EXHIBIT 1
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
SCANSOFT, INC.
SPIDERMAN ACQUISITION CORPORATION
AND
SPEECHWORKS INTERNATIONAL, INC.
DATED AS OF
APRIL 23, 2003
TABLE OF CONTENTS
PAGE
----
ARTICLE I
THE MERGER................................................................. 2
1.1 The Merger.................................................. 2
1.2 Effective Time; Closing..................................... 2
1.3 Effect of the Merger........................................ 2
1.4 Certificate of Incorporation and Bylaws..................... 2
1.5 Directors and Officers...................................... 2
1.6 Effect on Capital Stock..................................... 2
1.7 Surrender of Certificates................................... 3
1.8 No Further Ownership Rights in the Company Common Stock..... 5
1.9 Lost, Stolen or Destroyed Certificates...................... 5
1.10 Tax Consequences............................................ 5
1.11 Further Action.............................................. 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. 6
2.1 Organization; Standing and Power; Charter Documents;
Subsidiaries................................................ 6
2.2 Capital Structure........................................... 7
2.3 Authority; Non-Contravention; Necessary Consents............ 8
2.4 SEC Filings; Financial Statements........................... 9
2.5 Absence of Certain Changes or Events........................ 10
2.6 Taxes....................................................... 11
2.7 Intellectual Property....................................... 12
2.8 Compliance; Permits......................................... 13
2.9 Litigation.................................................. 14
2.10 Brokers' and Finders' Fees; Fees and Expenses............... 14
2.11 Transactions with Affiliates................................ 14
2.12 Employee Benefit Plans...................................... 14
2.13 Title to Properties......................................... 17
2.14 Environmental Matters....................................... 17
2.15 Contracts................................................... 18
2.16 Disclosure.................................................. 19
2.17 Board Approval.............................................. 20
2.18 Fairness Opinion............................................ 20
2.19 Takeover Statutes........................................... 20
2.20 Non-Competition Agreements.................................. 20
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................... 20
3.1 Organization; Standing and Power; Charter Documents;
Subsidiaries................................................ 20
3.2 Capital Structure........................................... 21
3.3 Authority; Non-Contravention; Necessary Consents............ 22
3.4 SEC Filings; Financial Statements........................... 23
3.5 Absence of Certain Changes or Events........................ 23
i
PAGE
----
3.6 Taxes....................................................... 24
3.7 Intellectual Property....................................... 25
3.8 Compliance; Permits......................................... 26
3.9 Litigation.................................................. 27
3.10 Brokers' and Finders' Fees.................................. 27
3.11 Transactions with Affiliates................................ 27
3.12 Parent Employee Benefit Plans............................... 27
3.13 Title to Properties......................................... 30
3.14 Environmental Matters....................................... 30
3.15 Contracts................................................... 30
3.16 Disclosure.................................................. 32
3.17 Board Approval.............................................. 32
3.18 Fairness Opinion............................................ 32
3.19 Rights Plan................................................. 33
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME........................................ 33
4.1 Conduct of Business by the Company.......................... 33
4.2 Conduct of Business by Parent............................... 36
ARTICLE V
ADDITIONAL AGREEMENTS...................................................... 37
5.1 Prospectus/Proxy Statement; Registration Statement.......... 37
5.2 Meetings of Stockholders; Board Recommendation.............. 37
5.3 Acquisition Proposals....................................... 38
5.4 Confidentiality; Access to Information; No Modification of
Representations, Warranties or Covenants.................... 41
5.5 Public Disclosure........................................... 41
5.6 Regulatory Filings; Reasonable Efforts...................... 42
5.7 Notification of Certain Matters............................. 43
5.8 Third-Party Consents........................................ 43
5.9 Equity Awards and Employee Benefits; Company Warrants....... 44
5.10 Form S-8.................................................... 45
5.11 Indemnification............................................. 45
5.12 Nasdaq Listing.............................................. 46
5.13 Company Affiliates; Restrictive Legend...................... 46
5.14 Treatment as Reorganization................................. 46
5.15 Section 16 Matters.......................................... 46
5.16 Merger Sub Compliance....................................... 46
5.17 Board of Directors.......................................... 46
5.18 Comfort Letter.............................................. 47
5.19 Agreements with Respect to Salary........................... 47
ii
PAGE
----
ARTICLE VI
CONDITIONS TO THE MERGER................................................... 47
6.1 Conditions to the Obligations of Each Party to Effect the
Merger...................................................... 47
6.2 Additional Conditions to the Obligations of the Company..... 48
6.3 Additional Conditions to the Obligations of Parent and
Merger Sub.................................................. 48
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER.......................................... 49
7.1 Termination................................................. 49
7.2 Notice of Termination; Effect of Termination................ 51
7.3 Fees and Expenses........................................... 51
7.4 Amendment................................................... 52
7.5 Extension; Waiver........................................... 52
ARTICLE VIII
GENERAL PROVISIONS......................................................... 52
8.1 Non-Survival of Representations and Warranties.............. 52
8.2 Notices..................................................... 53
8.3 Interpretation.............................................. 53
8.4 Counterparts................................................ 54
8.5 Entire Agreement; Third-Party Beneficiaries................. 54
8.6 Severability................................................ 54
8.7 Other Remedies; Specific Performance........................ 55
8.8 Governing Law............................................... 55
8.9 Rules of Construction....................................... 55
8.10 Assignment.................................................. 55
8.11 Waiver of Jury Trial........................................ 55
iii
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
This
AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made and
entered into as of April 23, 2003, by and among ScanSoft, Inc., a
Delaware
corporation ("PARENT"), Spiderman Acquisition Corporation, a
Delaware
corporation and direct wholly-owned subsidiary of Parent ("MERGER SUB"), and
SpeechWorks International, Inc., a
Delaware corporation (the "COMPANY").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and the
Company have deemed it advisable and in the best interests of their respective
corporations and stockholders that Parent and the Company consummate the
business combination and other transactions provided for herein in order to
advance their respective long-term strategic business interests.
B. The respective Boards of Directors of Parent, Merger Sub and the
Company have approved, in accordance with applicable provisions of the laws of
the state of
Delaware ("
DELAWARE LAW"), this Agreement and the transactions
contemplated hereby, including the Merger (as defined in Section 1.1).
C. The Board of Directors of Parent has resolved to recommend to its
stockholders approval of the issuance of shares of Parent Common Stock (as
defined in Section 1.6(a)) in connection with the Merger (the "STOCK ISSUANCE").
D. The Board of Directors of the Company has resolved to recommend to its
stockholders approval and adoption of this Agreement and approval of the Merger.
E. Concurrent with the execution and delivery of this Agreement, and as a
material inducement for Parent to consummate the Merger, Parent and the Chief
Executive Officer of the Company are entering into an employment agreement and
an employee proprietary information, inventions and non-competition agreement.
F. Concurrent with the execution and delivery of this Agreement, and as a
material inducement for Parent to consummate the Merger, certain employees of
the Company (other than employees set forth in Section 2.20 of the Company
Disclosure Letter (as defined herein)) shall continue to be subject to non-
competition agreements, each of which shall be effective as of the Effective
Time.
G. Concurrent with the execution and delivery of this Agreement, and as a
material inducement for Parent to consummate the Merger, certain stockholders
who are executive officers and directors of the Company are executing and
delivering voting agreements and irrevocable proxies (the "COMPANY VOTING
AGREEMENTS"), substantially in the form attached hereto as Exhibit A-1, to
Parent.
H. Concurrent with the execution and delivery of this Agreement, and as a
material inducement for the Company to consummate the Merger, certain
stockholders who are executive officers and directors of Parent are executing
and delivering voting agreements and irrevocable proxies (the "PARENT VOTING
AGREEMENTS"), substantially in the form attached hereto as Exhibit A-2, to the
Company.
I. For United States federal income tax purposes, the parties intend that
the Merger qualify as a reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"), and the parties
intend, by executing this Agreement, to adopt a plan of reorganization within
the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3.
1
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of
Delaware Law, Merger Sub shall be merged with and into
the Company (the "MERGER"), the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation. The Company,
as the surviving corporation after the Merger, is hereinafter sometimes referred
to as the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of
Delaware in
accordance with the relevant provisions of
Delaware Law (the "CERTIFICATE OF
MERGER") (the time of such filing with the Secretary of State of the State of
Delaware (or such later time as may be agreed in writing by the Company and
Parent and specified in the Certificate of Merger) being the "EFFECTIVE TIME")
as soon as practicable on or after the Closing Date (as defined below). The
closing of the Merger (the "CLOSING") shall take place at the offices of ▇▇▇▇
and ▇▇▇▇ LLP, located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at a time
and date to be specified by the parties, which shall be not later than the fifth
business day after the satisfaction or waiver of the conditions set forth in
Article VI, or at such other time, date and location as the parties hereto agree
in writing (the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of
Delaware
Law.
1.4 Certificate of Incorporation and Bylaws. At the Effective Time, the
Certificate of Incorporation of the Company shall be amended in its entirety in
the form attached hereto as Exhibit 1.4 and as so amended shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended in accordance with Delaware Law and as provided in such Certificate of
Incorporation. At the Effective Time, the Bylaws of the Company shall be amended
and restated in their entirety to be identical to the Bylaws of Merger Sub, as
in effect immediately prior to the Effective Time, until thereafter amended in
accordance with Delaware Law and as provided in such Bylaws.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of the Company immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Merger Sub, the Company or the holders of any shares of
capital stock of the Company, the following shall occur:
(a) Company Common Stock. Each share of the Common Stock, par value
$0.001 per share, of the Company ("COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time, other than any shares
of the Company Common Stock to be canceled pursuant to Section 1.6(c), will
be canceled and extinguished and automatically converted (subject to
Section 1.6(f)) into the right to receive 0.860 of a validly issued, fully
paid and nonassessable share (the "EXCHANGE RATIO") of the Common Stock,
par value $0.001 per share, of Parent ("PARENT COMMON STOCK") upon
surrender of the certificate representing such share of the Company Common
Stock in the manner provided in Section 1.7 (or in the case of a lost,
stolen or destroyed certificate, upon delivery of an affidavit (and bond,
if required) in the manner provided in Section 1.9).
(b) Company Restricted Stock. If any shares of Common Stock are
unvested or are subject to a repurchase option, risk of forfeiture or other
condition under any applicable restricted stock purchase
2
agreement or other agreement with the Company ("COMPANY RESTRICTED STOCK")
as of the Effective Time, then the shares of Parent Common Stock issued in
exchange for such shares of the Company Restricted Stock will also be
unvested and subject to the same repurchase option, risk of forfeiture or
other condition, and the certificates representing such shares of Parent
Common Stock may accordingly be marked with appropriate legends. The
Company shall take all action that may be necessary to ensure that, from
and after the Effective Time, the Surviving Corporation is entitled to
exercise any such repurchase option or other right set forth in any such
restricted stock purchase agreement or other agreement.
(c) Cancellation of Treasury and Parent Owned Stock. Each share of
the Company Common Stock held by the Company or Parent or any direct or
indirect wholly-owned Subsidiary of the Company or of Parent immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(d) Capital Stock of Merger Sub. Each share of common stock, par
value $0.001, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.001 per share, of the Surviving Corporation.
(e) Company Options; Employee Stock Purchase Plan; Company
Warrants. At the Effective Time, all Company Options (as defined in
Section 2.2(b)) shall be treated in accordance with Section 5.9(a). Rights
outstanding under the Company's 2000 Employee Stock Purchase Plan (the
"COMPANY PURCHASE PLAN") shall be treated as set forth in Section 5.9(b).
All warrants to purchase shares of Company Common Stock set forth on
Schedule 2.2(d) of the Company Disclosure Letter ("COMPANY WARRANTS") shall
be treated as set forth in Section 5.9(e).
(f) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a
fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Parent Common Stock that otherwise would be received
by such holder) shall, upon surrender of such holder's Certificate(s) (as
defined in Section 1.7(c)), receive from Parent an amount of cash (rounded
to the nearest whole cent), without interest, equal to the product of: (i)
such fraction, multiplied by (ii) the average closing price of one share of
Parent Common Stock for the ten (10) most recent trading days that Parent
Common Stock has traded ending on the trading day one day prior to the
Effective Time, as reported on The Nasdaq Stock Market, Inc. ("Nasdaq").
(g) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the appropriate effect of (i) any stock split,
reverse stock split, stock dividend (including any dividend or distribution
of securities convertible into Parent Common Stock or Company Common
Stock), reorganization, recapitalization, reclassification or other like
change with respect to Parent Common Stock or Company Common Stock having a
record date on or after the date hereof and prior to the Effective Time;
and (ii) any change during the period between April 22, 2003 and the
Closing Date in the number of issued and outstanding shares of Company
Common Stock set forth in Section 2.2(a) other than as a result of the
exercise of (A) options or warrants issued and outstanding as of April 22,
2003 or (B) purchase rights of participants in the Company Purchase Plan
for up to the aggregate number of shares of Company Common Stock authorized
and available for issuance thereunder on April 22, 2003, and as may be
increased pursuant to Section 4.1(b)(xiii) hereof or (C) options issuable
to Allowable New Hires (as defined in Section 4.1(b)(xviii)).
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall designate a bank or trust company
reasonably satisfactory to the Company to act as the exchange agent (the
"EXCHANGE AGENT") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective Time,
Parent shall enter into an agreement with the Exchange Agent effective as of the
Effective Time, reasonably satisfactory to the Company, which shall provide that
as of the Effective Time Parent shall deposit with the Exchange Agent for
3
exchange in accordance with this Article I, the shares of Parent Common Stock
issuable pursuant to Section 1.6(a) in exchange for outstanding shares of the
Company Common Stock. In addition, Parent shall deposit with, and make available
as necessary from time to time after the Effective Time as needed, cash in an
amount sufficient for payment in lieu of fractional shares pursuant to Section
1.6(f) and any dividends or distributions which holders of shares of Company
Common Stock may be entitled pursuant to Section 1.7(d). Any cash and Parent
Common Stock deposited with the Exchange Agent shall hereinafter be referred to
as the "EXCHANGE FUND."
(c) Exchange Procedures. Promptly after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates (the "CERTIFICATES") which immediately
prior to the Effective Time represented outstanding shares of the Company Common
Stock whose shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 1.6(a), cash in lieu of any fractional shares
pursuant to Section 1.6(f) and any dividends or other distributions pursuant to
Section 1.7(d): (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing whole shares of Parent Common Stock, cash
in lieu of any fractional shares pursuant to Section 1.6(f) and any dividends or
other distributions pursuant to Section 1.7(d). Upon surrender of Certificates
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificates shall be entitled to receive in exchange therefor the number
of whole shares of Parent Common Stock (after taking into account all
Certificates surrendered by such holder) to which such holder is entitled
pursuant to Section 1.6(a), payment in lieu of fractional shares which such
holder has the right to receive pursuant to Section 1.6(f) and any dividends or
distributions payable pursuant to Section 1.7(d), and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered, outstanding
Certificates will be deemed from and after the Effective Time, for all corporate
purposes, to evidence the right to receive the number of whole shares of Parent
Common Stock provided for herein and an amount in cash in lieu of the issuance
of any fractional shares in accordance with Section 1.6(f) and any dividends or
distributions payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the date hereof with respect to
Parent Common Stock with a record date after the Effective Time and no payment
in lieu of fractional shares pursuant to Section 1.6(f) will be paid to the
holders of any unsurrendered Certificates with respect to the shares of Parent
Common Stock entitled to thereby until the holders of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest (i) promptly after such
surrender, the number of whole shares of Parent Common Stock issued in exchange
therefor along with payment in lieu of fractional shares pursuant to Section
1.6(f) and the amount of any such dividends or other distributions with a record
date after the Effective Time and theretofore paid with respect to such whole
shares of Parent Common Stock and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time and a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If shares of Parent Common Stock are to be
issued in a name other than that in which the Certificates surrendered in
exchange therefor are registered, it will be a condition of the issuance thereof
that the Certificates so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the Persons (as defined in Section 8.3(c))
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other Taxes (as defined in Section 2.6) required by reason of
the issuance of shares of Parent Common Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Parent or any agent designated by it that such Tax has been paid
or is not payable.
4
(f) Required Withholding. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of the Company Common Stock such amounts as may be
required to be deducted or withheld therefrom under the Code or under any
provision of state, local or foreign Tax law or under any other applicable Legal
Requirement (as defined in Section 2.2(d)). To the extent such amounts are so
deducted or withheld, the amount of such consideration shall be treated for all
purposes under this Agreement as having been paid to the Person to whom such
consideration would otherwise have been paid.
(g) No Liability. Notwithstanding anything to the contrary in this Section
1.7 and to the extent permitted by applicable law, neither the Exchange Agent,
the Surviving Corporation nor any party hereto shall be liable to a holder of
shares of Parent Common Stock or Company Common Stock for any amount properly
paid to, or for any such shares (or dividends or distributions with respect
thereto) delivered to, a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund as directed by Parent on a daily basis; provided
that no such investment or loss thereon shall affect the amounts payable to the
Company stockholders pursuant to this Article I. Any interest and other income
resulting from such investment shall become a part of the Exchange Fund, and any
amounts in excess of the amounts payable to the Company stockholders pursuant to
this Article I shall promptly be paid to Parent.
(i) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Certificates six (6) months after the
Effective Time shall, at the request of the Surviving Corporation, be delivered
to the Surviving Corporation or otherwise on the instruction of the Surviving
Corporation, and any holders of the Certificates who have not surrendered such
Certificates in compliance with this Section 1.7 shall after such delivery to
Surviving Corporation look only to the Surviving Corporation for the shares of
Parent Common Stock pursuant to Section 1.6(a), cash in lieu of any fractional
shares pursuant to Section 1.6(f) and any dividends or other distributions
pursuant to Section 1.7(d) with respect to the shares of the Company Common
Stock formerly represented thereby. To the extent permitted under applicable
law, any such portion of the Exchange Fund remaining unclaimed by holders of
shares of Company Common Stock immediately prior to such time as such amounts
would otherwise escheat to or become property of any Governmental Entity (as
defined in Section 2.3(c)) shall become the property of Parent free and clear of
any claims or interest of any Person previously entitled thereto.
1.8 No Further Ownership Rights in the Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid in
respect thereof pursuant to Section 1.6(f) and 1.7(d)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event 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, such shares of Parent Common
Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.7(d); provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent, the Company or
the Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code. The parties hereto adopt this Agreement as a plan of reorganization
within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a).
5
1.11 Further Action. At and after the Effective Time, the officers and
directors of Parent and the Surviving Corporation will be authorized to execute
and deliver, in the name and on behalf of the Company and Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company and Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to
the exceptions specifically disclosed in writing in the disclosure letter
supplied by Company to Parent dated as of the date hereof and certified by a
duly authorized executive officer of Company (the "COMPANY DISCLOSURE LETTER"),
including to the extent further qualified by the applicable provisions of
Section 8.3(a), as follows:
2.1 Organization; Standing and Power; Charter Documents; Subsidiaries.
(a) Organization; Standing and Power. The Company and each of its
Subsidiaries (as defined below) (i) is a corporation or other organization duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, (ii) has the requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and (iii) is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to so
qualify or to be in good standing, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect (as defined in Section
8.3(b)) on the Company. For purposes of this Agreement, "SUBSIDIARY," when used
with respect to any party, shall mean any corporation or other organization,
whether incorporated or unincorporated, at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(b) Charter Documents. The Company has delivered or made available to
Parent: (i) a true and correct copy of the Certificate of Incorporation
(including any Certificate of Designations) and Bylaws of the Company, each as
amended to date (collectively, the "COMPANY CHARTER DOCUMENTS") and (ii) the
certificate of incorporation and bylaws, or like organizational documents
(collectively, "SUBSIDIARY CHARTER DOCUMENTS"), of each of its Subsidiaries, and
each such instrument is in full force and effect. The Company is not in
violation of any of the provisions of the Company Charter Documents and each
Subsidiary is not in violation of its respective Subsidiary Charter Documents.
(c) Subsidiaries. Section 2.1(c) of the Company Disclosure Letter sets
forth each Subsidiary of the Company. All the outstanding shares of capital
stock of, or other equity or voting interests in, each such Subsidiary have been
validly issued and are fully paid and nonassessable and are owned by the
Company, a wholly-owned Subsidiary of the Company, or the Company and another
wholly-owned Subsidiary of the Company, free and clear of all pledges, claims,
liens, charges, encumbrances, options and security interests of any kind or
nature whatsoever (collectively, "LIENS"), including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests, except for restrictions imposed by applicable securities
laws, except as would not reasonably be expected to have a Material Adverse
Effect on the Company or a Material Adverse Effect on such Subsidiary. Other
than the Subsidiaries of the Company, neither the Company nor any of its
Subsidiaries owns any capital stock of, or other equity or voting interests of
any nature in, or any interest convertible, exchangeable or exercisable for,
capital stock of, or other equity or voting interests of any nature in, any
other Person.
