Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November
---------
10, 1998, is entered into by and among Oracle Corporation, a Delaware
corporation ("Parent"), KL Acquisition Corporation, a Delaware corporation and a
------
wholly owned subsidiary of Parent (the "Purchaser"), and Concentra Corporation,
---------
a Delaware corporation (the "Company").
-------
RECITALS
--------
A. The respective Boards of Directors of the Company, Parent and the
Purchaser have approved the acquisition of the Company by the Purchaser and, in
furtherance of such acquisition, Parent proposes to cause the Purchaser to make
a cash tender offer (the "Offer") for all of the outstanding shares (the
-----
"Shares") of Common Stock of the Company, par value $0.00001 per share (the
------
"Company Common Stock"), on the terms specified herein.
---------------------
B. The Board of Directors of the Company has approved the Offer and
recommended that it be accepted by the stockholders of the Company.
C. The Boards of Directors of the Company and the Purchaser deem it
advisable and in the best interests of the stockholders of such corporations to
effect the merger (the "Merger") of the Purchaser with and into the Company
------
following the consummation of the Offer, all pursuant to this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL").
----
D. As a condition and inducement to Parent's and the Purchaser's
willingness to enter into this Agreement, upon the execution and delivery of
this Agreement (i) San Giorgio S.A., Special Situations Fund III, L.P., Special
Situations Private Equity Fund, L.P., Special Situations Cayman Fund, L.P.,
Special Situations Technology Fund, L.P., ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (individually
and as trustee), Toyo Corporation, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ are simultaneously
entering into and delivering support agreements (the "Support Agreements") in
------------------
the form attached hereto as Annex II, and (ii) directors with options under the
1994 Directors' Stock Option Plan are simultaneously entering into and
delivering option termination agreements (the "Director Option Termination
---------------------------
Agreements") in the form attached hereto as Annex III.
----------
The parties hereby agree as follows:
ARTICLE I
THE OFFER
1.1 The Offer.
---------
(a) Subject to the provisions of this Agreement and provided that
nothing shall have occurred that would result in a failure to satisfy any of the
conditions set forth
in Annex I hereto (the "Offer Conditions"), Parent shall cause the Purchaser
-------
to, as promptly as reasonably practicable after the date hereof, but in no
event later than five (5) business days following the initial public
announcement of the Purchaser's intention to commence the Offer, commence
(within the meaning of Rule 14d-2(a) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), the Offer for all of the outstanding Shares
------------
and the associated Series A Participating Cumulative Preferred Stock purchase
rights (collectively, the "Rights") issued pursuant to the Rights Agreement
------
between the Company and First National Bank of Boston, as Rights agent, dated as
of April 24, 1997 (the "Rights Agreement"), at a price of $7.00 per Share (and
----------------
associated Rights), net to the seller in cash. The obligation of the Purchaser
to accept for payment and to pay for any Shares (and associated Rights) tendered
shall be subject only (i) to such number of Shares, when added to the number of
Shares already owned by Parent, the Purchaser or any direct or indirect wholly
owned subsidiary of Parent, as shall constitute fifty-one percent (51%) of the
Company's Fully Diluted Shares (as defined in Section 4.2) being validly
tendered prior to the expiration or termination of the Offer and not withdrawn
(the "Minimum Share Condition") and (ii) to the other Offer Conditions. The
-----------------------
Purchaser may at any time transfer or assign to one or more corporations
directly or indirectly wholly owned by Parent the right to purchase all or any
portion of the Shares (and associated Rights) tendered pursuant to the Offer
(the "Tendered Shares"), but no such assignment shall relieve the Purchaser of
---------------
its obligations hereunder. The Purchaser expressly reserves the right to waive
any of the Offer Conditions (but not the Minimum Share Condition) and to modify
the terms of the Offer; provided, however, that, without the prior written
-------- -------
consent of the Company, the Purchaser shall not amend or modify the terms of the
Offer to (i) reduce the cash price to be paid pursuant to the Offer, (ii) reduce
the number of Shares (and associated Rights) as to which the Offer is made,
(iii) change the form of consideration to be paid in the Offer, or (iv) impose
conditions to the Offer in addition to the Offer Conditions or modify the Offer
Conditions (other than to waive any Offer Condition to the extent permitted by
this Agreement), or (v) make any other change or modification in any of the
terms of the Offer in any manner that is adverse to holders of the Shares.
Subject to the terms and conditions thereof, the Offer shall expire at midnight,
New York City time, on the date that shall be 20 business days after the date on
which the Offer shall be commenced. The Offer may not be extended without the
Company's prior written consent; provided, however, that the Purchaser may (x)
-------- -------
from time to time extend (and re-extend) the Offer, if at the scheduled
expiration date of the Offer any of the Offer Conditions (other than the Minimum
Share Condition) shall not have been satisfied or waived, until such time as
such conditions shall be satisfied or waived; (y) extend the Offer for any
period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission (the "SEC") or the staff thereof applicable
---
to the Offer; or (z) extend (and re-extend) the Offer for any reason on one or
more occasions for an aggregate period of not more than twenty (20) business
days beyond the latest expiration date that would otherwise be permitted under
clause (x) or (y) above if on such expiration date there shall not have been
tendered at least that number of Shares (and associated Rights) necessary to
permit the Merger to be effected without a meeting of the Company's stockholders
in accordance with the DGCL.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Purchaser shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to
---------------
-2-
the Offer. The Schedule 14D-1 shall contain or shall incorporate by reference
an offer to purchase and a related letter of transmittal and summary
advertisement (such Schedule 14D-1 and Offer to Purchase and the documents
included therein or incorporated therein by reference pursuant to which the
Offer shall be made, together with any supplements or amendments thereto, the
"Offer Documents"). Parent and the Purchaser agree that the Offer Documents
---------------
shall comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder and, on the date filed with the
SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by Parent or
the Purchaser with respect to information supplied by the Company or any of its
representatives which is included in the Offer Documents. Each of Parent, the
Purchaser and the Company agrees to correct promptly any information provided
by it for use in the Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and each of
Parent and the Purchaser further agrees to take all steps necessary to amend or
supplement the Offer Documents and to cause the Offer Documents as so amended or
supplemented to be filed with the SEC and to be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given a reasonable
opportunity to review the Offer Documents and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to stockholders of
the Company. Parent and the Purchaser agree to provide the Company and its
counsel any comments Parent, the Purchaser or their counsel may receive from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
of such comments.
(c) Subject to the terms and conditions of the Offer and of this
Agreement, the Purchaser shall, and the Parent shall cause the Purchaser to,
accept for payment and pay for all Shares (and associated Rights) which have
been validly tendered and not withdrawn pursuant to the Offer as promptly as
practicable following expiration of the Offer.
1.2 Company Action.
--------------
(a) The Company hereby approves of and consents to the Offer and
represents that at a meeting duly called and held the Board of Directors of the
Company has (i) by unanimous vote of all directors present and voting, approved
and adopted this Agreement and the transactions contemplated hereby and
determined that the Offer and the Merger are in the best interests of the
Company and its stockholders and on terms that are fair to such stockholders,
(ii) by unanimous vote of all directors present and voting, amended the Rights
Agreement to make the Rights Agreement inapplicable to the Offer, the Merger,
the Company Stock Option (as defined in Section 5.5), this Agreement, the
Support Agreements, the Director Option Termination Agreements and any other
transaction contemplated hereby and thereby, and determined that such amendment
to the Rights Agreement is in the best interests of the Company and its
stockholders, and (iii) recommended that the Company's stockholders accept the
Offer and tender all of their Shares (and associated Rights) in connection
therewith and, if required under the DGCL, approve this Agreement and the
transactions contemplated hereby (it being
-3-
understood that, notwithstanding anything in this Agreement to the contrary, if
the Company's Board of Directors modifies or withdraws its recommendation in
accordance with the terms of Section 5.3(b), such modification or withdrawal
shall not constitute a breach of this Agreement). The Company represents that
its Board of Directors has received the written opinion of ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ &
Company LLC (its "Financial Advisor") that the consideration to be received
-----------------
by the holders (other than Parent and the Purchaser) of Shares (and associated
Rights) pursuant to each of the Offer and the Merger is fair to such holders
from a financial point of view, and that a complete and correct signed copy of
such opinion has been delivered on or prior to the date hereof by the Company
to Parent. The Company hereby consents to the inclusion in the Offer Documents
of the recommendation of the Company's Board of Directors described in the
immediately preceding sentence (subject to the right of the Board of Directors
to modify or withdraw such recommendation in accordance with Section 5.3(b)).
The Company represents that it has been authorized by its Financial Advisor to
permit, subject to the prior review by its Financial Advisor, the inclusion of
the fairness opinion (and a description thereof) in the Offer Documents, the
Schedule 14D-9 (as defined in Section 1.2(b)) and the Proxy Statement (as
defined in Section 4.6).
(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing the
--------------
recommendation of the Company's Board of Directors described above in Section
1.2(a) (subject to the right of the Board of Directors to modify or withdraw
such recommendation in accordance with Section 5.3(b)) and shall mail the
Schedule 14D-9 to the stockholders of the Company. The Company agrees that the
Schedule 14D-9 shall comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder and, on the date filed with the SEC and on the date first published,
sent or given to the Company's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or the Purchaser or any of their respective representatives which is
included in the Schedule 14D-9. Each of the Company, Parent and the Purchaser
agrees to correct promptly any information provided by it for use in the
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to amend or supplement the Schedule 14D-9 and to cause
the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable federal securities laws. Parent and its counsel shall be
given a reasonable opportunity to review the Schedule 14D-9 and all amendments
and supplements thereto prior to their filing with the SEC or dissemination to
stockholders of the Company. The Company agrees to provide Parent and its
counsel with any comments the Company or its counsel may receive from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments.
-4-
(c) In connection with the Offer, the Company shall, or shall cause
its transfer agent to, furnish the Purchaser promptly with mailing labels
containing the names and addresses of the record holders of Company Common Stock
as of a recent date and of those persons becoming record holders subsequent to
such date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Company Common Stock,
and shall furnish to the Purchaser such information and assistance (including
updated lists of stockholders, security position listings and computer files) as
the Purchaser may reasonably request in communicating the Offer to the Company's
stockholders. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and the
Purchaser and their agents shall hold in confidence the information contained in
any such labels, listings and files, will use such information only in
connection with the Offer and the other transactions contemplated hereby and, if
this Agreement shall be terminated, will deliver, and will use their reasonable
efforts to cause their agents to deliver, to the Company all copies of such
information then in their possession or control.
1.3 Directors.
---------
(a) Promptly upon the purchase by the Purchaser of Shares (and
associated Rights) in the Offer, and from time to time thereafter, the Purchaser
shall be entitled to designate that number of directors, rounded up to the next
whole number, on the Company's Board of Directors that equals the product of (i)
the total number of directors on the Company's Board of Directors (giving effect
to the election of any additional directors pursuant to this Section 1.3) and
(ii) the percentage that the number of Shares owned by the Purchaser, Parent and
any direct or indirect wholly owned subsidiary of Parent (including Shares (and
associated Rights) purchased in the Offer) bears to the total number of Shares
(and associated Rights) outstanding at such time, and to effect the foregoing
the Company shall upon request by the Purchaser, at the Company's election,
either increase the number of directors comprising the Company's Board of
Directors or obtain and accept resignations of incumbent directors. The first
date on which designees of the Purchaser shall constitute a majority of the
Company's Board of Directors is referred to in this Agreement as the "Cut-Off
-------
Date." At such time, the Company will cause individuals designated by the
----
Purchaser to constitute the same percentage as such individuals represent on the
Company's Board of Directors of (x) each committee of the Board, (y) if
requested by Purchaser, each board of directors or other governing body of each
Subsidiary of the Company, and (z) if requested by Purchaser, each committee of
each such board or governing body.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) and Rule 14f-1 of the Exchange Act in order to fulfill its
obligations under this Section 1.3 and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill such obligations. The
Purchaser will supply to the Company any information with respect to itself and
its nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1.
-5-
(c) Following the Cut-Off Date and prior to the Effective Time (as
defined below), if the Company shall have at least one director who is neither
an employee of the Company or any of its Subsidiaries nor otherwise affiliated
with the Purchaser (one or more of such directors, the "Independent Directors"),
---------------------
any amendment of this Agreement or the Certificate of Incorporation or Bylaws of
the Company or any of its Subsidiaries, any termination or amendment of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or the Purchaser
or any exercise or waiver of any of the Company's rights hereunder, will require
the concurrence of a majority of the Independent Directors.
ARTICLE II
THE MERGER
2.1 Merger.
------
(a) At the Effective Time (as defined in Section 2.1(b) below) and
subject to the terms and conditions hereof and the provisions of the DGCL, the
Purchaser will be merged with and into the Company in accordance with the DGCL,
the separate existence of the Purchaser shall thereupon cease and the Company
shall continue as the surviving corporation (the "Surviving Corporation"). The
---------------------
Purchaser and the Company are sometimes hereinafter referred to collectively as
the "Constituent Corporations."
------------------------
(b) Subject to the terms and conditions hereof, the Merger shall be
consummated as promptly as practicable after the completion of the Offer and the
Stockholders' Meeting (as defined in Section 5.2), if any, by duly filing a
certificate of merger, in such form as is required by, and executed in
accordance with, the relevant provisions of the DGCL. The Merger shall be
effective at such time as the certificate of merger is duly filed with the
Secretary of State of the State of Delaware in accordance with the DGCL or at
such later time as is specified in the certificate of merger (the "Effective
---------
Time"). Prior to such filing, a closing shall take place at the offices of
----
Venture Law Group, A Professional Corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, or at such other place as the parties shall agree, for the purpose
of confirming the satisfaction or waiver of the conditions contained in Article
VII hereof. The date on which such closing shall occur is referred to herein as
the "Closing Date."
------------
(c) The separate corporate existence of the Company, as the Surviving
Corporation, with all its purposes, objects, rights, privileges, powers,
certificates and franchises, shall continue unimpaired by the Merger. The
Surviving Corporation shall succeed to all the properties and assets of the
Constituent Corporations and to all debts, choses in action and other interests
due or belonging to the Constituent Corporations and shall be subject to and
responsible for all the debts, liabilities and duties of the Constituent
Corporations with the effect set forth in Section 259 of the DGCL.
2.2 Conversion of Shares. At the Effective Time and by virtue of the
--------------------
Merger and without any action on the part of the holders of the capital stock
of the Constituent Corporations:
-6-
(a) Each Share (and associated Rights) issued and outstanding
immediately prior to the Effective Time (other than (i) Shares to be canceled
pursuant to Section 2.2(b) below, and (ii) Dissenting Shares (as defined in
Section 2.4)) shall be converted into the right to receive in cash an amount per
Share equal to the highest price paid per Share pursuant to the Offer (the
"Merger Price");
-------------
(b) Each Share (and associated Rights) held in the treasury of the
Company and each Share (and associated Rights) owned by Parent, the Purchaser or
the Company, or by any direct or indirect wholly owned subsidiary of any of
them, shall be canceled and retired without payment of any consideration
therefor; and
(c) Each share of common stock, par value $0.001 per share, of the
Purchaser 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 $0.00001 per share, of the Surviving Corporation.
