
indicated in the notes thereto) applied on a consistent basis throughout the
periods involved and fairly presented the consolidated financial position of
the Company and its Subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are
not expected to be material in amount. The audited balance sheet of the
Company as of September 30, 1999 is referred to herein as the "Company
Balance Sheet."
SECTION 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS . Since the date of
the Company Balance Sheet, the Company has conducted its business in the
ordinary course consistent with past practice and, since such date, there has
not occurred: (i) any change, development, event or other circumstance,
situation or state of affairs that has had or could reasonably be expected to
have a Company Material Adverse Effect; (ii) any amendments to or changes in
the Company Charter or Company By-Laws; (iii) any damage to, destruction or
loss of any asset of the Company or any of its Subsidiaries (whether or not
covered by insurance) that could reasonably be expected to have a Company
Material Adverse Effect; (iv) any change by the Company in its accounting
methods, principles or practices; (v) any revaluation by the Company of any
of its assets, including, without limitation, writing down the value of
inventory or writing off notes or accounts receivable other than in the
ordinary course of business consistent with past practice; (vi) any sale of a
material amount of assets (tangible or intangible) of the Company; or (vii)
any other action or event that would have required the consent of Parent
pursuant to Section 5.1 had such action or event occurred after the date of
this Agreement.
SECTION 3.8 NO UNDISCLOSED LIABILITIES . Except as disclosed in the
Company SEC Reports, neither the Company nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise), except liabilities
(a) adequately reflected in the Company Balance Sheet, (b) incurred in the
ordinary course of business consistent with past practice and not required
under GAAP to be reflected in the Company Balance Sheet, (c) incurred since
the date of the Company Balance Sheet in the ordinary course of business
consistent with past practice or (d) incurred in connection with this
Agreement.
13
SECTION 3.9 ABSENCE OF LITIGATION . There are no claims, actions,
suits, proceedings or investigations (i) pending against the Company or any
of its Subsidiaries or any properties or assets of the Company or of any of
its Subsidiaries or (ii) to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries, or any properties or assets of the
Company or of any of its Subsidiaries, in each case, which claims, actions,
suits, proceedings or investigations could reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.10 AGREEMENTS, CONTRACTS AND COMMITMENTS .
(a) Section 3.10(a) of the Company Disclosure Schedule sets forth a
list of (i) all agreements, contracts or other instruments containing
non-competition or similar restrictive provisions with respect to the Company
or any of its Subsidiaries and (ii) all agreements, contracts or other
instruments which, as of the date hereof, the Company is required to file as
"material contracts" with the SEC pursuant to the requirements of the
Exchange Act.
(b) (i) Neither the Company nor any of its Subsidiaries has breached
(without cure), is in default under, or has received written notice of any
breach of or default under, any agreements, contracts or other instruments
required to be disclosed in Section 3.10(a) of the Company Disclosure
Schedule (each, a "Material Contract"), (ii) to the Company's knowledge, no
other party to any Material Contract has breached or is in default of any of
its obligations thereunder, (iii) each Material Contract is in full force and
effect and (iv) each Material Contract is a legal, valid and binding
obligation of the Company or its Subsidiary and, to the knowledge of the
Company or any of its Subsidiaries, each of the other parties thereto,
enforceable in accordance with its terms, except that the enforcement thereof
may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (B) general principles of equity.
SECTION 3.11 COMPLIANCE; PERMITS .
(a) Neither the Company nor any of its Subsidiaries is in conflict
with, or in default or violation of (and has not received any notices of
violation with respect to), any (i) law, rule or regulation, or (ii) order,
judgment or decree applicable to the Company or any of its Subsidiaries or by
which its or any of their respective properties is bound or affected, and the
Company is not aware of any such conflict, default or violation thereunder
(other than any conflicts, defaults or violations under (i) of this Section
3.11(a) that have not had and could not reasonably be expected to have a
Company Material Adverse Effect).
14
(b) The Company and its Subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, authorizations,
registrations, orders and other approvals from any arbitrator, court, nation,
government, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial regulatory or administrative
functions of, or pertaining to, government that are material to the operation
of the business of the Company and its Subsidiaries taken as a whole as it is
now being conducted (collectively, the "Company Permits"). The Company
Permits are in full force and effect, have not been violated and no
suspension, revocation or cancellation thereof has been threatened and there
is no action, proceeding or investigation pending or threatened regarding
suspension, revocation or cancellation of any Company Permit.
SECTION 3.12 EMPLOYEE BENEFIT PLANS, OPTIONS AND EMPLOYMENT
AGREEMENTS.
(a) Section 3.12(a) of the Company Disclosure Schedule contains a
true and complete list of (i) each deferred compensation and each bonus or
other incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; (ii) each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")); (iii)
each profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA); (iv) each employment,
termination or severance agreement; and (v) each other employee benefit plan,
fund, program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by the Company
or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with the Company would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA, or to which the
Company or an ERISA Affiliate is party, whether written or oral, for the
benefit of any employee or former employee of the Company or any of its
Subsidiaries (collectively, the "Company Plans"). No Company Plan is subject
to Section 302 or Title IV of ERISA or Section 412 of the Code. Neither the
Company, any of its Subsidiaries nor any ERISA Affiliate has any commitment
or formal plan, whether legally binding or not, to create any additional
employee benefit plan or modify or change any existing Company Plan that
would affect any employee or former employee of the Company or any of its
Subsidiaries.
(b) With respect to each Company Plan, the Company has heretofore
delivered or made available to Parent true and complete copies of each of the
following documents: (i) a copy of the Company Plan and any amendments
thereto (or if the Company Plan is not a written Company Plan, a description
thereof); (ii) a copy of the two most recent annual reports and actuarial
reports, if required under ERISA, and the most recent report prepared with
respect thereto in accordance with State-
15
ment of Financial Accounting Standards No. 87; (iii) a copy of the most
recent Summary Company Plan Description required under ERISA with respect
thereto; (iv) if the Company Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof; and (v) the most recent determination
letter received from the IRS with respect to each Company Plan intended to
qualify under Section 401 of the Code.
(c) No liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability, other than liability for
premiums due to the Pension Benefit Guaranty Corporation (which premiums have
been paid when due).
(d) All contributions required to be made with respect to any
Company Plan on or prior to the Effective Time have been timely made or are
reflected on the Company Balance Sheet.
(e) Neither the Company nor any of its Subsidiaries, any Company
Plan, any trust created thereunder, nor any trustee or administrator thereof
has engaged in a transaction in connection with which the Company or any of
its Subsidiaries, any Company Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Company Plan or any such
trust could be subject to either a civil penalty assessed pursuant to Section
409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of
the Code.
(f) Each Company Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including
but not limited to ERISA and the Code. There are no pending, threatened or
anticipated claims by or on behalf of any Company Plan, by any employee or
beneficiary covered under any such Company Plan, or otherwise involving any
such Company Plan (other than routine claims for benefits).
(g) Each Company Plan intended to be "qualified" within the meaning
of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code. Each
Company Plan intended to satisfy the requirements of Section 501(c)(9) has
satisfied such requirements.
(h) No Company Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of the Company or any of its Subsidiaries for periods extending
beyond their retirement or other termination of service, other than (i)
coverage mandated by applicable law, (ii) death benefits under any "pension
plan," or (iii) benefits the full cost of which is
16
borne by the current or former employee (or his beneficiary). No condition
exists that would prevent the Company or any of its Subsidiaries from
amending or terminating any Company Plan providing health or medical benefits
in respect of any active or former employee of the Company or any of its
Subsidiaries.
(i) No amounts payable under the Company Plans have failed, or as a
result of the transactions contemplated hereby will fail, to be deductible
for federal income tax purposes by virtue of Sections 162(m) or 280G of the
Code.
(j) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event, (i)
entitle any current or former employee or officer of the Company or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement, or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due any such
employee or officer.
SECTION 3.13 LABOR MATTERS . (a) There are no controversies pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened,
between the Company or any of its Subsidiaries and any of their respective
employees, consultants or independent contractors; (b) neither the Company
nor any of its Subsidiaries is a party to any collective bargaining agreement
or other labor union contract applicable to persons employed by the Company
or its Subsidiaries, nor does the Company or any of its Subsidiaries know of
any activities or proceedings of any labor union to organize any such
employees; and (c) neither the Company nor any of its Subsidiaries has any
knowledge of any labor disputes, strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of, or
consultants or independent contractors to, the Company or any of its
Subsidiaries.
SECTION 3.14 PROPERTIES; ENCUMBRANCES . The Company and each of its
Subsidiaries have good, valid and marketable title to, or a valid leasehold
interest in, all the tangible properties and assets which it purports to own
or lease (real, personal and mixed), including, without limitation, all the
properties and assets reflected in the Company Balance Sheet (except for
personal property sold since the date of the Company Balance Sheet in the
ordinary course of business consistent with past practice). All properties
and assets reflected in the Company Balance Sheet are free and clear of all
Liens, except for Liens reflected on the Company Balance Sheet and Liens for
current taxes not yet due and other Liens that do not materially detract from
the value or impair the use of the property or assets subject thereto.
SECTION 3.15 TAXES .
(a) The Company and each of its Subsidiaries have timely filed with
the appropriate taxing authorities all Tax Returns required to be filed by
them (giving effect to valid extensions) and all such Tax Returns are true,
correct and complete in all material respects. Each group of corporations
with which the Company or any of
17
its Subsidiaries has filed (or was required to file) consolidated, combined,
unitary or similar Tax Returns (an "Affiliated Group") has timely filed all
income and other material Tax Returns that it was required to file (giving
effect to valid extensions) with respect to any period in which the Company
or any of its Subsidiaries was a member of such Affiliated Group (each such
Tax Return, an "Affiliated Return") and all such Affiliated Returns are true,
correct and complete in all material respects. All material Taxes due and
owing by the Company and its Subsidiaries have been timely paid or adequately
reserved for. There are no Tax Liens on any assets of the Company or any
Subsidiary thereof other than liens relating to current Taxes not yet due and
payable. Neither the Company, any of its Subsidiaries nor any member of any
Affiliated Group has granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax. No
power of attorney has been granted with respect to any matter relating to
Taxes of the Company or any of its Subsidiaries which is currently in force.
(b) Neither the Company nor any of its Subsidiaries is, or has been,
a United States real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(c) The Company and each of its Subsidiaries have complied in all
material respects with all applicable laws, rules and regulations relating to
Taxes required to be withheld or collected, including, without limitation,
Taxes required to be withheld pursuant to Sections 1441 and 1442 of the Code
and Taxes required to be withheld from employee wages. The Company has
delivered to Parent true, correct and complete copies of all (i) income and
other material Tax Returns filed by the Company and each of its Subsidiaries
and (ii) Affiliated Returns, in each case since the date of September 28,
1996. None of the Company, any of its Subsidiaries or any member of any
Affiliated Group has received any notice of any audit examination,
deficiency, refund litigation, proposed adjustment or matter in controversy
with respect to any Taxes or Tax Return of the Company, any of its
Subsidiaries or any Affiliated Group, and no audits or other administrative
proceedings or court proceedings with respect to any Taxes or Tax Return of
the Company, any of its Subsidiaries or any Affiliated Group are in progress.
No taxing authority has asserted that the Company, any of its Subsidiaries or
any Affiliated Group was required to file any Tax Return that was not filed.
Neither the Company nor any of its Subsidiaries is a "consenting corporation"
within the meaning of Section 341(f) of the Code or has agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned by the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is a party to or bound by any Tax indemnity, sharing,
allocation, or similar contract or arrangement. Neither the Company nor any
of its Subsidiaries is or has ever been a member of a group of corporations
with
18
which it has filed (or been required to file) consolidated, combined, unitary
or similar Tax Returns, other than a group of which only the Company and its
Subsidiaries are or were members. Neither the Company nor any of its
Subsidiaries has agreed to, or is required to, make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
(d) The statute of limitations for the assessment of Taxes has
expired for all Tax Returns of the Company and its Subsidiaries and any
Affiliated Group, or those Tax Returns have been audited and closed by the
appropriate taxing authorities. The Company has delivered to Parent true,
correct and complete copies of each of (i) all audit reports, letter rulings,
technical advice memoranda and similar documents issued by a taxing authority
relating to Taxes of, or with respect to, the Company or any of its
Subsidiaries and (ii) any closing agreements entered into by the Company or
any of its Subsidiaries with any taxing authority.
(e) For purposes of this Agreement, "Tax" or "Taxes" shall mean
taxes, fees, levies, duties, tariffs, imposts and governmental impositions or
charges of any kind in the nature of (or similar to) taxes, payable to any
federal, state, local or foreign taxing authority, including without
limitation (i) income, franchise, profits, gross receipts, AD VALOREM, net
worth, value added, sales, use, service, real or personal property, special
assessments, capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premium, windfall profits,
transfer and gains taxes and (ii) interest, penalties, additional taxes and
additions to tax imposed with respect thereto; and "Tax Returns" shall mean
returns, reports, declarations, schedules, certificates, information
statements and other similar documents with respect to Taxes (including any
supporting information) required to be filed with the IRS or any other taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined or unitary tax returns, claims for refund, amended returns, or
declarations of estimated Tax.