6
2.2 Capital Structure.
(a) Capital Stock. The authorized capital stock of Company consists of:
(i) 100,000,000 shares of Company Common Stock, par value $0.001 per share and
(ii) 10,000,000 shares of preferred stock, par value $0.001 per share (the
"COMPANY PREFERRED STOCK"). At the close of business on April 22, 2003: (i)
33,903,543 shares of Company Common Stock were issued and outstanding, excluding
shares of Company Common Stock held by the Company in its treasury, (ii) no
shares of Company Common Stock were issued and held by the Company in its
treasury, and (iii) no shares of Company Preferred Stock were issued and
outstanding, and on the date hereof there has been no change to the number of
shares of Company Common Stock issued and outstanding set forth in clause (i)
other than pursuant to the exercise of Company Options. No shares of Company
Common Stock are owned or held by any Subsidiary of the Company. All of the
outstanding shares of capital stock of Company are, and all shares of capital
stock of Company which may be issued as contemplated or permitted by this
Agreement will be, when issued, duly authorized and validly issued, fully paid
and nonassessable and not subject to any preemptive rights. Section 2.2(a) of
the Company Disclosure Letter sets forth each a list of each holder of Company
Restricted Stock and (a) the name of the holder of such Company Restricted
Stock, (b) the number of shares of Company Restricted Stock held by such holder,
(c) the repurchase price of such Company Restricted Stock, (d) the date on which
such Company Restricted Stock was purchased or granted, (e) the applicable
vesting schedule pursuant to which the Company's right of repurchase or
forfeiture lapses and (f) the extent to which such Company right of repurchase
or forfeiture has lapsed as of April 22, 2003. Upon consummation of the Merger,
(A) the shares of Parent Common Stock issued in exchange for any shares of
Company Restricted Stock will, without any further act of Parent, Merger Sub,
the Company or any other Person, become subject to the restrictions, conditions
and other provisions contained in the contract relating to such Company
Restricted Stock and (B) Parent will automatically succeed to and become
entitled to exercise the Company's rights and remedies under any such contract
without modification. There are no commitments or agreements of any character to
which the Company is bound obligating Company to waive (in whole or in part) its
right of repurchase or forfeiture with respect to any Company Restricted Stock
as a result of the Merger (whether alone or upon the occurrence of any
additional or subsequent events).
(b) Stock Options. As of April 22, 2003: (i) an aggregate of 8,002,424
shares of Company Common Stock are subject to issuance pursuant to outstanding
options to purchase Company Common Stock ("COMPANY OPTIONS") under the Company's
Amended and Restated 1995 Stock Option Plan and the Company's 2000 Employee,
Director and Consultant Stock Plan or otherwise (the "COMPANY STOCK PLANS"), and
(ii) 32 shares of Company Common Stock are reserved for future issuance under
the Company Purchase Plan. Section 2.2(b) of the Company Disclosure Letter sets
forth a list of each outstanding Company Option issued other than pursuant to
the Company Purchase Plan, and (a) the particular Company Stock Plan (if any)
pursuant to which such Company Option was granted, (b) the name of the holder of
such Company Option, (c) the number of shares of Company Common Stock subject to
such outstanding Company Option, (d) the exercise price of such Company Option,
(e) the date on which such Company Option was granted, (e) the applicable
vesting schedule, and the extent to which such Company Option is vested and
exercisable as of April 11, 2003, and (f) the date on which such Company Option
expires; and since April 11, 2003 there have been no changes in the information
provided pursuant to clauses (a) through (f) except changes resulting from the
vesting or exercise of Company Options in accordance with the terms of the
applicable Company Stock Plan and option agreement. All shares of Company Common
Stock subject to issuance under the Company Stock Plans and the Company Purchase
Plan, upon issuance in accordance with the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. Except as otherwise set forth in
Section 2.2(b) of the Company Disclosure Letter, there are no commitments or
agreements of any character to which the Company is bound obligating the Company
to accelerate the vesting of any Company Option or Common Restricted Stock as a
result of the Merger (whether alone or upon the occurrence of any additional or
subsequent events). There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or other similar rights with respect to the
Company.
7
(c) Voting Debt. No bonds, debentures, notes or other indebtedness of the
Company or any of its Subsidiaries (i) having the right to vote on any matters
on which stockholders may vote (or which is convertible into, or exchangeable
for, securities having such right) or (ii) the value of which is any way based
upon or derived from capital or voting stock of the Company, is issued or
outstanding as of the date hereof (collectively, "VOTING DEBT").
(d) Other Securities. Except as otherwise set forth in Section 2.2(d) of
the Company Disclosure Letter, as of the date hereof, there are no securities,
options, warrants, calls, rights, contracts, commitments, agreements,
instruments, arrangements, understandings, obligations or undertakings of any
kind to which the Company or any of its Subsidiaries is a party or by which any
of them is bound obligating Company or any of its Subsidiaries to (including on
a deferred basis) issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock, Voting Debt or other voting securities
of Company or any of its Subsidiaries, or obligating the Company or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, contract, commitment, agreement, instrument, arrangement,
understanding, obligation or undertaking. All outstanding shares of Company
Common Stock, all outstanding Company Options, and all outstanding shares of
capital stock of each Subsidiary of Company have been issued and granted in
compliance in all material respects with (i) all applicable securities laws and
all other applicable Legal Requirements (as defined below) and (ii) all
requirements set forth in applicable material Contracts. Except for shares of
Company Restricted Stock, there are not any outstanding Contracts of the Company
or any of its Subsidiaries to (i) repurchase, redeem or otherwise acquire any
shares of capital stock of, or other equity or voting interests in, the Company
or any of its Subsidiaries or (ii) dispose of any shares of the capital stock
of, or other equity or voting interests in, any of its Subsidiaries. Except as
otherwise set forth in Section 2.2(d) of the Company Disclosure Letter, the
Company is not a party to any voting agreement with respect to shares of the
capital stock of, or other equity or voting interests in, the Company or any of
its Subsidiaries and, to the knowledge of the Company, other than the Company
Voting Agreements and the irrevocable proxies granted pursuant to the Company
Voting Agreements, there are no irrevocable proxies and no voting agreements,
voting trusts, rights plans, anti-takeover plans or registration rights
agreements with respect to any shares of the capital stock of, or other equity
or voting interests in, the Company or any of its Subsidiaries. For purposes of
this Agreement, "CONTRACT" shall mean any written, oral or other agreement,
contract, subcontract, settlement agreement, lease, binding understanding,
instrument, note, option, warranty, purchase order, license, sublicense,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature, as in effect as of the date hereof or as may hereinafter be in
effect. For purposes of this Agreement, "LEGAL REQUIREMENTS" shall mean any
federal, state, local, municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, code, order, edict, decree,
rule, regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Entity.
2.3 Authority; Non-Contravention; Necessary Consents.
(a) Authority. The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize the execution and delivery
of this Agreement or to consummate the Merger and the other transactions
contemplated hereby, subject only to the approval and adoption of this Agreement
and the approval of the Merger by the Company's stockholders and the filing of
the Certificate of Merger pursuant to Delaware Law. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock to
approve and adopt this Agreement and approve the Merger is the only vote of the
holders of any class or series of Company capital stock necessary to approve and
adopt this Agreement, approve the Merger and consummate the Merger and the other
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and, assuming due execution and delivery by Parent and
Merger Sub, constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
8
(b) Non-Contravention. The execution and delivery of this Agreement by the
Company does not, and performance of this Agreement by the Company and the
consummation of the Merger and the transactions contemplated hereby will not:
(i) conflict with or violate the Company Charter Documents or any Subsidiary
Charter Documents of any Subsidiary of the Company, (ii) subject to obtaining
the approval and adoption of this Agreement and the approval of the Merger by
the Company's stockholders as contemplated in Section 5.2 and compliance with
the requirements set forth in Section 2.3(c), conflict with or violate any
material Legal Requirement applicable to the Company or any of its Subsidiaries
or by which the Company or any of its Subsidiaries or any of their respective
properties is bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or materially impair the Company's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Company or any of
its Subsidiaries pursuant to, any Company Material Contract (as defined in
Section 2.15). Section 2.3(b) of the Company Disclosure Letter lists all
consents, waivers and approvals under any of the Company's or any of its
Subsidiaries' Contracts required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually or
in the aggregate are not obtained, would result in a material loss of benefits
to the Company, Parent or the Surviving Corporation as a result of the Merger.
(c) Necessary Consents. No consent, approval, order or authorization of,
or registration, declaration or filing with any supranational, national, state,
municipal, local or foreign government, any instrumentality, subdivision, court,
administrative agency or commission or other governmental authority or
instrumentality, or any quasi-governmental or private body exercising any
regulatory, taxing, importing or other governmental or quasi-governmental
authority (a "GOVERNMENTAL ENTITY") is required to be obtained or made by the
Company in connection with the execution and delivery of this Agreement or the
consummation of the Merger and other transactions contemplated hereby, except
for: (i) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware and appropriate documents with the relevant authorities of
other states in which the Company and/or Parent are qualified to do business,
(ii) the filing of the Prospectus/Proxy Statement (as defined in Section 2.16)
with the SEC in accordance with the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT") and the effectiveness of the Registration Statement (as
defined in Section 2.16), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws and the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), (iv) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities or
"blue sky" laws and the securities laws of any foreign country, and (v) such
other consents, authorizations, filings, approvals and registrations which if
not obtained or made would not be material to the Company or Parent or
materially adversely affect the ability of the parties hereto to consummate the
Merger within the time frame in which the Merger would otherwise be consummated
in the absence of the need for such consent, approval, order, authorization,
registration, declaration or filings. The consents, approvals, orders,
authorizations, registrations, declarations and filings set forth in (i) through
(iv) are referred to herein as the "NECESSARY CONSENTS."
2.4 SEC Filings; Financial Statements.
(a) SEC Filings. The Company has filed all required registration
statements, prospectuses, reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated by
reference) required to be filed by it with the SEC since January 1, 2002. The
Company has made available to Parent all such registration statements,
prospectuses, reports, schedules, forms, statements and other documents in the
form filed with the SEC. All such required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
(including those that the Company may file subsequent to the date hereof until
the Effective Time) are referred to herein as the "COMPANY SEC REPORTS." As of
their respective dates, the Company SEC Reports (i) were prepared in accordance
and complied in all material respects with the requirements of the Securities
Act of 1933, as amended (the "SECURITIES ACT"), or the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Company SEC Reports and (ii) did not at the time they were filed (or if amended
or superseded by a filing
9
prior to the date of this Agreement then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
the Company's Subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Financial Statements. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports (the "COMPANY FINANCIALS"), including each Company SEC Report filed
after the date hereof until the Closing: (i) complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) was prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q, 8-K or any successor form under the Exchange Act), and (iii)
fairly presented in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries as at the respective dates thereof
and the consolidated results of the Company operations and cash flows for the
periods indicated. The balance sheet of the Company contained in the Company SEC
Reports as of December 31, 2002 is hereinafter referred to as the "COMPANY
BALANCE SHEET." Except as disclosed in the Company Financials, since the date of
the Company Balance Sheet, neither Company nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a consolidated balance sheet or in the related notes to the
consolidated financial statement prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of the Company and its Subsidiaries taken as a
whole, other than liabilities incurred (i) in the ordinary course of business
consistent with past practices or (ii) in connection with the performance by the
Company of its obligations under this Agreement and the transactions
contemplated herein.
2.5 Absence of Certain Changes or Events. Since the date of the Company
Balance Sheet through the date hereof each of the Company and its Subsidiaries
has conducted its respective business only in the ordinary course of business
consistent with past practice and there has not been: (i) any Material Adverse
Effect on the Company, (ii) any declaration, setting aside or payment of any
dividend on, or other distribution (whether in cash, stock or property) in
respect of, any of the Company's or any of its Subsidiaries' capital stock, or
any purchase, redemption or other acquisition by the Company or any of its
Subsidiaries of any of the Company's capital stock or any other securities of
the Company or its Subsidiaries or any options, warrants, calls or rights to
acquire any such shares or other securities except for repurchases from Company
Employees or independent contractors following their termination pursuant to the
terms of their pre-existing stock option or purchase agreements, (iii) any
split, combination or reclassification of any of the Company's or any of its
Subsidiaries' capital stock, (iv) any granting by the Company or any of its
Subsidiaries of any increase in compensation or fringe benefits, except for
increases of cash compensation (other than to directors or executive officers of
the Company) in the ordinary course of business consistent with past practice,
or any payment by the Company or any of its Subsidiaries of any bonus, except
for bonuses (other than to directors or executive officers of the Company) made
in the ordinary course of business consistent with past practice, or any
granting by the Company or any of its Subsidiaries of any increase in severance
or termination pay or any entry by the Company or any of its Subsidiaries into,
or material modification or amendment of, any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent or the terms of which are materially altered
upon the occurrence of a transaction involving the Company of the nature
contemplated hereby, (v) entry by the Company or any of its Subsidiaries into
any licensing or other agreement with regard to the acquisition or disposition
of any material Intellectual Property (as defined in Section 2.7(h)) other than
licenses, distribution agreements, advertising agreements, sponsorship
agreements, or merchant program agreements entered into in the ordinary course
of business consistent with past practice, (vi) any amendment or consent with
respect to any Company Material Contract in effect since the date of the Company
Balance Sheet other than statements of work or similar amendments to such
Company Material Contracts in the ordinary course of business consistent with
past practice, (vii) any material change by the Company in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP or by the SEC, (viii) any material revaluation by the Company of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off
10
notes or accounts receivable other than in the ordinary course of business
consistent with past practice, (ix) any communication from Nasdaq with respect
to the delisting of the Company Common Stock, (x) any cancellation by the
Company or any of its Subsidiaries of any debts or waiver of any claims or
rights of material value, (xi) any sale, transfer or other disposition outside
of the ordinary course of business of any properties or assets (real, personal
or mixed, tangible or intangible) by the Company or any of its Subsidiaries, or
(xii) any agreement, whether in writing or otherwise, to take any action
described in this section by the Company or any of its Subsidiaries.
2.6 Taxes.
(a) Definition. For the purposes of this Agreement, the term "TAX" or,
collectively, "TAXES" shall mean any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities in the nature of taxes, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts.
(b) Tax Returns and Audits.
(i) The Company and each of its Subsidiaries have prepared and timely filed
all required federal, state, local and foreign returns, estimates, information
statements and reports and any amendments thereto ("TAX RETURNS") relating to
any and all Taxes concerning or attributable to the Company, its Subsidiaries or
their respective operations and such Tax Returns are true and correct and have
been completed in accordance with applicable law.
(ii) The Company and each of its Subsidiaries have timely paid to the
appropriate Taxing authority all Taxes and any other amounts required to be paid
or withheld.
(iii) Neither the Company nor any of its Subsidiaries has been delinquent
in the payment of any Tax, nor is there any Tax deficiency outstanding, assessed
or proposed against the Company or any of its Subsidiaries, nor has the Company
or any of its Subsidiaries executed any waiver of any statute of limitations on
or extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Tax Return of the Company or any
of its Subsidiaries is presently in progress, nor has the Company or any of its
Subsidiaries been notified of any request for such an audit or other
examination.
(v) Neither the Company nor any of its Subsidiaries has any liabilities for
unpaid Taxes which have not been accrued or reserved on the Company Balance
Sheet in accordance with GAAP, and neither the Company nor any of its
Subsidiaries has incurred any liability for Taxes since the date of the Company
Balance Sheet other than in the ordinary course of business.
(vi) The Company has made available to Parent or its legal counsel, copies
of all Tax Returns for the Company and each of its Subsidiaries filed for all
periods since inception.
(vii) There are no Liens on the assets of the Company or any of its
Subsidiaries relating to or attributable to Taxes, other than Liens for Taxes
not yet due and payable. There is no basis for the assertion of any claim
relating or attributable to Taxes which, if adversely determined, would result
in any Lien for Taxes on the assets of the Company or any of its Subsidiaries.
(viii) None of the assets of the Company or any of its Subsidiaries is
treated as "tax-exempt use property," within the meaning of Section 168(h) of
the Code.
(ix) Neither the Company nor any of its Subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company or any of its Subsidiaries.
11
(x) Neither the Company nor any of its Subsidiaries is, nor has been at any
time, a "United States Real Property Holding Corporation" within the meaning of
Section 897(c)(2) of the Code.
(xi) No adjustment relating to any Tax Return filed by the Company or any
of its Subsidiaries has been proposed formally or, to the knowledge of the
Company or any of its Subsidiaries, informally by any tax authority to the
Company, any of its Subsidiaries or any representative thereof.
(xii) Neither the Company nor any of its Subsidiaries has (a) ever been a
member of an affiliated group (within the meaning of Code sec. 1504(a)) filing a
consolidated federal income Tax Return (other than a group the common parent of
which was Company), (b) ever been a party to any Tax sharing, indemnification or
allocation agreement, nor does the Company or any of its Subsidiaries owe any
amount under any such agreement, (c) any liability for the Taxes of any person
(other than Company or any of its Subsidiaries) under Treas. Reg. sec. 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise and (d) ever been a party to any joint
venture, partnership or other agreement that could be treated as a partnership
for Tax purposes.
(xiii) Neither the Company nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock intended to qualify for tax-free treatment under Section
355 of the Code (x) in the two years prior to the date of this Agreement or (y)
in a distribution which could otherwise constitute part of a "plan" or "series
of related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
2.7 Intellectual Property. Except as set forth in Section 2.7 of the
Company Disclosure Letter:
(a) To the knowledge of the Company the operation of the business of
the Company and each of its Subsidiaries, including their products and
services, does not infringe or misappropriate in any material respect the
Intellectual Property (defined below) of any third party or constitute
unfair competition or unfair trade practices under the laws of any
jurisdiction. The Company and its Subsidiaries own or possess sufficient
rights to all material Intellectual Property used in their businesses and
all Intellectual Property necessary for the operation of their businesses.
(b) As of the date hereof and, except as will not have a Material
Adverse Effect on or after the Closing Date, neither Company nor any of its
Subsidiaries have received or will have received any written notice from
any third party, and, to the knowledge of Company, there is and will be no
other assertion or pending threat from any third party, that the operation
of the business of Company or any of its Subsidiaries, or any of their
products or services, infringes or misappropriates the Intellectual
Property of any third party or constitutes unfair competition or unfair
trade practices under the laws of any jurisdiction. As of the date hereof
and, except as will not have a Material Adverse Effect, on the Closing
Date, neither Company nor any its Subsidiaries have brought or will have
brought, or have been or will have been, a party to any suits, arbitrations
or other adversarial proceedings with respect to a third party's
Intellectual Property that remain unresolved.
(c) To the knowledge of the Company, as of the date hereof, no person
is infringing or misappropriating any material Intellectual Property owned
or exclusively licensed by the Company or any of its Subsidiaries. Neither
the Company nor any its Subsidiaries have brought or have been a party to
any suits, arbitrations or other adversarial proceedings with respect to
their Intellectual Property against any third party that remain unresolved.
(d) The Company and its Subsidiaries are not subject to any judgment,
order, writ, injunction or decree of any court or any Federal, state,
local, foreign or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any arbitrator, which
restricts or impairs the use of any of their Intellectual Property. The
Intellectual Property owned or exclusively licensed by the Company is free
and clear of any Liens.
(e) The Company and each of its Subsidiaries are in material
compliance with, and have not materially breached any term of any
contracts, licenses or other agreements in which the Company and its
Subsidiaries have granted or received any Intellectual Property ("COMPANY
IP AGREEMENTS"). To the
12
knowledge of the Company, all third parties to such Company IP Agreements
are in compliance in all material respects with, and have not materially
breached, any of their terms.
(f) The Merger will not result in the termination or breach of any
Company IP Agreements, or any material loss or change in the rights or
obligations of the Company or its Subsidiaries or any third party to such
Company IP Agreements. The Merger will not result in the obligation for the
Company or its Subsidiaries to pay any consideration, royalties or other
amounts to any third party in excess of those amounts otherwise owed by the
Company or its Subsidiaries immediately prior to the Merger.
(g) The Merger will not result in: (i) Parent or its Subsidiaries
(other than Merger Sub, but only to the extent existing prior to the
Merger) being bound by any material non-compete, material exclusivity
obligation or other material restriction on the operation of any business
of the Company or its Subsidiaries, including any of their products or
services, or (ii) Parent or its Subsidiaries (other than Merger Sub, but
only to the extent existing prior to the Merger) granting to any third
party any rights or licenses to any material Intellectual Property of
Parent or any affiliate of Parent (including without limitation a covenant
not to ▇▇▇) pursuant to any agreements or obligations of the Company or its
Subsidiaries.
(h) "INTELLECTUAL PROPERTY" shall mean any or all of the following and
all rights in, arising out of, or associated therewith: (a) all United
States, international and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (b) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and
all documentation relating to any of the foregoing; (c) all copyrights,
copyrights registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (d) all mask works, mask work
registrations and applications therefor, and any equivalent or similar
rights in semiconductor masks, layouts, architectures or topology; (e)
domain names, uniform resource locators, and other names and locators
associated with the Internet, (f) all computer software, including all
source code, object code, firmware, development tools, files, records and
data, and all media on which any of the foregoing is recorded; (g) all
industrial designs and any registrations and applications therefor
throughout the world; (h) all trade names, logos, common law trademarks and
service marks, trademark and service ▇▇▇▇ registrations and applications
therefor throughout the world; (i) all databases and data collections and
all rights therein throughout the world; (j) all moral and economic rights
of authors and inventors, however denominated, throughout the world, and
(k) any similar or equivalent rights to any of the foregoing anywhere in
the world.
2.8 Compliance; Permits.
(a) Compliance. Neither the Company nor any of its Subsidiaries is, in any
material respect, in conflict with, or in default or in violation of any Legal
Requirement applicable to the Company or any of its Subsidiaries or by which the
Company or any of its Subsidiaries or any of their respective businesses or
properties is, or the Company believes is reasonably likely to be, bound or
affected, except, in each case, or in the aggregate, for conflicts, violations
and defaults that would not have a Material Adverse Effect on the Company. As of
the date hereof, no investigation or review by any Governmental Entity is
pending or, to the knowledge of the Company, has been threatened in a writing
delivered to the Company or any of its Subsidiaries, against the Company or any
of its Subsidiaries other than as contemplated by this Agreement. There is no
judgment, injunction, order or decree binding upon the Company or any of its
Subsidiaries which has or would reasonably be expected to have the effect of
prohibiting or impairing any business practice of the Company or any of its
Subsidiaries, any acquisition of property by the Company or any of its
Subsidiaries or the conduct of business by the Company and its Subsidiaries as
currently conducted, except as would not have a Material Adverse Effect on the
Company.