2.3 Exchange of Certificates.
------------------------
(a) From and after the Effective Time, a bank or trust company to be
designated by Parent shall act as exchange agent (the "Exchange Agent") in
--------------
effecting the exchange of the Merger Price for certificates which prior to the
Effective Time represented Shares (and associated Rights) and which as of the
Effective Time represent the right to receive the Merger Price (the
"Certificates"). Promptly after the Effective Time, the Exchange Agent shall
-------------
mail to each record holder of Certificates a form of letter of transmittal and
instructions for use in surrendering such Certificates and receiving the Merger
Price therefor in a form approved by Parent and the Company. At or prior to the
Effective Time, the Purchaser shall deposit in trust with the Exchange Agent
immediately available funds in an amount sufficient to pay the Merger Price for
all such Shares (and associated Rights) to the Company's stockholders as
contemplated by this Section 2.3. Upon the surrender of each Certificate and
the issuance and delivery by the Exchange Agent of the Merger Price for the
Shares (and associated Rights) represented thereby in exchange therefor, the
Certificate shall forthwith be canceled. Until so surrendered and exchanged,
each Certificate shall represent solely the right to receive the Merger Price
for the Shares (and associated Rights) represented thereby, without any interest
thereon. Upon the surrender and exchange of such an outstanding Certificate,
the holder thereof shall receive the Merger Price multiplied by the number of
Shares (and associated Rights) represented by such Certificate, without any
interest thereon. If any cash is to be paid to a name other than that in which
the Certificate surrendered in exchange therefor is registered, it shall be a
condition to such payment or exchange that the person requesting such payment or
exchange shall pay to the Exchange Agent any transfer or other taxes required by
reason of the payment of such cash to a name other than that of the registered
holder of the Certificate surrendered, or such person shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of Certificates for any part of the
Merger Price payments made to a public official pursuant to applicable abandoned
property, escheat or similar laws.
-7-
(b) Promptly following the sixth month after the Effective Time, the
Exchange Agent shall return to the Surviving Corporation all cash relating to
the transactions described in this Agreement, and the Exchange Agent's duties
shall terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the Merger
Price for such Shares (and associated Rights), without any interest thereon, but
shall have no greater rights against the Surviving Corporation than may be
accorded to general creditors of the Surviving Corporation under applicable law.
At and after the Effective Time, holders of Certificates shall cease to have any
rights as stockholders of the Company except for the right to surrender such
Certificates in exchange for the Merger Price for such Shares (and associated
Rights) or to perfect their right of appraisal with respect to their Shares (and
associated Rights) pursuant to the applicable provisions of the DGCL and Section
2.4 below, and there shall be no transfers on the stock transfer books of the
Company or the Surviving Corporation of any Shares (and associated Rights) that
were outstanding immediately prior to the Merger.
2.4 Dissenting Shares.
-----------------
(a) Notwithstanding the provisions of Section 2.2 or any other
provision of this Agreement to the contrary, Shares (and associated Rights) that
are issued and outstanding immediately prior to the Effective Time and are held
by stockholders who shall have properly demanded appraisal of such Shares (and
associated Rights) in accordance with the DGCL ("Dissenting Shares") shall not
-----------------
be converted into the right to receive the Merger Price at the Effective Time,
unless and until the holder of such Dissenting Shares shall have failed to
perfect or shall have effectively withdrawn or lost such right to appraisal and
payment under the DGCL. If a holder of Dissenting Shares (a "Dissenting
----------
Stockholder") shall have so failed to perfect or shall have effectively
-----------
withdrawn or lost such right to appraisal and payment, then, as of the Effective
Time or the occurrence of such event, whichever last occurs, such Dissenting
Shares shall be converted into and represent solely the right to receive the
Merger Price, without any interest thereon, as provided in Section 2.2.
(b) The Company shall give Parent (i) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to Section 262 of the DGCL and received by the
Company, and (ii) the opportunity to control all negotiations and proceedings
with respect to such demands for appraisal. The Company shall not, except with
the prior written consent of Parent, make any payment with respect to any
demands for appraisal or settle or offer to settle any such demands.
2.5 Certificate of Incorporation and Bylaws of the Surviving Corporation.
--------------------------------------------------------------------
(a) At the Effective Time the Certificate of Incorporation of the
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation; provided,
--------
however, that Article I of the Certificate of Incorporation of the Surviving
-------
Corporation shall be amended to read as follows: "The name of the corporation
is Concentra Corporation."
-8-
(b) At the Effective Time the Bylaws of the Purchaser, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation or such Bylaws.
2.6 Directors and Officers of the Surviving Corporation. At the Effective
---------------------------------------------------
Time, the directors of the Purchaser immediately prior to the Effective Time
shall become the directors of the Surviving Corporation, each of such directors
to hold office, subject to the applicable provisions of the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until the next annual
stockholders' meeting of the Surviving Corporation and until their successors
shall be duly elected or appointed and qualified. At the Effective Time, the
officers of the Purchaser immediately prior to the Effective Time shall become
the officers of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified.
2.7 Warrants. Parent shall not assume or continue any outstanding
--------
warrants to purchase shares of Company Common Stock (the "Warrants"). The
--------
parties hereto shall take all appropriate action to provide that, at and
following the Effective Time, each holder of an outstanding Warrant shall be
entitled to receive an amount in cash equal to the product of (i) the excess,
if any, of the Merger Price over the per share exercise price of such Warrant
and (ii) the number of Shares subject to such Warrant which are exercisable
immediately prior to the Effective Time.
2.8 Options. The Company common stock options shall be treated as set
-------
forth in Section 6.5.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser hereby jointly and severally represent and warrant
to the Company that, except as and to the extent set forth in a Disclosure
Schedule (the "Parent Disclosure Schedule") delivered to the Company on or prior
--------------------------
to the date hereof setting forth additional exceptions specified therein to the
representations and warranties contained in this Article III, which Disclosure
Schedule shall identify exceptions by specific Section references:
3.1 Corporate Organization.
----------------------
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Purchaser has
not engaged in any business since it was incorporated other than in connection
with the transactions contemplated by this Agreement. Parent owns all of the
outstanding capital stock of the Purchaser.
-9-
3.2 Authority. Each of Parent and the Purchaser has the full corporate
---------
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder 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 approved by the respective
Boards of Directors of Parent and the Purchaser and no other corporate
proceedings on the part of Parent or the Purchaser are necessary to consummate
the transactions so contemplated (other than, with respect to the Merger, the
filing and recordation of the appropriate merger documents as required by the
DGCL). This Agreement has been duly executed and delivered by each of Parent
and the Purchaser and, assuming the due authorization, execution and delivery
thereof by the Company, constitutes a valid and binding obligation of each of
Parent and the Purchaser, enforceable against such parties in accordance with
its terms.
3.3 Consents and Approvals; No Violation. Neither the execution and
------------------------------------
delivery of this Agreement by Parent and the Purchaser nor the consummation
by Parent and the Purchaser of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of their respective
charter documents, or (ii) assuming compliance with the matters referred to in
clause (iii) below, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or give rise to a
right of termination, cancellation or acceleration of any obligation contained
in or to the loss of a benefit under, or result in the creation of any lien or
other encumbrance upon any of the properties or assets of Parent or the
Purchaser under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease agreement or other agreement,
instrument, obligation, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Parent or the
Purchaser, or to which either of them or any of their respective properties or
assets may be subject, except for such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens or other
encumbrances, which, individually or in the aggregate, will not have a material
adverse effect on Parent and its subsidiaries taken as a whole or prevent or
materially delay consummation of the Offer or the Merger, or (iii) require any
consent, approval, authorization or permit of, or filing with or notification
to, any court, administrative agency, commission or other governmental or
regulatory authority or instrumentality, domestic or foreign (a "Governmental
------------
Entity"), except (A) pursuant to the Exchange Act, (B) filing of a certificate
------
of merger pursuant to the DGCL, (C) filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
-------
termination or expiration of the waiting periods thereunder, (D) filings
required under applicable antitrust laws of any foreign country, (E) filings
necessary to comply with state securities or "blue sky" laws, or (F) consents,
approvals, authorizations, permits, filings or notifications which if not
obtained or made will not, individually or in the aggregate, have a material
adverse effect on Parent and its subsidiaries taken as a whole or prevent or
materially delay consummation of the Offer or the Merger.
3.4 Brokers and Finders. Neither Parent nor the Purchaser has employed
-------------------
any broker or finder or incurred any liability for any fee or commission to any
broker, finder or intermediary in connection with the transactions contemplated
hereby.
-10-
3.5 Financing. The Purchaser has or will have, prior to the expiration
---------
of the Offer and the Effective Time of the Merger, sufficient cash or
cash-equivalent funds available to purchase all of the Shares (and associated
Rights) outstanding in the Offer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser
that, except as and to the extent set forth in a Disclosure Schedule (the
"Company Disclosure Schedule") delivered to Parent on or prior to the date
-----------------------------
hereof setting forth additional exceptions specified therein to the
representations and warranties contained in this Article IV, which Disclosure
Schedule shall identify exceptions by specific Section references:
4.1 Corporate Organization. Each of the Company and its Subsidiaries
----------------------
(as defined in Section 4.3) is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
organization, has all requisite corporate power and authority and all necessary
governmental approvals to own or lease and operate its properties and assets
and to carry on its business as it is now being conducted, and is duly
qualified or licensed as a foreign corporation to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties owned or leased by it makes
such qualification or licensing necessary, except where the failure to be so
organized, existing, in good standing, qualified or licensed would not have a
Material Adverse Effect. As used in this Agreement, the term "Material Adverse
----------------
Effect" means any change, event or effect that, individually or when taken
------
together with all other such changes or effects that have occurred prior to the
date of determination of the occurrence of the Material Adverse Effect, is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), condition (financial or otherwise), prospects or results of
operations of the Company and its Subsidiaries taken as a whole. None of the
following shall be deemed to constitute a Material Adverse Effect with respect
to any party: (a) any change in the market price or trading volume of the
Shares of the Company (it being understood that the underlying causes of such
change will not be excluded from the definition of Material Adverse Effect
except as otherwise provided in this definition); (b) any adverse effect on the
bookings of the Company or cancellation of the Company's existing orders (and
any resulting adverse effect on revenues and earnings) following the execution
of this Agreement which is reasonably attributable to the announcement of the
execution of this Agreement and the transactions contemplated thereby; (c) the
failure, in and of itself, to meet analysts' expectations (it being understood
that the underlying causes of such failure will not be excluded from the
definition of Material Adverse Effect except as otherwise provided in this
definition), or (d) employee attrition (provided, that the Offer Conditions
shall have been satisfied and provided that a sufficient number of employees
remain such that the business of the Company may continue to be operated
substantially consistent with past practice). The Company has made available to
Parent a complete and correct copy of the Company's and its Subsidiaries'
certificates of incorporation and bylaws (or comparable governing documents),
each as amended to the date hereof. The Company's and its Subsidiaries'
-11-
certificates of incorporation and bylaws (or comparable governing documents)
made available are in full force and effect. Neither the Company nor any of its
Subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or Bylaws (or comparable governing documents).
4.2 Capitalization. The authorized capital stock of the Company consists
--------------
of 40,000,000 shares of Company Common Stock and 4,000,000 shares of preferred
stock, par value $0.01 per share ("Preferred Stock"). As of the close of
---------------
business on November 6, 1998, (i) 6,103,944 shares of Company Common Stock were
issued and outstanding, (ii) no shares of Preferred Stock were issued and
outstanding, (iii) 1,330,582 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding options to acquire shares of Company
Common Stock ("Stock Options"), and (iv) no shares of Company Common Stock were
-------------
held by the Company in its treasury. As of November 6, 1998, no shares of
Company Common Stock were available for issuance under the Company's 1987 Stock
Plan, 852,940 shares of Company Common Stock were available for issuance
under the Company's 1993 Stock Plan, and 112,500 shares of Company Common Stock
were available for issuance under the Company's 1994 Non-Employee Directors'
Stock Option Plan (the foregoing Stock Option Plans are referred to,
collectively, as the "Company Stock Option Plans"). As of November 6, 1998,
--------------------------
363,622 shares of Company Common Stock were available for issuance under the
Company's 1995 Employee Stock Purchase Plan, and the Company is obligated to
issue 20,769 shares of Company Common Stock under such Plan for the current
period ending March 31, 1999, assuming continued participation by all current
participants through the date of termination of the plan (the "Current ESPP
------------
Shares"). The number of issued and outstanding shares of Company Common Stock
------
at any time taken together with the number of Current ESPP Shares and the
number of shares of Company Common Stock reserved for issuance upon the
exercise or conversion of outstanding Stock Options (other than the option
granted to the Purchaser under Section 5.5 and other than options first
becoming vested after June 30, 1999, but including any options that become
vested as a result of this Agreement, the Offer or the Merger) at such time is
referred to herein as the "Fully Diluted Shares." The number of shares of
--------------------
Company Common Stock subject to options being excluded from the calculation of
Fully Diluted Shares, other than the option granted to Purchaser under Section
5.5, are referred to herein as the "Excluded Shares." All of the issued and
---------------
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid and nonassessable and are not subject to preemptive rights created
by statute, the Certificate of Incorporation or Bylaws of the Company or any
agreement to which the Company is a party or by which the Company or its assets
is bound. Each of the outstanding shares of Capital Stock or other securities
of each of the Company's Subsidiaries directly or indirectly owned by the
Company is duly authorized, validly issued, fully paid and nonassessable and
owned by the Company or by a direct or indirect Subsidiary of the Company, free
and clear of any limitation or restriction (including any restriction on the
right to vote or sell the same except as may be provided as a matter of law).
There are no shares of capital stock of the Company issued or outstanding, and
except for the Stock Options and the Rights, there are no outstanding
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character (including, without limitation,
rights which will or could become exercisable as a result of this Agreement or
any transaction contemplated hereby) relating to the issued or unissued capital
stock or other securities of the Company obligating the Company to
-12-
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of the Company or obligating the Company to grant,
extend or enter into any subscription, option, warrant, right, convertible
security or other similar agreement or commitment. There are no voting trusts
or other agreements or understandings to which the Company is a party with
respect to the voting of the capital stock of the Company. All payments with
respect to Stock Options pursuant to Section 6.5 hereof shall not exceed
$1,800,000, including payments due to any acceleration of vesting resulting
from a change of control.
4.3 Subsidiaries. Schedule 4.3 of the Company Disclosure Schedule
------------
contains a correct and complete list of each of the Company's Subsidiaries, the
jurisdiction where each of such Subsidiaries is organized and the percentage of
outstanding capital stock of each of such Subsidiaries that is directly or
indirectly owned by the Company. The Company or another Subsidiary of the
Company owns its shares of the Capital Stock of each Subsidiary of the Company
free and clear of all liens, claims and encumbrances. Schedule 4.3 of the
Company Disclosure Schedule sets forth a true and complete list of each equity
investment in an amount of $250,000 or more or which represents a 5% or greater
ownership interest in the subject of such investment made by the Company or any
of its Subsidiaries in any other Person other than the Company's Subsidiaries
("Other Interests"). The Other Interests are owned by the Company, by one or
---------------
more of the Company's Subsidiaries or by the Company and one or more of its
Subsidiaries, in each case free and clear of all liens, claims and
encumbrances. For purposes of this Agreement, (i) the term "Subsidiary" shall
----------
mean any corporation, partnership, limited liability company, association,
trust, unincorporated association or other legal entity of which the Company,
either alone or through or together with any other Subsidiary, owns, directly
or indirectly, 50% or more of the capital stock, partnership interests, member
interests or other ownership interests, the holders of which are generally
entitled to vote for the election of the Board of Directors or other governing
body of such corporation or other legal entity, and (ii) "Capital Stock" shall
-------------
mean common stock, preferred stock, partnership interests, limited liability
company interests or other ownership interests entitling the holder thereof to
vote with respect to matters involving the issuer thereof, and (iii) the term
"Person" shall mean an individual, corporation (including not-for-profit),
------
partnership, limited liability company, association, trust, unincorporated
organization, joint venture, estate, Governmental Entity or other legal entity.