SECTION 3.16 ENVIRONMENTAL MATTERS .
(a) The Company and its Subsidiaries are in full compliance with all
applicable Environmental Laws; neither the Company nor any of its
Subsidiaries has received any communication whether from a Governmental
Entity, citizens group, employee or otherwise, that alleges that the Company
or any of its Subsidiaries are not in such full compliance; and, to the
Company's best knowledge, there are no circumstances that may prevent,
interfere with, such full compliance in the future.
(b) There is no Environmental Claim pending or threatened against
the Company or any of its Subsidiaries or, to the Company's knowledge,
against any person or entity whose liability for any Environmental Claim the
Company or any of its Subsidiaries have or may have retained or assumed
either contractually or by operation of law.
19
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including the Release, emission, discharge
or disposal of any Hazardous Materials, that could form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or, to the
Company's knowledge, against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries have or may have
retained or assumed either contractually or by operation of law.
(d) The Company and its Subsidiaries have delivered or otherwise
made available for inspection to Parent true, complete and correct copies and
results of any audits, reports, studies, analyses, tests or monitoring
possessed or initiated by the Company or its Subsidiaries pertaining to
Hazardous Materials in, on, beneath or adjacent to any property currently or
formerly owned, operated or leased by the Company or its Subsidiaries or
regarding the Company's or its Subsidiaries' compliance with applicable
Environmental Laws.
(e) "Environmental Claim" means any claim, action, cause of action,
investigation or notice by any person or entity alleging potential liability
arising out of, based on or resulting from (i) the presence, or release into
the environment, of any Hazardous Material at any location, whether or not
owned by the Company or any of its Subsidiaries or (ii) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law.
(f) "Environmental Laws" means all federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or
the environment, including without limitation laws and regulations relating
to emissions, discharges, releases or threatened releases of Hazardous
Materials or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials and all laws and regulations with regard to record keeping,
notification, disclosure and reporting requirements respecting Hazardous
Materials.
(g) "Hazardous Materials" means chemicals, pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, all substances
defined as Hazardous Substances, Hazardous Wastes, Oils, Pollutants or
Contaminants in the National Oil and Hazardous Substances Pollution
Contingency Plan, 40 C.F.R. Section 300.5, or defined as such by, or
otherwise regulated under, any Environmental Law.
(h) "Release" means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, dispersal, leaching or
migration into the indoor or outdoor environment (including, without
limitation, ambient air, surface water,
20
groundwater and surface or subsurface strata) or into or out of any property,
including the movement of Hazardous Materials through or in the air, soil,
surface water, groundwater or property.
SECTION 3.17 INTELLECTUAL PROPERTY .
(a) The Company or its Subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use (free and clear of all
liens and encumbrances), all trademarks, service marks, trade names,
copyrights, Internet domain names, mask works, including any registrations or
applications for registration thereof, patents and patent applications, and
trade secrets, including technology, know-how, processes, schematics,
computer software programs or applications, and all other tangible or
intangible proprietary information or material, that is used in the business
of the Company and its Subsidiaries as currently conducted (the "Company
Intellectual Property Rights"). Set forth in Section 3.17(a) of the Company
Disclosure Schedule is a list of all Company-owned patents and patent
applications, registered and unregistered trademarks and service marks, and
copyright and mask work registrations.
(b) Either the Company or one of its Subsidiaries is the sole and
exclusive owner of all right, title and interest in and to (free and clear of
any Liens), or is the exclusive or non-exclusive licensee of, the Company
Intellectual Property Rights, and, in the case of Company Intellectual
Property Rights owned by the Company or any of its Subsidiaries, has sole and
exclusive rights (and is not contractually obligated to pay any compensation
to any third party in respect thereof) to the use thereof and the material
covered thereby. No claims have been asserted or, to the Company's knowledge,
are threatened by any person (i) to the effect that the manufacture, sale,
licensing or use of any of the products or services of the Company or any of
its Subsidiaries as now manufactured, sold or licensed or used or proposed
for manufacture, use, sale or licensing by the Company or any of its
Subsidiaries infringes any intellectual property rights of any third party,
(ii) against the use by the Company or any of its Subsidiaries of any
trademarks, service marks, trade names, trade secrets, copyrights, patents,
technology or know-how used in the business of the Company and its
Subsidiaries as currently conducted or as presently proposed to be conducted,
or (iii) challenging the ownership or use by the Company or any of its
Subsidiaries or the validity of any of the Company Intellectual Property
Rights. All patents and trademark, service ▇▇▇▇, copyright and mask work
registrations held by the Company and its Subsidiaries and used in the
business of the Company or its Subsidiaries as currently conducted or as
presently proposed to be conducted are valid, subsisting, in full force and
effect, and have not lapsed, expired or been cancelled or abandoned. To the
knowledge of the Company, there is no unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property Rights by any
third party, including any employee or former employee of the Company or any
of its Subsidiaries. No Company Intellectual
21
Property Right or product or service of the Company or any of its
Subsidiaries is subject to any outstanding decree, order, judgment or
stipulation restricting in any manner the use, sale or licensing thereof by
the Company or any of its Subsidiaries. No current or former partner,
director, officer or employee of the Company or any of its Subsidiaries will,
after giving effect to the transactions contemplated hereby, own or retain
any rights in or to any of the Company Intellectual Property. Neither the
Company nor any of its Subsidiaries has entered into any agreement under
which the Company or its Subsidiaries is restricted from using or licensing
any Company Intellectual Property Right in any manner anywhere in the world,
or selling or otherwise distributing any of its products or services.
(c) Neither the Company nor any Subsidiary is, or as a result of the
execution or delivery of this Agreement or the performance of its obligations
hereunder will be in violation of any license, sublicense, agreement or
instrument to which the Company or such Subsidiary is a party or otherwise
bound, nor will the consummation of the transactions contemplated hereby
result in any material loss or impairment of the Company or any Subsidiary's
ownership of or right to use any of the Company Intellectual Property, nor
require the consent of any Governmental Entity or third party with respect to
any of the Company Intellectual Property.
SECTION 3.18 INSURANCE . To the Company's best knowledge, after
reasonable inquiry, all fire and casualty, general liability, business
interruption, product liability, sprinkler and water damage insurance
policies and other forms of insurance maintained by the Company or any of its
Subsidiaries are with reputable insurance carriers, provide adequate coverage
for all normal risks incident to the business of the Company and its
Subsidiaries and their respective properties and assets and are in character
and amount and with such deductibles and retained amounts as generally
carried by persons engaged in similar businesses and subject to the same or
similar perils or hazards.
SECTION 3.19 RESTRICTIONS ON BUSINESS ACTIVITIES . Except for this
Agreement, there is no agreement, judgement, injunction, order or decree
binding upon the Company or any of its Subsidiaries which has or could be
expected to have the effect of prohibiting or impairing any business practice
of the Company or any of its Subsidiaries, acquisition of property by the
Company or any of its Subsidiaries or the conduct of business by the Company
or any of its Subsidiaries as currently conducted or as proposed to be
conducted by the Company.
SECTION 3.20 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS .
The information supplied by the Company for inclusion in the Registration
Statement shall not at the time the Registration Statement is declared
effective by the SEC contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in
22
the light of the circumstances under which they were made, not misleading.
The information supplied by the Company for inclusion or incorporation by
reference in the proxy statement/prospectus (as amended or supplemented, the
"Proxy Statement/ Prospectus") to be sent to the shareholders of the Company
in connection with the meeting of the shareholders of the Company to consider
the Company Voting Proposal (the "Company Shareholders Meeting"), and
stockholders of Parent in connection with the meeting of the stockholders of
Parent to consider the issuance of the Parent Common Stock in the Merger (the
"Parent Stockholders Meeting"), shall not, on the date the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is
first mailed to shareholders of the Company and stockholders of Parent or at
the time of the Company Shareholders Meeting and the time of the Parent
Stockholders Meeting contain any statement which, at such time and in light
of the circumstances under which it shall be made, is false or misleading
with respect to any material fact, or shall omit to state any material fact
necessary in order to make the statements made therein not false or
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 Shareholders Meeting and the Parent Stockholders
Meeting which has become false or misleading. If at any time prior to the
later of the Company Shareholders Meeting and the Parent Stockholders Meeting
any event relating to the Company or any of its respective affiliates,
officers or directors should be discovered by the Company which should be set
forth in an amendment to the Registration Statement or a supplement to the
Proxy Statement/Prospectus, the Company shall promptly inform Parent. The
Proxy Statement/Prospectus shall comply in all material respects as to form
and substance with the requirements of the Securities Act, the Exchange Act
and the rules and regulations thereunder. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information
supplied by Parent or Merger Sub which is contained in the Registration
Statement or the Proxy Statement/Prospectus.
SECTION 3.21 INTERESTED PARTY TRANSACTIONS . Since the date of the
Company's proxy statement dated January 19, 1999, no event has occurred that
would be required to be reported as a Certain Relationship or Related
Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 3.22 CHANGE IN CONTROL PAYMENTS . Neither the Company nor
any of its Subsidiaries have any agreements, other than as previously
disclosed in Section 3.12 of the Company Disclosure Schedule, to which they
are parties, or to which they are subject, pursuant to which payments may be
required upon, or may become payable directly or indirectly as a result of, a
change of control of the Company.
SECTION 3.23 YEAR 2000 COMPLIANCE .
23
(a) All of (i) the internal systems used in the business or
operations of the Company and its Subsidiaries, including without limitation
computer hardware systems, software, applications, firmware, equipment
containing embedded microchips and other embedded systems and (ii) the
software, hardware, firmware and other technology that constitute part of the
products and services manufactured, marketed, licensed or sold by the Company
or any of its Subsidiaries to third parties are Year 2000 Compliant.
(b) To the Company's knowledge, all third-party systems used in
connection with the business, products, services or operations of the Company
or any of its Subsidiaries, including without limitation any system belonging
to any of the Company's or its Subsidiaries' vendors, co-venturers, service
providers or customers are Year 2000 Compliant. The Company and its
Subsidiaries have received satisfactory written assurances and warranties
from all of their respective vendors, co-venturers, service providers and
customers that are material to the ongoing operation of the business of the
Company and its Subsidiaries that past and future products, software,
equipment, components or systems provided by such parties are (or in the case
of future products, will be) Year 2000 Compliant.
(c) The Company has conducted "year 2000" audits with respect to (i)
each of the internal systems used in the business, products, services and
operations of the Company and its Subsidiaries, including without limitation
computer hardware systems, software, applications, firmware, equipment
containing embedded microchips and other embedded systems and (ii) all of the
software, applications, hardware, firmware and other technology which
constitute part of the products and services manufactured, marketed,
performed or sold by the Company or any of its Subsidiaries or licensed by
the Company or any of its Subsidiaries to third parties. The Company has
obtained "year 2000" certifications with respect to all material third-party
systems used in connection with the business or operations of the Company and
its Subsidiaries, including without limitation systems belonging to the
vendors, co-venturers, service providers and customers of the Company of any
or its Subsidiaries. The Company has made available to Parent true, complete
and correct copies of all "year 2000" audits, certifications, reports and
other similar documents that have been prepared or performed by or on behalf
of the Company or any third party with respect to the systems, business,
operations, products or services of the Company or any of its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has provided any
representation, warranty or guarantee for any product sold or licensed, or
service provided, by the Company or its Subsidiaries to the effect that such
product or service (i) complies with or accounts for the fact of the year
change from December 31, 1999 to January 1, 2000, (ii) will not be adversely
affected with respect to functionality, interoperability, connectivity,
performance, reliability or volume capacity (including without limitation the
processing storage, recall and reporting of
24
data) by the passage of any date, including without limitation the year
change from December 31, 1999 to January 1, 2000 or (iii) is otherwise Year
2000 Compliant.
(e) For purposes of this Agreement, "Year 2000 Compliant" means
that the applicable system, product, service or item:
(i) will accurately receive, record, store, provide, recognize,
recall and process all date and time data from, during, into and between the
years 1999, 2000 and 2001, and all years pertinent thereafter;
(ii) will accurately perform all date-dependent calculations
and operations (including without limitation, mathematical operations,
sorting, comparing and reporting) from, during, into and between the years
1999, 2000 and 2001, and all pertinent years thereafter; and
(iii) will not malfunction, cease to function or provide
invalid or incorrect results as a result of (A) the change of years from 1999
to 2000 or from 2000 to 2001, (B) date data, including date data which
represents or references different centuries, different dates during 1999,
2000 and 2001, or more than one century or (C) the occurrence of any
particular date;
in each case without human intervention, provided, in each case, that all
software, applications, hardware and other systems used in conjunction with
such system or item that are not owned or licensed by the Company or its
Subsidiaries correctly exchange date data with or provide data to such system
or item.