(b) Permits. The Company and its Subsidiaries hold, to the extent legally
required, all permits, licenses, variances, clearances, consents, commissions,
franchises, exemptions, orders, authorizations and approvals from Governmental
Entities ("PERMITS") that are required for the operation of the business of the
Company (collectively, "COMPANY PERMITS"), except where the failure to hold such
Permits would not have a
13
Material Adverse Effect on the Company. As of the date hereof, no suspension or
cancellation of any of the Company Permits is pending or, to the knowledge of
the Company, threatened. The Company and its Subsidiaries are in compliance in
all material respects with the terms of the Company Permits.
2.9 Litigation. As of the date hereof and, except as will not have a
Material Adverse Effect on or after the Closing Date, there are and will be no
claims, suits, actions or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, before any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator.
2.10 Brokers' and Finders' Fees; Fees and Expenses. Except for fees
payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated pursuant to an engagement letter
dated October 15, 2002, a copy of which has been provided to Parent, the Company
has not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby, and the
Company has not entered into any indemnification agreement or arrangement with
any Person in connection with this Agreement and the transactions contemplated
hereby. An itemized good faith estimate of the fees and expenses of any
accountant, broker, financial advisor, consultant, legal counsel or other Person
retained by the Company in connection with this Agreement or the transactions
contemplated hereby incurred or to be incurred by the Company in connection with
this Agreement and the transactions contemplated hereby (including any agreement
or understanding with respect to such agreement or understanding, whether
written or oral) is set forth in Section 2.10 of the Company Disclosure Letter,
and all such fees are, and shall be, reasonable and customary in nature.
2.11 Transactions with Affiliates. Except as set forth in the Company SEC
Reports, since the date of the Company's last proxy statement filed with the
SEC, no event has occurred as of the date hereof that would be required to be
reported by the Company pursuant to Item 404 of Regulation S-K promulgated by
the SEC. Section 2.11 of the Company Disclosure Letter identifies each Person
who is an "affiliate" (as that term is used in Rule 145 promulgated under the
Securities Act) of the Company as of the date hereof.
2.12 Employee Benefit Plans.
(a) Schedule. Except with respect to plans such as workers' compensation
which are required by law, Section 2.12(a) of the Company Disclosure Letter
contains an accurate and complete list of (i) each plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been, within the past three years,
maintained, contributed to, or required to be contributed to, by the Company or
any Subsidiary of the Company or any other person or entity under common control
with the Company or any Subsidiaries within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder (each a "COMPANY
ERISA AFFILIATE") for the benefit of any current or former or retired employee,
consultant or director of the Company or any Company ERISA Affiliate (each a
"COMPANY EMPLOYEE"), or with respect to which the Company or any Company ERISA
Affiliate has or may have any liability or obligation (collectively, the
"COMPANY EMPLOYEE PLANS"), and (ii) each employment, severance or consulting
agreement between the Company or any Company ERISA Affiliate and any Company
Employee (each a "COMPANY EMPLOYEE AGREEMENT"), except to the extent a Company
Employee Agreement provides for "at-will" employment and does not provide for
severance payments or benefits. Neither the Company nor any Company ERISA
Affiliate has any plan or commitment to establish any new Company Employee Plan
or Company Employee Agreement, to modify any Company Employee Plan or Company
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Company Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to adopt or enter into any Company Employee Plan
or Company Employee Agreement, except, in each case, or in the aggregate, as
would not result in material liability to the Company or its Subsidiaries.
(b) Documents. The Company has provided or made available to Parent
correct and complete copies of: (i) all documents embodying each Company
Employee Plan and each Company Employee Agreement
14
including (without limitation) all amendments thereto and all related trust
documents, administrative service agreements, group annuity contracts, group
insurance contracts, and policies pertaining to fiduciary liability insurance
covering the fiduciaries for each Company Employee Plan; (ii) the most recent
annual actuarial valuations, if any, prepared for each Company Employee Plan;
(iii) the three (3) most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Company Employee Plan; (iv) if the
Company Employee Plan is funded, the most recent annual and periodic accounting
of Company Employee Plan assets; (v) the most recent summary plan description
together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Company Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters; (vii) all material
correspondence to or from any governmental agency in the past three years
relating to any Company Employee Plan; (viii) discrimination tests for each
Company Employee Plan for the last plan year ending prior to the Closing Date,
to the extent applicable; (ix) all prospectuses prepared in connection with each
Company Employee Plan; and (x) visa and work permit information with respect to
the current Company Employees; provided that the Company may limit any
information under this Section 2.12 as required by law, treaty rule or
regulation of any Governmental Entity applicable to the Company or its
Subsidiaries to restrict or prohibit access to such information.
(c) Employee Plan Compliance. The Company and its Company ERISA Affiliates
have performed in all material respects all obligations required to be performed
by them under, are not in material default or violation of, and have no
knowledge of any default or violation by any other party to, each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in material
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code. Except as set forth in Section
2.12(c) of the Company Disclosure Letter, any Company Employee Plan intended to
be qualified under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either applied for, prior to the expiration
of the requisite period under applicable Treasury Regulations or IRS
pronouncements, or obtained a favorable determination, notification, advisory
and/or opinion letter, as applicable, as to its qualified status from the IRS or
still has a remaining period of time under applicable Treasury Regulations or
IRS pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination. For each Company Employee Plan
that is intended to be qualified under Section 401(a) of the Code there has been
no event, condition or circumstance that has adversely affected or is, in any
material respect, likely to adversely affect such qualified status. Except, in
each case, or in the aggregate, as would not result in material liability to the
Company or its Subsidiaries: (i) no "prohibited transaction," within the meaning
of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 408 of ERISA, has occurred with respect to any Company
Employee Plan; (ii) neither the Company nor any Company ERISA Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code; and (iii) the
Company and each Company ERISA Affiliate have timely made all contributions and
other payments required by and due under the terms of each Company Employee
Plan. There are no actions, suits or claims pending, or, to the knowledge of the
Company, threatened or reasonably anticipated (other than routine claims for
benefits) against any Company Employee Plan or against the assets of any Company
Employee Plan. Except to the extent limited by applicable law, each Company
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without material liability to
Parent, Company or any of its Company ERISA Affiliates (other than ordinary
administration expenses). There are no audits, inquiries or proceedings pending
or, to the knowledge of the Company or any Company ERISA Affiliates, threatened
by the IRS or the Department of Labor ("DOL"), or any other Governmental Entity
with respect to any Company Employee Plan.
(d) No Pension or Welfare Plans. Neither the Company nor any Company ERISA
Affiliate has ever maintained, established, sponsored, participated in, or
contributed to, any (i) Company Employee Plan which is an "employee pension
benefit plan," within the meaning of Section 3(2) of ERISA ("PENSION PLAN") and
is subject to Title IV of ERISA or Section 412 of the Code, (ii) Pension Plan
which is a "multiemployer plan," as defined in Section 3(37) of ERISA, (iii)
"multiple employer plan" as defined in ERISA or the Code, or (iv) a "funded
welfare plan" within the meaning of Section 419 of the Code. No Company
15
Employee Plan provides health benefits that are not fully insured through an
insurance contract except as set forth in Section 2.12(d) of the Company
Disclosure Letter.
(e) No Post-Employment Obligations. Except as set forth in Section 2.12(e)
of the Company Disclosure Letter, no Company Employee Plan currently provides,
or reflects or represents any liability to provide post-termination or retiree
welfare benefits to any person for any reason, except as may be required by
COBRA or other applicable statute, and neither the Company nor any Company ERISA
Affiliate has any liability to provide post-termination or retiree welfare
benefits to any person or ever represented, promised or contracted (other than
in written form) to any Employee (either individually or to Employees as a
group) or any other person that such Employee(s) or other person would be
provided with post-termination or retiree welfare benefits, except to the extent
required by statute. As used in this Agreement, "COBRA"shall mean the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and as
codified in Section 4980B of the Code and Section 601 et. seq. of ERISA.
(f) Health Care Compliance. Neither the Company nor any Company ERISA
Affiliate has, prior to the Effective Time and in any material respect, violated
any of the health care continuation requirements of COBRA, the requirements of
the Family Medical Leave Act of 1993, as amended, the requirements of the Health
Insurance Portability and Accountability Act of 1996, the requirements of the
Women's Health and Cancer Rights Act of 1998, the requirements of the Newborns'
and Mothers' Health Protection Act of 1996, or any amendment to each such act,
or any similar provisions of state law applicable to its Employees.
(g) Executive Loans. Neither the Company nor any Company ERISA Affiliate
has violated Section 402 of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the execution of this
Agreement and the consummation of the transactions contemplated hereby will not,
to the knowledge of the Company, cause such a violation.
(h) Effect of Transaction.
(i) Except as set forth in Section 2.12(h)(i) of the Company Disclosure
Letter, the execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of an
individual's termination of employment within one year prior to or three years
following the transactions contemplated hereby), constitute an event under any
Company Employee Plan, Company Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) Except as set forth in Section 2.12(h)(ii) of the Company Disclosure
Letter, no payment or benefit which will or may be made by the Company or its
Company ERISA Affiliates with respect to any Employee will be characterized as a
"parachute payment," within the meaning of Section 280G(b)(2) of the Code. There
is no contract, agreement, plan or arrangement to which Company or any of its
Company ERISA Affiliates is a party or by which it is bound to compensate any
Employee for excise taxes paid pursuant to Section 4999 of the Code.
(i) Employment Matters. The Company: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; and
(ii) is not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any governmental authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no claims or
actions against the Company under any worker's compensation policy or long-term
disability policy except as set forth in Section 2.12(i) of the Company
Disclosure Letter. Neither the Company nor any Company ERISA Affiliate has or
reasonably anticipates any direct or indirect material liability with respect to
any misclassification of any person as an independent contractor rather than as
an employee, or with respect to any employee leased from another employer.
(j) Labor. No work stoppage or labor strike against the Company or any
Company ERISA Affiliate is pending, threatened or reasonably anticipated. The
Company does not know of any activities or proceedings of
16
any labor union to organize any Employees. Except as set forth in Section
2.12(j) of the Company Disclosure Letter, there are no actions, suits, claims,
labor disputes or grievances pending, or, to the knowledge of the Company,
threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to the Company. Neither the Company nor any of its
subsidiaries has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act. Except as set forth in Section 2.12(j) of the
Company Disclosure Letter, the Company is not presently, nor has it been in the
past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement is
being negotiated with respect to Employees. Neither the Company nor any of its
Subsidiaries have incurred any material liability or material obligation under
the Worker Adjustment and Retraining Notification Act or any similar state or
local law which remains unsatisfied.
(k) International Employee Plan. Each Company Employee Plan that has been
adopted or maintained by the Company or any Company ERISA Affiliate, whether
informally or formally, or with respect to which the Company or any Company
ERISA Affiliate will or may have any liability, for the benefit of Employees who
perform services outside the United States (each a "COMPANY INTERNATIONAL
EMPLOYEE PLAN") has been established, maintained and administered in material
compliance with its terms and conditions and with the requirements prescribed by
any and all statutory or regulatory laws that are applicable to such Company
International Employee Plan. Furthermore, no Company International Employee Plan
has unfunded liabilities, that as of the Effective Time, will not be offset by
insurance or fully accrued. Except as required by law, no condition exists that
would prevent the Company or Parent from terminating or amending any Company
International Employee Plan at any time for any reason without liability to the
Company or its Company ERISA Affiliates (other than ordinary administration
expenses or routine claims for benefits).
2.13 Title to Properties.
(a) Properties. Neither Company nor any of its Subsidiaries owns any real
property. Section 2.13 of the Company Disclosure Letter sets forth a list of all
real property currently leased by the Company or any of its Subsidiaries, the
name of the lessor, the date of the lease and each amendment thereto. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing material default or material event of default (or event
which with notice or lapse of time, or both, would constitute a material
default).
(b) Valid Title. The Company and each of its Subsidiaries has good and
valid title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its tangible properties and assets, real, personal and
mixed, used or held for use in its business, free and clear of any Liens except
for Liens imposed by law in respect of obligations not yet due which are owed in
respect of taxes, except for such Liens which are not material in character,
amount or extent, and which do not materially detract from the value, or
materially interfere with the present use, of the property subject thereto or
affected thereby.
2.14 Environmental Matters.
(a) Hazardous Material. Except as would not result in a Material Adverse
Effect on the Company or its Subsidiaries, no underground storage tanks and no
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies, (a "HAZARDOUS MATERIAL") are present, as a result of the
actions of the Company or any of its Subsidiaries or any affiliate of the
Company, or, to the knowledge of the Company, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Company or
any of its Subsidiaries has at any time owned, operated, occupied or leased.
17
(b) Hazardous Materials Activities. Except as would not result in a
Material Adverse Effect on the Company: (i) neither the Company nor any of its
Subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of any
law in effect on or before the Closing Date and (ii) neither the Company nor any
of its Subsidiaries has disposed of, transported, sold, used, released, exposed
its employees or others to or manufactured any product containing a Hazardous
Material (collectively, "HAZARDOUS MATERIALS ACTIVITIES") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
2.15 Contracts.
(a) Material Contracts. For purposes of this Agreement, "COMPANY MATERIAL
CONTRACT" shall mean:
(i) any "material contracts" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) with respect to the Company and
its Subsidiaries;
(ii) any employment or consulting Contract with any executive officer
or other employee of the Company or member of the Company's Board of
Directors earning an annual salary in excess of the lowest annual base
salary reported in the Company's most recent annual report on Form 10-K or
definitive proxy statement for any of the Company's "named executive
officers," as such term is defined in Item 402(a)(3) of Regulation S-K of
the SEC, other than those that are terminable by the Company or any of its
Subsidiaries on no more than thirty (30) days notice without liability or
financial obligation to the Company;
(iii) any Contract or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(iv) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or
license of services or hardware or software products in the ordinary course
of business;
(v) any Contract containing any covenant (A) limiting in any respect
the right of the Company or any of its Subsidiaries to engage in any line
of business, to make use of any Intellectual Property or compete with any
Person in any line of business or to compete with any person, (B) granting
any exclusive rights, or (C) otherwise prohibiting or limiting the right of
the Company and its Subsidiaries to sell, distribute or manufacture any
products or services or to purchase or otherwise obtain any software,
components, parts or subassemblies;
(vi) any Contract relating to the disposition or acquisition by the
Company or any of its Subsidiaries after the date of this Agreement of a
material amount of assets not in the ordinary course of business or
pursuant to which the Company or any of its Subsidiaries has any material
ownership interest in any other Person or other business enterprise other
than the Company's Subsidiaries;
(vii) any dealer, distributor, joint marketing or development
agreement, under which the Company or any of its Subsidiaries have
continuing obligations or costs in excess of $100,000 per year, to jointly
market any product, technology or service, and which may not be canceled
without penalty upon notice of ninety (90) days or less; or any agreement
pursuant to which the Company or any of its Subsidiaries have continuing
obligations to jointly develop any Intellectual Property that will not be
owned, in whole or in part, by the Company or any of its Subsidiaries;
(viii) any Contract to provide source code to any third party for any
product or technology that is material to the Company and its Subsidiaries
taken as a whole;
(ix) any Contract (A) containing any support or maintenance obligation
on the part of the Company or any of its Subsidiaries outside of the
ordinary course of business consistent with past practice
18
or (B) containing any service obligation or cost on the part of the Company
or any of its Subsidiaries in excess of $100,000, other than those
obligations that are terminable by the Company or any of its Subsidiaries
on no more than thirty (30) days notice without liability or financial
obligation to the Company or its Subsidiaries;
(x) any Contract to license any third party to manufacture or
reproduce any of the Company's products, services or technology or any
Contract to sell or distribute any of the Company's products, services or
technology, except (A) agreements with distributors or sales
representatives in the ordinary course of business consistent with past
practice, or (B) agreements allowing internal backup copies made or to be
made by end-user customers in the ordinary course of business consistent
with past practice;
(xi) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other Contracts relating to the
borrowing of money or extension of credit, other than accounts receivables
and payables in the ordinary course of business;
(xii) (A) any settlement agreement entered into within five (5) years
prior to the date of this Agreement relating to Intellectual Property, and
(B) any settlement agreement not relating to Intellectual Property entered
into within two (2) years prior to the date of this Agreement, other than
(I) releases immaterial in nature or amount entered into with former
employees or independent contractors of the Company in the ordinary course
of business consistent with past practice in connection with the routine
cessation of such employee's or independent contractor's employment with
the Company or (II) settlement agreements for cash only (which has been
paid) and does not exceed $20,000 as to such settlement;
(xiii) any other agreement, contract or commitment that has a value of
$250,000 or more in any individual case not described in clauses (i)
through (xii) above;
(xiv) any Company IP Agreement; or
(xv) any Contract, or group of Contracts with a Person (or group of
affiliated Persons), the termination or breach of which would be reasonably
expected to have a material adverse effect on any material division or
business unit or other material operating group of product or service
offerings of the Company or otherwise have a Material Adverse Effect on the
Company.
(b) Schedule. Section 2.15(b) of the Company Disclosure Letter sets forth
a list of all Company Material Contracts to which the Company or any of its
Subsidiaries is a party or is bound by as of the date hereof which are described
in Sections 2.15(a)(i) through 2.15(a)(xiii) and 2.15(a)(xv) hereof.
(c) No Breach. All Company Material Contracts are valid and in full force
and effect except to the extent they have previously expired in accordance with
their terms or if the failure to be in full force and effect, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries has
violated any provision of, or committed or failed to perform any act which, with
or without notice, lapse of time or both would constitute a default under the
provisions of, any Company Material Contract, except in each case for those
violations and defaults which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company. To the
knowledge of the Company, neither the Company nor any of its Subsidiaries are in
breach of any material provision of a Company Material Contract.
2.16 Disclosure. None of the information supplied or to be supplied by or
on behalf of the Company for inclusion or incorporation by reference in the
registration statement on Form S-4 (or similar successor form) to be filed with
the SEC by Parent in connection with the issuance of Parent Common Stock
pursuant to the Merger (including amendments or supplements thereto) (the
"REGISTRATION STATEMENT") will, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the information
supplied or to be supplied by or on behalf of the Company for inclusion or
incorporation by reference in the Prospectus/Proxy Statement to be filed with
the SEC as part of the Registration Statement
19
(the "PROSPECTUS/PROXY STATEMENT"), will, at the time the Prospectus/Proxy
Statement is mailed to the stockholders of the Company, at the time of the
Company Stockholders' Meeting (as defined in Section 5.2(a)) or as of the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. The Prospectus/Proxy Statement will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein about Parent supplied by Parent for
inclusion or incorporation by reference in the Registration Statement or the
Prospectus/Proxy Statement.
2.17 Board Approval. The Board of Directors of the Company has, by
resolutions duly adopted by unanimous vote at a meeting of all Directors duly
called and held and not subsequently rescinded or modified in any way (the
"COMPANY BOARD APPROVAL") (i) determined that the Merger is fair to, and in the
best interests of, the Company and its stockholders and declared this Agreement
and the Merger to be advisable, (ii) approved this Agreement and the
transactions contemplated thereby, including the Merger, and (iii) recommended
that the stockholders of the Company approve and adopt this Agreement and
approve the Merger and directed that such matter be submitted to the Company's
stockholders at the Company Stockholders' Meeting.
2.18 Fairness Opinion. The Company's Board of Directors has received a
written opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, dated as of April 23,
2003, in customary form to the effect that, as of such date, the Exchange Ratio
is fair, from a financial point of view, to the Company stockholders, and has
delivered to Parent a copy of such opinion.
2.19 Takeover Statutes. The Board of Directors of the Company has taken
all actions so that the restrictions contained in Section 203 of the Delaware
General Corporation Law applicable to a "business combination" (as defined in
such Section 203), and any other similar Legal Requirement, will not apply to
Parent during the pendency of this Agreement, including the execution, delivery
or performance of this Agreement and the consummation of the Merger and the
other transactions contemplated hereby.
2.20 Non-Competition Agreements. Except as set forth in Section 2.20 of
the Company Disclosure Letter, each Company Employee has entered into a
non-competition agreement with the Company (the "NON-COMPETITION AGREEMENTS").
Each Non-Competition Agreement is in substantially the form of one of the three
standard form agreements provided to Parent, is enforceable by the Company on
the date hereof (except as otherwise limited by applicable law or public policy)
and shall be enforceable by each of the Company and Parent immediately following
the Merger to the full extent enforceable by the Company immediately prior to
the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, subject to the
exceptions specifically disclosed in writing in the disclosure letter supplied
by Parent and Merger Sub to the Company dated as of the date hereof and
certified by a duly authorized executive officer of each of Parent and Merger
Sub (the "PARENT DISCLOSURE LETTER"), including to the extent further qualified
by the applicable provisions of Section 8.3(a), as follows:
3.1 Organization; Standing and Power; Charter Documents; Subsidiaries.
(a) Organization; Standing and Power. Parent and each of its Subsidiaries
(i) is a corporation or other organization duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, (ii) has the requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
(iii) is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing
20
of its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to so qualify or to be in good standing,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Parent.
(b) Charter Documents. Parent has delivered or made available to the
Company (i) a true and correct copy of the Certificate of Incorporation
(including any Certificate of Designations) and Bylaws of Parent, each as
amended to date (collectively, the "PARENT CHARTER DOCUMENTS") and (ii) the
Subsidiary Charter Documents of each of its Significant Subsidiaries (as defined
in Rule 1.02 of Regulation of S-X of the SEC), and each such instrument is in
full force and effect. Parent is not in violation of any of the provisions of
the Parent Charter Documents and each Significant Subsidiary of Parent is not in
violation of its respective Subsidiary Charter Documents.