4.4 Authority. The Company has the full corporate power and authority
---------
to enter into this Agreement, to perform its obligations hereunder 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 approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions so contemplated (other than,
with respect to the Merger, the approval and adoption of this Agreement by the
stockholders of the Company if and to the extent required by applicable law,
and the filing and recordation of the appropriate merger documents as required
by the DGCL). This Agreement has been duly executed and delivered by, and,
assuming the due authorization, execution and delivery thereof by Parent and
the Purchaser, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The only action
-13-
required to be taken by stockholders of the Company in order to consummate the
Merger is the affirmative vote of a majority of the outstanding shares of
Common Stock of the Company.
4.5 Consents and Approvals; No Violation. Neither the execution and
------------------------------------
delivery of this Agreement by the Company nor the consummation by the Company
of the transactions contemplated hereby will (i) conflict with or result in any
breach or violation of any provision of the Certificate of Incorporation or
Bylaws of the Company or any of its Subsidiaries, or (ii) constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or give rise to a right of termination, consent, approval,
cancellation or acceleration of any obligation contained in or to the loss of a
benefit under, or result in the creation of any lien or other encumbrance upon
any of the properties or assets of the Company or any of its Subsidiaries
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or to which the Company, its Subsidiaries or any of their
properties or assets may be subject, or (iii) require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except (A) pursuant to the Exchange Act, (B) filing of a certificate of
merger pursuant to the DGCL, (C) filings under the HSR Act and the termination
or expiration of the waiting periods thereunder, (D) filings required under
applicable antitrust laws of any foreign country, or (E) filings necessary to
comply with state securities or "blue sky" laws.
4.6 Proxy or Information Statement. If a Stockholders' Meeting (as
------------------------------
defined in Section 5.2 below) is convened in connection with the Merger, the
proxy statement to be provided to stockholders of the Company in connection
with the Stockholders' Meeting (together with the amendments and supplements
thereto, the "Proxy Statement") and all amendments thereof and supplements
---------------
thereto shall, and if no Stockholders' Meeting is convened in connection with
the Merger, the information statement to be provided to stockholders of the
Company in connection with the Merger, if any (together with the amendments and
supplements thereto, the "Information Statement") shall, comply as to form in
---------------------
all material respects with the applicable requirements of the Exchange Act and
the rules and regulations promulgated thereunder, and shall not, at the time of
(i) first mailing thereof or (ii) in the case of the Proxy Statement, the
Stockholders' Meeting to be held in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the Company with respect to information
supplied by the Purchaser, Parent or any affiliates or representatives of
Parent or the Purchaser for inclusion in the Proxy Statement or Information
Statement, as the case may be.
4.7 Conduct of Business.
-------------------
(a) The business of the Company and its Subsidiaries, as presently
conducted, is not being conducted in default or violation of any term, condition
or provision of (i) their respective charter or bylaws, or (ii) any note, bond,
mortgage, indenture, deed of trust, lease, agreement or other instrument or
obligation of any kind to which the Company or any of
-14-
its Subsidiaries is a party or by which the Company or its Subsidiaries or any
of their properties or assets may be bound, or (iii) any federal, state, local
or foreign statute, law, ordinance, rule, regulation, judgment, decree, order,
concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to the Company or its Subsidiaries,
excluding from the foregoing clauses (ii) and (iii) defaults or violations that
could not reasonably be expected to have a Material Adverse Effect.
(b) The Company and its Subsidiaries have all licenses, permits,
orders or approvals of, and has made all required registrations with, all
Governmental Entities that are material to the conduct of the business of the
Company and its Subsidiaries (collectively, "Permits"). All Permits are in full
-------
force and effect, no material violations are or have been recorded in respect of
any Permit, and no proceeding is pending or threatened to revoke or limit any
Permit.
4.8 SEC Documents; Financial Statements.
-----------------------------------
(a) The Company has filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1, 1995 (the "SEC
---
Documents"). As of their respective dates, the SEC Documents 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 promulgated thereunder applicable to such SEC
Documents, and, at the time of filing, none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents (the "SEC
---
Financial Statements") comply as to form in all material respects with
--------------------
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved and fairly present the financial position of the Company as of the
dates thereof and its statements of operations, stockholders' equity and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal and recurring year-end audit adjustments which are not material). The
Company has heretofore delivered to Parent complete and correct copies of all of
the SEC Documents and all amendments and modifications thereto, as well as, to
the extent any shall exist, all amendments and modifications that have not been
filed by the Company with the SEC to all agreements, documents and other
instruments that previously had been filed by the Company with the SEC and are
currently in effect.
(b) The Company has delivered to Parent an unaudited balance sheet as
at September 30, 1998, and unaudited statements of income as of and for the six
months then ended (the "Interim Financial Statements," and together with the SEC
----------------------------
Financial Statements, the "Company Financial Statements").
----------------------------
(c) Except as and to the extent set forth on the balance sheet of the
Company as at September 30, 1998, including the notes thereto, the Company has
no liability or
-15-
obligation of any nature (whether accrued, absolute, contingent or otherwise)
which would be required to be reflected on a balance sheet, or in the notes
thereto, prepared in accordance with generally accepted accounting principles,
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since September 30, 1998 which could not
reasonably be expected to have a Material Adverse Effect.
4.9 Litigation.
----------
(a) There is no suit, action or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries. No Governmental Entity has at any time challenged or questioned
in a writing delivered to the Company or any of its Subsidiaries the legal right
of the Company or any of its Subsidiaries to design, manufacture, offer or sell
any of their respective products in the present manner or style thereof.
(b) Neither the Company nor any of its Subsidiaries has ever been
notified in writing that it has been subject to an audit, compliance review,
investigation or like contract review by the office of the Inspector General of
the U.S. General Services Administration or any other Governmental Entity or
agent thereof in connection with any government contract (a "Government Audit").
----------------
To the Company's knowledge, no Government Audit is threatened, and in the event
of any such Government Audit, to the knowledge of the Company, no basis exists
for a finding of material noncompliance with any provision of any government
contract or for a refund of any amounts paid or owed to the Company or any of
its Subsidiaries by any Governmental Entity pursuant to such government
contract. For any item disclosed in the Company Disclosure Schedule pursuant to
this Section 4.9, a true and complete copy of all material correspondence and
documentation with respect thereto has been made available to Parent.
4.10 Labor Agreements and Actions.
----------------------------
(a) Neither the Company nor any of its Subsidiaries is bound by or
subject to (and none of their respective assets or properties are bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of the Company, has sought to represent any of the employees,
representatives or agents of the Company or any of its Subsidiaries. There is
no strike, unfair labor practice complaint or other labor dispute involving the
Company or any of its Subsidiaries pending, or to the knowledge of the Company
threatened, which is reasonably likely to have a Material Adverse Effect, nor is
the Company aware of any labor organization activity involving its or any of its
Subsidiaries' employees. Neither the Company nor any of its Subsidiaries is
engaged in any unfair labor practice and neither the Company nor any of its
Subsidiaries is in material violation of any applicable laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours. Neither the Company nor any of its Subsidiaries has
experienced any material work stoppage or other material labor difficulty.
(b) The employment of each officer and employee of the Company and
each of its Subsidiaries is terminable at the will of the Company or such
Subsidiaries, as the
-16-
case may be, and neither the Company nor any of its Subsidiaries has entered
into any oral or written agreements with any of their respective officers or
employees that provide for severance or termination pay or acceleration of
vesting on stock options or restricted stock. Neither the Company nor any of
its Subsidiaries is a party to any agreement, contract or arrangement with any
officer or employee the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company or such Subsidiaries, as the case may be, of the nature of any of the
transactions contemplated by this Agreement.
(c) The Company and each of its Subsidiaries has complied in all
material respects with all applicable state and federal equal employment
opportunity laws and with other laws related to employment. The Company and
each of its Subsidiaries has conducted all employee terminations and reductions
in force in accordance with company policy and in compliance with all applicable
laws, including but not limited to the Worker Adjustment and Retraining
Notification Act ("WARN"). There is no, and has not been any, claim against the
----
Company or any of its Subsidiaries, or to the Company's knowledge, threatened
against the Company or any of its Subsidiaries, based on actual or alleged race,
age, sex, disability or other harassment or discrimination, or similar tortious
conduct, nor to the knowledge of the Company, is there any basis for any such
claim. There are no pending claims against the Company or any of its
Subsidiaries under any workers' compensation plan or policy or for long term
disability. There are no pending or threatened wage claims against the Company
or any of its Subsidiaries, and there are no other proceedings pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, by any employee or former employee.
(d) The Company is not aware that any officer of the Company or any of
its Subsidiaries, or any employee whose technical knowledge is of significant
importance for the development of products of the Company or any of its
Subsidiaries (including, but not limited to, the employees listed on Annex I to
the Company Disclosure Schedule), or that any group of officers or such
employees of the Company or any of its Subsidiaries, intends to terminate such
officer's or such employee's employment with the Company or its Subsidiaries, as
the case may be, nor does the Company or any of its Subsidiaries have any
present intention to terminate the employment of any officer or any such
employee. To the knowledge of the Company, each officer and each such employee
of the Company and its Subsidiaries is currently devoting 100% of his or her
business time attending to the affairs of the Company or its Subsidiaries, as
the case may be.
4.11 Certain Agreements and Employee Benefit Plans.
---------------------------------------------
(a) Schedule 4.11(a) of the Company Disclosure Schedule contains a
true and complete summary or list of, or otherwise describes, (i) all employee
benefit plans (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) which are maintained,
-----
contributed to or sponsored by the Company or any trade or business (whether or
not incorporated) which is treated as a single employer with the Company (an
"ERISA Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the
----------------
Internal Revenue Code of 1986, as amended (the "Code"), for the benefit of any
----
current or former employee, officer or director of the Company or an ERISA
Affiliate, (ii) each loan to a
-17-
non-officer employee and loans to officers and directors of the Company or any
of its Subsidiaries, (iii) all bonus, stock option, stock purchase, restricted
stock, phantom stock, or stock appreciation right plans, programs or
arrangements, (iv) all incentive, deferred compensation, supplemental
retirement, savings, profit sharing, or severance plans, programs or
arrangements, (v) all sabbatical, employee relocation, vacation, cafeteria
benefit (Code Section 125), dependent care benefit (Code Section 129), life or
accident insurance, disability, medical, dental, vision or any other fringe or
benefit plans, programs or arrangements, and (vi) any current or former
employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any present or former employee,
consultant or director of the Company or any of its Subsidiaries, as to which
(with respect to any of items (i) through (vi) above) any obligation or
potential liability is borne by the Company or any of its Subsidiaries
(together, the "Company Employee Plans").
----------------------
(b) The Company has delivered to Parent a copy of each of the Company
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and, to the extent still in its possession, any material
employee communications relating thereto) and has, with respect to each Company
Employee Plan which is subject to ERISA reporting requirements, provided copies
of any Form 5500 reports filed for the last three plan years. Any Company
Employee Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has applied to the Internal Revenue Service for such a determination letter
prior to the requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for a determination letter and
to make any amendments necessary to obtain a favorable determination. The
Company has also furnished Parent with the most recent Internal Revenue Service
determination letter issued with respect to each such Company Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any
Company Employee Plan subject to Code Section 401(a).
(c) With respect to each Company Employee Plan, (i) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, (ii) each Company Employee Plan has been administered
in accordance with its terms and in compliance with the requirements prescribed
by any and all statutes, rules and regulations (including ERISA and the Code),
(iii) the Company (or, as appropriate, an ERISA Affiliate) has prepared in good
faith and timely filed all requisite governmental reports (which were true and
correct as of the date filed) and has properly and timely filed and distributed
or posted all notices and reports to participants and beneficiaries required to
be filed, distributed or posted, (iv) no suit, administrative proceeding, action
or other litigation has been brought, or to the knowledge of the Company is
threatened against such Company Employee Plan, including any audit or inquiry by
the Internal Revenue Service or United States Department of Labor, (v) the
Company and each ERISA Affiliate have performed all material obligations
required to be performed by them and are not in any material respect in default
under or in violation of, and have no knowledge of any material default or
violation of, such Company Employee Plan, (vi)
-18-
neither the Company nor any ERISA Affiliate is subject to any liability or
penalty under Sections 4976 through 4980 of the Code or Title I of ERISA, (vii)
all contributions required to be made by the Company or any ERISA Affiliate
have been made on or before their due dates, (viii) no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such event for which
the thirty (30) day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of
ERISA has occurred, (ix) such Company Employee Plan is not covered by, and
neither the Company nor any ERISA Affiliate has incurred or expects to incur
any material liability under, Title IV of ERISA or Section 412 of the Code, and
(x) neither the Company nor any ERISA Affiliate is a party to, or has made any
contribution to or otherwise incurred any obligation under, any "multi-employer
plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Company Employee Plan, the Company has
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
-----
proposed regulations thereunder, (ii) the applicable requirements of the Family
and Medical Leave Act of 1993 ("FMLA") and the regulations thereunder, and (iii)
----
the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA") and the temporary regulations thereunder.
-----
The Company has no material obligations under COBRA with respect to any former
employees or qualifying beneficiaries thereunder.
(e) With respect to each Company Employee Plan, there has been no
amendment to, written interpretation or announcement (whether or not written) by
the Company or other ERISA Affiliate relating to, or change in participation or
coverage under, such Company Employee Plan which would materially increase the
expense of maintaining such Plan above the level of expense incurred with
respect to that Plan for the most recent fiscal year included in the Company
Financial Statements.
(f) Schedule 4.11(f) of the Company Disclosure Schedule contains a
true and correct list of each person who holds any stock option as of the date
hereof, together with (i) the number of shares of Company Common Stock subject
to such stock option, (ii) the date of grant of such stock option, (iii) the
extent to which such stock option is currently vested and, to the extent such
stock option is unvested, the vesting schedule, (iv) the exercise price of such
stock option, (v) whether such stock option is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code (an
"ISO"), and (vi) the expiration date of such stock option. Schedule 4.11(f) of
---
the Company Disclosure Schedule also sets forth the aggregate number of ISO's
and nonqualified stock options outstanding as of the date hereof.
(g) Neither the Company nor any of its Subsidiaries is a party to any
agreement or plan, including, without limitation, any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, 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.
-19-
(h) All options under the Company's 1995 Employee Stock Purchase Plan
shall terminate as of December 15, 1998 and all actions have been taken such
that the termination of the options is in full and complete compliance with the
terms of such plan.
4.12 Taxes.
-----
(a) The Company and each of its Subsidiaries (i) has filed when due
(taking into account extensions) with the appropriate federal, state, local,
foreign and other governmental agencies, all tax returns, estimates and reports
required to be filed by it, (ii) either paid when due and payable or established
adequate reserves or otherwise accrued all requisite federal, state, local or
foreign taxes, levies, imposts, duties, licenses and registration fees and
charges of any nature whatsoever, and unemployment and social security taxes and
income tax withholding, including interest and penalties thereon ("Taxes"), and
-----
(iii) has established or will establish in accordance with its normal accounting
practices and procedures accruals and reserves that, in the aggregate, are
adequate for the payment of all Taxes not yet due and payable and attributable
to any period preceding the Effective Time.