SECTION 3.24 POOLING; TAX MATTERS . Neither the Company nor any of
its affiliates has taken or agreed to take any action or failed to take any
action, or has any reason to believe that any conditions exist, that would
prevent (a) Parent from accounting for the business combination to be
effected by the Merger as a pooling of interests or (b) the Merger from
constituting a reorganization within the meaning of Section 368(a) of the
Code.
SECTION 3.25 NO EXISTING DISCUSSIONS . As of the date hereof, the
Company is not engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to an Acquisition Proposal (as
defined in Section 6.2(b)) or any other substantially similar proposal.
SECTION 3.26 OPINION OF FINANCIAL ADVISOR . The financial advisor of
the Company, First Security ▇▇▇ ▇▇▇▇▇▇, has delivered to the Company an
opinion dated the date of this Agreement to the effect that as of the date of
this Agreement, the Merger Consideration is fair, from a financial point of
view, to the shareholders of the Company. The Company has provided a complete
and correct copy of such opinion to Parent.
25
SECTION 3.27 BROKERS . No broker, finder or investment banker (other
than First Security ▇▇▇ ▇▇▇▇▇▇, whose brokerage, finder's or other fee will
be paid by the Company) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company or any
of its Subsidiaries. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and First
Security ▇▇▇ ▇▇▇▇▇▇ pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereunder.
SECTION 3.28 AFFILIATES . Section 3.28 of the Company Disclosure
Schedule contains a true, complete and correct list of all persons who, as of
the date hereof, to the best knowledge of the Company, may be deemed to be
affiliates of the Company excluding all its Subsidiaries but including all
directors and executive officers of the Company.
SECTION 3.29 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS .
Each current and former employee and officer of the Company has executed an
Agreement Regarding Confidential Information and Inventions, or an Employee
Proprietary Information Agreement or similar such agreement, in substantially
the form previously provided or made available to Parent. The Company is not
aware that any of the current or former employees of the Company is in
violation thereof.
SECTION 3.30 ABSENCE OF CERTAIN PAYMENTS . Neither the Company, nor,
to the Company's knowledge, any of its affiliates or any of their respective
officers, directors, employees or agents or other people acting on behalf of
any of them have: (i) engaged in any activity prohibited by the United States
Foreign Corrupt Practices Act of 1977 or any other similar law, regulation,
decree, directive or order of any Governmental Entity and (ii) without
limiting the generality of the preceding clause (i), used any corporate or
other funds for unlawful contributions, payments, gifts or entertainment, or
made any unlawful expenditures relating to political activity to government
officials or others. Neither the Company, nor, to the Company's knowledge,
any of its affiliates or any of their respective directors, officers,
employees or agents of other persons acting on behalf of any of them, has
accepted or received any unlawful contributions, payments, gifts or
expenditures.
SECTION 3.31 FULL DISCLOSURE . To the Company's best knowledge,
after reasonable inquiry, no representation or warranty by the Company in
this Agreement and no statement contained in any schedule or certificate
furnished or to be furnished by the Company to Parent, or any of its
representatives pursuant to the provisions hereof taken as a whole, contains
as of the date hereof any untrue statement of material fact or omits to state
any material fact necessary in order to make the
26
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that the
statements contained in this Article IV are true and correct, except as set
forth in the Parent Disclosure Schedule, dated as of the date hereof,
prepared by Parent and delivered to the Company in connection herewith (the
"Parent Disclosure Schedule"). The Parent Disclosure Schedule is arranged in
sections corresponding to the numbered and lettered sections contained in
this Article IV and shall qualify only the corresponding Section in this
Article IV.
SECTION 4.1 ORGANIZATION AND QUALIFICATION . Parent and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its respective incorporation
and has the requisite corporate power and authority necessary to own, lease
and operate the properties it purports to own, lease or operate and to carry
on its business as it is now being conducted or presently proposed to be
conducted. Parent and each of its Subsidiaries is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated
by it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and
in good standing that could not reasonably be expected to have a Parent
Material Adverse Effect. A true, complete and correct list of all of Parent's
Subsidiaries, together with the jurisdiction of incorporation of each
Subsidiary, the authorized capitalization of each Subsidiary, and the
percentage of each Subsidiary's outstanding capital stock owned by Parent or
another Subsidiary, is set forth in Section 4.1 of the Parent Disclosure
Schedule. Parent does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity, excluding securities in any
publicly traded company held for investment by Parent and comprising less
than one percent of the outstanding stock of such company. The term "Parent
Material Adverse Effect" means any change, effect or circumstance that,
individually or when taken together with all other such similar or related
changes, effects or circumstances that have occurred or could reasonably be
expected to occur prior to the date of determination of the occurrence of the
Parent Material Adverse Effect, (i) is materially adverse to the business,
prospects, assets (including intangible assets), condition (financial or
otherwise) or results of operations of Parent and its Subsidiaries taken as a
whole or (ii) could materially delay or prevent the consummation of the
transactions
27
contemplated hereby. Changes in economic or market conditions affecting the
computer peripherals or computer software industries generally, changes in
Parent's stock price, failure to meet Parent's revenue projections for the
first quarter of fiscal year 2000 (except as set forth below) or any loss of
a supplier, customer or employee resulting from the Merger or its
announcement to the extent so resulting will be deemed not to constitute a
Parent Material Adverse Effect; revenue for the first quarter of fiscal year
2000 of 25% or more below the amount set forth in Section 4.1 of the Parent
Disclosure Schedule will be deemed to constitute a Parent Material Adverse
Effect.
SECTION 4.2 CERTIFICATE OF INCORPORATION AND BY-LAWS . Parent has
heretofore furnished to the Company a true, complete and correct copy of its
Certificate of Incorporation, as amended to date (the "Parent Charter"), and
By-Laws, as amended to date (the "Parent By-Laws"). Such Parent Charter and
Parent By-Laws are in full force and effect. Parent is not in violation of
any of the provisions of the Parent Charter or Parent By-Laws.
SECTION 4.3 CAPITALIZATION .
(a) The authorized capital stock of Parent consists of 25,000,000
shares of Parent Common Stock, and 1,000,000 shares of preferred stock, par
value $.01 per share (the "Parent Preferred Stock"). As of November 30, 1999:
(i) 8,485,714 shares of Parent Common Stock are issued and outstanding,
1,826,309 shares of Parent Common Stock are reserved for issuance upon
exercise of options granted pursuant to Parent's 1982 Key Employee Incentive
Plan, 1986 Employee Stock Purchase Plan and 1992 Key Employee Incentive Plan;
and no shares of Parent Common Stock are issued and held in the treasury of
Parent; and (ii) no shares of Parent Preferred Stock are issued and
outstanding. All outstanding shares of Parent Common Stock are, and all
shares of Parent Common Stock subject to issuance as specified above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the DGCL, Parent Charter or
Parent By-Laws or any agreement to which Parent is a party or is otherwise
bound. No material change in such capitalization has occurred since November
30, 1999. All of the outstanding shares of capital stock of each of Parent's
Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, and all such shares are owned by Parent free and clear of all
Liens. There are no accrued and unpaid dividends with respect to any
outstanding shares of capital stock of Parent or any of its Subsidiaries.
(b) Except as described in Section 4.3(a) of this Agreement, there
are no equity securities of any class of Parent or any of its Subsidiaries or
any security
28
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. Except as described in Section 4.3(a) of this
Agreement, there are no options, warrants, calls, rights, commitments or
agreements of any character to which Parent or any of its Subsidiaries is a
party, or by which Parent or any of its Subsidiaries is bound, obligating
Parent or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of Parent or
any of its Subsidiaries or obligating Parent or any of its Subsidiaries to
grant, extend or accelerate the vesting of or enter into any such option,
warrant, call, right, commitment or agreement. To Parent's knowledge, there
are no voting trusts, proxies or other similar agreements or understandings
with respect to the shares of capital stock of Parent or any of its
Subsidiaries There are no obligations, contingent or otherwise, of Parent or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of Parent or any of its Subsidiaries or to provide funds to
or make any investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity.
(c) All of the shares of Parent Common Stock to be issued in the
Merger will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid and nonassessable.
(d) The authorized capital stock of Merger Sub consists of 100
Merger Sub Common Shares, all of which are issued and outstanding and fully
paid and nonassessable.
SECTION 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT . Subject only to
the approval of Parent's stockholders described below, each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and each instrument required hereby to be executed and
delivered by it (the "Parent Merger Documents") at the Closing and to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of the Parent
Merger Documents and the consummation of the transactions contemplated by the
Parent Merger Documents have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Sub, subject only
to the approval of the holders of Parent Common Stock of the issuance of the
Parent Common Stock in the Merger at a meeting where a quorum is present by a
majority of the votes properly cast (the "Parent Voting Proposal"). This
Agreement has been duly and validly executed and delivered by Parent and
Merger Sub and constitutes, and when executed and delivered by Parent and
Merger Sub, as applicable, each of the other Parent Merger Documents will
constitute, assuming the due authorization, execution and delivery by the
Company, the legal and binding obligation of each of Parent and Merger Sub,
as applicable, except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and by
general equitable
29
principles (regardless of whether enforceability is considered in a
proceeding in equity or at law). The Board of Directors of Parent has
determined that it is advisable and in the best interests of Parent's
stockholders for Parent to issue the shares to the Company's shareholders on
the terms and subject to the conditions of this Agreement, and has
recommended that Parent's stockholders approve the Parent Stockholder
Proposal.
SECTION 4.5 NO CONFLICT, REQUIRED FILINGS AND CONSENTS .
(a) The execution and delivery of the Parent Merger Documents by
Parent and Merger Sub do not, and the performance of this Agreement by Parent
and Merger Sub will not, (i) conflict with or violate the Parent Charter, the
Parent By-Laws, the Certificate of Incorporation of Merger Sub or the By-Laws
of Merger Sub, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Parent or Merger Sub by which its or
their respective properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default), or impair Parent's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a Lien on any of the
properties or assets of Parent or any of its Subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which Parent or any of its Subsidiaries or its
or any of their respective properties is bound or affected; other than such
conflicts, breaches, defaults, impairments or other effects under (iii) of
this Section 4.5(a) that have not had and could not reasonably be expected to
have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement or any instrument
required hereby to be executed and delivered by Parent and Merger Sub does
not, and the performance of this Agreement by Parent and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) the filing of the
pre-merger notification report under the HSR Act, (ii) the filing of the
Registration Statement with the SEC in accordance with the Securities Act,
and the filing of the Proxy Statement/Prospectus with the SEC under the
Exchange Act, (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country and
(iv) the filing and recordation of the Merger Agreement or other documents as
required by the CGCL and the DGCL.
30
SECTION 4.6 SEC FILINGS; FINANCIAL STATEMENTS .
(a) Parent has timely filed all forms, reports, schedules,
statements and other documents required to be filed by Parent with the SEC
since November 30, 1998 (collectively, the "Parent SEC Reports"). The Parent
SEC Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such Parent SEC Reports or
necessary in order to make the statements in such Parent SEC Reports, in
light of the circumstances under which they were made, not misleading. None
of Parent's Subsidiaries are required to file any forms, reports, schedules,
statements or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes), contained in the Parent SEC Reports, including
any Parent SEC Reports filed after the date of this Agreement until the
Closing, complied, as of its respective date, in all material respects with
all applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved and fairly
presented the consolidated financial position of Parent and its Subsidiaries
as at the respective dates and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS . Since the date of
the unaudited balance sheet of Parent as of November 30, 1999 (the "Parent
Balance Sheet"), a copy of which has been previously supplied to the Company
by Parent, and except as disclosed in the Parent SEC Reports, Parent has
conducted its business in the ordinary course consistent with past practice
and, since such date, there has not occurred: (i) any change, development,
event or other circumstance, situation or state of affairs that has had or
could reasonably be expected to have a Parent Material Adverse Effect; (ii)
any amendments to or changes in the Parent Charter or Parent By-Laws; (iii)
any damage to, destruction or loss of any asset of Parent or any of its
Subsidiaries (whether or not covered by insurance) that could reasonably be
expected to have a Parent Material Adverse Effect; (iv) any change by Parent
in its accounting methods, principles or practices; (v) any revaluation by
Parent of any of its assets, including, without limitation, writing down the
value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business consistent with past practice; or (vi) any
sale of a material amount of assets (tangible or
31
intangible) of Parent other than in the ordinary course of business and
consistent with past practice.
SECTION 4.8 NO UNDISCLOSED LIABILITIES . Except as disclosed in the
Parent SEC Reports or in the Parent Balance Sheet, to Parent's knowledge,
neither Parent nor any of its Subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise), except liabilities (a) adequately
reflected in the Parent Balance Sheet, (b) incurred in the ordinary course of
business consistent with past practice and not required under GAAP to be
reflected in the Parent Balance Sheet, (c) incurred since the date of the
Parent Balance Sheet in the ordinary course of business consistent with past
practice or (d) incurred in connection with this Agreement.