(c) Subsidiaries. Exhibit 21 to Parent's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002 includes all the Subsidiaries of Parent
which are Significant Subsidiaries. All the outstanding shares of capital stock
of, or other equity or voting interests in, each such Significant Subsidiary
have been validly issued and are fully paid and nonassessable and are owned by
Parent, a wholly-owned Subsidiary of Parent, or Parent and another wholly-owned
Subsidiary of Parent, free and clear of all Liens, including any restriction on
the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests, except for restrictions imposed by applicable securities
laws, except as would not reasonably be expected to have a Material Adverse
Effect on Parent or a Material Adverse Effect on such Subsidiary. Other than the
Subsidiaries of Parent, neither Parent nor any of its Subsidiaries owns any
capital stock of, or other equity or voting interests of any nature in, or any
interest convertible, exchangeable or exercisable for, capital stock of, or
other equity or voting interests of any nature in, any other Person.
3.2 Capital Structure.
(a) Capital Stock. The authorized capital stock of Parent consists of: (i)
140,000,000 shares of Parent Common Stock, par value $0.001 per share and (ii)
40,000,000 shares of preferred stock, par value $0.001 per share, of which
100,000 shares have been designated as Series A Preferred Stock (the "PARENT
SERIES A PREFERRED STOCK"), all of which will be reserved for issuance upon
exercise of preferred stock purchase rights (the "PARENT RIGHTS") issuable
pursuant to the Preferred Shares Rights Agreement dated as of October 23, 1996
by and between Parent and U.S. Stock Transfer Corporation (the "PARENT RIGHTS
AGREEMENT"), a true and complete copy of which is filed as Exhibit 1 to the
Company's Registration Statement on Form 8-A filed with the Commission on
October 31, 1996, and of which 15,000,000 shares have been designated as Series
B Preferred Stock (the "PARENT SERIES B PREFERRED STOCK," and together with the
Parent Series A Preferred Stock, the "PARENT PREFERRED STOCK"). At the close of
business on April 22, 2003: (i) 65,722,922 shares of Parent Common Stock were
issued and outstanding, excluding shares of Parent Common Stock held by Parent
in its treasury, (ii) 2,117,378 shares of Parent Common Stock were issued and
held by Parent in its treasury, (iii) no shares of Parent Series A Preferred
Stock were issued and outstanding and (iv) 3,562,238 shares of Parent Series B
Preferred Stock were issued and outstanding, and on the date hereof there has
been no change to the number of shares of Parent Common Stock issued and
outstanding set forth in clause (i) other than pursuant to the exercise of
Parent Options. No shares of Parent Common Stock are owned or held by any
Subsidiary of Parent. All of the outstanding shares of capital stock of Parent
are, and all shares of capital stock of Parent which may be issued as
contemplated or permitted by this Agreement will be, when issued, duly
authorized and validly issued, fully paid and nonassessable and not subject to
any preemptive rights.
(b) Stock Options. As of April 22, 2003: (i) an aggregate of 16,223,144
shares of Parent Common Stock are subject to issuance pursuant to outstanding
options to purchase Parent Common Stock ("PARENT OPTIONS") under the stock
option, stock award, stock appreciation or phantom stock plans of Parent (the
"PARENT STOCK OPTION PLANS"), and (ii) 2,158,264 shares of Parent Common Stock
are reserved for future issuance under the Parent Stock Option Plans. All shares
of Parent Common Stock subject to issuance under the Parent Stock Option Plans,
upon issuance in accordance with the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. Except as otherwise set forth in
Section 3.2 of the Parent Disclosure Letter, there are no
21
commitments or agreements of any character to which Parent is bound obligating
Parent to accelerate the vesting of any Parent Option as a result of the Merger
(whether alone or upon the occurrence of any additional or subsequent events).
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation or other similar rights with respect to Parent.
(c) Voting Debt. No Voting Debt of Parent is issued or outstanding as of
the date hereof.
(d) Other Securities. Except as otherwise set forth in Section 3.2 of the
Parent Disclosure Letter, as of the date hereof, there are no securities,
options, warrants, calls, rights, contracts, commitments, agreements,
instruments, arrangements, understandings, obligations or undertakings of any
kind to which Parent or any of its Subsidiaries is a party or by which any of
them is bound obligating Parent or any of its Subsidiaries to (including on a
deferred basis) issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock, Voting Debt or other voting securities
of Parent or any of its Subsidiaries, or obligating Parent or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, contract, commitment, agreement, instrument, arrangement,
understanding, obligation or undertaking. All outstanding shares of Parent
Common Stock, all outstanding Parent Options, and all outstanding shares of
capital stock of each Subsidiary of Parent have been issued and granted in
compliance in all material respects with (i) all applicable securities laws and
all other applicable Legal Requirements and (ii) all requirements set forth in
applicable material Contracts.
(e) Merger Sub Capital Stock. The authorized capital stock of Merger Sub
consists of 1,000 shares of common stock, par value $0.001 per share, of which
1,000 shares are issued and outstanding. Parent is the sole stockholder of
Merger Sub and is the legal and beneficial owner of all 1,000 issued and
outstanding shares. Merger Sub was formed by counsel to Parent at the direction
of Parent on April 21, 2003, solely for purposes of effecting the Merger and the
other transactions contemplated hereby. Except as contemplated by this
Agreement, Merger Sub does not hold, nor has it held, any material assets or
incurred any material liabilities nor has Merger Sub carried on any business
activities other than in connection with the Merger and the transactions
contemplated by this Agreement. All of the outstanding shares of capital stock
of Merger Sub have been duly authorized and validly issued, and are fully paid
and nonassessable and not subject to any preemptive rights.
3.3 Authority; Non-Contravention; Necessary Consents.
(a) Authority. Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize the execution and delivery of this Agreement or to
consummate the Merger and the other transactions contemplated hereby, subject
only to (i) the approval of the Stock Issuance by the Parent's stockholders as
required under the rules of Nasdaq, and (ii) the approval and adoption of this
Agreement and the approval of the Merger by Parent as Merger Sub's sole
stockholder and the filing of the Certificate of Merger pursuant to Delaware
Law. This Agreement has been duly executed and delivered by Parent and Merger
Sub and, assuming due execution and delivery by the Company, constitutes the
valid and binding obligation of Parent, enforceable against Parent and Merger
Sub in accordance with its terms.
(b) Non-Contravention. The execution and delivery of this Agreement by
Parent and Merger Sub does not, and performance of this Agreement by Parent and
the consummation of the Merger and the transactions contemplated hereby will
not: (i) conflict with or violate the Parent Charter Documents, the certificate
of incorporation or bylaws of Merger Sub or any other Subsidiary Charter
Documents of any Subsidiary of Parent, (ii) subject to compliance with the
requirements set forth in Section 3.3(c), conflict with or violate any material
Legal Requirement applicable to Parent, Merger Sub or any of Parent's other
Subsidiaries or by which Parent, Merger Sub or any of Parent's other
Subsidiaries or any of their respective properties is bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or materially
impair Parent's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of,
22
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 Parent Material Contract (as defined
in Section 3.15). Section 3.3(b) of the Parent Disclosure Letter lists all
consents, waivers and approvals under any of Parent's or any of its
Subsidiaries' Contracts required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually or
in the aggregate are not obtained, would result in a material loss of benefits
to the Company, Parent or the Surviving Corporation as a result of the Merger.
(c) Necessary Consents. No consent, approval, order or authorization of,
or registration, declaration or filing with any Governmental Entity is required
to be obtained or made by Parent in connection with the execution and delivery
of this Agreement or the consummation of the Merger and other transactions
contemplated hereby, except for (i) the Necessary Consents and (ii) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Parent, Merger Sub or the Company or
materially adversely affect the ability of the parties hereto to consummate the
Merger within the time frame in which the Merger would otherwise be consummated
in the absence of the need for such consent, approval, order, authorization,
registration, declaration or filings.
3.4 SEC Filings; Financial Statements.
(a) SEC Filings. Parent has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated by reference)
required to be filed by it with the SEC since January 1, 2002. Parent has made
available to the Company all such registration statements, prospectuses,
reports, schedules, forms, statements and other documents in the form filed with
the SEC. All such required registration statements, prospectuses, reports,
schedules, forms, statements and other documents (including those that Parent
may file subsequent to the date hereof until the Effective Time) are referred to
herein as the "PARENT SEC REPORTS." As of their respective dates, the Parent SEC
Reports (i) were prepared in accordance and complied in all material respects
with the requirements of the Securities Act, or the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Parent SEC Reports 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 therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of Parent's Subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Financial Statements. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Parent SEC
Reports (the "PARENT FINANCIALS"), including each Parent SEC Report filed after
the date hereof until the Closing: (i) complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited interim financial statements, as may be permitted
by the SEC on Form 10-Q, 8-K or any successor form under the Exchange Act), and
(iii) fairly presented in all material respects the consolidated financial
position of Parent and its consolidated Subsidiaries as at the respective dates
thereof and the consolidated results of Parent's operations and cash flows for
the periods indicated. The balance sheet of Parent contained in the Parent SEC
Reports as of December 31, 2002 is hereinafter referred to as the "PARENT
BALANCE SHEET." Except as disclosed in the Parent Financials, since the date of
the Parent Balance Sheet, neither Parent nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a consolidated balance sheet or in the related notes to the
consolidated financial statement prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Parent and its Subsidiaries taken as a
whole, other than liabilities incurred (i) in the ordinary course of business
consistent with past practices or (ii) in connection with the performance by the
Parent or any of its Subsidiaries of their respective obligations under this
Agreement and the transactions contemplated herein.
3.5 Absence of Certain Changes or Events. Except as otherwise set forth in
Section 3.5 of the Parent Disclosure Letter, since the date of the Parent
Balance Sheet through the date hereof Parent has conducted its
23
business only in the ordinary course of business consistent with past practice
and there has not been: (i) any Material Adverse Effect on Parent, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of Parent's or any of
its Subsidiaries' capital stock, or any purchase, redemption or other
acquisition by Parent or any of its Subsidiaries of any of Parent's capital
stock or any other securities of Parent or its Subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from Employees or independent contractors following their
termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of Parent's
or any of its Subsidiaries' capital stock, (iv) any granting by Parent or any of
its Subsidiaries of any increase in compensation or fringe benefits, except for
increases of cash compensation (other than to directors or executive officers of
Parent) in the ordinary course of business consistent with past practice, or any
payment by Parent or any of its Subsidiaries of any bonus, except for bonuses
(other than to directors or executive officers of Parent) made in the ordinary
course of business consistent with past practice, or any granting by Parent or
any of its Subsidiaries of any increase in severance or termination pay or any
entry by Parent or any of its Subsidiaries into, or material modification or
amendment of, any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Parent of the nature contemplated hereby, (v) entry by
Parent or any of its Subsidiaries into any licensing or other agreement with
regard to the disposition of any material Intellectual Property (as defined in
Section 2.7(h)) other than licenses, distribution agreements, advertising
agreements, sponsorship agreements or merchant program agreements entered into
in the ordinary course of business consistent with past practice, (vi) any
amendment or consent with respect to any Parent Material Contract in effect
since the date of the Parent Balance Sheet other than statements of work or
similar amendments to such Company Material Contracts in the ordinary course of
business consistent with past practice, (vii) any material change by Parent in
its accounting methods, principles or practices, except as required by
concurrent changes in GAAP or by the SEC, (viii) any material revaluation by
Parent of any of its assets, including, without limitation, writing down the
value of capitalized inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice, (ix) any
communication from Nasdaq with respect to the delisting of the Parent Common
Stock, (x) any cancellation by Parent or any of its Subsidiaries of any debts or
waiver of any claims or rights of material value, (xi) any sale, transfer or
other disposition outside of the ordinary course of business of any properties
or assets (real, personal or mixed, tangible or intangible) by Parent or any of
its Subsidiaries, or (xii) any agreement, whether in writing or otherwise, to
take any action described in this section by Parent or any of its Subsidiaries.
3.6 Taxes.
(a) Tax Returns and Audits. Except as otherwise set forth in Section
3.6(a) of the Parent Disclosure Letter:
(i) Parent and each of its Subsidiaries have prepared and timely filed
all required Tax Returns relating to any and all Taxes concerning or
attributable to Parent, its Subsidiaries or their respective operations and
such Tax Returns are true and correct and have been completed in accordance
with applicable law.
(ii) Parent and each of its Subsidiaries have timely paid to the
appropriate Taxing authority all Taxes and any other amounts required to be
paid or withheld.
(iii) Neither Parent nor any of its Subsidiaries has been delinquent
in the payment of any Tax, nor is there any Tax deficiency outstanding,
assessed or proposed against Parent or any of its Subsidiaries, nor has
Parent or any of its Subsidiaries executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of
any Tax.
(iv) No audit or other examination of any Tax Return of Parent or any
of its Subsidiaries is presently in progress, nor has Parent or any of its
Subsidiaries been notified of any request for such an audit or other
examination.
24
(v) Neither Parent nor any of its Subsidiaries has any liabilities for
unpaid Taxes which have not been accrued or reserved on the Parent Balance
Sheet in accordance with GAAP, and neither Parent nor any of its
Subsidiaries has incurred any liability for Taxes since the date of the
Parent Balance Sheet other than in the ordinary course of business.
(vi) Parent has made available to the Company or its legal counsel,
copies of all Tax Returns for Parent and each of its Subsidiaries filed for
all periods since inception.
(vii) There are no Liens on the assets of Parent or any of its
Subsidiaries relating to or attributable to Taxes, other than Liens for
Taxes not yet due and payable. There is no basis for the assertion of any
claim relating or attributable to Taxes which, if adversely determined,
would result in any Lien for Taxes on the assets of Parent or any of its
Subsidiaries.
(viii) None of the assets of Parent or any of its Subsidiaries is
treated as "tax-exempt use property," within the meaning of Section 168(h)
of the Code.
(ix) Neither Parent nor any of its Subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by Parent or any of its
Subsidiaries.
(x) Neither Parent nor any of its Subsidiaries is, nor has been at any
time, a "United States Real Property Holding Corporation" within the
meaning of Section 897(c)(2) of the Code.
(xi) No adjustment relating to any Tax Return filed by Parent or any
of its Subsidiaries has been proposed formally or, to the knowledge of
Parent or any of its Subsidiaries, informally by any tax authority to
Parent, any of its Subsidiaries or any representative thereof.
(xii) Neither Parent nor any of its Subsidiaries has (a) ever been a
member of an affiliated group (within the meaning of Code sec. 1504(a))
filing a consolidated federal income Tax Return (other than a group the
common parent of which was Parent), (b) ever been a party to any Tax
sharing, indemnification or allocation agreement, nor does Parent or any of
its Subsidiaries owe any amount under any such agreement, (c) any liability
for the Taxes of any person (other than Parent or any of its Subsidiaries)
under Treas. Reg. sec. 1.1502-6 (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract, or otherwise
and (d) ever been a party to any joint venture, partnership or other
agreement that could be treated as a partnership for Tax purposes.
(xiii) Neither Parent nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock intended to qualify for tax-free treatment under
Section 355 of the Code (x) in the two years prior to the date of this
Agreement or (y) in a distribution which could otherwise constitute part of
a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with the Merger.
3.7 Intellectual Property. Except as set forth in Section 3.7 of the
Parent Disclosure Letter:
(a) To the knowledge of Parent the operation of the business of Parent
and each of its Subsidiaries, including their products and services, does
not infringe or misappropriate in any material respect the Intellectual
Property of any third party or constitute unfair competition or unfair
trade practices under the laws of any jurisdiction. Parent and its
Subsidiaries own or possess sufficient rights to all material Intellectual
Property used in their businesses and all Intellectual Property necessary
for the operation of their businesses.
(b) As of the date hereof and, except as will not have a Material
Adverse Effect on or after the Closing Date, neither Parent nor any of its
Subsidiaries have received or will have received any written notice from
any third party, and, to the knowledge of Parent, there is and will be no
other assertion or pending threat from any third party, that the operation
of the business of Parent or any of its Subsidiaries, or any of their
products or services, infringes or misappropriates the Intellectual
Property of any third party or constitutes unfair competition or unfair
trade practices under the laws of any jurisdiction. As of
25
the date hereof and, except as will not have a Material Adverse Effect, on
the Closing Date, neither Parent nor any its Subsidiaries have brought or
will have brought, or have been or will have been, a party to any suits,
arbitrations or other adversarial proceedings with respect to a third
party's Intellectual Property that remain unresolved.
(c) To the knowledge of Parent, as of the date hereof, no person is
infringing or misappropriating any material Intellectual Property owned or
exclusively licensed by Parent or any of its Subsidiaries. Neither Parent
nor any its Subsidiaries have brought or have been a party to any suits,
arbitrations or other adversarial proceedings with respect to their
Intellectual Property against any third party that remain unresolved.
(d) Parent and its Subsidiaries are not subject to any judgment,
order, writ, injunction or decree of any court or any Federal, state,
local, foreign or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any arbitrator, which
restricts or impairs the use of any of their Intellectual Property. The
Intellectual Property owned or exclusively licensed by Parent is free and
clear of any Liens.
(e) Parent and each of its Subsidiaries are in material compliance
with, and have not materially breached any term of any contracts, licenses
or other agreements in which Parent and its Subsidiaries have granted or
received any Intellectual Property ("PARENT IP AGREEMENTS"). To the
knowledge of Parent, all third parties to such Parent IP Agreements are in
compliance in all material respects with, and have not materially breached,
any of their terms.
(f) The Merger will not result in the termination or breach of any
Parent IP Agreements, or any material loss or change in the rights or
obligations of Parent or its Subsidiaries or any third party to such Parent
IP Agreements. The Merger will not result in the obligation for Parent or
its Subsidiaries to pay any consideration, royalties or other amounts to
any third party in excess of those amounts otherwise owed by Parent or its
Subsidiaries immediately prior to the Merger.
(g) The Merger will not result in: (i) the Company being bound by any
material non-compete, material exclusivity obligation or other material
restriction on the operation of any business of Parent or its Subsidiaries,
including any of their products or services, or (ii) the Company granting
to any third party any rights or licenses to any material Intellectual
Property of the Company or any affiliate of the Company (including without
limitation a covenant not to ▇▇▇) pursuant to any agreements or obligations
of Parent or its Subsidiaries.
3.8 Compliance; Permits.
(a) Compliance. Neither Parent nor any of its Subsidiaries is, in any
material respect, in conflict with, or in default or in violation of any Legal
Requirement applicable to Parent or any of its Subsidiaries or by which Parent
or any of its Subsidiaries or any of their respective businesses or properties
is, or Parent believes is reasonably likely to be, bound or affected, except, in
each case, or in the aggregate, for conflicts, violations and defaults that
would not have a Material Adverse Effect on Parent. Except as otherwise set
forth in Section 3.8 of the Parent Disclosure Letter, as of the date hereof, no
investigation or review by any Governmental Entity is pending or, to the
knowledge of Parent, has been threatened in a writing delivered to Parent or any
of its Subsidiaries, against Parent or any of its Subsidiaries other than as
contemplated by this Agreement. There is no judgment, injunction, order or
decree binding upon Parent or any of its Subsidiaries which has or would
reasonably be expected to have the effect of prohibiting or impairing any
business practice of Parent or any of its Subsidiaries, any acquisition of
property by Parent or any of its Subsidiaries or the conduct of business by
Parent and its Subsidiaries as currently conducted, except as would not have a
Material Adverse Effect on Parent.
(b) Permits. Parent and its Subsidiaries hold, to the extent legally
required, all Permits that are required for the operation of the business of
Parent (collectively, "PARENT PERMITS"), except where the failure to hold such
Permits would not have a Material Adverse Effect on Parent. As of the date
hereof, no suspension or cancellation of any of the Parent Permits is pending
or, to the knowledge of Parent, threatened. Parent and its Subsidiaries are in
compliance in all material respects with the terms of the Parent Permits.
26
3.9 Litigation. Except as otherwise set forth in Section 3.9 of the Parent
Disclosure Letter, as of the date hereof and, except as will not have a Material
Adverse Effect on or after the Closing Date, there are and will be no claims,
suits, actions or proceedings pending or, to the knowledge of Parent, threatened
against Parent or any of its Subsidiaries, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator.
3.10 Brokers' and Finders' Fees. Except for fees payable to Evercore
Partners pursuant to an engagement letter dated March 20, 2003, a copy of which
has been provided to the Company, Parent has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby, and Parent has not entered into any
indemnification agreement or arrangement with any Person in connection with this
Agreement and the transactions contemplated hereby. An itemized good faith
estimate of the fees and expenses of any accountant, broker, financial advisor,
consultant, legal counsel or other Person retained by Parent in connection with
this Agreement or the transactions contemplated hereby incurred or to be
incurred by Parent in connection with this Agreement and the transactions
contemplated hereby (including any agreement or understanding with respect to
such agreement or understanding, whether written or oral) is set forth in
Section 3.10 of the Parent Disclosure Letter, and all such fees are, and shall
be, reasonable and customary in nature.
3.11 Transactions with Affiliates. Except as set forth in the Parent SEC
Reports, since the date of Parent's last proxy statement filed with the SEC, no
event has occurred as of the date hereof that would be required to be reported
by the Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.
Section 3.11 of the Parent Disclosure Letter identifies each Person who is an
"affiliate" (as that term is used in Rule 145 promulgated under the Securities
Act) of Parent as of the date hereof.