(b) No deficiencies for Taxes have been threatened or claimed by any
taxing authority in respect of any tax returns filed by the Company or any of
its Subsidiaries (or any predecessor corporations). Neither the Company nor any
of its Subsidiaries (nor any predecessor corporation of any of such entities)
has executed or filed with any taxing authority any agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any Taxes. Neither the Company nor any of its Subsidiaries is
currently being audited by any taxing authority nor have any of them received
notice of a proposed audit pertaining to Taxes. There are no tax liens on any
assets of the Company, any of its Subsidiaries or any affiliate, except for
Taxes not yet due and payable. The accruals and reserves for taxes reflected in
the balance sheet of the Company as at September 30, 1998 are in all material
respects adequate to cover all Taxes accruable through the date thereof
(including interest and penalties, if any, thereon and Taxes being contested) in
accordance with generally accepted accounting principles.
(c) Neither the Company nor any of its Subsidiaries is a party to, is
bound by, or has any obligation under any tax sharing or similar agreement.
(d) Neither the Company nor any of its Subsidiaries is required to
include in income (i) any amount in respect of any adjustment under Section 481
of the Code, (ii) any deferred intercompany transaction, or (iii) any
installment sale gain, where the inclusion in income would result in a Tax
liability materially in excess of the reserves therefor. Neither the Company
nor any of its Subsidiaries has given a consent under Section 341(f) of the
Code. Neither the Company nor any of its Subsidiaries is, nor has it been at
any time, a "United States real property holding corporation" within the meaning
of Section 897(c)(2) of the Code. Neither the Company nor any of its
Subsidiaries owns any property of a character which would give rise to any
documentary, stamp or other transfer tax as a result of the transactions
contemplated by this Agreement.
-20-
(e) Neither the Company nor any of its Subsidiaries is a party to any
agreement, contract or arrangement that may result, separately or in the
aggregate, in the payment of any "excess parachute payment" within the meaning
of Section 280G of the Code, determined without regard to Section 280G(b)(4) of
the Code, or under which any person may receive payments subject to the tax
imposed by Section 4999 of the Code, by reason of the transactions contemplated
by this Agreement.
(f) All independent contractors and consultants of the Company and
each of its Subsidiaries have been properly classified as independent
contractors for the purposes of federal and applicable state laws and laws
applicable to employee benefits and other applicable law.
4.13 Absence of Certain Changes or Events. Since September 30, 1998,
------------------------------------
except as contemplated by this Agreement, the Company and each of its
Subsidiaries has conducted its business only in the ordinary course consistent
with past practice, and there has not been (i) any damage, destruction or loss,
whether covered by insurance or not, having or which, insofar as reasonably can
be foreseen, in the future would have a Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend (whether in cash, stock
or property) with respect to Company Common Stock, or any redemption, purchase
or other acquisition of any of its securities, (iii) any event or change in the
business, operations, properties, prospects, condition (financial or
otherwise), assets or liabilities (including, without limitation, contingent
liabilities) of the Company or any of its Subsidiaries having, or which,
insofar as reasonably can be foreseen, in the future would have a Material
Adverse Effect, (iv) any labor dispute, other than routine matters, none of
which is material to the Company or any of its Subsidiaries, (v) any entry into
any material commitment or transaction (including, without limitation, any
borrowing or capital expenditure) other than in the ordinary course of business
consistent with past practice, (vi) any material change by the Company in its
accounting methods, principles or practices, (vii) any revaluation by the
Company of any asset (including, without limitation, any writing down of the
value of inventory or writing off of notes or accounts receivable), (viii) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or key employees of the Company or any of its
Subsidiaries, or (ix) 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 other than nonexclusive licenses granted in
the ordinary course of business consistent with past practice.
-21-
4.14 Title to Properties; Absence of Liens and Encumbrances; Condition of
--------------------------------------------------------------------
Equipment.
---------
(a) Neither the Company nor any of its Subsidiaries owns any real
property.
(b) All of the existing real property leases to which the Company or
any of its Subsidiaries is a party have been previously delivered to Parent.
Schedule 4.14(b) of the Company Disclosure Schedule sets forth a complete and
accurate list of all real property leased by the Company or any of its
Subsidiaries. All such 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 default (by the Company or any of its Subsidiaries
or, to the knowledge of the Company, any other party) or event of default (or
event which with notice or lapse of time, or both, would constitute a default)
that would give rise to a material claim against the Company or any of its
Subsidiaries or, to the knowledge of the Company, any other party.
(c) The Company and each of its Subsidiaries owns or has valid
leasehold interests in all of its tangible properties and assets (real, personal
and mixed) used in its business, free and clear of any liens (other than liens
for Taxes that are not yet delinquent), charges, pledges, security interests or
other encumbrances, except as reflected in the Company Financial Statements and
except for such imperfections of title and encumbrances, if any, that are not
substantial in character, amount or extent, and that do not and are not
reasonably likely to materially detract from the value, or interfere with the
use of the property subject thereto or affected thereby. The Company has
delivered to Parent correct and complete copies of each lease identified in
Schedule 4.14(b) of the Company Disclosure Schedule and each such lease is valid
and enforceable by the Company or a Subsidiary in accordance with its terms.
Neither the Company nor any Subsidiary has received notice that, and, to the
Company's knowledge, no circumstance exists which, with the passage of time or
the giving of notice or both, could constitute a default under any such lease.
(d) Each item of machinery and equipment owned or leased by the
Company or any of its Subsidiaries is (i) adequate for the conduct of the
business of the Company consistent with its past practice, (ii) suitable for the
uses to which it is currently employed, (iii) in good operating condition,
ordinary wear and tear excepted, and (iv) regularly and properly maintained.
-22-
4.15 Intellectual Property.
---------------------
(a) The Company and each of its Subsidiaries owns all patents,
trademarks, trade names, service marks, copyrights and any applications for such
patents, trademarks, trade names, service marks and copyrights, and all patent
rights, trade secrets, schematics, technology, know-how, computer software,
documentation and tangible or intangible proprietary information or material and
other intellectual property or proprietary rights (collectively, "Intellectual
------------
Property") used in the conduct of its business as currently conducted, including
--------
without limitation all copyrights registered in the name of the Company or any
of its Subsidiaries ("Company Intellectual Property"). The Company and each of
-----------------------------
its Subsidiaries has taken reasonable measures to protect the proprietary nature
of each item of Company Intellectual Property that it considers confidential,
and to maintain in confidence all trade secrets and confidential information
that it presently owns or uses.
(i) Section 4.15(a)(i) of the Company Disclosure Schedule lists,
as of the date hereof, all patents and patent applications and all trademarks,
registered copyrights, trade names and service marks owned by, or licensed to,
the Company or any of its Subsidiaries and which are currently used in
connection with the business of the Company or its Subsidiaries, including the
jurisdictions in which each item of such Company Intellectual Property has been
issued or registered or in which any such application for such issuance or
registration has been filed.
(ii) Section 4.15(a)(ii) of the Company Disclosure Schedule
lists, as of the date hereof, all written licenses, sublicenses and other
agreements to which Company or any of its Subsidiaries is a party and pursuant
to which any person is authorized to use any Company Intellectual Property
rights, excluding object code, nonexclusive end-user licenses granted to
end-users in the ordinary course of business that permit use of software
products without a right to modify, distribute or sublicense the same
("End-User Licenses"), and excluding any such licenses relating solely to the
-----------------
business of Knowledge Technologies International ("KTI") that have been
---
assigned to KTI and reflected in the schedules to the Transition Agreement
between the Company and KTI. Section 4.15(a)(ii) separately lists all End-User
Licenses other than those relating solely to the business of KTI.
(iii) Section 4.15(a)(iii) of the Company Disclosure Schedule
lists, as of the date hereof, all written licenses, sublicenses and other
agreements to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any such Subsidiary is authorized to use any
third party Intellectual Property ("Third Party Intellectual Property") which
---------------------------------
is incorporated ("Embedded Third Party Intellectual Property") in any existing
------------------------------------------
software, hardware, product or service of the Company or any of its
Subsidiaries, or any software, hardware, product or service currently under
development ("Products").
--------
(iv) Section 4.15(a)(iv) of the Company Disclosure Schedule
lists, as of the date hereof, all written agreements or other arrangements
under which the Company or any of its Subsidiaries has provided or agreed to
provide source code of any product of the Company or any of its Subsidiaries to
any third party.
-23-
The Company has made available to Parent correct and complete copies
of all patents, registrations, applications (owned by the Company or any of its
Subsidiaries), and all licenses, sublicenses and agreements referred to in this
Section 4.15(a), each as amended to date. Except for retail purchases of
software, neither the Company nor any of its Subsidiaries is a party to any oral
license, sublicense or agreement which, if reduced to written form, would be
required to be listed in Section 4.15 of the Company Disclosure Schedule under
the terms of this Section 4.15(a).
(b) With respect to each item of Company Intellectual Property that
the Company or any of its Subsidiaries owns, (i) the Company or its Subsidiaries
possess all right, title and interest in and to such item; and (ii) such item is
not subject to any outstanding judgment, order, decree, stipulation or
injunction.
(c) With respect to each item of Third Party Intellectual Property
listed in Section 4.15(a)(iii): (i) the license, sublicense or other agreement
covering such item is legal, valid, binding, enforceable and in full force and
effect with respect to the Company or such Subsidiary, and, to the Company's
knowledge, is legal, valid, binding, enforceable and in full force and effect
with respect to each other party thereto; (ii) neither the Company nor any of
its Subsidiaries is in material breach or default thereunder, and, to the
Company's knowledge, no other party to such license, sublicense or other
agreement is in material breach or default thereunder, and, to the Company's
knowledge, no event has occurred which with notice or lapse of time would
constitute a material breach or default by the Company or any of its
Subsidiaries or permit termination, modification or acceleration thereunder by
the other party thereto; (iii) to the Company's knowledge, the underlying item
of Third Party Intellectual Property is not subject to any outstanding judgment,
order, decree, stipulation or injunction to which the Company or any of is
Subsidiaries is a party or has been specifically named that interferes with the
conduct of the Company's or any of its Subsidiaries' business as currently
conducted, nor, to the Company's knowledge, subject to any other outstanding
judgment, order, decree, stipulation or injunction that interferes with the
conduct of the Company's or any of its Subsidiaries' business as currently
conducted.
(d) Neither the Company nor any of its Subsidiaries has (i) been named
in any suit, action or proceeding as to which it has been served with process
which involves a claim of infringement or misappropriation of any Intellectual
Property right of any third party or (ii) received any written notice alleging
any such claim of infringement or misappropriation. The Company has made
available to Parent correct and complete copies of all such suits, actions or
proceedings or written notices. The manufacturing, marketing, licensing, use or
sale of the products or the performance of the services offered by the Company
and its Subsidiaries do not currently infringe, and have not infringed, any
Intellectual Property right of any third party; and, to the knowledge of the
Company, none of the Company Intellectual Property rights are being infringed by
activities, products or services of any third party.
(e) The execution and delivery of this Agreement by the Company, and
the consummation of the transactions contemplated hereby, will neither cause the
Company nor any of its Subsidiaries to be in violation or default under any
license, sublicense or other
-24-
agreement relating to Intellectual Property, nor terminate nor modify nor
entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement, nor limit in any way
the Company's or any of its Subsidiaries' ability to conduct its business or
use or provide the use of Company Intellectual Property or any Intellectual
Property rights of others.
(f) Except for Embedded Third Party Intellectual Property for which
the Company has valid non-exclusive licenses and which are adequate for each of
the Company's and its Subsidiaries' businesses as presently conducted, and
except for usual and customary rights retained by the United States government
with respect to Intellectual Property developed under research contracts with
the Federal government (the "Retained Fed Rights"), the Company is the sole and
-------------------
exclusive owner or the licensee of, with all right, title and interest in and to
all Company Intellectual Property (free and clear of any liens or encumbrances),
and has sole and exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use and distribution
thereof or the material covered thereby in connection with the services or
products in respect of which Company Intellectual Property is being used. To
the Company's knowledge, the United States government has never exercised, and
the Company has no notice that the government intends to exercise, its rights to
use or provide to others the use of the Retained Fed Rights with respect to any
Company Intellectual Property in a manner that would be material to the
Company's non-governmental business. The Retained Fed Rights do not materially
interfere with the conduct of the Company's business.
(g) The Company has made available to Parent copies of the Company's
and each of its Subsidiaries' standard forms of End-User Licenses. Section 4.15
of the Company Disclosure Schedule describes the material variations from the
standard form of End-User License, and as of the date hereof, neither the
Company nor any of its Subsidiaries has entered into any End-User Licenses which
contain terms materially different than as set forth in the standard forms of
such agreements made available to Parent.
(h) The Company and each of its Subsidiaries has taken reasonable
security measures to safeguard and maintain the secrecy, confidentiality and
value of, and its property rights in, all Company Intellectual Property. All
officers, employees and consultants of the Company or any of its Subsidiaries
who have access to proprietary information or Company Intellectual Property have
executed and delivered to the Company or such Subsidiary an agreement regarding
the protection of proprietary information and the assignment to the Company or
any of its Subsidiaries of all Intellectual Property arising from the services
performed for the Company or any of its Subsidiaries by such persons. No
current or prior officers, employees or consultants of the Company or any of its
Subsidiaries claim any ownership interest in any Company Intellectual Property
as a result of having been involved in the development of such property while
employed by or consulting to the Company or any of its Subsidiaries, or
otherwise. Except for the Embedded Third Party Intellectual Property, all
Company Intellectual Property has been developed by employees of the Company or
its Subsidiaries, within the course and scope of their employment.
-25-
(i) To the Company's knowledge, there are no material defects in the
Company's or any of its Subsidiaries' Products, and there are no errors in any
documentation, specifications, manuals, user guides, promotional material,
internal notes and memos, technical documentation, drawings, flow charts,
diagrams, source language statements, demo disks, benchmark test results, and
other written materials related to, associated with or used or produced in the
development of the Company's or any of its Subsidiaries' Products (collectively,
the "Design Documentation"), which defects or errors would reasonably be
--------------------
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company. The occurrence in or use by (i) the computer software currently
sold by the Company or any of its Subsidiaries (excluding third party software
not currently incorporated into the Products), or developed or modified by the
Company or any of its Subsidiaries on behalf of others, or (ii) to the Company's
knowledge, third party software not currently incorporated into the Products, of
dates on or after January 1, 2000 (the "Millennial Dates") will not adversely
----------------
affect the performance of the software with respect to date dependent data,
computations, output or other functions (including without limitation,
calculating, computing and sequencing) and such software will create, sort and
generate output data related to or including Millennial Dates without errors or
omissions.
(j) No government funding or university or college facilities were
used in the development of the Company's or any of its Subsidiaries' Products
and such Products were not developed pursuant to any contract or other agreement
with any person or entity.
(k) Section 4.15 of the Company Disclosure Schedule lists all warranty
claims (including any pending claims) related to the Company's or any of its
Subsidiaries' Products and the nature of such claims, except for customary
product support and maintenance claims that are not material to the Company or
any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has
made any material oral or written representations or warranties with respect to
its Products.
(l) The Company and its Subsidiaries have been and are in compliance
with the Export Administration Act of 1979, as amended, and all regulations
promulgated thereunder.
(m) As part of the Company Disclosure Schedule, the Company has
provided Parent a list (including names, addresses, contact names, telephone
numbers as well as the termination date and next renewal date of the agreement),
which is complete in all material respects, of all agreements or other
arrangements pursuant to which the Company or any Subsidiary is obligated to
provide support services (such agreements, as supplemented below, are referred
to collectively as the "Maintenance Agreements"). Except for any nonstandard
----------------------
maintenance agreements specified in Section 4.15(m) of the Company Disclosure
Schedule (the "Nonstandard Maintenance Agreements"), all of the Maintenance
----------------------------------
Agreements are in all material respects in the form of the license agreement
identified as the Standard Maintenance Agreement set forth in the Company
Disclosure Schedule (the "Standard Maintenance Agreement"). The versions of the
------------------------------
products currently supported by the Company or any Subsidiary are set forth in
the Company Disclosure Schedule. Prior to the Closing, the Company will
supplement the Company Disclosure Schedule with any addresses, contact names and
telephone numbers
-26-
omitted from the initial Company Disclosure Schedule to include: (i) all
Standard Maintenance Agreements entered into between the date hereof and the
Closing, and (ii) all Nonstandard Maintenance Agreements that were entered into
between the date hereof and the Closing with the written consent of the Parent.