SECTION 4.9 COMPLIANCE . To Parent's knowledge, neither Parent nor
any of its Subsidiaries is in conflict with, or in default or violation of
(and has not received any notices of violation with respect to), any (i) law,
rule or regulation, or (ii) order, judgment or decree applicable to Parent or
any of its Subsidiaries or by which its or any of their respective properties
is bound or affected, and Parent is not aware of any such conflict, default
or violation thereunder (other than any conflicts, defaults or violations
under (i) of this Section 4.9 that have not had and could not reasonably be
expected to have a Parent Material Adverse Effect).
SECTION 4.10 ABSENCE OF LITIGATION . Except as disclosed in the
Parent SEC Reports, there are no claims, actions, suits, proceedings or
investigations (i) pending against Parent or any of its Subsidiaries or any
properties or assets of Parent or of any of its Subsidiaries or (ii) to the
knowledge of Parent, threatened against Parent or any of its Subsidiaries, or
any properties or assets of Parent or of any of its Subsidiaries, in each
case, which claims, actions, suits, proceedings or investigations could
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.11 EMPLOYEE BENEFIT PLANS, OPTIONS AND EMPLOYMENT
AGREEMENTS.
(a) Section 4.11(a) of the Parent Disclosure Schedule contains a
true and complete list of (i) each deferred compensation and each bonus or
other incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; (ii) each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of Section 3(1) of
ERISA); (iii) each profit-sharing, stock bonus or other "pension" plan, fund
or program (within the meaning of Section 3(2) of ERISA); (iv) each
employment, termination or severance agreement; and (v) each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by
Parent or by any trade or business, whether or not incorporated (a "Parent
ERISA
32
Affiliate"), that together with Parent would be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA, or to which Parent or a
Parent ERISA Affiliate is party, whether written or oral, for the benefit of
any employee or former employee of Parent or any of its Subsidiaries
(collectively, the "Parent Plans"). No Parent Plan is subject to Section 302
or Title IV of ERISA or Section 412 of the Code. Neither Parent, any of its
Subsidiaries nor any Parent ERISA Affiliate has any commitment or formal
plan, whether legally binding or not, to create any additional employee
benefit plan or modify or change any existing Parent Plan that would affect
any employee or former employee of Parent or any of its Subsidiaries.
(b) With respect to each Parent Plan, Parent has heretofore delivered
or made available to the Company true and complete copies of each of the
following documents: (i) a copy of the Parent Plan and any amendments thereto
(or if the Parent Plan is not a written Parent Plan, a description thereof);
(ii) a copy of the two most recent annual reports and actuarial reports, if
required under ERISA, and the most recent report prepared with respect thereto
in accordance with Statement of Financial Accounting Standards No. 87; (iii) a
copy of the most recent Summary Parent Plan Description required under ERISA
with respect thereto; (iv) if the Parent Plan is funded through a trust or
any third party funding vehicle, a copy of the trust or other funding
agreement and the latest financial statements thereof; and (v) the most
recent determination letter received from the IRS with respect to each Parent
Plan intended to qualify under Section 401 of the Code.
(c) No liability under Title IV or Section 302 of ERISA has been
incurred by Parent or any Parent ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a material risk to Parent or
any Parent ERISA Affiliate of Parent incurring any such liability, other than
liability for premiums due to the Pension Benefit Guaranty Corporation (which
premiums have been paid when due).
(d) All contributions required to be made with respect to any Parent
Plan on or prior to the Effective Time have been timely made or are reflected
on the Parent Balance Sheet.
(e) Neither Parent nor any of its Subsidiaries, any Parent Plan, any
trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which Parent or any of its
Subsidiaries, any Parent Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Parent Plan or any such
trust could be subject to either a civil penalty assessed pursuant to Section
409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of
the Code.
(f) Each Parent Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including
but not limited to ERISA and the Code. There are no pending, threatened or
anticipated claims by or on behalf of any Parent Plan, by any employee or
beneficiary covered under any
33
such Parent Plan, or otherwise involving any such Parent Plan (other than
routine claims for benefits).
(g) Each Parent Plan intended to be "qualified" within the meaning
of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code. Each
Parent Plan intended to satisfy the requirements of Section 501(c)(9) has
satisfied such requirements.
(h) No Parent Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of Parent or any of its Subsidiaries for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan," or
(iii) benefits the full cost of which is borne by the current or former
employee (or his beneficiary). No condition exists that would prevent Parent
or any of its Subsidiaries from amending or terminating any Parent Plan
providing health or medical benefits in respect of any active or former
employee of Parent or any of its Subsidiaries.
(i) No amounts payable under the Parent Plans have failed, or as a
result of the transactions contemplated hereby will fail, to be deductible
for federal income tax purposes by virtue of Sections 162(m) or 280G of the
Code.
(j) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event, (i)
entitle any current or former employee or officer of Parent or any Parent
ERISA Affiliate to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement, or (ii) accelerate
the time of payment or vesting, or increase the amount of compensation due
any such employee or officer.
SECTION 4.12 LABOR MATTERS . (a) There are no controversies pending
or, to the knowledge of Parent or any of its Subsidiaries, threatened,
between Parent or any of its Subsidiaries and any of their respective
employees, consultants or independent contractors; (b) neither Parent nor any
of its Subsidiaries is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by Parent or its
Subsidiaries, nor does Parent or any of its Subsidiaries know of any
activities or proceedings of any labor union to organize any such employees;
and (c) neither Parent nor any of its Subsidiaries has any knowledge of any
labor disputes, strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of, or consultants or
independent contractors to, Parent or any of its Subsidiaries.
SECTION 4.13 PROPERTIES; ENCUMBRANCES . Parent and each of its
Subsidiaries have good, valid and marketable title to, or a valid leasehold
interest in, all the tangible properties and assets which it purports to own
or lease (real, personal
34
and mixed), including, without limitation, all the properties and assets
reflected in the Parent Balance Sheet (except for personal property sold
since the date of the Parent Balance Sheet in the ordinary course of business
consistent with past practice). All properties and assets reflected in the
Parent Balance Sheet are free and clear of all Liens, except for Liens
reflected on the Parent Balance Sheet and Liens for current taxes not yet due
and other Liens that do not materially detract from the value or impair the
use of the property or assets subject thereto.
SECTION 4.14 TAXES .
(a) Parent and each of its Subsidiaries have timely filed with the
appropriate taxing authorities all Tax Returns required to be filed by them
(giving effect to valid extensions) and all such Tax Returns are true,
correct and complete in all material respects. Each group of corporations
with which Parent or any of its Subsidiaries has filed (or was required to
file) consolidated, combined, unitary or similar Tax Returns (an "Parent
Affiliated Group") has timely filed all income and other material Tax Returns
that it was required to file (giving effect to valid extensions) with respect
to any period in which Parent or any of its Subsidiaries was a member of such
Parent Affiliated Group (each such Tax Return, a "Parent Affiliated Return")
and all such Parent Affiliated Returns are true, correct and complete in all
material respects. All material Taxes due and owing by Parent and its
Subsidiaries have been timely paid or adequately reserved for. There are no
Tax Liens on any assets of Parent or any Subsidiary thereof other than liens
relating to current Taxes not yet due and payable. Neither Parent, any of its
Subsidiaries nor any member of any Affiliated Group has granted any waiver of
any statute of limitations with respect to, or any extension of a period for
the assessment of, any Tax. No power of attorney has been granted with
respect to any matter relating to Taxes of Parent or any of its Subsidiaries
which is currently in force.
(b) Neither Parent nor any of its Subsidiaries is, or has been, a
United States real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(c) Parent and each of its Subsidiaries have complied in all
material respects with all applicable laws, rules and regulations relating to
Taxes required to be withheld or collected, including, without limitation,
Taxes required to be withheld pursuant to Sections 1441 and 1442 of the Code
and Taxes required to be withheld from employee wages. None of Parent, any of
its Subsidiaries or any member of any Parent Affiliated Group has received
any notice of any audit examination, deficiency, refund litigation, proposed
adjustment or matter in controversy with respect to any Taxes or Tax Return
of Parent, any of its Subsidiaries or any Parent Affiliated Group, and no
audits or other administrative proceedings or court proceedings with respect
to any Taxes or Tax Return of Parent, any of its Subsidiaries or any Parent
Affiliated Group are in progress. No taxing authority has asserted that
Parent, any of its
35
Subsidiaries or any Parent Affiliated Group was required to file any Tax
Return that was not filed. Neither Parent nor any of its Subsidiaries is a
"consenting corporation" within the meaning of Section 341(f) of the Code or
has agreed to have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Code) owned by Parent or any of its Subsidiaries. Neither Parent nor any of
its Subsidiaries is a party to or bound by any Tax indemnity, sharing,
allocation, or similar contract or arrangement. Neither Parent nor any of its
Subsidiaries is or has ever been a member of a group of corporations with
which it has filed (or been required to file) consolidated, combined, unitary
or similar Tax Returns, other than a group of which only Parent and its
Subsidiaries are or were members. Neither Parent nor any of its Subsidiaries
has agreed to, or is required to, make any adjustment under Section 481(a) of
the Code by reason of a change in accounting method or otherwise.
(d) The statute of limitations for the assessment of Taxes has
expired for all Tax Returns of Parent and its Subsidiaries and any Parent
Affiliated Group, or those Tax Returns have been audited and closed by the
appropriate taxing authorities.
SECTION 4.15 ENVIRONMENTAL MATTERS .
(a) Parent and its Subsidiaries are in full compliance with all
applicable Environmental Laws; neither Parent nor any of its Subsidiaries has
received any communication whether from a Governmental Entity, citizens
group, employee or otherwise, that alleges that Parent or any of its
Subsidiaries are not in such full compliance; and, to Parent's best
knowledge, there are no circumstances that may prevent, interfere with, such
full compliance in the future.
(b) There is no Environmental Claim pending or threatened against
Parent or any of its Subsidiaries or, to Parent's knowledge, against any
person or entity whose liability for any Environmental Claim Parent or any of
its Subsidiaries have or may have retained or assumed either contractually or
by operation of law.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including the Release, emission, discharge
or disposal of any Hazardous Materials, that could form the basis of any
Environmental Claim against Parent or any of its Subsidiaries or, to Parent's
knowledge, against any person or entity whose liability for any Environmental
Claim Parent or any of its Subsidiaries have or may have retained or assumed
either contractually or by operation of law.
36
(d) Parent and its Subsidiaries have delivered or otherwise made
available for inspection to Parent true, complete and correct copies and
results of any audits, reports, studies, analyses, tests or monitoring
possessed or initiated by Parent or its Subsidiaries pertaining to Hazardous
Materials in, on, beneath or adjacent to any property currently or formerly
owned, operated or leased by Parent or its Subsidiaries or regarding Parent's
or its Subsidiaries' compliance with applicable Environmental Laws.
SECTION 4.16 INTELLECTUAL PROPERTY .
(a) To Parent's knowledge, Parent or its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use (free and
clear of all liens and encumbrances), all trademarks, service marks, trade
names, copyrights, Internet domain names, mask works, including any
registrations or applications for registration thereof, patents and patent
applications, and trade secrets, including technology, know-how, processes,
schematics, computer software programs or applications, and all other
tangible or intangible proprietary information or material, that is used in
the business of Parent and its Subsidiaries as currently conducted (the
"Parent Intellectual Property Rights").
(b) To Parent's knowledge, either Parent or one of its Subsidiaries
is the sole and exclusive owner of all right, title and interest in and to
(free and clear of any Liens), or is the exclusive or non-exclusive licensee
of, the Parent Intellectual Property Rights, and, in the case of Parent
Intellectual Property Rights owned by Parent or any of its Subsidiaries, has
sole and exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use thereof and
the material covered thereby. No claims have been asserted or, to Parent's
knowledge, are threatened by any person (i) to the effect that the
manufacture, sale, licensing or use of any of the products or services of
Parent or any of its Subsidiaries as now manufactured, sold or licensed or
used or proposed for manufacture, use, sale or licensing by Parent or any of
its Subsidiaries infringes any intellectual property rights of any third
party, (ii) against the use by Parent or any of its Subsidiaries of any
trademarks, service marks, trade names, trade secrets, copyrights, patents,
technology or know-how used in the business of Parent and its Subsidiaries as
currently conducted or as presently proposed to be conducted, or (iii)
challenging the ownership or use by Parent or any of its Subsidiaries or the
validity of any of the Parent Intellectual Property Rights. To Parent's
knowledge, all patents and trademark, service ▇▇▇▇, copyright and mask work
registrations held by Parent and its Subsidiaries and used in the business of
Parent or its Subsidiaries as currently conducted or as presently proposed to
be conducted are valid, subsisting, in full force and effect, and have not
lapsed, expired or been canceled or abandoned. To Parent's knowledge, there
is no unauthorized use, infringement or misappropriation of any of the Parent
Intellectual Property Rights by any third party, including any employee or
former employee of Parent or any of its Subsidiaries. To
37
Parent's knowledge, no Parent Intellectual Property Right or product or
service of Parent or any of its Subsidiaries is subject to any outstanding
decree, order, judgment or stipulation restricting in any manner the use,
sale or licensing thereof by Parent or any of its Subsidiaries. To Parent's
knowledge, no current or former partner, director, officer or employee of
Parent or any of its Subsidiaries will, after giving effect to the
transactions contemplated hereby, own or retain any rights in or to any of
the Parent Intellectual Property. To Parent's knowledge, neither Parent nor
any of its Subsidiaries has entered into any agreement under which Parent or
its Subsidiaries is restricted from using or licensing any Parent
Intellectual Property Right in any manner anywhere in the world, or selling
or otherwise distributing any of its products or services.