3.12 Parent Employee Benefit Plans.
(a) Schedule. Except with respect to plans such as workers' compensation
which are required by law, Section 3.12(a) of the Parent Disclosure Letter
contains an accurate and complete list of (i) each plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been, within the past three years,
maintained, contributed to, or required to be contributed to, by Parent or any
Subsidiary of Parent or any other person or entity under common control with
Parent or any Subsidiaries within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the regulations issued thereunder (each a "PARENT ERISA
AFFILIATE") for the benefit of any current or former or retired employee,
consultant or director of Parent or any Parent ERISA Affiliate (each a "PARENT
EMPLOYEE"), or with respect to which Parent or any Parent ERISA Affiliate has or
may have any liability or obligation (collectively, the "PARENT EMPLOYEE
PLANS"), and (ii) each employment, severance or consulting agreement between
Parent or any Parent ERISA Affiliate and any Parent Employee (each a "PARENT
EMPLOYEE AGREEMENT"), except to the extent a Parent Employee Agreement provides
for "at-will" employment and does not provide for severance payments or
benefits. Neither the Company nor any Parent ERISA Affiliate has any plan or
commitment to establish any new Parent Employee Plan or Parent Employee
Agreement, to modify any Parent Employee Plan or Parent Employee Agreement
(except to the extent required by law or to conform any such Parent Employee
Plan or Parent Employee Agreement to the requirements of any applicable law, in
each case as previously disclosed to the Company in writing, or as required by
this Agreement), or to adopt or enter into any Parent Employee Plan or Parent
Employee Agreement, except, in each case, or in the aggregate, as would not
result in material liability to Parent or its Subsidiaries.
(b) Documents. Parent has provided or made available to the Company
correct and complete copies of: (i) all documents embodying each Parent Employee
Plan and each Parent Employee Agreement including (without limitation) all
amendments thereto and all related trust documents, administrative service
agreements, group annuity contracts, group insurance contracts, and policies
pertaining to fiduciary liability
27
insurance covering the fiduciaries for each Parent Employee Plan; (ii) the most
recent annual actuarial valuations, if any, prepared for each Parent Employee
Plan; (iii) the three (3) most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Parent Employee Plan; (iv) if the
Parent Employee Plan is funded, the most recent annual and periodic accounting
of Parent Employee Plan assets; (v) the most recent summary plan description
together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Parent Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters; (vii) all material
correspondence to or from any governmental agency in the past three years
relating to any Parent Employee Plan; (viii) discrimination tests for each
Parent Employee Plan for the last plan year ending prior to the Closing Date, to
the extent applicable; (ix) all prospectuses prepared in connection with each
Parent Employee Plan; and (x) visa and work permit information with respect to
the current Parent Employees; provided that Parent may limit any information
under this Section 3.12 as required by law, treaty rule or regulation of any
Governmental Entity applicable to Parent or its Subsidiaries to restrict or
prohibit access to such information.
(c) Parent Employee Plan Compliance. Parent and its Parent ERISA
Affiliates have performed in all material respects all obligations required to
be performed by them under, are not in material default or violation of, and
have no knowledge of any default or violation by any other party to, each Parent
Employee Plan, and each Parent Employee Plan has been established and maintained
in all material respects in accordance with its terms and in material compliance
with all applicable laws, statutes, orders, rules and regulations, including but
not limited to ERISA or the Code. Any Parent Employee Plan intended to be
qualified under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either applied for, prior to the expiration
of the requisite period under applicable Treasury Regulations or IRS
pronouncements, or obtained a favorable determination, notification, advisory
and/or opinion letter, as applicable, as to its qualified status from the IRS or
still has a remaining period of time under applicable Treasury Regulations or
IRS pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination. For each Parent Employee Plan
that is intended to be qualified under Section 401(a) of the Code there has been
no event, condition or circumstance that has adversely affected or is, in any
material respect, likely to adversely affect such qualified status. Except, in
each case, or in the aggregate, as would not result in material liability to
Parent or its Subsidiaries: (i) no "prohibited transaction," within the meaning
of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 408 of ERISA, has occurred with respect to any Parent
Employee Plan; (ii) neither Parent nor any Parent ERISA Affiliate is subject to
any penalty or tax with respect to any Parent Employee Plan under Section 502(i)
of ERISA or Sections 4975 through 4980 of the Code; and (iii) Parent and each
Parent ERISA Affiliate have timely made all contributions and other payments
required by and due under the terms of each Parent Employee Plan. There are no
actions, suits or claims pending, or, to the knowledge of Parent, threatened or
reasonably anticipated (other than routine claims for benefits) against any
Parent Employee Plan or against the assets of any Parent Employee Plan. Except
to the extent limited by applicable law, each Parent Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without material liability to the Company, Parent or
any of its Parent ERISA Affiliates (other than ordinary administration
expenses). There are no audits, inquiries or proceedings pending or, to the
knowledge of Parent or any Parent ERISA Affiliates, threatened by the IRS or
DOL, or any other Governmental Entity with respect to any Parent Employee Plan.
(d) No Pension or Welfare Plans. Neither Parent nor any Parent ERISA
Affiliate has ever maintained, established, sponsored, participated in, or
contributed to, any (i) Parent Employee Plan which is a Pension Plan and is
subject to Title IV of ERISA or Section 412 of the Code, (ii) Pension Plan which
is a "multiemployer plan," as defined in Section 3(37) of ERISA, (iii) "multiple
employer plan" as defined in ERISA or the Code, or (iv) a "funded welfare plan"
within the meaning of Section 419 of the Code. No Parent Employee Plan provides
health benefits that are not fully insured through an insurance contract.
(e) No Post-Employment Obligations. Except as set forth in Section 3.12(e)
of the Parent Disclosure Letter, no Parent Employee Plan currently provides, or
reflects or represents any liability to provide post-termination or retiree
welfare benefits to any person for any reason, except as may be required by
COBRA or
28
other applicable statute, and neither Parent nor any Parent ERISA Affiliate has
any liability to provide post-termination or retiree welfare benefits to any
person or ever represented, promised or contracted (other than in written form)
to any Parent Employee (either individually or to Parent Employees as a group)
or any other person that such Parent Employee(s) or other person would be
provided with post-termination or retiree welfare benefits, except to the extent
required by statute.
(f) Health Care Compliance. Neither Parent nor any Parent ERISA Affiliate
has, prior to the Effective Time and in any material respect, violated any of
the health care continuation requirements of COBRA, the requirements of the
Family Medical Leave Act of 1993, as amended, the requirements of the Health
Insurance Portability and Accountability Act of 1996, the requirements of the
Women's Health and Cancer Rights Act of 1998, the requirements of the Newborns'
and Mothers' Health Protection Act of 1996, or any amendment to each such act,
or any similar provisions of state law applicable to its Parent Employees.
(g) Executive Loans. Neither Parent nor any Parent ERISA Affiliate has
violated Section 402 of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the execution of this
Agreement and the consummation of the transactions contemplated hereby will not,
to the knowledge of Parent, cause such a violation.
(h) Effect of Transaction.
(i) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the
occurrence of an individual's termination of employment within one year
prior to or three years following the transactions contemplated hereby),
constitute an event under any Parent Employee Plan, Parent Employee
Agreement, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any Parent Employee.
(ii) No payment or benefit which will or may be made by Parent or its
Parent ERISA Affiliates with respect to any Parent Employee will be
characterized as a "parachute payment," within the meaning of Section
280G(b)(2) of the Code. There is no contract, agreement, plan or
arrangement to which Parent or any of its Parent ERISA Affiliates is a
party or by which it is bound to compensate any Parent Employee for excise
taxes paid pursuant to Section 4999 of the Code.
(i) Employment Matters. Parent: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Parent Employees;
(ii) is not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any governmental authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Parent Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
claims or actions against Parent under any worker's compensation policy or
long-term disability policy. Neither Parent nor any Parent ERISA Affiliate has
or reasonably anticipates any direct or indirect material liability with respect
to any misclassification of any person as an independent contractor rather than
as an employee, or with respect to any employee leased from another employer.
(j) Labor. No work stoppage or labor strike against Parent or any Parent
ERISA Affiliate is pending, threatened or reasonably anticipated. Parent does
not know of any activities or proceedings of any labor union to organize any
Parent Employees. There are no actions, suits, claims, labor disputes or
grievances pending, or, to the knowledge of Parent, threatened or reasonably
anticipated relating to any labor, safety or discrimination matters involving
any Parent Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to Parent.
Neither Parent nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act. Parent is not
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Parent Employees and no
collective bargaining agreement is being negotiated with respect to Parent
Employees. Neither Parent nor any of its Subsidiaries have incurred any material
liability or material obligation under the
29
Worker Adjustment and Retraining Notification Act or any similar state or local
law which remains unsatisfied.
(k) Parent International Employee Plan. Each Parent Employee Plan that has
been adopted or maintained by Parent or any Parent ERISA Affiliate, whether
informally or formally, or with respect to which Parent or any Parent ERISA
Affiliate will or may have any liability, for the benefit of Parent Employees
who perform services outside the United States (each a "PARENT INTERNATIONAL
EMPLOYEE PLAN") has been established, maintained and administered in material
compliance with its terms and conditions and with the requirements prescribed by
any and all statutory or regulatory laws that are applicable to such Parent
International Employee Plan. Furthermore, no Parent International Employee Plan
has unfunded liabilities, that as of the Effective Time, will not be offset by
insurance or fully accrued. Except as required by law, no condition exists that
would prevent Parent or the Company from terminating or amending any Parent
International Employee Plan at any time for any reason without liability to
Parent or its Parent ERISA Affiliates (other than ordinary administration
expenses or routine claims for benefits).
3.13 Title to Properties.
(a) Properties. Neither Parent nor any of its Subsidiaries owns any real
property. Section 3.13 of the Parent Disclosure Letter sets forth a list of all
real property currently leased by Parent or any of its Subsidiaries, the name of
the lessor, the date of the lease and each amendment thereto. All such current
leases are in full force and effect, are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
material default or material event of default (or event which with notice or
lapse of time, or both, would constitute a material default).
(b) Valid Title. Parent and each of its Subsidiaries has good and valid
title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its tangible properties and assets, real, personal and
mixed, used or held for use in its business, free and clear of any Liens except
for Liens imposed by law in respect of obligations not yet due which are owed in
respect of taxes, except for such Liens which are not material in character,
amount or extent, and which do not materially detract from the value, or
materially interfere with the present use, of the property subject thereto or
affected thereby.
3.14 Environmental Matters.
(a) Hazardous Material. Except as would not result in a Material Adverse
Effect on Parent or its Subsidiaries, no underground storage tanks and no amount
of any substance that has been designated by any Governmental Entity or by
applicable federal, state or local law to be a Hazardous Material are present,
as a result of the actions of Parent or any of its Subsidiaries or any affiliate
of Parent, or, to the knowledge of Parent, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that Parent or any of
its Subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not result in a
Material Adverse Effect on Parent: (i) neither Parent nor any of its
Subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of any
law in effect on or before the Closing Date and (ii) neither Parent nor any of
its Subsidiaries has conducted any Hazardous Material Activities in violation of
any rule, regulation, treaty or statute promulgated by any Governmental Entity
in effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
3.15 Contracts.
(a) Material Contracts. For purposes of this Agreement, "PARENT MATERIAL
CONTRACT" shall mean:
(i) any "material contracts" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) with respect to Parent and its
Subsidiaries;
(ii) any employment or consulting Contract with any executive officer
or other employee of Parent or member of Parent's Board of Directors
earning an annual salary in excess of the lowest annual base
30
salary reported in Parent's most recent annual report on Form 10-K or
definitive proxy statement for any of Parent's "named executive officers,"
as such term is defined in Item 402(a)(3) of Regulation S-K of the SEC,
other than those that are terminable by Parent or any of its Subsidiaries
on no more than thirty (30) days notice without liability or financial
obligation to Parent;
(iii) any Contract or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(iv) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or
license of services or hardware or software products in the ordinary course
of business;
(v) any Contract containing any covenant (A) limiting in any respect
the right of Parent or any of its Subsidiaries to engage in any line of
business, to make use of any Intellectual Property or compete with any
Person in any line of business or to compete with any person, (B) granting
any exclusive rights, or (C) otherwise prohibiting or limiting the right of
Parent and its Subsidiaries to sell, distribute or manufacture any products
or services or to purchase or otherwise obtain any software, components,
parts or subassemblies;
(vi) any Contract relating to the disposition or acquisition by Parent
or any of its Subsidiaries after the date of this Agreement of a material
amount of assets not in the ordinary course of business or pursuant to
which Parent or any of its Subsidiaries has any material ownership interest
in any other Person or other business enterprise other than Parent's
Subsidiaries;
(vii) any dealer, distributor, joint marketing or development
agreement, under which Parent or any of its Subsidiaries have continuing
obligations or costs in excess of $100,000 per year, to jointly market any
product, technology or service, and which may not be canceled without
penalty upon notice of ninety (90) days or less; or any agreement pursuant
to which Parent or any of its Subsidiaries have continuing obligations to
jointly develop any Intellectual Property that will not be owned, in whole
or in part, by Parent or any of its Subsidiaries;
(viii) any Contract to provide source code to any third party for any
product or technology that is material to Parent and its Subsidiaries taken
as a whole;
(ix) any Contract (A) containing any support or maintenance obligation
on the part of Parent or any of its Subsidiaries outside of the ordinary
course of business consistent with past practice or (B) containing any
service obligation or cost on the part of Parent or any of its Subsidiaries
in excess of $100,000, other than those obligations that are terminable by
Parent or any of its Subsidiaries on no more than thirty (30) days notice
without liability or financial obligation to Parent or its Subsidiaries;
(x) any Contract to license any third party to manufacture or
reproduce any of Parents products, services or technology or any Contract
to sell or distribute any of the Parent's products, services or technology,
except (A) agreements with distributors or sales representatives in the
ordinary course of business consistent with past practice, or (B)
agreements allowing internal backup copies made or to be made by end-user
customers in the ordinary course of business consistent with past practice;
(xi) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other Contracts relating to the
borrowing of money or extension of credit, other than accounts receivables
and payables in the ordinary course of business;
(xii) (A) any settlement agreement entered into within five (5) years
prior to the date of this Agreement relating to Intellectual Property, and
(B) any settlement agreement not relating to Intellectual Property entered
into within two (2) years prior to the date of this Agreement, other than
(I) releases immaterial in nature and amount entered into with former
employees or independent contractors of Parent in the ordinary course of
business consistent with past practice in connection with
31
the routine termination of such employee's or independent contractor's
employment with Parent and (II) settlement agreements under which Parent's
obligations do not exceed $20,000 in the aggregate under any single
agreement;
(xiii) any other agreement, contract or commitment that has a value of
$600,000 or more in any individual case not described in clauses (i)
through (xii) above;
(xiv) any Parent IP Agreement; or
(xv) any Contract, or group of Contracts with a Person (or group of
affiliated Persons), the termination or breach of which would be reasonably
expected to have a material adverse effect on any material division or
business unit or other material operating group of product or service
offerings of Parent or otherwise have a Material Adverse Effect on Parent.
(b) Schedule. Section 3.15(b) of the Parent Disclosure Letter sets forth a
list of all contracts to which Parent or any of its Subsidiaries is a party or
is bound by as of the date hereof which are described in Section 3.15(a)(v) or
Section 3.15(a)(vi) hereof.
(c) No Breach. All Parent Material Contracts are valid and in full force
and effect except to the extent they have previously expired in accordance with
their terms or if the failure to be in full force and effect, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Parent. Neither Parent nor any of its Subsidiaries has violated any
provision of, or committed or failed to perform any act which, with or without
notice, lapse of time or both would constitute a default under the provisions
of, any Parent Material Contract, except in each case for those violations and
defaults which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Parent. To the knowledge of
Parent, neither Parent nor any of its Subsidiaries are in breach of any material
provision of a Parent Material Contract.
3.16 Disclosure. None of the information supplied or to be supplied by or
on behalf of Parent or Merger Sub for inclusion or incorporation by reference in
the Registration Statement will, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the information
supplied or to be supplied by or on behalf of Parent and Merger Sub for
inclusion or incorporation by reference in the Prospectus/Proxy Statement, will,
at the time the Prospectus/Proxy Statement is mailed to the stockholders of
Company, the time of the Stockholders' Meeting or as of the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Prospectus/Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing, no
representation or warranty is made by Parent with respect to statements made or
incorporated by reference therein about the Company supplied by the Company for
inclusion or incorporation by reference in the Registration Statement or the
Prospectus/Proxy Statement.
3.17 Board Approval. The Board of Directors of Parent has, by resolutions
duly adopted by unanimous vote at a meeting of all Directors duly called and
held and not subsequently rescinded or modified in any way (the "PARENT BOARD
APPROVAL") (i) determined that the Merger is fair to, and in the best interests
of, Parent and its stockholders and declared this Agreement and the Merger to be
advisable, and (ii) approved this Agreement and the transactions contemplated
thereby, including the Merger, and (iii) recommended that the stockholders of
Parent approve the Stock Issuance.
3.18 Fairness Opinion. Parent's Board of Directors has received a written
opinion from Evercore Partners, dated as of April 23, 2003, in customary form to
the effect that, as of such date, the Exchange Ratio is fair, from a financial
point of view, to Parent stockholders, and has delivered to the Company a copy
of such opinion.
32
3.19 Rights Plan. Parent's Board of Directors has not adopted any
resolution pursuant to Section 3(c) of the Parent Rights Agreement to the effect
that shares of Parent Common Stock issued pursuant to the Merger shall not be
entitled to the benefit of the Parent Rights.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by the Company.
(a) Ordinary Course. During the period from the date hereof and continuing
until the earlier of the termination of this Agreement pursuant to its terms or
the Effective Time, the Company shall and shall cause each of its Subsidiaries
to, except as otherwise expressly contemplated by this Agreement or to the
extent that Parent shall otherwise consent in writing, (i) carry on its business
in the usual, regular and ordinary course, in substantially the same manner as
heretofore conducted and in compliance with all applicable laws and regulations,
(ii) pay its debts and taxes when due, pay or perform other material obligations
when due (subject to good faith disputes over such debts, taxes or obligations),
and (iii) use all commercially reasonable efforts consistent with past practices
and policies to (x) preserve intact its present business organization, (y) keep
available the services of its present executive officers and Employees, and (z)
preserve its relationships with customers, suppliers, licensors, licensees, and
others with which it has business dealings.
(b) Required Consent. In addition, without limiting the generality of
Section 4.1(a), except as permitted or specifically contemplated by the terms of
this Agreement, without the prior written consent of Parent, during the period
from the date hereof and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, the Company shall not do
any of the following, and shall not permit any of its Subsidiaries to do any of
the following:
(i) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock, other than any
such transaction by a wholly-owned Subsidiary of it that remains a
wholly-owned Subsidiary of it after consummation of such transaction, in
the ordinary course of business consistent with past practice;
(ii) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of its capital stock or the capital stock of its Subsidiaries,
except repurchases of unvested shares at cost in connection with the
termination of the employment relationship with any employee pursuant to
stock option or purchase agreements in effect on the date hereof;
(iii) Issue, deliver, sell, authorize, pledge or otherwise encumber
any shares of capital stock, Voting Debt or any securities convertible into
shares of capital stock or Voting Debt, or subscriptions, rights, warrants
or options to acquire any shares of capital stock or Voting Debt or any
securities convertible into shares of capital stock or Voting Debt, or
enter into other agreements or commitments of any character obligating it
to issue any such securities or rights, other than (i) issuances of Company
Common Stock upon the exercise of Company Options, warrants or other rights
of the Company existing on the date hereof in accordance with their present
terms or (ii) issuances of Company Options for up to an aggregate 200,000
shares of Company Common Stock to Allowable New Hires (as defined in
Section 4.1(b)(xviii)); provided, however, that no Allowable New Hire shall
receive Company Options for more than 10,000 shares (in the aggregate as to
such Allowable New Hire) of Company Common Stock;
(iv) Cause, permit or propose any amendments to the Company Charter
Documents or any of the Subsidiary Charter Documents of the Company's
Subsidiaries;
(v) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity or voting interest in or a portion of the assets
of, or by any other manner, any business or any Person or
33
division thereof, or otherwise acquire or agree to acquire any assets which
are material, individually or in the aggregate, to the business of the
Company;
(vi) Enter into any binding agreement, agreement in principle, letter
of intent, memorandum of understanding or similar agreement with respect to
any joint venture, strategic partnership or alliance; provided, however,
that this clause (vi) shall not prohibit the Company from entering into, in
the ordinary course of business consistent with past practice (i) original
equipment manufacturer agreements, (ii) agreements with end-user customers
or (iii) agreements with distributors or sales representatives; provided,
further, that nothing contained in this clause (vi) shall affect the
restrictions upon the Company set forth elsewhere in this Section 4.1;
(vii) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except (A) sales of inventory in the ordinary course
of business consistent with past practice, (B) the sale, lease or
disposition (other than through licensing) of property or assets which are
not material, individually or in the aggregate, to the business of Company
and its Subsidiaries, (C) the sale of goods or non-exclusive licenses of
Intellectual Property in the ordinary course of business and in a manner
consistent with past practice or (D) dispositions of other immaterial
assets in the ordinary course of business and in a manner consistent with
past practice;
(viii) Make any loans, advances or capital contributions to, or
investments in, any other Person, other than employee advances for travel,
business and entertainment expenses made in the ordinary course of business
consistent with past practices provided such employee loans are in
compliance with applicable law;
(ix) Except as required by GAAP or the SEC as concurred in by its
independent auditors, make any material change in its methods or principles
of accounting since the date of the Company Balance Sheet;
(x) Make or change any material Tax election or adopt or change any
accounting method, enter into any closing agreement, settle or compromise
any claim or assessment in respect of Taxes or consent to any extension or
waiver of any limitation period with respect to any claim or assessment for
Taxes;
(xi) Except as required by GAAP or the SEC (and upon consultation with
its independent auditors), revalue any of its assets or make any change in
accounting methods, principles or practices;
(xii) (A) Pay, discharge, settle or satisfy any claims (including any
Tax claim), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), or litigation (whether or not
commenced prior to the date of this Agreement) other than the payment,
discharge, settlement or satisfaction for money, of claims, liabilities,
obligations or litigation (x) in the ordinary course of business consistent
with past practice or in accordance with their terms, of claims not in
excess of $100,000 individually or $500,000 in the aggregate or (y) to the
extent subject to reserves on the Company Financials existing as of the
date hereof in accordance with GAAP, or (B) waive the benefits of, agree to
modify in any manner, terminate, release any person from or knowingly fail
to enforce any confidentiality or similar agreement to which Company or any
of its Subsidiaries is a party or of which Company or any of its
Subsidiaries is a beneficiary;
(xiii) Except as required by applicable law and disclosed in writing
to Parent, take any of the following actions: (1) increase in any manner
(including by means of acceleration of payment) the amount of salary, cash
bonus, compensation or fringe benefits of, or pay any bonus to or ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ or termination pay to any Employee or director of the Company or
any Subsidiary of the Company, (2) make any increase in or commitment to
increase any Company Benefit Plan (including any severance plan), adopt or
amend or make any commitment to adopt or amend any Company Benefit Plan, or
make any contribution to any Company Benefit Plan, other than (x) regularly
scheduled contributions to a Company Benefit Plan or (y) an increase in the
number of shares of Company Common Stock authorized for issuance under the
Company Purchase Plan from an aggregate of 349,968 shares (which shares
have been issued prior to the date of this Agreement) to an aggregate of
700,000 shares, (3) waive any stock repurchase rights, accelerate (other
than by operation of the terms of
34
the respective agreement or the Company Purchase Plan as in effect on the
date hereof), amend or change the period of exercisability (other than by
operation of the terms of the respective agreement or the Company Purchase
Plan as in effect on the date hereof) of Company Options or Company
Restricted Stock, or reprice any Company Options or authorize cash payments
in exchange for any Company Options, (4) enter into any employment,
severance, termination or indemnification agreement with any Company
Employee or enter into any collective bargaining agreement (other than
offer letters and letter agreements entered into in the ordinary course of
business consistent with past practice with employees who are terminable
"at will"), (5) make any material oral or written representation or
commitment with respect to any material aspect of any Company Benefit Plan
that is not materially in accordance with the existing written terms and
provision of such Company Benefit Plan, (6) grant any stock appreciation
right, phantom stock award, stock-related award or performance award
(whether payable in cash, shares or otherwise) to any Person (including any
Company Employee), or (7) enter into any agreement with any Company
Employee the benefits of which are (in whole or in part) contingent or the
terms of which are materially altered in favor of the Company Employee upon
the occurrence of a transaction involving Company of the nature
contemplated hereby; provided, however, that the Company shall not be
prohibited from increasing the compensation of Company Employees in the
ordinary course of business consistent with past practice to the extent
such increases are consistent with plans and forecasts that have been
previously provided to, and agreed with by, Parent.