Section 4.15(m) of the Company Disclosure Schedule sets forth and indicates the
agreements with source code escrow provisions relative to the Company's
Products.
4.16 Agreements, Contracts and Commitments. As of the date hereof,
-------------------------------------
neither the Company nor any of its Subsidiaries is a party to or is bound by:
(a) any oral or written plan, contract or arrangement which requires
aggregate payments by the Company or any of its Subsidiaries in excess of
$50,000, which provides for bonuses, pensions, deferred compensation, severance
pay or benefits, retirement payments, profit-sharing, or the like;
(b) any oral or written consulting agreement, contract or commitment
with any independent contractor or consultant 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, or any oral or written
consulting agreement, contract or commitment with any independent contractor or
consultant under which any benefits of which are contingent upon the occurrence
of a transaction involving the Company of the nature of any of the transactions
contemplated by this Agreement;
(c) any joint marketing agreement, joint development agreement, joint
venture contract or agreement, or any other agreement currently in force under
which the Company or any of its Subsidiaries have continuing obligations to
jointly market any product, technology or service and which may not be canceled
without penalty upon notice of thirty (30) 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 and which may not
be canceled without penalty upon notice of thirty (30) days or less, or which
has involved, or is expected to involve, a sharing of profits with other
persons;
(d) any existing OEM agreement, VAR agreement, distribution agreement,
volume purchase agreement, or other similar agreement in which the annual amount
involved in 1997 exceeded, or is expected to exceed in 1998, $50,000 in
aggregate amount or pursuant to which the Company or any of its Subsidiaries has
granted or received most favored customer provisions or exclusive marketing
rights related to any product, group of products or territory;
(e) any agreement, contract, mortgage, indenture, lease, instrument,
license, franchise, permit, concession, arrangement, commitment or authorization
which may be, by its terms, terminated or breached by reason of the execution of
this Agreement, the Merger, or the consummation of the transactions contemplated
hereby or thereby;
-27-
(f) except for trade indebtedness incurred in the ordinary course of
business, any loan, note, indenture, or other instrument evidencing or related
in any way to indebtedness in excess of $50,000 incurred in the acquisition of
companies or other entities, or any indebtedness in excess of $50,000 for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, indemnification or otherwise;
(g) any agreement, contract, or commitment containing covenants
purporting to limit the Company's freedom or that of any of its Subsidiaries to
(i) engage in any line of business, (ii) compete in any geographic area or with
any third party, or (iii) grant any exclusive distribution rights;
(h) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or license
of software products in the ordinary course of business;
(i) any license agreement, either as licensor or licensee, excluding
End-User Licenses, or any agreement, contract or commitment currently in force
to license any third party to manufacture or reproduce any Company product,
service or technology except as a distributor in the normal course of business;
(j) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $100,000;
(k) any agreement, contract or commitment currently in force 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 has any material
ownership interest in any corporation, partnership, joint venture or other
business enterprise other than the Company's Subsidiaries;
(l) any other agreement, contract or commitment that is material
to the Company or to any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries, nor to the Company's
knowledge any other party to any of the agreements, contracts or commitments to
which the Company or any of its Subsidiaries is a party or by which any of them
are bound that are required to be disclosed in the Company Disclosure Schedule
pursuant to Section 4.15 or this Section 4.16 ("Company Contracts") is, as of
-----------------
the date hereof, in breach, violation or default under, any Company Contract,
except for breaches, violations or defaults that in the aggregate would not have
a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has
received written notice that it has breached, violated or defaulted under, any
of the material terms or conditions of any Company Contract in such a manner as
would permit any other party to cancel or terminate such Company Contract, or
would permit any other party to seek material damages or other remedies (for any
or all of such breaches, violations or defaults, in the aggregate).
-28-
4.17 Proprietary Information and Inventions Agreements. Each current
-------------------------------------------------
and former employee, consultant and officer of the Company and each of its
Subsidiaries has executed an agreement with the Company or a Subsidiary
regarding confidentiality and proprietary information substantially in the form
or forms delivered to Parent. The Company, after reasonable investigation, is
not aware that any of its employees or consultants is in violation thereof, and
the Company and each of its Subsidiaries will use its best efforts to prevent
any such violation. All consultants to or vendors of the Company and each of
its Subsidiaries with access to confidential information of the Company or any
of its Subsidiaries are parties to a written agreement substantially in the
form or forms provided to Parent under which, among other things, each such
consultant or vendor is obligated to maintain the confidentiality of
confidential information of the Company and its Subsidiaries. The Company,
after reasonable investigation, is not aware that any of its consultants or
vendors are in violation thereof, and the Company will use its best efforts to
prevent any such violation.
4.18 No Conflict of Interest. Except as expressly disclosed in the
-----------------------
SEC Documents, neither the Company nor any of its Subsidiaries is indebted,
directly or indirectly, to any of its officers or directors or to their
respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees. To the Company's knowledge,
none of the officers or directors of the Company or any of its Subsidiaries, or
any members of their immediate families, directly or indirectly, are indebted to
the Company or any of its Subsidiaries or have any direct or indirect ownership
interest in any firm or corporation with which the Company or any of its
Subsidiaries is affiliated or with which the Company or any of its Subsidiaries
has a business relationship, or any firm or corporation which competes with the
Company or any of its Subsidiaries, except that officers, directors and/or
stockholders of the Company and its Subsidiaries may own stock in (but not
exceeding two percent of the outstanding capital stock of) publicly traded
companies that compete with the Company and its Subsidiaries. To the Company's
knowledge, none of the officers or directors of the Company or any of its
Subsidiaries or any member of their immediate families is, directly or
indirectly, interested in any material contract with the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
4.19 Takeover Statutes Inapplicable. No "fair price," "moratorium,"
------------------------------
"control share acquisition" or other similar anti-takeover statute or
regulation (each a "Takeover Statute") is applicable to the Company, any
----------------
Subsidiary of the Company, the Shares (and associated Rights), the Offer, the
Merger or any of the other transactions contemplated by this Agreement. The
Company has heretofore delivered to Parent a complete and correct copy of the
resolutions of the Board of Directors of the Company approving the Offer, the
Merger and this Agreement, and such approval is sufficient to render
inapplicable to the Offer, the Merger, this Agreement and the transactions
contemplated by this Agreement the provisions of Section 203 of the DGCL.
4.20 Brokers and Finders. Except for the Financial Advisor and the fees
-------------------
payable by the Company to such firm described in an engagement letter dated
October 5, 1998, a complete and correct copy of which has been provided to
Parent on or prior to the date hereof,
-29-
neither the Company nor any of its Subsidiaries has employed any broker or
finder or incurred any liability for any fee or commission to any broker,
finder or intermediary in connection with the transactions contemplated hereby.
4.21 Environmental Laws.
------------------
(a) The operations of the Company and its Subsidiaries comply in all
material respects with all applicable federal, state and local environmental
laws, statutes and regulations.
(b) To the Company's knowledge, the operations of the Company and its
Subsidiaries are not the subject of any judicial or administrative proceeding
alleging the violation of any federal, state or local environmental law, statute
or regulation.
(c) The Company and its Subsidiaries have not been notified that their
operations are the subject of any federal or state investigation pursuant to
which the Company or any Subsidiary has been ordered to respond to a release of
any hazardous or toxic waste or substance into the environment in violation of
law.
(d) Each of the Company and its Subsidiaries has not filed any notice
under federal or state law indicating past or present treatment, storage or
disposal requiring a Part B permit or designation of "interim status" as defined
under 40 C.F.R. Parts 260-270 or any state equivalent of a hazardous or toxic
waste or substance as defined therein or reporting a spill or release of a
hazardous or toxic waste or substance into the environment except in accordance
with applicable law.
(e) Each of the Company and its Subsidiaries has not released, as
defined in the Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. (S)9601 et seq.), any hazardous substance as defined therein into
-- ---
the environment, except where such release could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole;
(f) None of the operations of the Company or any Subsidiary involve
the generation, transportation, treatment or disposal as defined under 40 C.F.R.
Parts 260-270 or any state equivalent of hazardous waste as defined therein
requiring a Part B permit or designation of "interim status".
(g) No underground storage tanks are on the premises of the
Company or any Subsidiary.
(h) To the Company's knowledge, no lien in favor of any governmental
authority for (i) any liability under federal or state environmental laws or
regulations, or (ii) damages arising from or costs incurred by such governmental
authority in response to a release of a hazardous or toxic waste or substance
into the environment has been filed or attached to the premises currently owned
or leased by the Company or any Subsidiary.
-30-
(i) All material permits necessary for the continued conduct of the
business of the Company and its Subsidiaries for the transportation, transfer,
recycling, storage, use, treatment, manufacture, investigation or removal of any
hazardous or toxic waste or substance have been obtained by the Company or any
Subsidiary. All such permits are valid and in full force and effect. Each of
the Company and the its Subsidiaries has complied in all material respects with
all covenants and conditions of such permits and no circumstances exist which
could cause any permit to be revoked, modified or rendered non-renewable upon
the payment of the permit fee or, to the best of the Company's knowledge, which
could impose upon the Company, any of the Company's Subsidiaries or the
Surviving Corporation the obligation to obtain any additional permits for such
activities, absent a change in operations.
(j) Neither the Company nor any Subsidiary has exposed any persons in
a material manner to, nor received notice of any claim of injury due to exposure
of any person to, hazardous or toxic wastes or substances manufactured, stored,
used, distributed, disposed of, released or controlled by the Company or any
Subsidiary.
(k) No hazardous or toxic wastes or substances are present on any
property which has been owned, leased or occupied by the Company or any
Subsidiary, for the conduct of its business which could reasonably be expected
to result in a Material Adverse Effect on the Company and its Subsidiaries taken
as a whole.
(l) No claim, complaint, or administrative proceeding has been brought
or is currently pending against the Company or any Subsidiary relating to any
liability of the Company or any Subsidiary existing or threatened with respect
to the release of hazardous or toxic wastes or substances or as to the
investigation or remediation of hazardous or toxic wastes or substances.
As used herein "federal, state and local environmental laws, statutes
-----------------------------------------------------
or regulations" means any and all applicable laws, rules, regulations, orders,
--------------
treaties, statutes and codes promulgated by any local, state, federal or
international governmental authority or agency which has jurisdiction over the
environment and any portion of the current operations of the Company and its
Subsidiaries, and which prohibits, regulates or controls any hazardous material
or the transportation, storage, transfer, recycling, use, treatment,
manufacture, investigation, removal, remediation, release, sale or distribution
of hazardous materials including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. (S)9601 et
--
seq.), the Hazardous Material Transportation Act (49 U.S.C. (S)1801 et seq.),
--- -- ---
the Resource Conservation and Recovery Act (42 U.S.C. (S)6901 et seq.), the
-- ---
Federal Water Pollution Control Act (33 U.S.C. (S)1251 et seq.), the Clean Air
-- ---
Act (42 U.S.C. (S)7401 et seq.), the Toxic Substances Control Act, as amended
-- ---
(15 U.S.C. (S)2601 et seq.), as these laws have been amended or supplemented to
-- ---
date and any analogous state or local statutes and the regulations promulgated
to date pursuant thereto.
As used herein, "hazardous or toxic waste or substance" means those
-------------------------------------
substances which are regulated by or form the basis of liability under any
federal, state and local environmental laws, statutes or regulations because
they are radioactive, toxic or hazardous,
-31-
including, without limitation: (a) asbestos, (b) oil and petroleum products,
(c) explosives, (d) radioactive substances, pollutants or wastes, (e) urea
formaldehyde-containing building materials, (f) polychlorinated biphenyls, (g)
radon gas, and (h) ultra-hazardous or toxic substances, pollutants or wastes.
4.22 Rights Agreement. The Rights Agreement has been amended to render
-----------------
the Rights Agreement inapplicable to the Offer, the Merger, the Company
Stock Option, this Agreement, the Support Agreements, the Director Option
Termination Agreements and any transaction contemplated hereby or thereby
between the Company, Parent, Purchaser, and any such stockholders. Such
amendment to the Rights Agreement is attached to the Company Disclosure
Schedule.
4.23 Disclosure. The Company has provided or made available to Parent
----------
copies of all documents and information requested by Parent on Parent's
diligence request lists dated September 16, 1998 and October 15, 1998, to the
extent the items on such lists are applicable to the Company or any of its
Subsidiaries. The Company has made available to Parent true and correct copies
of all minutes of meetings or actions by written consent of the boards of
directors (including without limitation all committees thereof) and
stockholders of the Company and its Subsidiaries, which minutes and actions by
written consent reflect all actions taken by the boards of directors (including
without limitation all committees thereof ) and stockholders of the Company and
its Subsidiaries.