(c) To Parent's knowledge, neither Parent nor any Subsidiary is, or
as a result of the execution or delivery of this Agreement or the performance
of its obligations hereunder will be in violation of any license, sublicense,
agreement or instrument to which Parent or such Subsidiary is a party or
otherwise bound, nor will the consummation of the transactions contemplated
hereby result in any material loss or impairment of Parent or any
Subsidiary's ownership of or right to use any of the Parent Intellectual
Property, nor require the consent of any Governmental Entity or third party
with respect to any of the Parent Intellectual Property.
SECTION 4.17 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS .
The information supplied by Parent for inclusion in the Registration
Statement shall not at the time the Registration Statement is declared
effective by the SEC contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The information supplied by Parent for
inclusion or incorporation by reference in the Proxy Statement/Prospectus to
be sent to the stockholders of Parent and the shareholders of the Company in
connection with the Parent Stockholders Meeting and the Company Shareholders
Meeting, shall not, on the date the Proxy Statement/Prospectus (or any
amendment thereof or supplement thereto) is first mailed to stockholders of
Parent or shareholders of the Company or at the time of the Parent
Stockholders Meeting or the Company Shareholders Meeting, contain any
statement which, at such time and in light of the circumstances under which
it shall be made, is false or misleading with respect to any material fact,
or shall omit to state any material fact necessary in order to make the
statements made therein not false or 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 Parent Stockholders
Meeting or the Company Shareholders Meeting which has become false or
misleading. If at any time prior to the Parent Stockholders Meeting or the
Company Shareholders Meeting any event relating to Parent or any of its
respective affiliates, officers or directors should be discovered by Parent
which should be set forth in an amendment to the
38
Registration Statement or a supplement to the Proxy Statement/Prospectus,
Parent shall promptly inform the Company. The Registration Statement shall
comply in all material respects as to form and substance with the
requirements of the Securities Act, the Exchange Act and the rules and
regulations thereunder. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any information supplied by the
Company which is contained in any of the foregoing documents.
SECTION 4.18 YEAR 2000 COMPLIANCE .
(a) All of (i) the internal systems used in the business or
operations of Parent and its Subsidiaries, including without limitation
computer hardware systems, software, applications, firmware, equipment
containing embedded microchips and other embedded systems and (ii) the
software, hardware, firmware and other technology that constitute part of the
products and services manufactured, marketed, licensed or sold by Parent or
any of its Subsidiaries to third parties are Year 2000 Compliant.
(b) To Parent's knowledge, all third-party systems used in
connection with the business, products, services or operations of Parent or
any of its Subsidiaries, including without limitation any system belonging to
any of Parent's or its Subsidiaries' vendors, co-venturers, service providers
or customers are Year 2000 Compliant. Parent and its Subsidiaries have
received satisfactory written assurances and warranties from all of their
respective vendors, co-venturers, service providers and customers that are
material to the ongoing operation of the business of Parent and its
Subsidiaries that past and future products, software, equipment, components
or systems provided by such parties are (or in the case of future products,
will be) Year 2000 Compliant.
(c) Parent has conducted "year 2000" audits with respect to (i) each
of the internal systems used in the business, products, services and
operations of Parent and its Subsidiaries, including without limitation
computer hardware systems, software, applications, firmware, equipment
containing embedded microchips and other embedded systems and (ii) all of the
software, applications, hardware, firmware and other technology which
constitute part of the products and services manufactured, marketed,
performed or sold by Parent or any of its Subsidiaries or licensed by Parent
or any of its Subsidiaries to third parties. Parent has obtained "year 2000"
certifications with respect to all material third-party systems used in
connection with the business or operations of Parent and its Subsidiaries,
including without limitation systems belonging to the vendors, co-venturers,
service providers and customers of Parent of any or its Subsidiaries. Parent
has made available to the Company true, complete and correct copies of all
"year 2000" audits, certifications, reports and other similar documents that
have been prepared or performed by or on
39
behalf of Parent or any third party with respect to the systems, business,
operations, products or services of Parent or any of its Subsidiaries.
(d) Neither Parent nor any of its Subsidiaries has provided any
representation, warranty or guarantee for any product sold or licensed, or
service provided, by Parent or its Subsidiaries to the effect that such
product or service (i) complies with or accounts for the fact of the year
change from December 31, 1999 to January 1, 2000, (ii) will not be adversely
affected with respect to functionality, interoperability, connectivity,
performance, reliability or volume capacity (including without limitation the
processing storage, recall and reporting of data) by the passage of any date,
including without limitation the year change from December 31, 1999 to
January 1, 2000 or (iii) is otherwise Year 2000 Compliant.
SECTION 4.19 BROKERS . No broker, finder or investment banker (other
than U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. whose brokerage, finder's or other fee
will be paid by Parent) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent.
SECTION 4.20 OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES . As of
the date hereof and as of the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement and except for this Agreement
and any other agreements or arrangements contemplated by this Agreement,
Merger Sub has not and will not have incurred, directly or indirectly, any
obligations or liabilities or engaged in any business activities of any type
or kind whatsoever or entered into any agreements or arrangements with any
person.
SECTION 4.21 POOLING; TAX MATTERS . Neither Parent nor any of its
affiliates has taken or agreed to take any action or failed to take any
action, or has any reason to believe that any conditions exist, that would
prevent (a) Parent from accounting for the business combination to be
effected by the Merger as a pooling of interests or (b) the Merger from
constituting a reorganization within the meaning of Section 368(a) of the
Code.
SECTION 4.22 AFFILIATES. Section 4.22 of the Parent Disclosure
Schedule contains a true, complete and correct list of all persons who, as of
the date hereof, to the best knowledge of Parent, may be deemed to be
affiliates of Parent excluding all its Subsidiaries but including all
directors and executive officers of Parent.
40
ARTICLE V
CONDUCT OF BUSINESS
SECTION 5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER .
The Company covenants and agrees that, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless Parent shall otherwise agree in
writing or in accordance with Section 6.2(b), the Company shall conduct its
business and shall cause the businesses of its Subsidiaries to be conducted
only in, and the Company and its Subsidiaries shall not take any action
except in, the ordinary course of business and in a manner consistent with
past practice and in compliance in all material respects with all applicable
laws and regulations; and the Company shall use commercially reasonable best
efforts to preserve substantially intact the business organization of the
Company and its Subsidiaries, to keep available the services of the current
officers, employees and consultants of the Company and its Subsidiaries and
to preserve the present relationships of the Company and its Subsidiaries
with customers, suppliers and other persons with which the Company or any of
its Subsidiaries has significant business relations. By way of amplification
and not limitation, except (x) as set forth in Section 5.1 of the Company
Disclosure Schedule, (y) as contemplated by this Agreement or (z) in
accordance with Section 6.2(b), the Company shall not and shall not permit
its Subsidiaries to, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Parent:
(a) amend or otherwise change the Company Charter, Company By-Laws
or any Subsidiary Document;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in
the Company or any of its Subsidiaries, other than Company Common Stock
pursuant to the exercise of (x) options currently outstanding, under the
Company Stock Option Plans or the Company ESPP, in each case, in accordance
with their current terms, (y) the Other Company Options in accordance with
their current terms or (z) the warrants in accordance with their current
terms;
(c) sell, pledge, dispose of or encumber any assets of the Company
or any of its Subsidiaries (except for sales of assets in the ordinary course
of business and in a manner consistent with past practice);
41
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock, except that a wholly owned Subsidiary
of the Company may declare and pay a dividend to its parent, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) amend the terms or
change the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, or permit any Subsidiary to purchase, repurchase, redeem
or otherwise acquire, any of its securities or any securities of its
Subsidiaries, or any option, warrant or right, directly or indirectly, to
acquire any such securities, or propose to do any of the foregoing, other
than Company Common Stock pursuant to the exercise of options currently
outstanding, under the Company Stock Option Plans or the Company ESPP, in
each case, in accordance with their current terms, (y) the Other Company
Options in accordance with their current terms or (z) the warrants in
accordance with their current terms;
(e) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any person, or make
any loans or advances or capital contributions to or investments in any other
person, except in the ordinary course of business and consistent with past
practice; (iii) enter into or amend any material contract or agreement, or
enter into, renew, amend or terminate any lease relating to real property; or
(iv) authorize any capital expenditures or purchase of fixed assets which
are, in the aggregate, in excess of $100,000 for the Company and its
Subsidiaries taken as a whole;
(f) except as disclosed in Section 5.1(f) of the Company Disclosure
Schedule, increase the compensation payable or to become payable to its
directors, officers or employees (except such increases payable to
non-officer employees made in the ordinary course of business consistent with
past practice), grant any severance or termination pay to, or enter into or
amend any employment or severance agreement with, any director, officer or
other employee of the Company or any of its Subsidiaries, establish, adopt,
enter into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any current or former
directors, officers or employees, pay any bonuses to any officer of the
Company, materially change any actuarial assumption or other assumption used
to calculate funding obligations with respect to any pension or retirement
plan, or change the manner in which contributions to any such plan are made
or the basis on which such contributions are determined;
42
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable), except as required by GAAP;
(h) make any Tax election or settle or compromise any Tax liability
or agree to an extension of a statute of limitations or file any amended Tax
Returns or claims for refund;
(i) except for the settlement of existing lawsuits disclosed in
Section 5.1(i) of the Company Disclosure Schedule solely in exchange for the
payment of not more than $50,000 per lawsuit (and $100,000 in the aggregate
for all such lawsuits) in cash, pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the financial statements
contained in the Company SEC Reports filed prior to the date of this
Agreement or incurred in the ordinary course of business and consistent with
past practice; or
(j) take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through (i) above, or any action which
would make any of the representations or warranties of the Company contained
in this Agreement untrue or incorrect or prevent the Company from performing
or cause the Company not to perform its covenants hereunder, in each case,
such that the conditions set forth in Sections 7.2(a) or 7.2(b), as the case
may be, would not be satisfied.
SECTION 5.2 CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER .
Parent covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless the Company shall otherwise agree in
writing, Parent shall conduct its business and shall cause the businesses of
its Subsidiaries to be conducted only in the ordinary course of business and
in compliance in all material respects with all applicable laws and
regulations; and Parent shall use commercially reasonable best efforts to
preserve substantially intact the business organization of Parent and its
Subsidiaries, to keep available the services of the current officers,
employees and consultants of Parent and its Subsidiaries and to preserve the
present relationships of Parent and its Subsidiaries with customers,
suppliers and other persons with which Parent or any of its Subsidiaries has
significant business relations.
SECTION 5.3 ADVICE OF CHANGES . Parent and the Company shall
promptly advise the other party orally and in writing to the extent it has
knowledge of (i) any representation or warranty made by it (and, in the case
of Parent, made by
43
Merger Sub) contained in this Agreement becoming untrue or inaccurate in any
material respect, (ii) the failure by it (and, in the case of Parent, by
Merger Sub) to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement and (iii) any change or event having, or which
could reasonably be expected to have, a Company Material Adverse Effect or a
Parent Material Adverse Effect, as the case may be, on such party or the
ability for the conditions set forth in Article VII to be satisfied;
PROVIDED, HOWEVER, that no such notification shall affect in any manner the
representations, warranties, covenants or agreements of the parties (or
remedies with respect thereto) or any matter set forth in the Company
Disclosure Schedule, the Parent Disclosure Schedule or the conditions to the
obligations of the parties under this Agreement.
SECTION 5.4 COOPERATION . Subject to compliance with applicable law,
from the date hereof until the Effective Time, (a) representatives of the
Company shall confer on a regular and frequent basis with one or more
representatives of Parent to discuss operational matters that are material
and the general status of ongoing operations and (b) each of Parent and the
Company shall promptly provide the other party or its counsel with copies of
all filings made by such party with any Governmental Entity in connection
with this Agreement, the Merger and the transactions contemplated hereby and
thereby.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 ACCESS TO INFORMATION; CONFIDENTIALITY .