(xiv) Grant any exclusive rights with respect to any Intellectual
Property of such party;
(xv) Enter into or renew any Contracts containing, or otherwise
subject the Surviving Corporation or Parent to, any non-competition,
exclusivity or other material restrictions on the Company or the Surviving
Corporation or Parent, or any of their respective businesses, following the
Closing;
(xvi) Enter into any agreement or commitment the effect of which would
be to grant to a third party following the Merger any actual or potential
right of license to any Intellectual Property owned by Parent or any of its
Subsidiaries (other than the Surviving Corporation);
(xvii) Engage in any action that could reasonably be expected to cause
the Merger to fail to qualify as a "reorganization" under Section 368(a) of
the Code;
(xviii) Hire or offer to hire employees, other than: (i) up to ten
(10) new employees below the level of vice president hired to replace up to
ten (10) existing employees of the Company who leave the Company's employ
after the date hereof ("REPLACEMENT NEW HIRES"), provided however that the
hiring of Replacement New Hires shall not increase the then-current number
of existing employees of the Company; or (ii) additional new employees
hired to provide professional services on behalf of the Company with a view
toward building revenues, consistent with the Company operating plan
provided to Parent ("PROFESSIONAL SERVICES NEW HIRES" and together with the
Replacement New Hires, "ALLOWABLE NEW HIRES"), provided however that the
hiring of Professional Services New Hires shall not increase the current
number of existing professional services employees of the Company by more
than twelve (12) professional services employees, on a net basis as to
professional services employees; provided, further, that the Company shall
consult with Parent prior to hiring any Allowable New Hire; provided,
further, that this obligation to consult shall not, in any manner
whatsoever, be construed or implied to require the Company to obtain the
consent of Parent in connection with the hiring of any Allowable New Hire;
(xix) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
the Company or any of its Subsidiaries, guarantee any debt securities of
another Person, enter into any "keep well" or other agreement to maintain
any financial statement condition of any other Person or enter into any
arrangement having the economic effect of any of the foregoing;
(xx) Make any individual or series of related payments outside of the
ordinary course of business or make or commit to make capital expenditures
beyond those contained in the Company's capital
35
expenditure budget in effect on the date hereof, a copy of which is
attached hereto as Schedule 4.1(b)(xx);
(xxi) Enter into, modify or amend in a manner adverse in any material
respect to the Company, or terminate any lease, sublease or Company
Material Contract, or waive, release or assign any material rights or
claims thereunder, in each case, in a manner adverse in any material
respect to the Company, other than entering into any new, or any
modification, amendment or termination of any existing, Company Material
Contract in the ordinary course of business, consistent with past practice;
(xxii) Permit Employees to exercise their Company Options with a
promissory note or through a net exercise;
(xxiii) Enter into any Contract requiring the Company or any of its
Subsidiaries to pay in excess of an aggregate of $250,000 or
(xxiv) Agree in writing or otherwise to take any of the actions
described in (i) through (xxiii) above.
4.2 Conduct of Business by Parent.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, except as permitted by the terms of this Agreement, without the
prior written consent of the Company, Parent shall not (i) cause, permit or
propose any amendments to the Parent Charter Documents or any of the Subsidiary
Charter Documents of the Parent's Significant Subsidiaries that would materially
impair or adversely affect the ability of Parent to consummate the transactions
contemplated by this Agreement; (ii) declare, set aside or pay any dividends on
or make any other distributions (whether in cash, stock, equity securities or
property) in respect of any Parent capital stock unless the Exchange Ratio shall
be appropriately adjusted; (iii) adopt a plan of liquidation or dissolution;
(iv) purchase, redeem or otherwise acquire, directly or indirectly, shares of
its capital stock or the capital stock of its Subsidiaries for an aggregate
repurchase price in excess of $10,000,000, except repurchases of unvested shares
at cost in connection with the termination of the employment relationship with
any employee pursuant to stock option or purchase agreements in effect on the
date hereof; (v) acquire any Person if such acquisition is likely to delay the
Merger; (vi) except as required by GAAP or the SEC (and upon consultation with
its independent auditors), revalue any of its assets or make any change in
accounting methods, principles or practices; or (vii) adopt any resolution
pursuant to Section 3(c) of the Parent Rights Agreement that is intended to
treat the shares of Parent Common Stock issued pursuant to the Merger
differently under the Parent Rights Agreement than other outstanding shares of
Parent Common Stock for purposes of the issuance of Parent Rights in respect of
such shares of Parent Common Stock; provided, however, that nothing in this
clause (vii) shall in any manner whatsoever limit the ability of Parent to treat
differently under the Parents Rights Agreement shares of Parent Common Stock
beneficially owned by an "Acquiring Person," as such term is defined in the
Parent Rights Agreement. During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Parent shall consult with the Company prior to:
(A) granting any exclusive rights with respect to any Intellectual Property of
Parent or any of its Subsidiaries, (B) entering into any settlement agreement
obligating Parent or any of its Subsidiaries to make cash payments in excess of
$100,000 individually or $1,000,000 in the aggregate in settlement of claims
with respect to the Intellectual Property of Parent or any of its Subsidiaries,
or (C) entering into any agreement or commitment the effect of which would be to
grant to a third party following the Merger a right to use any material
Intellectual Property owned by the Company; provided, however, that this
obligation to consult shall not, in any manner whatsoever, be construed or
implied to require Parent to obtain the consent of the Company in connection
with the actions set forth in clause (A), (B) or (C) of this sentence.
36
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Prospectus/Proxy Statement; Registration Statement. As promptly as
practicable after the execution of this Agreement, Parent and the Company will
prepare and file with the SEC the Prospectus/Proxy Statement, and Parent will
prepare and file with the SEC the Registration Statement in which the
Prospectus/Proxy Statement is to be included as a prospectus. Parent and the
Company will provide each other with any information which may be required in
order to effectuate the preparation and filing of the Prospectus/Proxy Statement
and the Registration Statement pursuant to this Section 5.1. Each of Parent and
the Company will respond to any comments from the SEC, will use all commercially
reasonable efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as practicable after such filing and to
keep the Registration Statement effective as long as is necessary to consummate
the Merger and the transactions contemplated hereby. Each of Parent and the
Company will notify the other promptly upon the receipt of any comments from the
SEC or its staff in connection with the filing of, or amendments or supplements
to, the Registration Statement and/or the Prospectus/Proxy Statement. Whenever
any event occurs which is required to be set forth in an amendment or supplement
to the Prospectus/Proxy Statement and/or the Registration Statement, Parent or
the Company, as the case may be, will promptly inform the other of such
occurrence and cooperate in filing with the SEC or its staff, and/or mailing to
stockholders of Parent and/or the Company, such amendment or supplement. Each of
Parent and the Company shall cooperate and provide the other (and its counsel)
with a reasonable opportunity to review and comment on any amendment or
supplement to the Registration Statement and Prospectus/Proxy Statement prior to
filing such with the SEC, and will provide each other with a copy of all such
filings made with the SEC. Each of Parent and the Company will cause the
Prospectus/Proxy Statement to be mailed to its respective stockholders at the
earliest practicable time after the Registration Statement is declared effective
by the SEC. Parent shall also use all commercially reasonable efforts to take
any action required to be taken by it under any applicable state securities laws
in connection with the issuance of Parent Common Stock pursuant to the Merger
and the conversion of the Company Options into options to acquire Parent Common
Stock, and the Company shall furnish any information concerning the Company and
the holders of the Company Common Stock and the Company Options as may be
reasonably requested in connection with any such action.
5.2 Meetings of Stockholders; Board Recommendation.
(a) Company Stockholders' Meeting. Promptly after the Registration
Statement is declared effective under the Securities Act, the Company will take
all action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to call, hold and convene a meeting of its stockholders
to consider the adoption and approval of this Agreement and approval of the
Merger (the "COMPANY STOCKHOLDERS' MEETING") to be held as promptly as
practicable (without limitation, within 60 days, if practicable) after the
declaration of effectiveness of the Registration Statement. The Company will use
all commercially reasonable efforts to hold the Company Stockholders' Meeting on
the same date as the Parent Stockholders' Meeting (as defined below). The
Company will use all commercially reasonable efforts to solicit from its
stockholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger, and will take all other action necessary or
advisable to secure the vote or consent of its stockholders required by the
rules of Nasdaq or Delaware Law to obtain such approvals; provided, however,
that the taking of any action allowed by Section 5.2(c) shall not be deemed to
be a breach or failure of performance under this Section 5.2(a). Notwithstanding
anything to the contrary contained in this Agreement, the Company may adjourn or
postpone the Company Stockholders' Meeting to the extent necessary to ensure
that any necessary supplement or amendment to the Prospectus/Proxy Statement is
provided to its stockholders in advance of a vote on the Merger and this
Agreement or, if as of the time for which the Company Stockholders' Meeting is
originally scheduled (as set forth in the Prospectus/Proxy Statement) there are
insufficient shares of Common Stock of Company represented (either in person or
by proxy) to constitute a quorum necessary to conduct the business of such
Company Stockholders' Meeting. The Company shall ensure that the calling,
notice, convening and conduct of the Company Stockholders' Meeting, and that all
proxies solicited by it in connection with the
37
Company Stockholders' Meeting, are solicited and done in compliance with
Delaware Law, its Certificate of Incorporation and Bylaws, the rules of Nasdaq
and all other applicable Legal Requirements.
(b) Parent Stockholders' Meeting. Promptly after the Registration
Statement is declared effective under the Securities Act, Parent will take all
action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to call, hold and convene a meeting of its stockholders
to consider the Stock Issuance (the "PARENT STOCKHOLDERS' MEETING") to be held
as promptly as practicable (without limitation, within 60 days, if practicable)
after the declaration of effectiveness of the Registration Statement. Parent
will use all commercially reasonable efforts to hold the Parent Stockholders'
Meeting on the same date as the Company Stockholders' Meeting. Parent will use
all commercially reasonable efforts to solicit from its stockholders proxies in
favor of the Stock Issuance and will take all other action necessary or
advisable to secure the vote or consent of its stockholders required by the
rules of Nasdaq or Delaware Law to obtain such approvals. Notwithstanding
anything to the contrary contained in this Agreement, Parent may adjourn or
postpone the Parent Stockholders' Meeting to the extent necessary to ensure that
any necessary supplement or amendment to the Prospectus/Proxy Statement is
provided to its stockholders in advance of a vote on the Stock Issuance or, if
as of the time for which the Parent Stockholders' Meeting is originally
scheduled (as set forth in the Prospectus/Proxy Statement) there are
insufficient shares of Common Stock of Parent represented (either in person or
by proxy) to constitute a quorum necessary to conduct the business of such
Parent Stockholders' Meeting. Parent shall ensure that the calling, notice,
convening and conduct of the Parent Stockholders' Meeting, and that all proxies
solicited by it in connection with the Parent Stockholders' Meeting, are
solicited and done in compliance with Delaware Law, its Certificate of
Incorporation and Bylaws, the rules of Nasdaq and all other applicable Legal
Requirements.
(c) Company Board Recommendation. (i) The Board of Directors of the
Company shall recommend that the stockholders of the Company vote in favor of
the adoption and approval of this Agreement and approval of the Merger at the
Company Stockholders' Meeting, (ii) the Prospectus/Proxy Statement shall include
a statement to the effect that the Board of Directors of the Company has
recommended that the Company's stockholders vote in favor of adoption and
approval of this Agreement and approval of the Merger at the Company
Stockholders' Meeting, and (iii) neither the Board of Directors of the Company
nor any committee thereof shall withdraw, amend or modify, or propose or resolve
to withdraw, amend or modify in a manner adverse to Parent, the recommendation
of its Board of Directors that the stockholders of the Company vote in favor of
the adoption and approval of this Agreement and the Merger; provided, however,
that the foregoing shall not prohibit the Board of Directors of the Company from
fulfilling its duty of candor or disclosure to the Company's stockholders under
applicable law. Notwithstanding the foregoing, the Board of Directors of the
Company may withhold, withdraw, amend or modify its recommendation in favor of
this Agreement and the Merger to the extent (and only to the extent) expressly
permitted by Section 5.3(d).
(d) Parent Board Recommendation. (i) The Board of Directors of Parent
shall recommend that the stockholders of Parent vote in favor of the Stock
Issuance at the Parent Stockholders' Meeting, (ii) the Prospectus/Proxy
Statement shall include a statement to the effect that the Board of Directors of
Parent has recommended that Parent's stockholders vote in favor of the Stock
Issuance at the Parent Stockholders' Meeting, and (iii) neither the Board of
Directors of Parent nor any committee thereof shall withdraw, amend or modify,
or propose or resolve to withdraw, amend or modify in a manner adverse to the
Company, the recommendation of its Board of Directors that the stockholders of
Parent vote in favor of the Stock Issuance; provided, however, that the
foregoing shall not prohibit the Board of Directors of Parent from fulfilling
its duty of candor or disclosure to Parent stockholders under applicable law.
5.3 Acquisition Proposals.
(a) No Solicitation. The Company agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall use all commercially reasonable efforts to cause its
and its Subsidiaries' Employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to (and shall not authorize any of them to) directly or
indirectly: (i) solicit or initiate, or knowingly encourage, facilitate or
induce, the making, submission or announcement of any Acquisition Proposal (as
defined in Section 5.3(g)(i)), (ii) participate in
38
any discussions or negotiations regarding, or furnish to any person any
nonpublic information with respect to, or take any other action to knowingly
encourage, facilitate or induce any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, any Acquisition Proposal,
(iii) engage in discussions with any person with respect to any Acquisition
Proposal, except as to the existence of these provisions, (iv) approve, endorse
or recommend any Acquisition Proposal (except to the extent specifically
permitted pursuant to Section 5.3(d)), or (v) enter into any letter of intent or
similar document or any contract, agreement or commitment contemplating or
otherwise relating to any Acquisition Proposal or transaction contemplated
thereby. The Company and its Subsidiaries will each immediately cease any and
all existing activities, discussions or negotiations with any third parties
conducted heretofore with respect to any Acquisition Proposal.
(b) Notification of Unsolicited Acquisition Proposals. As promptly as
practicable after receipt of any (i) Acquisition Proposal; (ii) request for
nonpublic information; or (iii) inquiry from a third party regarding the making
of an Acquisition Proposal, or regarding whether the Company would be amenable
to the making of an Acquisition Proposal or as to the manner in which such third
party could proceed with the making of an Acquisition Proposal, the Company
shall provide Parent with oral and written notice of the material terms and
conditions of such Acquisition Proposal, request or inquiry, and the identity of
the person or group making any such Acquisition Proposal, request or inquiry and
a copy of all such written Acquisition Proposals, requests or inquiries. The
Company shall (x) provide Parent as promptly as practicable oral and written
notice setting forth reasonable details of any material amendments or proposed
material amendments of any such Acquisition Proposal, request or inquiry and
shall promptly provide to Parent a copy of all written materials subsequently
provided by the Company to such third party in connection with such Acquisition
Proposal, request or inquiry, and (y) keep Parent informed, on a current basis,
of all material developments with respect to the status of any negotiations or
related discussions in connection with such Acquisition Proposal.
(c) Superior Offers. Notwithstanding anything to the contrary contained in
Section 5.3(a), in the event that the Company receives an unsolicited, bona fide
written Acquisition Proposal from a third party that its Board of Directors has
in good faith concluded (following consultation with its outside legal counsel
and its financial advisor), is, or is reasonably likely to result in, a Superior
Offer (as defined in Section 5.3(g)(ii)), it may then take the following actions
(but only if and to the extent that its Board of Directors concludes in good
faith, following consultation with its outside legal counsel, that such actions
are required in order for the Board of Directors to comply with its fiduciary
obligations under applicable law):
(i) Furnish nonpublic information to the third party making such
Acquisition Proposal, provided that (A) (1) concurrently with furnishing
any such nonpublic information to such party, it gives Parent written
notice of its intention to furnish nonpublic information and (2) it
receives from the third party an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such third party on its behalf,
the terms of which are at least as restrictive as the terms contained in
the Confidentiality Agreement (as defined in Section 5.4(a)), it being
understood that such confidentiality agreement and any related agreements
shall not include any provision calling for any exclusive right to
negotiate with such party or having the effect of prohibiting the Company
from satisfying its obligations hereunder and (B) contemporaneously with
furnishing any such nonpublic information to such third party, it furnishes
such nonpublic information to Parent (to the extent such nonpublic
information has not been previously so furnished), together with a complete
list identifying all nonpublic information furnished to such third party;
and
(ii) Engage in negotiations with the third party with respect to the
Acquisition Proposal, provided that concurrently with entering into
negotiations with such third party, it gives Parent written notice of its
intention to enter into negotiations with such third party and (x) provides
Parent as promptly as practicable oral and written notice setting forth
reasonable details of any material amendments or proposed material
amendments of such Acquisition Proposal and promptly provides to Parent a
copy of all written materials subsequently provided by the Company to such
third party in connection with such Acquisition Proposal, and (y) continues
to keep Parent informed, on a current basis, of all material developments
with respect to the status of any such negotiations or related discussions.
39
(d) Changes of Recommendation. In response to the receipt of an
Acquisition Proposal, the Company Board of Directors may withhold, withdraw,
amend or modify its recommendation in favor of the Merger, and, in the case of a
Superior Offer that is a tender or exchange offer made directly to its
stockholders, may recommend that its stockholders accept the tender or exchange
offer (any of the foregoing actions, whether by the Company Board of Directors
or a committee thereof, a "CHANGE OF RECOMMENDATION"), if all of the following
conditions in clauses (i) through (v) are met:
(i) The Board of Directors determines, in good faith, that the
Acquisition Proposal constitutes a Superior Offer and such Acquisition
Proposal has been made and has not been withdrawn;
(ii) The Company Stockholders' Meeting has not occurred;
(iii) (A) The Company shall have delivered to Parent written notice (a
"CHANGE OF RECOMMENDATION NOTICE") at least three (3) business days prior
to effecting such Change of Recommendation, which notice shall state
expressly (1) that it has received an Acquisition Proposal which it has
determined is a Superior Offer and (2) that it intends to effect a Change
of Recommendation and the manner in which it intends or may intend to do
so; and (B) the Company and its Board of Directors shall have complied with
all obligations under Sections 5.3(a), (b) and (c) of this Agreement;
(iv) The Company Board of Directors has concluded in good faith, after
consultation with its outside legal counsel, that, in light of such
Superior Offer, such Change of Recommendation is required in order for the
Board of Directors to comply with its fiduciary obligations under
applicable law; and
(v) The Company shall not have breached any of the provisions set
forth in Section 5.2 or this Section 5.3.
During the three business day period set forth in Section 5.3(d)(iii)(A),
the Board of Directors of the Company shall provide Parent the opportunity to
make, and shall give due consideration to, adjustments to the terms and
conditions of this Agreement or the transactions contemplated hereby, and
alternative proposals in connection therewith.
(e) Continuing Obligation to Call, Hold and Convene Stockholders' Meeting;
No Other Vote. Notwithstanding anything to the contrary contained in this
Agreement, the obligation of the Company or Parent, as the case may be, to call,
give notice of, convene and hold its Stockholders' Meeting shall not be limited
or otherwise affected by the commencement, disclosure, announcement or
submission to it of any Acquisition Proposal, or by any Change of
Recommendation. The Company shall not submit to the vote of its stockholders any
Acquisition Proposal, or propose to do so.