SECTION V
COVENANTS OF THE COMPANY AND PARENT
5.1 Conduct of Business of the Company. Except as contemplated by this
----------------------------------
Agreement, during the period commencing on the date of this Agreement and
continuing until the first to occur of the Cut-Off Date or the termination of
this Agreement in accordance with its terms, the Company and each of its
Subsidiaries shall conduct its operations in the ordinary and usual course
consistent with past practice, and the Company and each of its Subsidiaries will
endeavor to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain satisfactory relations
with suppliers, contractors, distributors, licensors, licensees, customers and
others having business relationships with it. Without limiting the generality
of the foregoing and except as provided in this Agreement, prior to the Cut-Off
Date, the Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly do, or propose to do, any of the following, without the
prior written consent of Parent (which consent shall not be unreasonably
withheld):
(a) Declare or pay any dividends on or make any other distribution in
respect of any of its capital stock;
(b) Split, combine or reclassify any of its capital stock or issue or
authorize any other securities in respect of, in lieu of or in substitution for,
shares of its capital stock, or repurchase, redeem or otherwise acquire any
shares of its capital stock;
-32-
(c) Issue, deliver, encumber, sell or purchase any shares of its
capital stock or any securities convertible into, or warrants, options or other
rights of any kind to acquire, any such shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) (other
than the issuance of Company Common Stock upon the exercise of outstanding Stock
Options and Warrants);
(d) Amend or otherwise change its Certificate of Incorporation or
Bylaws (or other comparable organizational document);
(e) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof;
(f) Sell, lease, license or otherwise dispose of any of its assets
(including the Company Intellectual Property), other than End-User Licenses on
terms consistent with the Standard License Agreement in the ordinary course of
business consistent with its past practice and other than insignificant amounts
of assets that are not Company Intellectual Property;
(g) Incur, assume or pre-pay any indebtedness for borrowed money,
guarantee any indebtedness or obligation of another person, issue or sell any
debt securities or options, warrants, calls or other rights to acquire any debt
securities, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the economic
effect of any of the foregoing other than (i) in connection with the financing
of ordinary course trade payables consistent with past practice, or (ii) as
contemplated by this Agreement;
(h) Enter into or amend any contract or agreement other than in the
ordinary course of business consistent with past practice;
(i) Authorize any single capital expenditure which is in excess of
$100,000 or capital expenditures which are, in the aggregate, in excess of
$250,000 for the Company and its Subsidiaries taken as a whole;
(j) Increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past practice in
salaries or wages of employees of the Company or its Subsidiaries who are not
officers of the Company or its Subsidiaries, or grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or other employee of the Company or any of its
Subsidiaries, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee of the Company
or any of its Subsidiaries;
-33-
(k) Take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures (including, without limitation, procedures
with respect to cash management, the payment of accounts payable and the
collection of accounts receivable);
(l) Make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability, or execute or file with
the IRS or any other taxing authority any agreement or other document extending,
or having the effect of extending, the period of assessment or collection of any
taxes;
(m) Amend or modify the warranty policy of the Company or any
Subsidiary;
(n) Pay, discharge, satisfy, settle or compromise any suit, claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business and consistent with past practice, of liabilities
reflected or reserved against in the Company's balance sheet dated as of
September 30, 1998 or subsequently incurred in the ordinary course of business
and consistent with past practice;
(o) Take any action that would result in any of the representations
and warranties of the Company set forth in this Agreement becoming untrue in any
material respect or that would be reasonably likely to result in any of the
conditions to the Offer or any of the conditions to the Merger set forth in
Article VII not being satisfied (provided, however, that the Board of Directors
shall retain the right to modify or withdraw its recommendation with respect to
the Offer and the Merger pursuant to Section 5.3(b));
(p) Enter into, amend or extend any contracts, agreements, or
obligations relating to the distribution, sale, sublicense or marketing by third
parties of the Company's or any Subsidiary's products or products licensed by
the Company or any Subsidiary, other than agreements, extensions or amendments
that grant non-exclusive rights to such third parties and provide for
termination by the Company or any Subsidiary for convenience on not more than 60
days' notice;
(q) Materially revalue any of its assets (other than the booking of
reserves in the ordinary course of business and consistent with past practices)
or, except as required by a change in law or in generally accepted accounting
principles or the rules of the SEC, make any change in accounting methods,
principles or practices, including inventory accounting practices;
(r) Materially accelerate or delay collection of any notes or accounts
receivable in advance of or beyond their regular due dates or the dates when the
same would have been collected in the ordinary course of business;
-34-
(s) Materially delay or accelerate payment of any account payable
beyond or in advance of its due date or the date such liability would have been
paid in the ordinary course of business; or
(t) Cancel or terminate any material insurance policy naming it as a
beneficiary or a loss payable payee or permit any such policy to lapse (it being
understood that the Company and any Subsidiary may renew any insurance policy in
effect as of the date of this Agreement).
5.2 Stockholder Meeting; Proxy Material; Information Statement.
----------------------------------------------------------
(a) If this Agreement is required by the DGCL to be approved by the
Company's stockholders, then the Company shall cause a meeting of its
stockholders (the "Stockholders' Meeting") to be duly called and held as soon as
---------------------
reasonably practicable for the purpose of voting on the approval and adoption of
this Agreement and the transactions contemplated hereby. The Board of Directors
of the Company shall, subject to the terms of Section 5.3(b), recommend approval
and adoption of this Agreement and the Merger by the Company's stockholders. In
connection with such meeting, the Company (i) shall promptly prepare and file
with the SEC, use all reasonable efforts to have cleared by the SEC and
thereafter mail to its stockholders as promptly as practicable the Proxy
Statement and all other proxy materials for such meeting, (ii) shall notify
Parent of the receipt of any comments of the SEC with respect to the Proxy
Statement and of any requests by the SEC for any amendment or supplement thereto
or for additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC, (iii) shall give Parent and its counsel the opportunity to review the Proxy
Statement prior to its being filed with the SEC and shall give Parent and its
counsel the opportunity to review all amendments and supplements to the Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the SEC, (iv) shall,
subject to the fiduciary duties of its Board of Directors as advised by counsel,
use all reasonable efforts to obtain the necessary approvals by its stockholders
of this Agreement and the transactions contemplated hereby and (v) shall
otherwise comply with all legal requirements applicable to such meeting.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90% of the then outstanding Shares (and associated Rights), the
parties hereto agree, at the request of Purchaser, subject to the provisions of
Article VII, to take all necessary and appropriate action, including the
preparation and mailing of the Information Statement if the Purchaser determines
that such an Information Statement is appropriate or required, to cause the
Merger to become effective, in accordance with Section 253 of the DGCL, as soon
as reasonably practicable after such acquisition, without a meeting of the
stockholders of the Company.
5.3 Third Party Acquisitions.
------------------------
(a) The Company agrees that neither it, nor any of its Subsidiaries,
nor any of the employees, officers or directors of the Company or any of its
Subsidiaries, nor the stockholders who have executed the Support Agreements (the
"Supporting Stockholders") shall,
-----------------------
-35-
and the Company shall direct and cause the agents and representatives
(including its Financial Advisor or any other investment banker and any
attorney or accountant retained by it (collectively, "Company Advisors")) of it
----------------
and each of its Subsidiaries not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate the making of any inquiries in respect of, or
the making of any proposal for, a Third Party Acquisition (as defined in
Section 5.3(b) below). The Company further agrees that neither it, nor any of
its Subsidiaries, nor any of the employees, officers or directors of the
Company or any of its Subsidiaries, nor the Supporting Stockholders shall, and
the Company shall direct and cause all Company Advisors not to, directly or
indirectly, engage in any negotiations concerning, or provide any information
or data to, or have any discussions with, any Third Party (as defined in
Section 5.3(b) below) relating to the proposal of a Third Party Acquisition, or
otherwise facilitate any effort or attempt to make or implement a Third Party
Acquisition; provided, however, that if at any time prior to the acceptance
-------- -------
by Purchaser for payment of Shares (and associated Rights) pursuant to the
Offer, the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's stockholders under applicable
law, the Company may, in response to an inquiry, proposal or offer for a Third
Party Acquisition which was not solicited subsequent to the date hereof and
that does not result from a breach of this Section 5.3, (x) furnish only such
information with respect to the Company and its Subsidiaries to any such person
pursuant to a customary confidentiality agreement as was delivered to Parent
prior to the execution of this Agreement and (y) participate in the discussions
and negotiations regarding such inquiry, proposal or offer. The Company shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Third Parties conducted heretofore with
respect to any of the foregoing, and to promptly request each Third Party that
has heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Company or any of its Subsidiaries, if any, to
return to the Company all confidential information heretofore furnished to such
Third Party by or on behalf of the Company. The Company shall take the
necessary steps to promptly inform all Company Advisors of the obligations
undertaken in this Section 5.3(a). The Company agrees to notify Parent
promptly (and in any event within 24 hours) if (i) any inquiries relating to or
proposals for a Third Party Acquisition are received by the Company, any of its
Subsidiaries or any of the Company Advisors, (ii) any information about the
Company or its Subsidiaries is requested from the Company, its Subsidiaries or
any of the Company Advisors, or (iii) any negotiations or discussions in
connection with a possible Third Party Acquisition are sought to be initiated
or continued with the Company or any of the Company Advisors indicating, in
each such case, in connection with such notice, the principal terms and
conditions of any proposals or offers, including the identity of the offering
party, and thereafter shall keep Parent informed in writing, on a reasonably
current basis, on the status and terms of any such proposals or offers and the
status of any such negotiations or discussions.
(b) Except as permitted by this Section 5.3(b), the Board of Directors
of the Company shall not withdraw its recommendation of the Offer or the Merger
and other transactions contemplated hereby or approve or recommend, or cause the
Company or any of its Subsidiaries to enter into any agreement with respect to,
any Third Party Acquisition. Notwithstanding the preceding sentence, if the
Board of Directors of the Company determines in its good faith judgment, after
consultation with outside counsel, that it is necessary to do so in
-36-
order to comply with its fiduciary duties to the Company's stockholders under
applicable law, the Board of Directors may withdraw or alter its recommendation
of the Offer or the Merger and the other transactions contemplated hereby, or
approve or recommend or cause the Company to enter into an agreement with
respect to a Superior Proposal (as defined below), but in each case only (i)
after providing written notice to Parent (a "Notice of Superior Proposal")
---------------------------
advising Parent that the Board of Directors has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person or entity making such Superior Proposal and (ii) if
Parent does not, within five (5) business days (or within two (2) business days
with respect to any amendment to any Superior Proposal which was noticed at
least five (5) business days prior to such amendment) after Parent's receipt of
the Notice of Superior Proposal, make an offer which the Board of Directors of
the Company determines in its good faith judgment (based on the advice of its
Financial Advisor or another financial adviser of nationally recognized
reputation) to be as favorable to the Company's stockholders as such Superior
Proposal; provided, however, that the Company shall not be entitled to enter
-------- -------
into any agreement with respect to a Superior Proposal unless this Agreement is
concurrently terminated by its terms pursuant to Section 8.1(e)(i).
(c) For purposes of this Agreement, "Third Party Acquisition" means
-----------------------
the occurrence of any of the following events: (i) the acquisition of the
Company by merger or otherwise by any person or entity (which includes a
"person" as such term is defined in Section 13(d)(3) of the Exchange Act) other
than Parent, the Purchaser or any affiliate thereof (a "Third Party"); (ii) the
-----------
acquisition by a Third Party of 20% or more of the total assets of the Company
(other than the purchase of the Company's products in the ordinary course of
business); (iii) the acquisition by a Third Party of 20% or more of the
outstanding Shares; (iv) the adoption by the Company of a plan of partial or
complete liquidation or the declaration or payment of an extraordinary dividend;
(v) the repurchase by the Company of 20% or more of the outstanding Shares; or
(vi) the acquisition by the Company by merger, purchase of stock or assets,
joint venture or otherwise of a direct or indirect ownership interest or
investment in any business whose annual revenues, net income or assets is equal
to or greater than 20% of the annual revenues, net income or assets of the
Company. For purposes of this Agreement, a "Superior Proposal" means any bona
-----------------
fide proposal to acquire directly or indirectly, for consideration consisting of
cash and/or securities, 100% of the Shares then outstanding or all or
substantially all the assets of the Company and otherwise on terms which the
Board of Directors of the Company by a majority vote determines in its good
faith judgment (based on consultation with its Financial Advisor or another
financial adviser of nationally recognized reputation) to be reasonably capable
of being completed (taking into account all legal, financial, regulatory and
other aspects of the proposal and the person or entity making the proposal,
including the availability of financing therefor) and more favorable to the
Company's stockholders than the Offer and the Merger.
(d) The Company shall not be prohibited from disclosing to its
stockholders a position contemplated by Rules 14d-9 and 14e-2 promulgated under
the Exchange Act to the extent such position is arrived at in compliance with
this Section 5.3.
-37-
5.4 Section 203 of the DGCL. From and after the date of this Agreement
-----------------------
until the earlier of the termination of this Agreement pursuant to its terms or
the Effective Time, the Company will not approve any acquisition of shares of
Company Common Stock by any person (other than Parent, the Purchaser or their
respective affiliates) which would result in such person becoming an
"interested stockholder" (as such term is defined in Section 203 of the DGCL)
or otherwise become subject to Section 203 of the DGCL, unless such acquisition
is related to a Superior Proposal and the Company has complied with Section 5.3
and, if applicable, Section 8.3.
5.5 Company Stock Option.
--------------------
(a) Grant of Company Stock Option. Subject to Section 8.4, the Company
-----------------------------
hereby grants to Parent an irrevocable option (the "Company Stock Option")
--------------------
to purchase, for $7.00 per share in cash, newly issued shares of Company Common
Stock representing 19.9% of the Company's total outstanding Company Common
Stock (and associated Rights), which percentage shall be calculated after
taking into account the exercise in full of the Company Stock Option.
(b) Term of Company Stock Option. Parent may exercise the Company Stock
----------------------------
Option, in whole or in part, at any time or from time to time from the day (the
"Exercise Commencement Date") on which either an event described in Section
--------------------------
8.3(a) or (b) has occurred or a tender offer to purchase fifteen percent (15%)
or more of the Shares is consummated by a Third Party, whichever is earlier,
until the day (the "Option Termination Date") which is the earlier of (i) the
-----------------------
Effective Time, or (ii) one (1) year after the termination of this Agreement.
(c) Exercise of Company Stock Option. If Parent wishes to exercise the
--------------------------------
Company Stock Option, it shall do so by giving the Company notice to such
effect, specifying the number of shares of Company Common Stock to be purchased
and a place and date not earlier than one (1) business day nor later than ten
(10) business days from the date such notice is given for the closing of the
purchase. If any such closing cannot be consummated on the date specified by
Parent in its notice of election to exercise the Company Stock Option as a
result of any restriction arising under any applicable law or regulation, the
date for such closing shall be on such date within five (5) days following the
cessation of all such restrictions as Parent may specify.
(d) Payment and Delivery of Company Common Stock. At any closing in
--------------------------------------------
connection with the Company Stock Option, (i) Parent shall make payment to the
Company of the aggregate purchase price for the shares of Company Common Stock
to be purchased by delivery to the Company of a certified, cashier's or bank
check payable to the order of the Company or, if mutually agreed, by wire
transfer of funds to an account designated by the Company, and (ii) the Company
shall deliver to Parent a certificate or certificates representing the shares of
Company Common Stock so purchased, registered in the name of Parent or its
designee.
-38-
(e) Certain Adjustments. In the event of any change in the Company's
-------------------
capital stock by reason of stock dividends, stock splits, mergers,
consolidations, recapitalizations, combinations, conversions, exchanges of
Shares, extraordinary or liquidating dividends, or other changes in the
corporate or capital structure of the Company which would have the effect of
diluting or changing Parent's rights hereunder, the number and kind of capital
stock subject to the Company Stock Option and the purchase price per share (but
not the total purchase price) shall be appropriately and equitably adjusted so
that Parent shall receive upon exercise of the Company Stock Option the number
and class of capital stock or other securities or property that Parent would
have received in respect of the shares of Company Common Stock purchasable upon
exercise of the Company Stock Option if the Company Stock Option had been
exercised immediately prior to such event.
(f) Exercise Commencement Date. At any time or from time to time after the
--------------------------
Exercise Commencement Date, Parent may, at its election, upon two (2) days'
notice to the Company, surrender all or a part of the Company Stock Option to
the Company, in which event the Company shall pay to Parent, on the day of each
such surrender and in consideration thereof, against tender by Parent of an
instrument evidencing such surrender, an amount in cash per share of Company
Common Stock (the rights to which are surrendered) equal to the excess of (i)
the greater of (x) the closing price of the Company's Common Stock on The Nasdaq
Stock Market on the date of surrender (or the closing price as reported by any
other applicable securities exchange if not listed on The Nasdaq Stock Market,
or if not actively traded, the fair market value as determined by investment
bankers chosen by the Parent) and (y) the price per Share to be paid in the
Third Party Acquisition or tender offer which created the Exercise Commencement
Date, if any, over (ii) the Merger Price. If all or a portion of the price per
Share to be paid in such Third Party Acquisition or tender offer consists of
non-cash consideration, then the price per Share referred to in clause (i) above
shall be the cash consideration per Share, if any, plus the fair market value of
the non-cash consideration per Share as set forth in such Third Party
Acquisition or tender offer or, if not so set forth, as determined by investment
bankers chosen by the Parent. Upon exercise of its right to surrender the
Company Stock Option or any portion thereof and the receipt by Parent of cash
pursuant to this Section 5.5(f), any and all rights of Parent to purchase shares
of Company Common Stock with respect to the portion of the Company Stock Option
surrendered pursuant to this Section 5.5(f) shall be terminated.
(g) Listing and Reservation of Company Common Stock; Notification of Record
-----------------------------------------------------------------------
Dates.