(a) The Company shall (and shall cause its Subsidiaries and its and
their respective officers, directors, employees, auditors and agents to)
afford to Parent and to Parent's officers, employees, financial advisors,
legal counsel, accountants, consultants and other representatives access
during normal business hours throughout the period prior to the Effective
Time to all of its books and records and its properties, plants and personnel
and, during such period, the Company shall furnish promptly to Parent a copy
of each report, schedule and other document filed or received by it pursuant
to the requirements of federal securities laws, provided that no
investigation pursuant to this Section 6.1(a) shall affect any
representations or warranties made herein or the conditions to the
obligations of the respective parties to consummate the Merger.
(b) Parent shall (and shall cause its Subsidiaries and its and their
respective officers, directors, employees, auditors and agents to) afford to
the Company and to the Company's officers, employees, financial advisors,
legal
44
counsel, accountants, consultants and other representatives access during
normal business hours throughout the period prior to the Effective Time to
all of its books and records and its properties, plants and personnel and,
during such period, Parent shall furnish promptly to the Company a copy of
each report, schedule and other document filed or received by it pursuant to
the requirements of federal securities laws, provided that no investigation
pursuant to this Section 6.1(b) shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger.
(c) Unless otherwise required by law, each party agrees that it (and
its Subsidiaries and its and their respective representatives) shall hold in
confidence all non-public information acquired in accordance with the terms
of the Mutual Agreement of Confidentiality dated November 11, 1999 between
Parent and the Company (the "Confidentiality Agreement"); provided, however,
that the termination date of the Confidentiality Agreement is hereby extended
to June 30, 2000.
SECTION 6.2 NO SOLICITATION .
(a) From and after the date of this Agreement until the earlier of
the termination of this Agreement in accordance with its terms or the
Effective Time, the Company and its Subsidiaries and affiliates shall not,
directly or indirectly, through any officer, director, employee, advisor,
financial advisor, representative or agent (and it shall cause such officers,
directors, employees, advisors, financial advisors, representatives and
agents not to, directly or indirectly), (i) solicit, initiate, facilitate or
encourage any inquiries or proposals that constitute, or could be expected to
lead to, an Acquisition Proposal or (ii) engage in negotiations or
discussions concerning, or provide any non-public information with respect to
the Company and its Subsidiaries to any person making or proposing to make,
any Acquisition Proposal; PROVIDED, HOWEVER, that if, at any time prior to
the date of the Company Shareholders Meeting, the Board of Directors of the
Company determines in good faith, after consultation with outside counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
the Company's shareholders under applicable law, the Company may, in response
to an unsolicited Acquisition Proposal, and subject to the Company's
compliance with Section 6.2(c), (x) furnish information with respect to the
Company and its Subsidiaries to any person making such Acquisition Proposal
pursuant to a confidentiality agreement containing terms no less favorable to
the Company than the Confidentiality Agreement and (y) participate in
discussions or negotiations regarding such Acquisition Proposal.
(b) From and after the date of this Agreement until the earlier of
the termination of this Agreement in accordance with its terms or the
Effective Time, neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse
45
to Parent, the approval or recommendation by such Board of Directors or such
committee of the Company Voting Proposal, (ii) approve or recommend, or
propose publicly to approve or recommend, any Acquisition Proposal, or (iii)
cause the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or similar agreement related to any Acquisition
Proposal; PROVIDED, HOWEVER, that if, at any time prior to the date of the
Company Shareholders Meeting, the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law, the Board of Directors of the
Company may, in response to an unsolicited Superior Proposal, and subject to
the Company's compliance with Section 6.2(c), (x) take any action prohibited
by clause (i) of this sentence or (y) if prior to taking any action
prohibited by clauses (ii) or (iii) of this sentence the Company terminates
this Agreement pursuant to Section 8.1(g) and pays to Parent all amounts due
Parent in connection with such termination pursuant to Sections 8.3(b) and
(c) in accordance therewith, take any action prohibited by clauses (ii) or
(iii) of this sentence. For purposes of this Agreement, "Acquisition
Proposal" means any inquiry, proposal or offer from any person relating to
any direct or indirect acquisition or purchase of a business that constitutes
15% or more of the net revenues, net income or the assets of the Company and
its Subsidiaries, taken as a whole, or 15% or more of any class of equity
securities of the Company or any of its Subsidiaries, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 15% or more of any class of equity securities of the Company or any of
its Subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement. For purposes of this Agreement, a "Superior
Proposal" means any proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash or
securities, more than 50% of the combined voting power of the shares of
Company Common Stock then outstanding or all or substantially all the assets
of the Company and otherwise on terms which the Board of Directors of the
Company determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation, including First
Security ▇▇▇ ▇▇▇▇▇▇) to be more favorable to the Company's shareholders than
the Merger and for which financing, to the extent required, is then committed.
(c) The Company, its Subsidiaries and affiliates (and their
respective officers, directors, employees, advisors, financial advisors,
representatives and agents) shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
person (other than Parent or its representatives) conducted heretofore with
respect to any Acquisition Proposal. The Company shall
46
notify Parent immediately after receipt by the Company (or its counsel,
advisors or agents) of any Acquisition Proposal or any request for nonpublic
information in connection with an Acquisition Proposal or for access to the
properties, books or records of the Company or any of its Subsidiaries by any
person or entity that informs the Company that it is considering making, or
has made, an Acquisition Proposal. Such notice to Parent shall be made orally
and in writing and shall indicate in detail the identity of the offeror and
the terms and conditions of such proposal, inquiry or contact. The Company
shall keep Parent informed of all developments and the status of any
Acquisition Proposal, any negotiations or discussions with respect to any
Acquisition Proposal or any request for nonpublic information in connection
with any Acquisition Proposal or for access to the properties, books or
records of the Company or any of its Subsidiaries by any person or entity
that is considering making, or has made, an Acquisition Proposal. The Company
shall give Parent five business days advance notice of its intention to
exercise its rights under the proviso to (i) Section 6.2(a) specifying the
material terms and conditions of the Acquisition Proposal with respect to
which it intends to exercise such rights and identifying the person making
such Acquisition Proposal, or (ii) Section 6.2(b) specifying the material
terms and conditions of the Superior Proposal with respect to which it
intends to exercise such rights and identifying the person making such
Superior Proposal. The Company shall provide Parent with (i) copies of all
documents received from any person or entity that is considering making or
has made an Acquisition Proposal and (ii) copies of all documents to be
delivered or sent to any person or entity that is considering making or has
made an Acquisition Proposal.
(d) Nothing contained in this Section 6.2 shall prohibit the Company
from taking and disclosing to its shareholders a position with respect to a
tender or exchange offer by a third party contemplated by Rule 14d-9 or
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
the Company's shareholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, failure so
to disclose would be inconsistent with its obligations under applicable law;
PROVIDED, HOWEVER, that, except as expressly provided in Sections 6.2(b) and
6.4, neither the Company nor its Board of Directors nor any committee thereof
shall withdraw or modify, in a manner adverse to Parent, or propose publicly
to withdraw or modify, in a manner adverse to Parent, its position with
respect to the Company Voting Proposal or approve or recommend, or propose
publicly to approve or recommend, an Acquisition Proposal.
47
SECTION 6.3 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT .
(a) As promptly as practicable after execution of this Agreement,
Parent and the Company shall in consultation with each other prepare, and
shall file with the SEC, preliminary joint proxy materials which shall
constitute the Proxy Statement/Prospectus. As promptly as practicable after
comments are received from the SEC thereon and after the furnishing by the
Company and Parent of all information required to be contained therein, (i)
Parent and the Company shall file with the SEC the Proxy Statement/Prospectus
and (ii) Parent shall file with the SEC the Registration Statement. The
Company and Parent shall use all reasonable efforts to cause the Registration
Statement to become effective as soon thereafter as practicable.
(b) The Company shall use all reasonable efforts to mail the Proxy
Statement/Prospectus to the shareholders of the Company and Parent shall use
all reasonable efforts to mail the Proxy Statement/Prospectus to the
stockholders of Parent as soon as practicable after the Registration
Statement is declared effective by the SEC.
(c) The Company shall furnish Parent with all information concerning
the Company and the holders of its capital stock and shall take such other
action as Parent may request pursuant to this Agreement in connection with
the Registration Statement and the issuance of the shares of Parent Common
Stock.
(d) The Company and Parent shall make any necessary filing with
respect to the Merger under the Securities Act and the Exchange Act and the
rules and regulations thereunder.
48
SECTION 6.4 SHAREHOLDERS' AND STOCKHOLDERS' MEETINGS .
(a) The Company shall, subject to and in accordance with applicable
law and the Company Charter and Company By-Laws, promptly and duly call, give
notice of, convene and hold the Company Shareholders Meeting to be held as
promptly as practicable following the date upon which the Registration
Statement becomes effective for the purpose of voting on the Company Voting
Proposal. The Company will, through its Board of Directors, recommend to its
shareholders the approval of the Company Voting Proposal and the other
transactions contemplated, which recommendation shall be included in the
Proxy Statement/Prospectus, and will use its best efforts to solicit from its
shareholders proxies in favor of the Company Voting Proposal; PROVIDED,
HOWEVER, that the Board of Directors of the Company may withdraw or modify,
in a manner adverse to Parent, such recommendation (i) if a Superior Proposal
has been made and remains in effect, then if the Board of Directors of the
Company is permitted to do so under Section 6.2(b) or (ii) if no Acquisition
Proposal or Superior Proposal has been made, then if, at any time prior to
the date of the Company Shareholders Meeting, the Board of Directors of the
Company determines in good faith, after consultation with outside counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
the Company's stockholders under applicable law.
(b) At or prior to the Closing, the Company shall deliver to Parent
a certificate of its Corporate Secretary setting forth the voting results
from the Company Shareholders Meeting.
(c) Parent shall, subject to and in accordance with applicable law
and the Parent Charter and Parent By-Laws, promptly and duly call, give
notice of, convene and hold the Parent Stockholders Meeting to be held as
promptly as practicable following the date upon which the Registration
Statement becomes effective for the purpose of voting on the Parent
Stockholder Proposal. Parent will, through its Board of Directors, recommend
to its stockholders the approval of the Parent Voting Proposal and will use
its best efforts to solicit from its stockholders proxies in favor of the
Parent Voting Proposal. In addition to a proposal that four of its five
existing directors be reelected to it's Board of Directors, Parent will
include in the Proxy Statement/Prospectus, a proposal that ▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ be elected to it's Board of Directors, effective as of the
Effective Time. Management of Parent shall recommend to the Board of
Directors of Parent that Parent include in the Proxy Statement/Prospectus a
proposal to increase the number of shares reserved for issuance under the
Parent's Stock Option Plan by an amount to be determined by the management of
Parent to be prudent under the circumstances.
49
(d) At or prior to the Closing, Parent shall deliver to the Company
a certificate of its Corporate Secretary setting forth the voting results
from the Parent Stockholders Meeting.
SECTION 6.5 LEGAL CONDITIONS TO MERGER . Each of Parent and, subject
to Section 6.2, the Company will use its commercially reasonable best efforts
to comply promptly with all legal requirements which may be imposed with
respect to the Merger (which actions shall include, without limitation,
furnishing all information required under the HSR Act and in connection with
approvals of or filings with any other Governmental Entity) and will promptly
cooperate with and furnish information to each other in connection with any
such requirements imposed upon any of them or any of their Subsidiaries in
connection with the Merger. Each of Parent and the Company will, and will
cause its Subsidiaries to, take all actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity required to be
obtained or made by Parent, the Company or any of their Subsidiaries in
connection with the Merger or taking of any action contemplated thereby or by
this Agreement.
SECTION 6.6 AGREEMENTS WITH RESPECT TO AFFILIATES .
(a) The Company will use its commercially reasonable best efforts to
cause each person who is identified in Section 3.28 of the Company Disclosure
Schedule and any other person who may be or become an "affiliate" of the
Company as of the time of the Company Shareholders Meeting for purposes of
(i) Rule 145 under the Securities Act ("Rule 145") or (ii) qualifying the
merger for pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations to
deliver to Parent, as soon as practicable but not later than thirty days
preceding the Effective Time, a written agreement (a "Company Affiliate
Agreement") in connection with restrictions on affiliates under Rule 145 and
pooling of interests accounting treatment, substantially in the form of
EXHIBIT B hereto. The Company shall provide prompt notice to Parent of any
such other person who may be or become an "affiliate" of the Company as of
the time of the Company Shareholders Meeting who is not identified in Section
3.28 of the Company Disclosure Schedule.
(b) Parent will use its commercially reasonable best efforts to
cause each person who is identified in Section 4.22 of the Parent Disclosure
Schedule and any other person who may be or become an "affiliate" of Parent
as of the time of the Parent Stockholders Meeting for purposes of qualifying
the merger for pooling of interests accounting treatment under Opinion 16 of
the Accounting Principles Board
50
and applicable SEC rules and regulations to deliver to the Company, as soon
as practicable but not later than thirty days preceding the Effective Time, a
written agreement (a "Parent Affiliate Agreement") in connection with
restrictions on affiliates under pooling of interests accounting treatment,
substantially in the form of EXHIBIT C hereto. Parent shall provide prompt
notice to the Company of any such other person who may be or become an
"affiliate" of Parent as of the time of the Parent Stockholders Meeting who
is not identified in Section 4.22 of the Parent Disclosure Schedule.