(f) Compliance with Tender Offer Rules. Nothing contained in this
Agreement shall prohibit either the Company or Parent or their respective Boards
of Directors from taking and disclosing to their respective stockholders a
position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange
Act; provided that the content of any such disclosure thereunder shall be
governed by the terms of this Agreement. Without limiting the foregoing proviso,
the Company shall not effect a Change of Recommendation unless specifically
permitted pursuant to the terms of this Agreement. Nothing contained in this
Section 5.3(f) shall be interpreted to affect or otherwise qualify, limit or
modify in any way the definition of "Parent Triggering Event" set forth in
Section 7.1 hereof.
(g) Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(i) "ACQUISITION PROPOSAL" shall mean any offer or proposal, relating
to any transaction or series of related transactions involving: (A) any
purchase from such party or acquisition by any Person or "GROUP" (as
defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a fifteen percent (15%) interest in
the total outstanding voting securities of the Company or any of its
Subsidiaries or any tender offer or exchange offer that if consummated
would result in any person or group beneficially owning fifteen percent
(15%) or more of the total outstanding voting securities of the Company or
any of its Subsidiaries or any merger, consolidation, business combination
or similar transaction involving the Company or any of its Subsidiaries,
(B) any sale, lease (other than in the
40
ordinary course of business), exchange, transfer, license (other than in
the ordinary course of business), acquisition or disposition of assets of
the Company (including its Subsidiaries taken as a whole) representing more
than fifteen percent (15%) of the aggregate fair market value of the
Company's business immediately prior to such acquisition, or (C) any
liquidation or dissolution (or the adoption of a plan pertaining thereto)
of the Company or the declaration or payment of an extraordinary dividend
(whether in cash or other property); provided, however, the Merger and the
transactions contemplated hereby shall not be deemed an Acquisition
Proposal in any case; and
(ii) "SUPERIOR OFFER" shall mean an unsolicited, bona fide written
offer made by a third party to acquire, directly or indirectly, pursuant to
a tender offer, exchange offer, merger, consolidation or other business
combination, all or substantially all of the assets of the Company or all
of the outstanding voting securities of the Company and as a result of
which the stockholders of the Company immediately preceding such
transaction would hold less than fifty percent (50%) of the equity
interests in the surviving or resulting entity of such transaction or any
direct or indirect parent or Subsidiary thereof, on terms that the Company
Board of Directors has in good faith concluded (following consultation with
its outside legal counsel and its financial adviser), taking into account,
among other things, all legal, financial, regulatory and other aspects of
the offer and the Person making the offer, to be more favorable to the
Company's stockholders (in their capacities as stockholders) than the terms
of the Merger and is reasonably capable of being consummated.
5.4 Confidentiality; Access to Information; No Modification of
Representations, Warranties or Covenants.
(a) Confidentiality. The parties acknowledge that the Company and Parent
have previously executed a Confidentiality Agreement dated November 19, 2002
(the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will continue
in full force and effect in accordance with its terms and each of Parent and the
Company will hold, and will cause its respective directors, officers, Employees,
agents and advisors (including attorneys, accountants, consultants, bankers and
financial advisors) to hold, any Information (as defined in the Confidentiality
Agreement) confidential in accordance with the terms of the Confidentiality
Agreement. Notwithstanding the foregoing, the Company and Parent (and each
employee, representative, or other agent of such party) may disclose to any and
all persons, without limitation of any kind, the U.S. federal tax treatment and
tax structure of the transaction contemplated hereby and all materials of any
kind (including opinions or other tax analyses) that are provided to the Company
or Parent relating to such tax treatment and tax structure. For this purpose,
"tax structure" is limited to any facts relevant to the U.S. federal income tax
treatment of the transaction.
(b) Access to Information. Each party will afford the other party's
accountants, counsel and other identified representatives (the "DESIGNATED
REPRESENTATIVES") reasonable access during normal business hours to its
properties, books, records and personnel during the period prior to the
Effective Time to obtain all reasonable information concerning its business as
may be reasonably requested, consistent with those certain Non-Disclosure
Agreements entered into by and among Parent, the Company and certain of the
Designated Representatives; provided, however, that the parties may restrict the
foregoing access to the extent that any law, treaty, rule or regulation of any
Governmental Entity applicable to a party requires such party or its
Subsidiaries to restrict or prohibit access to any such properties or
information.
(c) No Modification of Representations and Warranties or Covenants. No
information or knowledge obtained in any investigation or notification pursuant
to this Section 5.4, Section 5.6 or Section 5.7 shall affect or be deemed to
modify any representation or warranty contained herein, the covenants or
agreements of the parties hereto or the conditions to the obligations of the
parties hereto under this Agreement.
5.5 Public Disclosure. Without limiting any other provision of this
Agreement, Parent and the Company will consult with each other before issuing,
and provide each other the opportunity to review, comment upon and concur with,
and use all commercially reasonable efforts to agree on any press release or
public statement with respect to this Agreement and the transactions
contemplated hereby, including the Merger and any Acquisition Proposal, and will
not issue any such press release or make any such public statement prior to such
consultation and (to the extent practicable) agreement, except as may be
required by
41
law or any listing agreement with Nasdaq or any other applicable national or
regional securities exchange. The parties have agreed to the text of the joint
press release announcing the signing of this Agreement.
5.6 Regulatory Filings; Reasonable Efforts.
(a) Regulatory Filings. Each of Parent, Merger Sub and the Company shall
coordinate and cooperate with one another and shall each use all commercially
reasonable efforts to comply with, and shall each refrain from taking any action
that would impede compliance with, all Legal Requirements, and as promptly as
practicable after the date hereof, each of Parent, Merger Sub and the Company
shall make all filings, notices, petitions, statements, registrations,
submissions of information, application or submission of other documents
required by any Governmental Entity in connection with the Merger and the
transactions contemplated hereby, including, without limitation: (i)
Notification and Report Forms with the United States Federal Trade Commission
(the "FTC") and the Antitrust Division of the United States Department of
Justice ("DOJ") as required by the HSR Act, (ii) any other filing necessary to
obtain any Necessary Consent, (iii) filings under any other comparable
pre-merger notification forms required by the merger notification or control
laws of any applicable jurisdiction, as agreed by the parties hereto, and (iv)
any filings required under the Securities Act, the Exchange Act, any applicable
state or securities or "blue sky" laws and the securities laws of any foreign
country, or any other Legal Requirement relating to the Merger. Each of Parent
and the Company will cause all documents that it is responsible for filing with
any Governmental Entity under this Section 5.6(a) to comply in all material
respects with all applicable Legal Requirements.
(b) Exchange of Information. Parent, Merger Sub and the Company each shall
promptly supply the other with any information that may be required in order to
effectuate any filings or application pursuant to Section 5.6(a). Except where
prohibited by applicable Legal Requirements, and subject to the Confidentiality
Agreement, each of the Company and Parent shall consult with the other prior to
taking a position with respect to any such filing, shall permit the other to
review and discuss in advance, and consider in good faith the views of the other
in connection with any analyses, appearances, presentations, memoranda, briefs,
white papers, arguments, opinions and proposals before making or submitting any
of the foregoing to any Governmental Entity by or on behalf of any party hereto
in connection with any investigations or proceedings in connection with this
Agreement or the transactions contemplated hereby (including under any antitrust
or fair trade Legal Requirement), coordinate with the other in preparing and
exchanging such information and promptly provide the other (and its counsel)
with copies of all filings, presentations or submissions (and a summary of any
oral presentations) made by such party with any Governmental Entity in
connection with this Agreement or the transactions contemplated hereby, provided
that with respect to any such filing, presentation or submission, each of Parent
and the Company need not supply the other (or its counsel) with copies (or in
case of oral presentations, a summary) to the extent that any law, treaty, rule
or regulation of any Governmental Entity applicable to such party requires such
party or its Subsidiaries to restrict or prohibit access to any such properties
or information. It is acknowledged and agreed by the parties hereto that, except
where prohibited by applicable Legal Requirements, Parent and the Company shall
mutually consult with each other on the strategy for dealing with the FTC, DOJ
or any other Governmental Authority with responsibility for reviewing the Merger
with respect to antitrust or competition issues; provided, however, in the event
Parent and the Company differ upon such strategy following such consultation,
Parent's strategy shall prevail and be cooperated with by the Company.
(c) Notification. Each of Parent, Merger Sub and the Company will notify
the other promptly upon the receipt of: (i) any comments from any officials of
any Governmental Entity in connection with any filings made pursuant hereto and
(ii) any request by any officials of any Governmental Entity for amendments or
supplements to any filings made pursuant to, or information provided to comply
in all material respects with, any Legal Requirements. Whenever any event occurs
that is required to be set forth in an amendment or supplement to any filing
made pursuant to Section 5.6(a), Parent, Merger Sub or the Company, as the case
may be, will promptly inform the other of such occurrence and cooperate in
filing with the applicable Governmental Entity such amendment or supplement.
(d) Reasonable Efforts. Subject to the express provisions of Section 5.2
and Section 5.3 hereof and upon the terms and subject to the conditions set
forth herein, each of the parties agrees to use all commercially
42
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using all commercially reasonable
efforts to accomplish the following: (i) the taking of all commercially
reasonable acts necessary to cause the conditions precedent set forth in Article
VI to be satisfied, (ii) the obtaining of all necessary actions or nonactions,
waivers, consents, approvals, orders and authorizations from Governmental
Entities and the making of all necessary registrations, declarations and filings
(including registrations, declarations and filings with Governmental Entities,
if any) and the taking of all commercially reasonable steps as may be necessary
to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, including all Necessary Consents, (iv) the defending
of any suits, claims, actions, investigations or proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (v) the execution or delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. In connection with and without
limiting the foregoing, the Company and its Board of Directors shall, if any
takeover statute or similar Legal Requirement is or becomes applicable to the
Merger, this Agreement or any of the transactions contemplated by this
Agreement, use all commercially reasonable efforts to ensure that the Merger and
the other transactions contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such Legal Requirement on the Merger, this
Agreement and the transactions contemplated hereby.
(e) Limitation on Divestiture. Notwithstanding anything in this Agreement
to the contrary, nothing contained in this Agreement shall be deemed to require
Parent or any Subsidiary or affiliate of Parent to agree to any Action of
Divestiture (as defined below). The Company shall not take or agree to take any
Action of Divestiture without the prior written consent of Parent. For purposes
of this Agreement, an "ACTION OF DIVESTITURE" shall mean (i) making proposals,
executing or carrying out agreements or submitting to Legal Requirements
providing for the license, sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories
of assets that are material to Parent, the Company or any of their respective
Subsidiaries or the holding separate of the Company capital stock or imposing or
seeking to impose any limitation on the ability of Parent, the Company or any of
their respective Subsidiaries, to conduct their respective businesses or own
such assets or to acquire, hold or exercise full rights of ownership of the
Company's business or (ii) otherwise taking any step to avoid or eliminate any
impediment which may be asserted under any Legal Requirement governing
competition, monopolies or restrictive trade practices.
5.7 Notification of Certain Matters.
(a) By the Company. The Company shall give prompt notice to Parent and
Merger Sub of any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate, or any failure of the Company to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Section 6.3(a) or 6.3(b) would not be
satisfied.
(b) By Parent. Parent and Merger Sub shall give prompt notice to the
Company of any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate, or any failure of Parent to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, such that
the conditions set forth in Section 6.2(a) or 6.2(b) would not be satisfied.
5.8 Third-Party Consents.
(a) Company Efforts. As soon as practicable following the date hereof, the
Company will use all commercially reasonable efforts to obtain any material
consents, waivers and approvals under any of its or its Subsidiaries' respective
Contracts required to be obtained in connection with the consummation of the
transactions contemplated hereby.
43
(b) Parent Efforts. As soon as practicable following the date hereof,
Parent will use all commercially reasonable efforts to obtain any material
consents, waivers and approvals under any of its or its Subsidiaries' respective
Contracts required to be obtained in connection with the consummation of the
transactions contemplated hereby.
5.9 Equity Awards and Employee Benefits; Company Warrants.
(a) Stock Plan; Company Options. Parent shall assume the Company's 2000
Employee, Director and Consultant Stock Plan at the Effective Time. Prior to the
Effective Time, the Company shall provide that each outstanding Company Option
shall accelerate and become fully vested, and to the extent not exercised prior
to the Effective Time shall terminate and be cancelled and shall not be assumed
by Parent. The Company shall take (or cause to be taken) all actions necessary
or appropriate to terminate, effective immediately prior to the Effective Time,
each Company Option, ensuring that no Company Employee (and no other person) has
any rights under such Company Options and that any liabilities of the Company
under such Company Options are fully extinguished at no cost to the Company. In
furtherance of the foregoing, the Company shall provide a notice to the
optionees informing them that the Company Options not exercised prior to the
Effective Time shall terminate immediately prior to the Effective Time, which
notice shall be provided to the optionees no later than thirty (30) days prior
to the Effective Time. The form and substance of such notice shall be subject to
advance review and approval of Parent, which approval will not be unreasonably
withheld.
(b) Termination of the Company's Stock Purchase Plan. Prior to the
Effective Time, the Company Purchase Plan shall be terminated. The rights of
participants in the Company Purchase Plan with respect to any offering period
then underway under such the Company Purchase Plan shall be determined by
treating the last business day prior to, or if more administratively advisable,
the last payroll date of the Company immediately prior to, the Effective Time,
as the last day of such offering period and by making such other pro-rata
adjustments as may be necessary to reflect the shortened offering period but
otherwise treating such shortened offering period as a fully effective and
completed offering period for all purposes under such Company Purchase Plan.
Prior to the Effective Time, the Company shall take all actions (including, if
appropriate, amending the terms of such Company Purchase Plan) that are
necessary to give effect to the transactions contemplated by this Section
5.9(b).
(c) Termination of 401(k) Plans. To the extent requested in writing by
Parent no later than five (5) business days prior to the Closing Date, the
Company shall take (or cause to be taken) all actions necessary or appropriate
to terminate, effective no later than the date immediately preceding the Closing
Date, any Company Employee Plan that contains a cash or deferred arrangement
intended to qualify under Section 401(k) of the Code (the "401(K) PLANS"). If
Parent provides such notice to the Company, Parent shall receive from the
Company, prior to the Effective Time, evidence that the Company's Board of
Directors has adopted resolutions to terminate the 401(k) Plans (the form and
substance of which resolutions shall be subject to review and approval of
Parent, which approval shall not be unreasonably withheld), effective no later
than the date immediately preceding the Closing Date.
(d) Employee Benefits. As soon as practicable after the Effective Time and
in any event within one year of the Effective Time, Parent shall use
commercially reasonable efforts to provide the employees of the Company and its
Subsidiaries who are employed by Parent or one of its Subsidiaries after the
Effective Time (the "CONTINUING EMPLOYEES") with similar types and levels of
employee benefits as those provided to similarly situated employees of Parent.
For purposes of determining eligibility to participate, vesting and entitlement
to benefits where length of service is relevant under any benefit plan or
arrangement (other than a defined benefit plan) of Parent and to the extent
permitted by applicable law, Parent shall provide that the Continuing Employees
shall receive service credit under Parent's benefit plans or arrangements for
their period of service with the Company and its Subsidiaries prior to the
Closing. Parent shall use commercially reasonable efforts to waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Continuing
Employees under any medical, dental and vision plans that such employees may be
eligible to participate in after the Closing Date, other than limitations or
waiting periods that would apply if such Continuing Employee had been employed
by
44
Parent for the period of the Continuing Employee's employment with the Company
or one of its Subsidiaries; provided that with respect to those employees for
whom such limitations and waiting periods cannot be waived, Parent shall use
commercially reasonable efforts to provide such employees with the opportunity
to retain any affected coverage they had under the Company Employee Plans.
Subject to Parent receiving sufficient information to comply with the following,
Parent shall also use its commercially reasonable efforts to provide Continuing
Employees and their eligible dependents with credit for any co-payments and
deductibles paid under Company's medical plans for the year in which the Closing
occurs under Parent's medical plans for the purposes of satisfying any
applicable co-payments and deductibles in the year in which the Closing occurs.
Prior to the time that the provisions of the first sentence of this paragraph
are satisfied, Parent or one of its Subsidiaries may continue one or more of the
Company Employee Plans; provided the employee benefits provided would, in the
aggregate, in the reasonable judgment of Parent, be no less favorable than those
provided under the Company Employee Plans (not including those provided under
individual agreements). Parent shall provide to the individual employees set
forth in Section 5.9(d) of the Parent Disclosure Letter the employee benefits
described therein as applicable to such individual employee
(e) Company Warrants. At the Effective Time, each outstanding Company
Warrant shall, in connection with the Merger, be automatically assumed by Parent
in accordance with the terms of the applicable Company Warrant. After the
Effective Time, each Company Warrant shall be exercisable upon the same terms
and conditions as were applicable to such Company Warrant immediately prior to
the Effective Time, except that each such Company Warrant shall, following the
Effective Time, become exercisable for that number of shares of Parent Common
Stock equal to the number of shares of Company Common Stock issuable upon
exercise of such Company Warrant multiplied by the Exchange Ratio and at an
exercise price per share equal to the exercise price per share of Company Common
Stock under such Company Warrant divided by the Exchange Ratio. Parent shall
take all corporate actions necessary to assume the Company Warrants and to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery following the exercise of the Company Warrants. The Company will
provide notice required under the terms of any Company Warrant to the holder of
such Company Warrant in connection with the Merger.
5.10 Form S-8. Parent agrees to file a registration statement on Form S-8
for the shares of Parent Common Stock issuable with respect to assumed Company
Options to the extent Form S-8 is available as soon as is reasonably practicable
after the Effective Time and shall maintain the effectiveness of such
registration statement thereafter for so long as any of such options or other
rights remain outstanding.
5.11 Indemnification.
(a) Indemnity. From and after the Effective Time, Parent will, and will
cause the Surviving Corporation to, fulfill and honor in all respects the
obligations of the Company pursuant to the Certificate of Incorporation and
Bylaws of the Company as in effect on the date hereof, with respect to the
Company's directors and officers (the "INDEMNIFIED PARTIES"), subject to
applicable law. The Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain provisions with respect to exculpation, advancement of
expenses and indemnification that are at least as favorable to the Indemnified
Parties as those contained in the Certificate of Incorporation and Bylaws of the
Company as in effect on the date hereof, which provisions will not be amended,
repealed or otherwise modified for a period of six (6) years from the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who, immediately prior to the Effective Time, were directors,
officers, Employees or agents of the Company, unless such modification is
required by law.
(b) Insurance. For a period of three (3) years after the Effective Time,
Parent will cause the Surviving Corporation to maintain directors' and officers'
liability insurance covering those persons who are covered by the Company's
directors' and officers' liability insurance policy as of the date hereof, on
terms comparable to those applicable as of the date hereof to the current
directors and officers of Parent (i.e., with policy coverage of $10,000,000).
(c) Third-Party Beneficiaries. This Section 5.11 is intended to be for the
benefit of, and shall be enforceable by the Indemnified Parties and their heirs
and personal representatives and shall be binding on Parent and the Surviving
Corporation and its successors and assigns. In the event Parent or the Surviving
45
Corporation or its successor or assign (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
in such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any Person, then, and in each case, proper
provision shall be made so that the successor and assign of Parent or the
Surviving Corporation, as the case may be, honor the obligations set forth with
respect to Parent or the Surviving Corporation, as the case may be, in this
Section 5.11.
5.12 Nasdaq Listing. Prior to the Effective Time, Parent agrees to use all
commercially reasonable efforts to authorize for listing on Nasdaq the shares of
Parent Common Stock issuable, and those required to be reserved for issuance, in
connection with the Merger, subject to official notice of issuance.
5.13 Company Affiliates; Restrictive Legend. The Company will use all
commercially reasonable efforts to deliver or cause to be delivered to Parent,
as promptly as practicable on or following the date hereof, from each person who
may reasonably be deemed to be an affiliate of the Company for purposes of Rule
145 promulgated under the Securities Act an executed affiliate agreement
pursuant to which such affiliate shall agree to be bound by the provision of
Rule 145 promulgated under the Securities Act in a form provided by Parent and
reasonably acceptable to the Company. Parent will give stop transfer
instructions to its transfer agent with respect to any Parent Common Stock
received pursuant to the Merger by any stockholder of the Company who may
reasonably be deemed to be an affiliate of the Company for purposes of Rule 145
promulgated under the Securities Act and there will be placed on the
certificates representing such Parent Common Stock, or any substitutions
therefor, a legend stating in substance that the shares were issued in a
transaction to which Rule 145 promulgated under the Securities Act applies and
may only be transferred (i) in conformity with Rule 145 or (ii) in accordance
with a written opinion of counsel, reasonably acceptable to Parent, in form and
substance that such transfer is exempt from registration under the Securities
Act.
5.14 Treatment as Reorganization. None of Parent, Merger Sub or the
Company shall, and they shall not permit any of their respective Subsidiaries
to, take any action prior to or following the Closing that would reasonably be
expected to cause the Merger to fail to qualify as a reorganization with the
meaning of Section 368(a) of the Code.
5.15 Section 16 Matters. Prior to the Effective Time, (i) the Company
shall take all such steps as may be required to cause any dispositions of the
Company Common Stock (including derivative securities with respect to the
Company Common Stock) resulting from the transactions contemplated by Article I
of this Agreement by each individual who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to the Company to
be exempt under Rule 16b-3 promulgated under the Exchange Act, and (ii) Parent
shall take all such steps as may be required to cause any acquisitions of Parent
Common Stock (including associated Parent Rights and derivative securities with
respect to Parent Common Stock) resulting from the transactions contemplated by
Article I of this Agreement by each individual who will, as a result of the
transactions contemplated by Article I of this Agreement, be subject to the
reporting requirements of Section 16(a) of the Exchange Act with respect to
Parent to be exempt under Rule 16b-3 promulgated under the Exchange Act.