-----
(i) Promptly after the date hereof, and from time to time thereafter if
necessary, the Company will apply to list all of the Company Common Stock
subject to the Company Stock Option on the Nasdaq National Market and will use
its best efforts to obtain approval of such listing as soon as practicable.
(ii) The Company has taken all necessary corporate and other action to
authorize, reserve, and permit it to issue, and at all times from the date
hereof until such time as the obligation to deliver Company Common Stock upon
the exercise of the Company Stock Option terminates, will have reserved for
issuance, upon any exercise of the Company
-39-
Stock Option, the number of Company Common Stock subject to the Company Stock
Option (less the number of shares of Company Common Stock previously issued
upon any partial exercise of the Company Stock Option or as to which the
Company Stock Option may no longer be exercised).
(iii) The Company shall give Parent at least ten (10) days' prior written
notice before setting the record date for determining the holders of record of
Company Common Stock entitled to notice of, or to vote on, any matter, to
receive any dividend or distribution or to participate in any rights offering or
other matter, or to receive any other benefit or right, with respect to Company
Common Stock.
(h) Registration of the Company Common Stock.
----------------------------------------
(i) If Parent requests the Company in writing to register under the
Securities Act any of the shares of Company Common Stock owned by Parent, the
Company will use its best efforts to cause the offering of the shares of Company
Common Stock so specified in such request to be registered a soon as practicable
so as to permit the sale or other distribution by Parent of the shares of
Company Common Stock specified in its request (and to keep such registration in
effect for a period of at least ninety (90) days), and in connection therewith
prepare and file as promptly as reasonably possible (but in no event later than
sixty (60) days from receipt of Parent's request) a registration statement under
the Securities Act to effect such registration on an appropriate form, which
would permit the sale of the shares of Company Common Stock by Parent in the
manner specified by Parent in its request. The Company shall not be obligated
to make effective more than three (3) registration statements pursuant to the
foregoing sentence. Upon written notice to Parent, the Company may postpone
effecting a registration pursuant to this Section 5.5 on one occasion during any
period of twelve (12) consecutive months for a reasonable time specified in the
notice but not exceeding ninety (90) days (which period may not be extended or
renewed), if (A) an investment banking firm of recognized national standing
shall advise the Company and Parent in writing that effecting the registration
would materially and adversely affect an offering of securities of the Company
the preparation of which had then been commenced, or (B) the Company is in
possession of material non-public information the disclosure of which during the
period specified in such notice the Company believes, in its reasonable
judgment, would not be in the best interests of the Company.
(ii) The Company shall notify Parent in writing not less than ten (10) days
prior to filing a registration statement under the Securities Act (other than a
filing on Form S-4 or S-8) with respect to any shares of Company Common Stock of
the Company's intention so to file. If Parent wishes to have any portion of its
shares of Company Common Stock included in such registration statement, it shall
advise the Company in writing to that effect within two (2) business days
following receipt of such notice, and the Company will thereupon include the
number of shares of Company Common Stock indicated by Parent under such
registration statement. If such registration involves an underwritten public
offering and the managing underwriter shall advise the Company and Parent that
in its view the number of shares of Company Common Stock requested to be
included in such registration (including any
-40-
securities which the Company proposes to be included) exceeds the largest
number of shares which can be sold without having an adverse effect on such
offering, including the price at which such shares can be sold (the "Maximum
-------
Offering Size"), the Company will include in such registration, up to the
-------------
Maximum Offering Size: first, all securities proposed to be registered by the
Company, and second, shares of Company Common Stock requested to be registered
by Parent.
(iii) The Company shall pay all fees and expenses in connection with any
registration pursuant to this Section 5.5 other than underwriting discounts and
commissions to brokers or dealers and shall indemnify Parent, its officers,
directors, agents, other controlling persons and any underwriters retained by
Parent in connection with such sale of such shares of Company Common Stock in
the customary way, and agree to customary contribution provisions with such
persons, with respect to claims, damages, losses and liabilities (and any
expenses relating thereto) arising (or to which Parent, its officers, directors,
agents, other controlling persons or underwriters may be subject) in connection
with any such offer or sale under the federal securities laws or otherwise,
except for information furnished in writing by Parent or its underwriters to the
Company. Parent and its underwriters, respectively, shall indemnify the Company
to the same extent with respect to information furnished in writing to the
Company by Parent and such underwriters.
5.6 SEC Reports. From and after the date of this Agreement until the
-----------
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, the Company will timely file all reports required to be filed by
it under the Exchange Act.
5.7 Indemnification. Parent agrees that all rights to indemnification
---------------
existing in favor of directors, officers or employees of the Company (the
"Indemnified Persons") as provided in the Company's Certificate of
-------------------
Incorporation, Bylaws or any indemnification agreements listed in Section 5.7 of
the Company Disclosure Schedule, with respect to matters occurring through the
Effective Time, shall survive the Merger and shall continue in full force and
effect for a period of not less than six (6) years from the Effective Time.
Effective upon the Effective Time, to the fullest extent permitted by law,
Parent shall be directly bound by, and shall guarantee the Company's and the
Surviving Corporation's performance of, the Company's and the Surviving
Corporation's obligations described in the prior sentence for a period of six
(6) years after the Effective Time. If Parent, the Surviving Corporation or any
of either of its successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, none of which actions are restricted by
this Section 5.7, then and in each such case, proper provision shall be made so
that the successors and assigns of Parent and the Surviving Corporation assume
the obligations set forth in this Section 5.7.
5.8 Rights Agreement. The Company shall take all necessary action to
-----------------
render the Rights Agreement inapplicable to the Offer, the Merger, the Company
Stock Option, this Agreement, the Support Agreements, the Director Option
Termination Agreements and any other transaction contemplated hereby and
thereby.
-41-
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information. Between the date of this Agreement and
---------------------
the Cut-Off Date, the Company will afford to Parent and its authorized
representatives for the transactions contemplated hereby reasonable access at
all reasonable times to the officers, employees, agents, properties, offices and
all other facilities, books and records of the Company as Parent may reasonably
request. Additionally, the Company will permit Parent and its authorized
representatives for the transactions contemplated hereby to make such
inspections of the Company, each of its Subsidiaries and each of their
operations at all reasonable times as it may reasonably require and will cause
its officers, employees and agents to furnish Parent with such financial and
operating data and other information with respect to the business and properties
of the Company and each of its Subsidiaries as Parent may from time to time
reasonably request. No investigation pursuant to this Section 6.1 shall affect
any representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
6.2 Legal Conditions to Offer and Merger.
------------------------------------
(a) Prior to the Effective Time, the parties shall take, or cause to
be taken, all such actions as may be necessary or appropriate in order to
effectuate, as expeditiously as practicable, the Offer and the Merger and the
other transactions contemplated by this Agreement, including any necessary
consents and waivers.
(b) Without limiting the foregoing, the Company will take, and will
cause each of its Subsidiaries to take, all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on the Company
or any of its Subsidiaries with respect to the Offer and the Merger (including
furnishing all information required under the HSR Act and under applicable
antitrust laws of any foreign country) and will take, and will cause each of its
Subsidiaries to take, all reasonable actions necessary to cooperate promptly
with and furnish information to the Purchaser or Parent in connection with any
such requirements imposed upon the Purchaser or Parent in connection with the
Offer and the Merger. The Company will take, and will cause each of its
Subsidiaries to take, all reasonable actions necessary to obtain (and will take
and cause to be taken all reasonable actions necessary to cooperate promptly
with the Purchaser and Parent in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity, or other third party,
required to be obtained or made by the Company or any Subsidiary (or by the
Purchaser or Parent) in connection with the Offer or the Merger or the taking of
any action contemplated thereby or by this Agreement.
(c) Without limiting the foregoing, the Purchaser and Parent will take
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on them with respect to the Offer and the Merger (including
furnishing all information required under the HSR Act and under applicable
antitrust laws of any foreign country) and will take all reasonable actions
necessary to cooperate promptly with and furnish information to the Company in
connection with any such requirements imposed upon the Company or any of its
-42-
Subsidiaries in connection with the Offer and the Merger. The Purchaser and
Parent will take all reasonable actions necessary to obtain (and will take all
reasonable actions necessary to cooperate promptly with the Company in
obtaining) any consent, authorization, order or approval of, or exemption by,
any Governmental Entity, or other third party, required to be obtained or made
by the Purchaser or Parent (or by the Company or any of its Subsidiaries) in
connection with the Offer or the Merger or the taking of any action contemplated
thereby or by this Agreement.
(d) Notwithstanding anything to the contrary in this Agreement,
including without limitation Section 6.2(c), as a result of filings made with
Governmental Entities pursuant to this Agreement, neither Parent nor any of its
subsidiaries, nor the Company nor any of its Subsidiaries, shall be required to
divest any of their respective businesses, product lines or assets, or agree to
any other limitation with respect to its business.
6.3 Confidentiality Agreement. The Company and Parent acknowledge that
-------------------------
the existing confidentiality agreement between such parties (the
"Confidentiality Agreement") shall remain in full force and effect at all times
prior to the Effective Time and after any termination of this Agreement, and
such parties agree to comply with the terms of such Agreement.
6.4 Public Announcements. The Purchaser, Parent and the Company will
--------------------
consult with each other before issuing any press release or otherwise making
any public statements with respect to the Offer, the Merger or any transaction
contemplated hereby and shall not issue any such press release or make any such
public statement except as they may mutually agree unless required so to do by
law or by obligations pursuant to any listing agreement with any national
securities exchange or the National Association of Securities Dealers, Inc. The
Company and Parent have agreed as to the form of joint press release announcing
execution of this Agreement.
6.5 Company Stock Plans.
-------------------
(a) At the Effective Time, each outstanding Stock Option to purchase
shares of Company Common Stock under the Company Stock Option Plans shall
terminate and each holder thereof shall receive in exchange for such termination
a cash payment equal to, subject to Section 6.5(f) below, the excess, if any, of
(i) the Merger Price times the number of shares of Company Common Stock subject
to such option which are vested and exercisable (including such number of shares
that become vested and exercisable by its terms as a result of the transactions
contemplated by this Agreement), over (ii) the aggregate exercise price of such
option. The fair market value of the Company Common Stock on the Effective Date
shall be deemed to equal the Merger Price.
(b) Prior to the Effective Time, the Company shall take all actions
(including if appropriate amending the terms of the Company Stock Option Plans
or obtaining the consent of holders of Stock Options) that are necessary to give
effect to the transactions contemplated by Section 6.5(a).
-43-
(c) The Company shall take all steps required to terminate the Company
Stock Option Plans immediately after the Effective Time.
(d) The Company shall take all actions reasonably necessary to cause
the last day of the then-current "offering," as such term is defined in the
Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan"), to be
-------------
December 15, 1998 (the "Final Purchase Date"), and shall apply on the Final
-------------------
Purchase Date the funds within each participant's accumulated payroll account as
of such date to the purchase of whole shares of Company Common Stock in
accordance with the terms of the Purchase Plan. No new offering shall commence
under the Purchase Plan following the Final Purchase Date.
(e) The Company shall take all steps required to terminate the
Purchase Plan immediately after the Effective Time.
(f) Payments pursuant to Section 6.5(a) above shall be subject to any
applicable tax withholding required under the Code, the rules and regulations
thereunder or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Stock
Options.
6.6 Certain Employee Benefits Matters. Employees of the Company at the
---------------------------------
Effective Time will be provided with employee benefit plans by the Surviving
Corporation or Parent, except with respect to such Company Benefit Plans Parent
determines that it will continue in effect, which employee benefits will in the
aggregate be reasonably equivalent to the employee benefits generally offered to
Parent's employees of like position and responsibility.
6.7 Notice of Certain Events. The Company shall notify Parent, and
------------------------
Parent shall promptly notify the Company, of:
(i) receipt of any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) receipt of any notice or other communication from any
Governmental Entity in connection with the transactions contemplated by this
Agreement;
(iii) receipt of notice that any actions, suits, claims,
investigations or proceedings have been commenced or, to the knowledge of the
Company, threatened, against or involving the Company, any of its Subsidiaries
or Parent, as applicable, which, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 4.9 or which
relate to the consummation of the transactions contemplated by this Agreement;
(iv) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of it (and, in the case of Parent, of the Purchaser) contained in this Agreement
to be untrue or inaccurate; and
-44-
(v) any failure of the Company, Parent or the Purchaser, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
-------- -------
of any notice pursuant to this Section 6.7 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
6.8 Obligations of Purchaser. Parent will take all action necessary to
------------------------
cause the Purchaser to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement.
6.9 Voting of Shares. Parent agrees (i) to cause the Purchaser and
----------------
any other Person controlled by Parent to vote all Shares beneficially owned by
it in favor of adoption of this Agreement and the Merger at the Stockholders'
Meeting, if any such meeting shall be required by the DGCL, and (ii) if no
Stockholders' Meeting shall be required by the DGCL, to cause the Purchaser to
file a certificate of merger providing for the Merger of the Purchaser with and
into the Company as soon as reasonably practicable under applicable regulatory
requirements and law.
6.10 Expenses. Except as otherwise provided in Section 8.3, whether or
--------
not the Merger shall be consummated, all costs and expenses incurred in
connection with this Agreement and the Merger and the other transactions
contemplated hereby shall be paid by the party incurring such cost or expense.
6.11 Takeover Statutes. If any Takeover Statute is or may become
-----------------
applicable to the Offer, the Merger or the other transactions contemplated by
this Agreement, each of Parent and the Company and their respective Boards of
Directors shall grant such approvals and take such lawful actions as are
necessary to ensure that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise act to
eliminate or minimize the effects of such statute and any regulations
promulgated thereunder on such transactions.
ARTICLE VII
CONDITIONS
7.1 Conditions of Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligation of each party to effect the Merger is subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
--------------------
been approved and adopted by the affirmative vote or consent of the stockholders
of the Company to the extent required by the DGCL and the Certificate of
Incorporation of the Company.
(b) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any Governmental
Entity of
-45-
competent jurisdiction nor any statute, rule, regulation or executive
order promulgated or enacted by any Governmental Entity, nor other legal
restriction, restraint or prohibition arising under the authority of any
Governmental Entity, preventing the consummation of the Merger shall be in
effect; provided, however, that each of the parties shall have used reasonable
-------- -------
efforts to prevent the entry of any such injunction or other order and to appeal
as promptly as practicable any injunction or other order that may be entered.
(c) Regulatory Consents. The waiting period applicable to the
--------------------
consummation of the Merger under the HSR Act and under any applicable foreign
antitrust laws shall have expired or been terminated.
(d) The Offer. The Purchaser shall have accepted for payment and paid
---------
for Shares (and associated Rights) pursuant to the Offer in accordance with the
terms hereof.
7.2 Conditions to Obligations of Parent and the Purchaser. The
------------------------------------------------------
obligations of Parent and the Purchaser to effect the Merger are also subject to
the satisfaction or waiver by Parent prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date.
(b) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
7.3 Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company to effect the Merger are also subject to the satisfaction or waiver by
the Company prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and the Purchaser set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date.