SECTION 6.7 TAX-FREE REORGANIZATION . Parent and the Company intend
that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code. Parent and the Company shall each use its
commercially reasonable best efforts to cause the Merger to so qualify.
Neither Parent nor the Company shall knowingly take any action, or knowingly
fail to take any action, that could jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 6.8 POOLING ACCOUNTING . Parent and the Company shall each
use its commercially reasonable best efforts to cause the business
combination to be effected by the Merger to be accounted for as a pooling of
interests for accounting purposes. Neither Parent nor the Company shall
knowingly take any action, or knowingly fail to take any action, that could
jeopardize the treatment of the Merger as a pooling of interests for
accounting purposes. Each of Parent and the Company agrees to take such
commercially reasonable action as may be required to negate the impact of any
past actions which to its knowledge could jeopardize the treatment of the
Merger as a pooling of interests for accounting purposes.
SECTION 6.9 LETTERS OF ACCOUNTANTS .
(a) Parent shall use its commercially reasonable best efforts to
cause to be delivered to the Company (i) a copy of a letter of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, Parent's independent auditors, dated a date within two business
days before the date on which the Registration Statement shall become
effective, in form and substance satisfactory to Parent and customary in
scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Registration
Statement, which letter shall be brought down to the Effective Time and (ii)
the letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP referred to in Section 7.1(h).
(b) The Company shall use its commercially reasonable best efforts
to cause to be delivered to Parent (i) a copy of a letter of Ernst & Young
LLP, the Company's independent auditors, dated a date within two business
days before the date on which the Registration Statement shall become
effective, in form and substance satisfactory to Parent and customary in
scope and substance for letters delivered by independent public accountants
in connection with registration
51
statements similar to the Registration Statement, which letter shall be
brought down to the Effective Time and (ii) the letter of Ernst & Young LLP
referred to in Section 7.1(h).
SECTION 6.10 PUBLIC ANNOUNCEMENTS . Parent and the Company shall
consult with each other before issuing any press release or making any public
statement with respect to the Merger or this Agreement and shall not issue
any such press release or make any such public statement without the prior
written consent of the other party, which shall not be unreasonably withheld
or delayed; PROVIDED, HOWEVER, that a party may, without the prior consent of
the other party, issue such press release or make such public statement as
may upon the advice of counsel be required by law or the rules and
regulations of the NASDAQ if it has used all reasonable efforts to consult
with the other party prior thereto.
SECTION 6.11 LISTING OF PARENT SHARES . Parent shall use its
commercially reasonable best efforts to have authorized for listing on the
NASDAQ, upon official notice of issuance, the shares of Parent Common Stock
to be issued in the Merger.
SECTION 6.12 OPTIONS . As of the Effective Time, each option to
acquire shares of Company Common Stock (each, a "Company Option") other than
options issued pursuant to the Radius, Inc. Directors' Stock Option Plan (all
of which ACCELERATE AND WILL BE EXERCISED OR WILL expire pursuant to their
existing terms as of the Effective Time) shall become and represent an option
to purchase (i) the number of shares of Parent Common Stock (a "Parent
Option") determined by multiplying (x) the number of shares of Company Common
Stock which would have been purchasable pursuant to such Company Option by
(y) the Exchange Ratio (with the result rounded up to the nearest whole
share) (ii) at an exercise price per share of Parent Common Stock equal to
the exercise price per share of Company Common Stock subject to the Company
Option divided by the Exchange Ratio (with the result rounded to the nearest
whole cent); provided, however, that in the case of any Company Option to
which Section 421 of the Code applies by reason of its qualification as an
incentive stock option under Section 422 of the Code, the conversion formula
shall be adjusted if necessary to comply with Section 424(a) of the Code.
After the Effective Time, (i) each Parent Option shall be exercisable upon
the same terms and conditions as were applicable to the related Company
Option immediately prior to the Effective Time and (ii) Parent shall promptly
file a Registration Statement on Form S-8 with respect to the shares of
Parent Common Stock issuable with respect thereto and shall use its
commercially reasonable best efforts to list such shares with the NASDAQ.
Prior to the Effective Time, the Company shall take all necessary and
appropriate action to effectuate the provisions of this Section 6.12.
52
SECTION 6.13 CONSENTS . The Company shall use its commercially
reasonable best efforts to obtain all necessary consents, waivers and
approvals under any of the Company's material agreements, contracts, licenses
or leases in connection with the Merger, including without limitation each of
the consents listed in Section 3.5 of the Company Disclosure Schedule.
SECTION 6.14 INDEMNIFICATION AND INSURANCE .
(a) All rights to indemnification, advancement of litigation
expenses and limitation of personal liability existing in favor of the
directors, officers and employees of the Company and its Subsidiaries under
the provisions existing on the date hereof in the Company Charter or Company
By-Laws or in the indemnification agreements previously provided by the
Company to Parent (collectively "Existing Indemnification Obligations")
shall, with respect to any matter existing or occurring at or prior to the
Effective Time (including the transactions contemplated by this Agreement),
survive the Effective Time. Parent shall cause the Existing Indemnification
Obligations to be assumed (by operation of law or otherwise) by any successor
to the Surviving Corporation by merger or sale of all or substantially all
assets and shall guarantee the performance of the Existing Indemnification
Obligation by the Surviving Corporation (or any such successor) with respect
to claims thereunder related to the transactions contemplated by this
Agreement.
(b) For a period of five years after the Effective Time, Parent
shall cause the Surviving Corporation (or any successor of the Surviving
Corporation by merger or sale of all or substantially all assets) to maintain
in effect the current policies of directors' and officers' and fiduciary
liability insurance maintained by the Company (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
and amounts containing terms and conditions which are no less advantageous to
former officers and directors of the Company) only with respect to claims
arising from facts or events which occurred at or before the Effective Time;
PROVIDED, HOWEVER, that in no event shall the Surviving Corporation (or any
such successor) be required to expend pursuant to this Section 6.14(b) more
than an aggregate amount equal to 125% the current aggregate annual premiums
paid by the Company for such insurance (the "Maximum Amount") (which premiums
the Company represents and warrants to be $117,000 in the aggregate). If the
amount of the aggregate annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, the Surviving Corporation (or
any such successor) during such five-year period shall maintain or procure as
much coverage as possible for aggregate annual premiums not to exceed the
Maximum Amount and shall promptly send a letter to the persons listed in
Section 6.14(b) of the Company Disclosure Schedule notifying them of such
occurrence.
SECTION 6.15 ADDITIONAL AGREEMENTS; BEST EFFORTS . Subject to the
terms and conditions of this Agreement, each of the parties agrees to use its
commercially
53
reasonable best efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER . The respective obligations of each party to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose and no
similar proceeding in respect of the Proxy Statement/Prospectus shall have
been initiated or threatened by the SEC;
(b) SHAREHOLDER APPROVAL. The Company Voting Proposal shall have
been approved and adopted by the requisite vote of the shareholders of the
Company;
(c) HSR ACT AND OTHER APPROVALS. The waiting period applicable to
the consummation of the Merger under the HSR Act and under any other legal
requirement (including without limitation any authorization, consent, order
or approval, or dedication, filing or expiration of any waiting period) of
any Governmental Entity shall have expired or been terminated, as the case
may be, and any requirements of other jurisdictions applicable to the
consummation of the Merger shall have been satisfied;
(d) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by any administrative agency or commission or
other Governmental Entity seeking any of the foregoing be pending; and there
shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal;
(e) TAX OPINIONS. (i) Parent shall have received an opinion of its
counsel, Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, in form and substance
54
reasonably satisfactory to Parent, dated as of the Effective Time,
substantially to the effect that for U.S. federal income tax purposes the
Merger will qualify as a reorganization within the meaning of Section 368(a)
of the Code, (ii) the Company shall have received an opinion of its counsel,
Fenwick & West LLP, in form and substance reasonably satisfactory to the
Company, dated as of the Effective Time, substantially to the effect that for
U.S. federal income tax purposes the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code, and (iii) the issuance of
the opinions described in clauses (i) and (ii) of this paragraph shall be
conditioned upon the receipt by counsel for Parent and the Company of
representation letters from each of Parent, Merger Sub and Company, in each
case, in form and substance reasonably satisfactory to both of such counsel;
(f) GOVERNMENTAL ACTIONS. There shall not be pending or threatened
any action or proceeding (or any investigation or other inquiry that might
result in such an action or proceeding) by any Governmental Entity or
administrative agency before any Governmental Entity, administrative agency
or court of competent jurisdiction, nor shall there be in effect any
judgment, decree or order of any Governmental Entity, administrative agency
or court of competent jurisdiction, in either case, seeking to prohibit or
limit Parent from exercising all material rights and privileges pertaining to
its ownership of the Surviving Corporation or the ownership or operation by
Parent of all or a material portion of the business or assets of Parent, or
seeking to compel Parent to dispose of or hold separate all or any portion of
the business or assets of Parent (including the Surviving Corporation and its
subsidiaries), as a result of the Merger or the transactions contemplated by
this Agreement;
(g) NASDAQ LISTING. The shares of Parent Common Stock issuable in
the Merger shall have been authorized for listing on the NASDAQ upon official
notice of issuance;
(h) OPINION OF ACCOUNTANTS. Parent shall have received (and
delivered to the Company copies of) a letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, dated
a date within two business days of the Proxy Statement/Prospectus and within
two business days of the Closing Date, stating that the business combination
to be effected by the Merger will qualify as a pooling of interests
transaction under generally accepted accounting principles. The Company shall
have received (and delivered to Parent copies of) a letter from Ernst & Young
LLP, dated a date within two business days of the Proxy Statement/Prospectus
and within two business days of the Closing Date, stating that neither the
Company nor any of its Subsidiaries has taken or agreed to take any action
that (without giving effect to this Agreement, the transactions contemplated
hereby, or any action taken or agreed to be taken by Parent or any of its
Subsidiaries) would prevent Parent from accounting for the business
combination to be effected by the Merger as a pooling of interests
transaction under generally accepted accounting principles; and
55
(i) STOCKHOLDER APPROVAL. The Parent Voting Proposal shall have been
approved and adopted by the requisite vote of the stockholders of Parent.
SECTION 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND
MERGER SUB . The obligations of Parent and Merger Sub to effect the Merger
are also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company contained in this Agreement shall be true and
correct, in each case as of the date of this Agreement and (except to the
extent such representations speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, except (x) for changes
contemplated by this Agreement and (y) where the failures to be true and
correct (without regard to any materiality, Company Material Adverse Effect
or knowledge qualifications contained therein), individually or in the
aggregate, have not had, and could not reasonably be expected to have, a
Company Material Adverse Effect; and Parent and Merger Sub shall have
received a certificate signed on behalf of the Company by the chief executive
officer and chief financial officer of the Company to such effect;
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it at or prior to the
Closing Date; and Parent and Merger Sub shall have received a certificate
signed by the chief executive officer and the chief financial officer of the
Company to such effect;
(c) CONSENTS OBTAINED. All consents, waivers, approvals,
authorizations and orders required to be obtained, and all filings required
to be made, by the Company for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by the Company; and
(d) AFFILIATE AGREEMENTS. Parent shall have received from each
person within the time frame specified in Section 6.6(a) who is identified in
Section 3.28 of the Company Disclosure Schedule or in any notice delivered by
the Company to Parent pursuant to Section 6.6(a) as an "affiliate" of the
Company, an Affiliate Agreement, and each such Affiliate Agreement shall be
in full force and effect.
SECTION 7.3 ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY .
The obligation of the Company to effect the Merger is also subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and
56
correct, in each case as of the date of this Agreement and (except to the
extent such representations speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, except (x) for changes
contemplated by this Agreement, and, (y) where the failures to be true and
correct (without regard to any materiality, Parent Material Adverse Effect or
knowledge qualifications contained therein), individually or in the
aggregate, have not had, and could not reasonably be expected to have, a
Parent Material Adverse Effect; and the Company shall have received a
certificate signed on behalf of the Company by the chief executive officer
and chief financial officer of Parent to such effect;
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them
at or prior to the Closing Date; and the Company shall have received a
certificate signed by the chief executive officer and the chief financial
officer of Parent to such effect; and
(c) AFFILIATE AGREEMENTS. The Company shall have received from each
person within the time frame specified in Section 6.6(b) who is identified in
Section 4.22 of the Parent Disclosure Schedule or in any notice delivered by
Parent to the Company pursuant to Section 6.6(b) as an "affiliate" of the
Company, an Affiliate Agreement, and each such Affiliate Agreement shall be
in full force and effect.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have
been consummated by June 30, 2000 (the "Outside Date") (provided that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date);
(c) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued a nonappealable final order, decree or ruling or
taken any other action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger (provided that the party
seeking to terminate pursuant to this Section 8.1(c) shall
57
have complied with its obligations under Section 6.5 and used its reasonable
best efforts to have any such order, decree, ruling or other action vacated
or lifted);
(d) by either Parent or the Company, if at the Company Shareholders
Meeting (including any adjournment or postponement), the requisite vote of
the shareholders of the Company in favor of the Company Voting Proposal shall
not have been obtained;
(e) by Parent, if the Company shall have breached or failed to
perform any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform would cause
the conditions set forth in Sections 7.2(a) or 7.2(b) to not be satisfied and
which breach shall not have been cured within 10 business days following
receipt by the Company of written notice of such breach from Parent;
(f) by the Company, if Parent shall have breached or failed to
perform any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform would cause
the conditions set forth in Sections 7.3(a) or 7.3(b), to not be satisfied
and which breach shall not have been cured within 10 business days following
receipt by Parent of written notice of such breach from the Company;
(g) by the Company at any time prior to the date of the Company
Shareholders Meeting if, in response to an unsolicited Superior Proposal,
and, subject to the Company's compliance with Section 6.2(c), the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is necessary to terminate this Agreement in order to
comply with its fiduciary duties to the Company's shareholders under
applicable law; provided that any termination by the Company pursuant to this
Section 8.1(g) shall not be effective unless and until the Company shall have
paid to Parent all amounts due Parent in connection with such termination
pursuant to Sections 8.3(b) and (c) in accordance therewith;
(h) by Parent in the event of a breach of Section 6.2 or Section
6.4(a) or (b);
(i) by Parent or the Company if, at the Parent Stockholders Meeting
(including any adjournment or postponement thereof), the Parent Stockholder
Proposal shall not have been approved ;
(j) by Parent, if for any reason other than Parent's failure to
perform its obligations under this Agreement the Company fails to call and
hold the Company Shareholders Meeting by the date which is one business day
prior to the Outside Date; or
58
(k) by the Company, if for any reason other than the Company's
failure to perform its obligations under this Agreement Parent fails to call
and hold the Parent Stockholders Meeting by the date which is one business
day prior to the Outside Date.
SECTION 8.2 EFFECT OF TERMINATION . In the event of the termination
of this Agreement pursuant to Section 8.1, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
or any of its affiliates, directors, officers, stockholders or shareholders
except (i) that the provisions of Sections 3.27, 4.19, 8.3, this Section 8.2
and Article IX shall survive termination and (ii) nothing herein shall
relieve any party from liability for any breach hereof prior to such
termination.
SECTION 8.3 FEES AND EXPENSES .
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated; PROVIDED, HOWEVER, that Parent shall bear all fees and
expenses, other than the Company's financial advisor's, accountant's and
attorneys' fees and expenses, incurred in connection with preparing the
printing and filing of the Proxy Statement/Prospectus (including any
preliminary materials related thereto), the Registration Statement (including
financial statements and exhibits) and any amendments or supplements thereto
and filings under the HSR Act.
(b) The Company shall reimburse Parent for all fees and expenses of
Parent (or in the case of clause (i) of this Section 8.3(b), up to $750,000
of fees and expenses of Parent) actually incurred relating to the
transactions contemplated by this Agreement prior to termination (including
without limitation fees and expenses of Parent's counsel, accountants and
financial advisors), upon the termination of this Agreement (i) by Parent or
the Company pursuant to Section 8.1(d) (if prior to such termination an
Acquisition Proposal shall have been publicly announced or otherwise become
publicly known or any person shall have publicly announced an intention
(whether or not conditional) to make an Acquisition Proposal), or (ii) by
Parent pursuant to Sections 8.1(e), 8.1(h) or 8.1(j) or (iii) by the Company
pursuant to Section 8.1(g).
(c) The Company shall pay Parent a termination fee of $1,620,000
(and in the case of termination of this Agreement pursuant to Section 8.1(d),
the Company shall also reimburse Parent for all fees and expenses of Parent
actually incurred relating to the transactions contemplated by this Agreement
prior to termination in excess of the amount previously reimbursed pursuant
to 8.3(b)) on the date of the first to occur of the following events:
59
(i) the entry by the Company into an agreement with respect
to, or the consummation of, any Acquisition Proposal within six months of the
termination of this Agreement pursuant to Sections 8.1(d), 8.1(e), 8.1(h) or
8.1(j) if prior to such termination an Acquisition Proposal shall have been
publicly announced or otherwise become publicly known or any person shall
have publicly announced an intention (whether or not conditional) to make an
Acquisition Proposal; or
(ii) the termination of this Agreement by the Company
pursuant to Section 8.1(g).
(d) Parent shall reimburse the Company for all fees and expenses of
the Company actually incurred relating to the transactions contemplated by
this Agreement prior to termination (including without limitation fees and
expenses of the Company's counsel, accountants and financial advisors), upon
the termination of this Agreement (i) by Parent or the Company pursuant to
Section 8.1(i), or (ii) by the Company pursuant to Sections 8.1(f) or 8.1(k).
(e) Parent and the Company each acknowledge that the agreements
contained in this Section 8.3 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the other
party would not enter into this Agreement; accordingly, if Parent or the
Company fails promptly to pay the amount due pursuant to this Section 8.3,
and, in order to obtain such payment, the other party commences a suit which
results in a judgment against Parent or the Company, as the case may be, for
the fee set forth in this Section 8.3, Parent or the Company, as the case may
be, shall pay to the other party its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on
the amount of the fee at the prime rate of Citibank, N.A. in effect on the
date such payment was required to be made.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 NONSURVIVAL OF REPRESENTATIONS; WARRANTIES AND
AGREEMENTS . None of the representations, warranties or agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Articles I
and II, Sections 6.12, 6.14 and 6.15, this Article IX and the Affiliate
Agreements.
SECTION 9.2 NOTICES . All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made if and when delivered personally or by overnight courier
to the parties at the following addresses or sent by electronic transmission,
with confirmation
60
received, to the telecopy numbers specified below (or at such other address
or telecopy number for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.3 CERTAIN DEFINITIONS . For purposes of this Agreement, the
term:
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(a) "affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person; including, without limitation, any
partnership or joint venture in which the first mentioned person (either
alone, or through or together with any other subsidiary) has, directly or
indirectly, an interest of 5% or more;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement or
understanding, or (iii) which are beneficially owned, directly or indirectly,
by any other persons with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares;
(c) "business day" means any day other than a Saturday or Sunday or
any day on which banks in The Commonwealth of Massachusetts are required or
authorized to be closed;
(d) "control" including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise; and
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act).
SECTION 9.4 AMENDMENT . This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; PROVIDED, HOWEVER, that,
after approval of the Company Voting Proposal by the shareholders of the
Company, no amendment may be made which by law requires further approval by
such shareholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 9.5 EXTENSION; WAIVER . At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may to the extent legally allowed, (a) extend the time
for the performance
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of any of the obligations or other acts of any other party hereto, (b) waive
any inaccuracies in the representations and warranties of any other party
hereto contained herein or in any document delivered pursuant hereto or (c)
waive compliance with any of the agreements or conditions of any other party
hereto contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
SECTION 9.6 HEADINGS . The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.7 SEVERABILITY . If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
SECTION 9.8 ENTIRE AGREEMENT, NO THIRD PARTY BENEFICIARIES . This
Agreement (including the documents and instruments referred to herein,
including the Confidentiality Agreement) (a) constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof and (b) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder, other than the persons
intended to benefit from the provisions of Section 6.14, who shall have the
right to enforce such provisions directly.
SECTION 9.9 ASSIGNMENT . This Agreement shall not be assigned by
operation of law or otherwise, except that Parent and Merger Sub may assign
all or any of their rights hereunder to any wholly owned subsidiary thereof;
PROVIDED, HOWEVER, that no such assignment pursuant to this Section 9.9 shall
relieve Parent of its obligations hereunder.
SECTION 9.10 INTERPRETATION . When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation."
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SECTION 9.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE .
No failure or delay on the part of any party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 9.12 GOVERNING LAW . This Agreement shall be governed by,
and construed in accordance with, the internal laws of the State of
California, without regard to the conflict of law provisions thereof,
including that the Merger shall be effected in accordance with the applicable
provisions of the CGCL. Each of the parties hereto agrees that any action or
proceeding brought to enforce the rights or obligations of any party hereto
under this Agreement will be commenced and maintained in any court of
competent jurisdiction located in the State of California. Each of the
parties hereto further agrees that process may be served upon it by certified
mail, return receipt requested, addressed as more generally provided in
Section 9.2, and consents to the exercise of jurisdiction of a court of the
State of California over it and its properties with respect to any action,
suit or proceeding arising out of or in connection with this Agreement or the
transactions contemplated hereby or the enforcement of any rights under this
Agreement.
SECTION 9.13 COUNTERPARTS . This Agreement may be executed in two or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
MEDIA 100 INC.
By:
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President of Finance
DERRINGER ACQUISITION CORP.
By:
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and Secretary
DIGITAL ORIGIN, INC.
By:
------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
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TABLE OF DEFINED TERMS
Cross Reference
Terms in Agreement
----- --------------
Acquisition Proposal Section 6.2(b)
Affiliate Section 9.3(a)
Affiliated Group Section 3.15(a)
Affiliated Return Section 3.15(a)
Agreement Preamble
Beneficial Owner Section 9.3(b)
Business Day Section 9.3(c)
Certificates Section 2.1(a)
CGCL Preamble
Closing Section 1.6
Closing Date Section 1.6
Code Preamble
Common Shares Trust Section 2.2(d)(ii)
Company Preamble
Company Affiliate Agreement Section 6.6(a)
Company Balance Sheet Section 3.6(b)
Company By-Laws Section 3.2
Company Charter Section 3.2
Company Common Stock Section 2.1
Company Disclosure Schedule Article III
Company ESPP Section 2.1(e)
Company Intellectual Property Rights Section 3.17(a)
Company Material Adverse Effect Section 3.1
Company Merger Documents Section 3.4
Company Option Section 6.12
Company Permits Section 3.11(b)
66
Company Plans Section 3.12(a)
Company Preferred Stock Section 3.3(a)
Company SEC Reports Section 3.6(a)
Company Shareholders Meeting Section 3.20
Company Stock Option Plans Section 2.1(e)
Company Voting Proposal Section 3.4
Company Warrants Section 2.1(b)
Confidentiality Agreement Section 6.1(c)
Control Section 9.3(d)
DGCL Preamble
Dissenting Shares Section 2.1(c)
Effective Time Section 1.2
Environmental Claim Section 3.16(e)
Environmental Laws Section 3.16(f)
ERISA Section 3.12(a)
ERISA Affiliate Section 3.12(a)
Excess Shares Section 2.2(a)(ii)
Exchange Act Section 3.5(b)
Exchange Agent Section 2.2(a)
Exchange Ratio Section 2.1(a)
Existing Indemnification Obligations Section 6.14(a)
GAAP Section 3.6(b)
Governmental Entity Section 3.5(b)
Hazardous Materials Section 3.16(g)
HSR Act Section 3.5(b)
Liens Section 3.3(a)
Material Contract Section 3.10(b)
Maximum Amount Section 6.14(b)
Merger Preamble
Merger Agreement Section 1.2
67
Merger Consideration Section 2.1(a)
Merger Sub Preamble
Merger Sub Common Shares Section 2.1(d)
NASDAQ Section 2.2.(d)(ii)
Other Company Options Section 2.1(e)
Outside Date Section 8.1(b)
Parent Preamble
Parent Affiliate Agreement Section 6.6(b)
Parent Affiliated Group Section 4.14(a)
Parent Affiliated Return Section 4.14(a)
Parent Balance Sheet Section 4.7
Parent By-Laws Section 4.2
Parent Charter Section 4.2
Parent Common Stock Section 2.1(a)
Parent Disclosure Schedule Article IV
Parent ERISA Affiliate Section 4.11(a)
Parent Intellectual Property Rights Section 4.16(a)
Parent Material Adverse Effect Section 4.1
Parent Merger Documents Section 4.4
Parent Option Section 6.12
Parent Plans Section 4.11(a)
Parent Preferred Stock Section 4.3(a)
Parent SEC Reports Section 4.6(a)
Parent Stockholders' Meeting Section 3.20
Parent Voting Proposal Section 4.4
Person Section 9.3(e)
Proxy Statement/Prospectus Section 3.20
Registration Statement Section 3.5(b)
Release Section 3.16(h)
Rule 145 Section 6.6(a)
68
SEC Section 3.5(b)
Securities Act Section 3.5(b)
Subsidiary Section 3.1
Subsidiary Documents Section 3.2
Superior Proposal Section 6.2(b)
Surviving Corporation Section 1.1
Tax Returns Section 3.15(e)
Tax/Taxes Section 3.15(e)
Year 2000 Compliant Section 3.23(e)
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