5.16 Merger Sub Compliance. Parent shall cause Merger Sub to comply with
all of Merger Sub's obligations under or relating to this Agreement. Merger Sub
shall not engage in any business which is not in connection with the merger with
and into the Company pursuant to this Agreement.
5.17 Board of Directors. The Board of Directors of Parent shall take all
actions necessary such that effective as of immediately following the Effective
Time, the Board of Directors of Parent shall be comprised of 8 directors, and
shall include three (3) directors designated by the Company, who shall initially
be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and two other directors reasonably acceptable to Parent
(the "COMPANY DESIGNATED DIRECTORS"). If any of the above named Company
Designated Directors is unable or unavailable to serve as a director of Parent
at the Effective Time, then the Company shall be entitled to designate another
Person to serve as a Company Designated Director, as long as such alternate
Person serves as a director on the Board of Directors of the Company on the date
hereof and is reasonably acceptable to Parent.
46
5.18 Comfort Letter. The Company shall use all commercially reasonable
efforts to cause its independent public accountants to deliver a letter dated
not more than five (5) days prior to the date on which the Registration
Statement shall become effective and addressed to itself and Parent and their
respective Boards of Directors in form and substance reasonably satisfactory to
Parent and customary in scope and substance for agreed-upon procedures letters
delivered by independent public accountants in connection with registration
statements and prospectus/proxy statements similar to the Registration Statement
and the Prospectus/Proxy Statement.
5.19 Agreements with Respect to Salary. Except as set forth in Section
5.19 of the Company Disclosure Letter, if the Company has taken any action prior
to the date hereof to (i) increase in any manner the salary, cash bonus,
severance pay, termination pay or other cash compensation of any Company
Employee ("CASH COMPENSATION"), or (ii) accelerate in any manner the payment of
any Cash Compensation to any Company Employee, which increase or acceleration
would take effect after the date of this Agreement, then the Company shall
rescind any such previously taken actions that provide for any such increases or
acceleration.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to the Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted, and the Merger shall have been duly approved, by the requisite
vote under applicable law, by the stockholders of the Company and the Stock
Issuance shall have been approved, by the requisite vote under the Nasdaq
Marketplace Rules, by the stockholders of Parent.
(b) No Order. No Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which (i) is in effect and (ii) has
the effect of making the Merger or the Stock Issuance illegal or otherwise
prohibiting consummation of the Merger or the Stock Issuance.
(c) Registration Statement Effective; Prospectus/Proxy Statement. The
SEC shall have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose, and no
similar proceeding in respect of the Prospectus/Proxy Statement, shall have
been initiated or threatened in writing by the SEC.
(d) HSR Act. All waiting periods (and any extension thereof) under
the HSR Act relating to the transactions contemplated hereby will have
expired or terminated early. All other material foreign antitrust approvals
required to be obtained prior to the Merger in connection with the
transactions contemplated hereby shall have been obtained.
(e) No Governmental Restriction. There shall not be any pending or
overtly threatened suit, action or proceeding asserted by any Governmental
Authority (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by
this Agreement, the effect of which restraint or prohibition if obtained
would cause the condition set forth in Section 6.1(b) to not be satisfied
or (ii) seeking to require Parent or the Company or any Subsidiary or
affiliate to effect an Action of Divestiture.
(f) Tax Opinions. Parent and the Company shall each have received
written opinions from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional
Corporation and ▇▇▇▇ and ▇▇▇▇ LLP, respectively, in form and substance
reasonably satisfactory to them, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code and such opinions shall not have been withdrawn; provided, however,
that if the counsel to either Parent or the Company does not render such
opinion, this
47
condition shall nonetheless be deemed to be satisfied with respect to such
party if counsel to the other party renders the opinion to such party that
the Merger will constitute a tax-free reorganization within the meaning of
Section 368(a) of the Code. Parent and the Company shall deliver to tax
counsel, and tax counsel shall be entitled to rely upon, reasonable and
customary tax representations in connection with rendering such opinions
substantially in the form attached as Appendix 6.1(f) to each of the
Company Disclosure Letter and the Parent Disclosure Letter.
(g) Nasdaq Listing. The shares of Parent Common Stock to be issued
pursuant to the Merger and the transactions contemplated hereby shall have
been authorized for listing on Nasdaq, subject to official notice of
issuance.
6.2 Additional Conditions to the Obligations of the Company. The
obligation of the Company to consummate and effect the Merger shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be
true and correct on the date hereof and as of the Closing Date with the
same force and effect as if made on the Closing Date (except that those
representations and warranties which address matters only as of a
particular date shall have been true and correct only on such date),
except, in each case, or in the aggregate, as does not constitute a
Material Adverse Effect on Parent at the Closing Date (it being understood
that, (i) for purposes of determining the accuracy of such representations
and warranties, any update of or modification to the Parent Disclosure
Letter made or purported to have been made after the execution of this
Agreement shall be disregarded; and (ii) for purposes of determining
whether the inaccuracy of such representations and warranties constitutes,
in each case or in the aggregate, a Material Adverse Effect on Parent at
the Closing Date, any references in such representations and warranties to
materiality, whether by reference to the words "material," Material Adverse
Effect" or otherwise, shall be disregarded). The Company shall have
received a certificate with respect to the foregoing signed on behalf of
Parent, with respect to the representations and warranties of Parent, by an
authorized executive officer of Parent and a certificate with respect to
the foregoing signed on behalf of Merger Sub, with respect to the
representations and warranties of Merger Sub, by an authorized officer of
Merger Sub.
(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 it
on or prior to the Closing Date, and the Company shall have received a
certificate with respect to the foregoing signed on behalf of Parent, with
respect to the covenants of Parent, by an authorized executive officer of
Parent and a certificate with respect to the foregoing signed on behalf of
Merger Sub, with respect to the covenants of Merger Sub, by an authorized
officer of Merger Sub.
(c) Material Adverse Effect. No Material Adverse Effect on Parent
shall have occurred since the date hereof and be continuing.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent and Merger Sub:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and
correct on the date hereof and as of the Closing Date with the same force
and effect as if made on the Closing Date (except that those
representations and warranties which address matters only as of a
particular date shall have been true and correct only on such date),
except, in each case, or in the aggregate, as does not constitute a
Material Adverse Effect on the Company at the Closing Date (it being
understood that, (i) for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the
Company Disclosure Letter made or purported to have been made after the
execution of this Agreement shall be disregarded; and (ii) for purposes of
determining whether the inaccuracy of such representations and warranties
48
constitutes, in each case or in the aggregate, a Material Adverse Effect on
the Company at the Closing Date, any references in such representations and
warranties to materiality, whether by reference to the words "material,"
Material Adverse Effect" or otherwise, shall be disregarded). Parent and
Merger Sub shall have received a certificate with respect to the foregoing
signed on behalf of the Company by an authorized executive officer of the
Company.
(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 to such effect signed on behalf of the Company by an authorized
executive officer of the Company.
(c) Material Adverse Effect. No Material Adverse Effect on the
Company shall have occurred since the date hereof and be continuing.
(d) Non-Competition Agreements. Each Non-Competition Agreement
entered into by and between the Company and (except as set forth in Section
2.20 of the Company Disclosure Letter) each Company Employee shall not have
been modified or amended since the date hereof, and shall be enforceable by
each of the Company and Parent immediately following the Merger to the full
extent enforceable by the Company immediately prior to the Merger.
(e) Material Consents. All third party consents, permits and
approvals listed in Section 6.3(e) of the Company Disclosure Letter shall
have been obtained.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, and except as provided below, whether before or
after the requisite approvals of the stockholders of the Company or Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either the Company or Parent if the Merger shall not have been
consummated by October 15, 2003 (which date shall be extended by one
calendar day for each calendar day the Merger is delayed by reason of a
pending Parent Change of Control Transaction (as such term is defined in
Section 7.3(b)(ii) hereof), but only to the extent such delay is directly
attributable to such pending Parent Change of Control Transaction) (the
"END DATE"); provided, however, that the right to terminate this Agreement
under this Section 7.1(b) shall not be available to any party whose action
or failure to act has been a principal cause of or resulted in the failure
of the Merger to occur on or before such date and such action or failure to
act constitutes a material breach of this Agreement;
(c) by either the Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action (including
the failure to have taken an action), in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger or
the Stock Issuance, which order, decree, ruling or other action is final
and nonappealable;
(d) by either the Company or Parent if the required approval of the
stockholders of Parent contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting
of Parent stockholders duly convened therefor or at any adjournment
thereof; provided, however, that the right to terminate this Agreement
under this Section 7.1(d) shall not be available to Parent where the
failure to obtain Parent stockholder approval shall have been caused by the
action or failure to act of Parent and such action or failure to act
constitutes a material breach by Parent of this Agreement;
(e) by either the Company or Parent if the required approval of the
stockholders of the Company contemplated by this Agreement shall not have
been obtained by reason of the failure to obtain the
49
required vote at a meeting of the Company stockholders duly convened
therefore or at any adjournment thereof; provided, however, that the right
to terminate this Agreement under this Section 7.1(e) shall not be
available to the Company where the failure to obtain the Company
stockholder approval shall have been caused by the action or failure to act
of the Company and such action or failure to act constitutes a material
breach by the Company of this Agreement;
(f) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of the
Company) if a Parent Triggering Event (as defined below) shall have
occurred;
(g) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or
if any representation or warranty of Parent shall have become untrue, in
either case such that the conditions set forth in Section 6.2(a) or Section
6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided
that if such inaccuracy in Parent's representations and warranties or
breach by Parent is curable by Parent prior to the End Date through the
exercise of reasonable efforts, then the Company may not terminate this
Agreement under this Section 7.1(g) prior to thirty (30) days following the
receipt of written notice from the Company to Parent of such breach,
provided that Parent continues to exercise all commercially reasonable
efforts to cure such breach through such thirty (30) period (it being
understood that the Company may not terminate this Agreement pursuant to
this paragraph 7.1(g) if it shall have materially breached this Agreement
or if such breach by Parent is cured within such thirty (30) day period);
(h) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided,
that if such inaccuracy in the Company's representations and warranties or
breach by the Company is curable by the Company prior to the End Date
through the exercise of commercially reasonable efforts, then Parent may
not terminate this Agreement under this Section 7.1(h) prior to thirty (30)
days following the receipt of written notice from Parent to the Company of
such breach, provided that the Company continues to exercise all
commercially reasonable efforts to cure such breach through such thirty
(30) day period (it being understood that Parent may not terminate this
Agreement pursuant to this paragraph 7.1(h) if it shall have materially
breached this Agreement or if such breach by the Company is cured within
such thirty (30) day period);
(i) by Parent, if a Material Adverse Effect on the Company shall have
occurred since the date hereof; and
(j) by the Company, if a Material Adverse Effect on Parent shall have
occurred since the date hereof.
For the purposes of this Agreement, a "PARENT TRIGGERING EVENT" shall be
deemed to have occurred if: (i) the Company's Board of Directors or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent, including through the discharge of its
duty of candor or disclosure to its stockholders, its recommendation in favor
of, the adoption and approval of this Agreement or the approval of the Merger,
(ii) the Company shall have failed to include in the Prospectus/Proxy Statement
the recommendation of the Company's Board of Directors in favor of the adoption
and approval of this Agreement and the approval of the Merger, (iii) the
Company's Board of Directors fails to reaffirm (publicly, if so requested),
after public announcement of an Acquisition Proposal, its recommendation in
favor of the adoption and approval of the Agreement and the approval of the
Merger within ten (10) business days after Parent requests in writing that such
recommendation be reaffirmed, (iv) the Company's Board of Directors or any
committee thereof shall have approved or recommended any Acquisition Proposal,
or (v) a tender or exchange offer relating to the Company's securities shall
have been commenced by a Person unaffiliated with Parent and the Company shall
not have sent to its securityholders pursuant to Rule 14e-2 promulgated under
the Securities Act, within ten (10) business days after such tender or exchange
offer is first
50
published, sent or given, a statement disclosing that the Board of Directors of
the Company recommends rejection of such tender or exchange offer.
7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of a valid written notice of the terminating party to the other party
hereto. In the event of the termination of this Agreement as provided in Section
7.1, this Agreement shall be of no further force or effect, except (i) as set
forth in Section 5.4(a), this Section 7.2, Section 7.3 and Article VIII, each of
which shall survive the termination of this Agreement and (ii) nothing herein
shall relieve any party from liability for any willful breach of this Agreement.
No termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and the Company
shall share equally (i) all fees and expenses, other than attorneys' and
accountants' fees and expenses which fees shall be paid for by the party
incurring such expense, incurred in relation to the printing and filing (with
the SEC) of the Prospectus/Proxy Statement (including any preliminary materials
related thereto) and the Registration Statement (including financial statements
and exhibits) and any amendments or supplements thereto and (ii) the filing fee
for the Notification and Report Forms filed with the FTC and DOJ under the HSR
Act and premerger notification and reports forms under similar applicable laws
of other jurisdictions, in each case pursuant to Section 5.6(a).
(b) Payments.
(i) Payment by the Company. In the event that this Agreement is terminated
by Parent or the Company, as applicable, pursuant to Sections 7.1(b), (e), or
(f), the Company shall promptly, but in no event later than two (2) business
days after the date of such termination, pay Parent a fee equal to Six Million
Five Hundred Thousand Dollars ($6,500,000) in immediately available funds (the
"COMPANY TERMINATION FEE"); provided, that in the case of termination under
Section 7.1(b) or 7.1(e): (A) such payment shall be made only if following the
date hereof and prior to the termination of this Agreement, there has been
public disclosure of an Acquisition Proposal with respect to the Company and (1)
within twelve (12) months following the termination of this Agreement an
Acquisition (as defined in Section 7.3(b)(v)) of the Company is consummated or
(2) within twelve (12) months following the termination of this Agreement the
Company enters into an agreement providing for an Acquisition of the Company and
an Acquisition of the Company is consummated within twenty-four (24) months of
the termination of this Agreement and (B) such payment shall be made promptly,
but in no event later than two (2) business days after the consummation of such
Acquisition of the Company.
(ii) Payment by Parent. In the event that this Agreement is terminated by
Parent or the Company, as applicable, pursuant to Section 7.1(d), Parent shall
pay as provided below the Company a fee equal to Six Million Five Hundred
Thousand Dollars ($6,500,000) in immediately available funds (the "PARENT
TERMINATION FEE"); provided, however, that such payment shall be made only if
following the date hereof and prior to the Parent Stockholders' Meeting, there
has been public disclosure of a bona fide written offer made by a third party to
acquire, directly or indirectly, pursuant to a tender offer, exchange offer,
merger, consolidation or other business combination, all or substantially all of
the assets of Parent or all of the outstanding voting securities of Parent and
as a result of which the stockholders of Parent immediately preceding such
transaction would hold less than fifty percent (50%) of the equity interests in
the surviving or resulting entity of such transaction or any direct or indirect
parent or Subsidiary thereof (a "PARENT CHANGE OF CONTROL TRANSACTION") and
within twelve (12) months following the termination of this Agreement such
Parent Change of Control Transaction is consummated. Such payment, if any, shall
be made not later than two (2) business days after the consummation of such
Parent Change of Control Transaction.
51
(iii) Liquidated Damages. Each of Parent and the Company acknowledges that
(1) the damages that would result from a termination described in Section
7.3(b)(i) or 7.3(b)(ii) above are uncertain and incapable of accurate
calculation by any accepted rule of law; and (2) accordingly, the amount fixed
as the Company Termination Fee and the Parent Termination Fee are reasonable
estimates of the actual damages that would result from such a termination
described in Section 7.3(b)(i) or 7.3(b)(ii) above.
(iv) Interest and Costs; Other Remedies. Each of Parent and the Company
acknowledges that the agreements contained in this Section 7.3(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the other party hereto would not enter into this
Agreement; accordingly, if Parent or the Company, as the case may be, fails to
pay in a timely manner the amounts due pursuant to this Section 7.3(b), and, in
order to obtain such payment, the other party hereto makes a claim that results
in a judgment against the party failing to pay for the amounts set forth in this
Section 7.3(b), the party so failing to pay shall pay to the other party its
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in this Section 7.3(b) at the prime rate of Citibank, N.A. in effect
on the date such payment was required to be made. Payment of the fees described
in this Section 7.3(b) shall not be in lieu of damages incurred in the event of
breach of this Agreement.
(v) Certain Definitions. For the purposes of this Section 7.3(b) only,
"ACQUISITION," with respect to a party hereto, shall mean any of the following
transactions (other than the transactions contemplated by this Agreement): (i) a
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the party pursuant to which the
stockholders of the party immediately preceding such transaction hold less than
sixty percent (60%) of the aggregate equity interests in the surviving or
resulting entity of such transaction or any direct or indirect parent thereof,
(ii) a sale or other disposition by the party of assets representing in excess
of forty percent (40%) of the aggregate fair market value of the party's
business immediately prior to such sale, or (iii) the acquisition by any Person
or group (including by way of a tender offer or an exchange offer or issuance by
the party or such Person or group), directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership of shares representing in
excess of forty percent (40%) of the voting power of the then outstanding shares
of capital stock of the party.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of Parent and the Company,
provided, after any such approval, no amendment shall be made which by law or in
accordance with the rules of any relevant stock exchange requires further
approval by such stockholders without such further stockholder approval. This
Agreement may not be amended except by execution of an instrument in writing
signed on behalf of each of Parent, Merger Sub and the Company.
7.5 Extension; Waiver. At any time prior to the Effective Time either
party hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of the Company, Parent and Merger Sub contained in this
Agreement, or any instrument delivered pursuant to this Agreement, shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time and this Article VIII shall survive the Effective
Time.
52
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if delivered
personally, (ii) on the date of confirmation of receipt (or, the first business
day following such receipt if the date is not a business day) of transmission by
telecopy or telefacsimile, or (iii) on the date of confirmation of receipt (or,
the first business day following such receipt if the date is not a business day)
if delivered by a nationally recognized courier service. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice:
(a) if to Parent or Merger Sub, to:
ScanSoft, Inc.
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
SpeechWorks International, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation.
(a) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. When a
reference is made in this Agreement to Sections, such reference shall be to a
section of this Agreement unless otherwise indicated. For purposes of this
Agreement, the words "INCLUDE," "INCLUDES" and "INCLUDING," when used herein,
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "THE BUSINESS OF" an entity,
such reference shall be deemed to include the business of all such entity and
its Subsidiaries, taken as a whole. For purposes of Article II and
53
Article III hereof the word "MATERIAL" shall modify only the object of the
specific representation and warranty and shall not be deemed to modify the
business of an entity and its Subsidiaries, taken as a whole, except where
otherwise clearly indicated. An exception or disclosure made in the Company
Disclosure Letter with regard to a representation of the Company, or in the
Parent Disclosure Letter with regard to a representation of Parent or Merger
Sub, shall be deemed made with respect to any other representation by such party
which a reasonable person would understand that such exception or disclosure
would apply to such representation or warranty (notwithstanding the absence of a
specific cross-reference); provided however, that this shall not be construed to
expand the scope of or otherwise include any information not specifically
described in such Disclosure Letter.
(b) For purposes of this Agreement, the term "MATERIAL ADVERSE EFFECT,"when
used in connection with an entity, means any change, event, violation,
inaccuracy, circumstance or effect (any such item, an "EFFECT"), individually or
when taken together with all other Effects that have occurred prior to the date
of determination of the occurrence of the Material Adverse Effect, that is or is
reasonably likely to (i) be materially adverse to the business, assets
(including intangible assets), capitalization, financial condition or results of
operations of such entity taken as a whole with its Subsidiaries or (ii)
materially impede the authority of such entity to consummate the transactions
contemplated by this Agreement in accordance with the terms hereof and
applicable Legal Requirements; provided, however, that, for purposes of clause
(i) above, in no event shall any of the following be taken into account in
determining whether there has been or will be, a Material Adverse Effect on any
entity: (A) any Effect resulting from compliance with the terms and conditions
of this Agreement, (B) any Effect resulting from the announcement or pendency of
the Merger (other than any Effects resulting from a breach of the
representations and warranties contained in Sections 2.7, 2.15, 3.7 or 3.15 of
this Agreement, which Effects, if any, shall be taken into account in
determining whether there has been or will be a Material Adverse Effect on any
entity), (C) any change in such entity's stock price or trading volume, (D) any
Effect that results from changes affecting any of the industries in which such
entity operates generally or the United States economy generally (which changes
in each case do not disproportionately affect such entity in any material
respect), or (E) any Effect that results from changes affecting general
worldwide economic or capital market conditions (which changes in each case do
not disproportionately affect such entity in any material respect).
(c) For purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third-Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Letter
and the Parent Disclosure Letter (i) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement and (ii) are not
intended to confer upon any other Person any rights or remedies hereunder,
except as specifically provided, following the Effective Time, in Section 5.11.
8.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
Persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
54
that will achieve, to the greatest extent possible, the economic, business and
other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance.
(a) Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
(b) Specific Performance. It is accordingly agreed that the parties shall
be entitled to seek an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Any purported assignment in violation of this Section 8.10
shall be void. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 Waiver of Jury Trial. EACH OF PARENT, MERGER SUB AND THE COMPANY
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, MERGER SUB OR THE COMPANY
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
* * * * *
55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
SCANSOFT, INC.
By:
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
Chairman and Chief Executive Officer
SPIDERMAN ACQUISITION CORPORATION
By:
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
Chairman and Chief Executive Officer
SPEECHWORKS INTERNATIONAL, INC.
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chief Executive Officer
****
AGREEMENT AND PLAN OF REORGANIZATION****
56