(b) Performance of Obligations of Parent and the Purchaser. Each of
------------------------------------------------------
Parent and the Purchaser shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
-46-
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated and the Merger may
-----------
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval of this Agreement and the transactions contemplated hereby by
the stockholders of the Company, only:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company, Parent and the Purchaser;
(b) by either Parent or the Company if any Governmental Entity shall
have issued an order, decree, ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the acceptance for payment of,
or payment for, Shares (and associated Rights) pursuant to the Offer or the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable;
(c) by either Parent or the Company if (i) the Offer shall have
terminated or expired in accordance with its terms without the Purchaser having
accepted for payment any Shares (and associated Rights) pursuant to the Offer;
or (ii) the Purchaser shall not have accepted for payment any Shares (and
associated Rights) pursuant to the Offer within one hundred twenty (120) days
following the commencement of the Offer; provided, however, that the right to
-------- --------
terminate this Agreement pursuant to this Section 8.1(c) shall not be available
to any party (or to any of its affiliates) that has failed to perform or
breached in any material respect any of its obligations under this Agreement,
which results in the failure of any condition set forth in Annex I or a material
------
breach of a representation or warranty under this Agreement by such party;
(d) by Parent if (i) prior to the purchase of Shares (and associated
Rights) pursuant to the Offer, (A) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified its approval or
recommendation of the Offer, this Agreement, the Merger or any other transaction
contemplated by this Agreement; (B) the Board of Directors of the Company or any
committee thereof shall have recommended to the stockholders of the Company,
taken no position with respect to, or failed to recommend against acceptance of,
a Third Party Acquisition; (C) the Company shall have entered into any
definitive agreement with respect to a Third Party Acquisition; (D) the Board of
Directors of the Company fails to reconfirm its recommendation of the Offer,
this Agreement, the Merger and transactions contemplated by this Agreement
within five days of any written request by Parent that the Company's Board of
Directors reconfirm its recommendation; or (E) the Board of Directors of the
Company or any committee thereof shall have resolved to do any of the foregoing;
or (ii) the Company shall have breached in any material respect any of its
representations, warranties, covenants or other agreements contained in this
Agreement which breach cannot be or has not been cured within 20 days after the
giving of written notice to the Company or shall have breached Section 5.3; or
(e) by the Company if (i) the Board of Directors of the Company shall
have withdrawn or modified in a manner adverse to the Purchaser or Parent its
approval or
-47-
recommendation of the Offer, this Agreement or the Merger in order to approve
the execution by the Company of a definitive agreement providing for the
transactions contemplated by a Superior Proposal, provided that the Company
--------
shall have complied with the provisions of Section 5.3, including the notice
provisions therein; or (ii) Parent or the Purchaser shall have breached in any
material respect any of their respective representations, warranties, covenants
or other agreements contained in this Agreement which breach cannot be or has
not been cured within 20 days after the giving of written notice to Parent or
the Purchaser, as applicable, except, in any case, for such breaches which are
not reasonably likely to affect adversely Parent's or the Purchaser's ability to
complete the Offer or the Merger.
8.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
Section 8.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except for breach of any provision
of this Agreement, and except that the agreements contained in Sections 5.5,
6.3, 6.10, 8.3 and in Article IX shall survive the termination hereof.
8.3 Certain Payments.
----------------
(a) In the event that this Agreement is terminated pursuant to Section
8.1(d)(i) or Section 8.1(e)(i), then, in any such event, the Company shall pay
Parent fifty percent (50%) of the Termination Fee (as defined below) within five
(5) days after the first of such events shall have occurred. The Company shall
pay Parent the remaining fifty percent (50%) of the Termination Fee within the
earlier of (i) nine (9) months following such event, or (ii) five (5) days after
the consummation of a Third Party Acquisition or similar alternative transaction
with any person other than Parent or any of its affiliates. For purposes of
this Section 8.3, the "Termination Fee" shall be a dollar amount equal to (A)
---------------
three percent (3%) of the amount obtained by multiplying the total number of
Fully Diluted Shares outstanding plus the total number of Excluded Shares by
$7.00, plus (B) an amount equal to Parent's actual and reasonably documented
----
out-of-pocket fees and expenses (not to exceed $200,000) incurred by Parent and
the Purchaser in connection with the Offer, the Merger, this Agreement and the
transactions contemplated hereby, which amounts shall be payable in immediately
available funds.
(b) In the event that this Agreement is terminated pursuant to Section
8.1(c) or 8.1(d)(ii), and the Company shall have announced (and subsequently
consummates) or shall have consummated a Third Party Acquisition with any person
other than Parent or any of its affiliates before or within nine (9) months
after the date of such termination, the Company shall pay Parent the entire
Termination Fee within five (5) days after the consummation of the Third Party
Acquisition.
(c) In the event that the Company shall fail to pay any amounts owing
pursuant to Section 8.3(a) or 8.3(b) when due, interest shall be paid on such
unpaid amounts, commencing on the date such amounts became due, at a rate of six
percent (6%) per annum. The Company acknowledges that the agreement contained
in this Section 8.3 is an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails promptly to pay any amount due
-48-
pursuant to this Section 8.3, and, in order to obtain such payment, Parent
commences a suit which results in a judgment against the Company for the amounts
set forth in this Section 8.3, the Company shall pay to Parent its reasonable
costs and expenses (including attorneys' fees and expenses) in connection with
such suit, together with interest on the amounts set forth in this Section 8.3.
(d) The Termination Fee shall not be deemed to be liquidated damages,
and the right to the payment of the Termination Fee shall be in addition to (and
not a maximum payment in respect of) any other damages or remedies at law or in
equity to which Parent or the Purchaser may be entitled as a result of the
breach of any term or provision of this Agreement or any Support Agreement.
8.4 Limitation on Total Profits. Notwithstanding any provision of this
---------------------------
Agreement to the contrary, the Total Profit (as hereinafter defined) that Parent
shall be permitted to realize in respect of the Termination Fee and the Company
Stock Option shall not exceed four percent (4%) of the aggregate purchase price
that would have been payable for one hundred percent (100%) of the Company's
Fully Diluted Shares and one hundred percent (100%) of the Excluded Shares at
$7.00 per share. In the event Parent's Total Profit would exceed such amount,
Parent shall, at its sole election, (a) reduce the number of Shares subject to
the Company Stock Option, (b) deliver Shares received upon an exercise of the
Company Stock Option to the Company for cancellation, (c) pay an amount of cash
to the Company, or (d) do any combination of the foregoing so that Parent's
actual realized Total Profit shall not exceed four percent (4%) of the aggregate
purchase price that would have been payable for one hundred percent (100%) of
the Company's Fully Diluted Shares and one hundred percent (100%) of the
Excluded Shares at $7.00 per share. "Total Profit" shall mean the aggregate
------------
(before taxes) of (i) any amount received pursuant to the Company's repurchase
of the Company Stock Option (or any portion thereof), (ii) any amount received
pursuant to the Company's repurchase of the Shares (less the purchase price for
such Shares) subject to the Company Stock Option, (iii) any net cash received
pursuant to the sale of Shares received by Parent in any exercise of the Company
Stock Option to any third party (less the purchase price of such Shares), (iv)
any amounts received on transfer of the Company Stock Option or any portion
thereof to a third party, (v) any equivalent amounts received with respect to
the Option adjusted pursuant to Section 5.5(e), and (vi) the Termination Fee.
-49-
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and Agreements. All
---------------------------------------------------------
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger,
except for the agreements contained in Sections 5.7, 6.6, 6.10 and this Article
IX of this Agreement, each of which shall survive the Merger.
9.2 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the parties. Any amendment or
waiver effected in accordance with this Section 9.2 shall be binding upon the
parties and their respective successors and assigns.
9.3 Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any of the other provisions hereof.
If any provision of this Agreement, or the application thereof to any person or
any circumstance, is illegal, invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, and
the application thereof, in any other jurisdiction.
9.4 Interpretation.
--------------
(a) The Article, Section and subsection headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section, Schedule, Annex or
Exhibit, such reference shall be to a Section of, or Schedule, Annex or Exhibit
to, this Agreement, unless otherwise indicated. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein means such agreement, instrument or statute as
from time to time amended, modified or supplemented, including (in the case of
agreements or instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statues and references to all attachments
thereto and instruments incorporated therein. References to a person are also
to its permitted successors and assigns and, in the case of an individual, to
his or her heirs and estate, as applicable.
-50-
(b) This Agreement has been negotiated at arm's length by and between
persons sophisticated and knowledgeable in the matters addressed in this
Agreement. Each of the parties has been represented by experienced and
knowledgeable legal counsel. Accordingly, any rule of law (including California
Civil Code Section 1564) or legal decision that would require interpretation of
any ambiguities in this Agreement against the party that has drafted it is not
applicable and is waived. The provisions of this Agreement shall be interpreted
in a reasonable manner to effect the purpose of the parties and this Agreement.
9.5 Assignment. Except as set forth in Section 1.1(a), this Agreement
----------
shall not be assignable by operation of law or otherwise and any attempted
assignment of this Agreement in violation of this sentence shall be void;
provided, however, that this Agreement shall be assignable by any party after
-------- -------
the Effective Time.
9.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.7 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified
or registered mail with postage prepaid, if such notice is addressed to the
party to be notified at such party's address or facsimile number as set forth
below, or as subsequently modified by written notice in accordance with this
Section 9.7:
(a) If to Parent or the Purchaser:
Oracle Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Senior
Vice President, General Counsel
and Secretary
with a copy to:
Venture Law Group
A Professional Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-51-
(b) If to the Company:
Concentra Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Chairman and Chief Executive Officer
with a copy to:
Peabody & ▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
9.8 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits), together with the Confidentiality Agreement, are the product of all
of the parties hereto, and constitute the entire agreement between such parties
pertaining to the subject matter hereof, and merge all prior negotiations and
drafts of the parties with regard to the transactions contemplated herein. Any
and all other written or oral agreements existing between the parties hereto
regarding such transactions are expressly canceled.
9.9 No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
confer upon any Person other than the parties hereto any rights or remedies
hereunder, except that the provisions of Section 5.7 are intended for the
benefit of the Indemnified Persons, who shall be entitled to enforce the
provisions thereof.
9.10 Governing Law.
-------------
(a) EXCEPT TO THE EXTENT THAT THE LAW OF THE STATE OF DELAWARE SHALL
BE MANDATORILY APPLICABLE TO THE MERGER AND THE RIGHTS OF THE STOCKHOLDERS OF
THE COMPANY, THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH LAW OF
THE STATE OF CALIFORNIA WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
(b) The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they are entitled
at law or in equity.
-52-
The parties have caused this Agreement and Plan of Merger to be signed by
their respective duly authorized officers, all as of the date first written
above.
ORACLE CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President, Corporate Development
KL ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President, Chief Executive Officer
CONCENTRA CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President, Chief Executive Officer
SIGNATURE PAGE TO
AGREEMENT AND PLAN OF MERGER
-53-
ANNEX I
-------
CONDITIONS OF THE OFFER
Defined Terms. Capitalized terms used in this Annex I and not otherwise
defined shall have the meanings attributed thereto in the Agreement and Plan of
Merger, dated as of November 10, 1998 (the "Merger Agreement"), by and among
----------------
Parent, the Purchaser and the Company.
Conditions of the Offer. Subject to the terms of the Offer and the Merger
Agreement, the Purchaser shall not be required to accept for payment or pay for
any Shares (and associated Rights) tendered pursuant to the Offer, and may
terminate or amend the Offer and may postpone the acceptance for payment of and
payment for Shares (and associated Rights) tendered, if (i) the Minimum Share
Condition shall not have been satisfied, or (ii) at least fifteen (15) of the
employees listed on Annex I to the Company Disclosure Schedule shall not have
signed offer letters to become employees of Parent, or (iii) any applicable
waiting period under the HSR Act and under any applicable antitrust laws of any
foreign country shall not have expired or been terminated prior to the
expiration of the Offer, or (iv) the amendment to the agreement described in
Item 20 of Schedule 4.15(a)(ii) of the Company Disclosure Schedule shall not
have been entered into or shall not be in effect, or (v) at any time on or after
the date of the Merger Agreement and before the acceptance of such Shares (and
associated Rights) for payment or the payment therefor, any of the following
conditions exists:
(a) a preliminary or permanent injunction or other order by any
federal, state or foreign court which prevents the acceptance for payment of, or
payment for, some of or all the Shares shall have been issued and shall remain
in effect;
(b) there shall have been instituted or be pending any action or
proceeding by any Governmental Entity (i) challenging the acquisition by the
Purchaser of Shares or otherwise seeking to restrain, materially delay or
prohibit the consummation of the Offer or the Merger or seeking damages that
would make the Offer, the Merger or any other transaction contemplated by the
Merger Agreement materially more costly to Parent or the Purchaser, (ii) seeking
to prohibit or limit materially the ownership or operation by the Purchaser or
Parent of all or a material portion of the business or assets of the Company, or
to compel the Purchaser or Parent to dispose of or hold separate all or a
material portion of the business or assets of the Company or the Purchaser or
Parent, as a result of the Offer or the Merger, (iii) seeking to impose or
confirm limitations on the ability of Parent or the Purchaser effectively to
exercise full rights of ownership of the Shares (and associated Rights),
including, without limitation, the right to vote the Shares purchased by it on
all matters properly presented to the Company's stockholders, including, without
limitation, the approval and adoption of the Merger Agreement and the
transactions contemplated by the Merger Agreement, (iv) seeking to require
divestiture, or separate ownership, by Parent, the Purchaser or any other
affiliate of Parent of any Shares or any portion of the business or assets of
Parent, Purchaser or the Company or any of their subsidiaries, or (v) which
reasonably could be expected to result in a Material Adverse Effect;
(c) there shall have been any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Offer, the Merger or any other transaction contemplated by the Merger Agreement,
by any Governmental Entity or by any third party, except for the waiting period
provisions of the HSR Act, which is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through (iv)
of paragraph (b) above;
(d) any event, change or effect that, individually or in the
aggregate, is or is reasonably likely to constitute a Material Adverse Effect
shall have occurred following the date of the Merger Agreement;
(e) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under the
Merger Agreement, which breach or failure cannot be or has not been cured prior
to the earlier of (i) 20 days after the giving of written notice to the Company,
and (ii) the expiration of the Offer;
(f) any representation or warranty of the Company in the Merger
Agreement that is qualified as to materiality shall not be true and correct or
any such representation or warranty that is not so qualified shall not be true
and correct in any material respect, in each case when made and at and as of
such time as if made at and as of such time (except that representations and
warranties made as of a specified date shall only be true and correct as of such
date);
(g) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq National Market or
the over the counter market; (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States; (iii) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States; (iv) any
extraordinary material adverse change in the financial markets in the United
States; or (v) in the case of any of the foregoing existing on the date hereof,
a material acceleration or worsening thereof;
(h) (i) it shall have been publicly disclosed or the Purchaser shall
have otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of
a majority of the then outstanding Shares have been acquired by any person other
than Parent or any of its affiliates, or (ii)(A) the Board of Directors of the
Company or any committee thereof shall have withdrawn or modified the approval
or recommendation of the Offer, the Merger or the Merger Agreement, or approved
or recommended any Third Party Acquisition or any other acquisition of Shares
other than the Offer and the Merger, (B) the Company shall have entered into a
definitive agreement with respect to a Third Party Acquisition, (C) the Board of
Directors of the Company fails to reconfirm its recommendation of the Offer or
the Merger within five (5) days of any written request by Parent or the
Purchaser for such reconfirmation, or (D) the Board of Directors of the Company
or any committee thereof shall have resolved to do any of the foregoing; or
(i) the Merger Agreement shall have been terminated in accordance with
its terms.
-2-
The foregoing conditions (other than the Minimum Share Condition) are
for the sole benefit of the Purchaser and Parent. The foregoing rights of the
Purchaser shall be available regardless of the circumstances giving rise to any
such conditions (including any action or omission to act of the Purchaser) and,
subject to Section 1.1(a) of the Merger Agreement, may be waived by the
Purchaser or Parent in whole or in part at any time and from time to time in
their sole discretion.
The failure by the Purchaser or Parent at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right; the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
-3-