Exhibit 99.2
CONFORMED COPY
NETWORK SIX, INC.,
TRW INC.
AND
NSI SYSTEMS INC.
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 6, 2001
TABLE OF CONTENTS
ARTICLE I.
MERGER
PAGE
1.1. The Merger 2
1.2. Effective Time 2
1.3. Conversion of Shares 2
1.4. Dissenting Shares 3
1.5. Surrender of Shares 3
1.6 Options 5
1.7. Articles of Incorporation and Bylaws 5
1.8. Directors and Officers 5
1.9. Other Effects of Merger 5
1.10. Proxy Statement 6
1.11. Additional Actions 6
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1. Organization and Good Standing 8
2.2. Capitalization 8
2.3. Subsidiaries 8
2.4. Authorization; Binding Agreement 9
2.5. Governmental Approvals 9
2.6. No Violations 9
2.7. Securities Filings 10
2.8. Company Financial Statements 10
2.9. Absence of Certain Changes or Events 10
2.10. Compliance with Laws 11
2.11. Permits 11
2.12. Litigation 11
2.13. Contracts 11
2.14. Employee Benefit Plans 12
2.15. Taxes and Returns 13
2.16 Intellectual Property 14
2.17. Environmental Matters 14
2.18. Proxy Statement 16
2.19. Labor Matters 16
2.20. Finders and Investment Bankers 17
2.21. Fairness Opinion 17
2.22. Related Party Transactions 17
2.23 Year 2000 Compliance 17
2.24 Directors' and Officers' Liability Insurance Policies 18
2.25 Existing Contracts 18
2.26 No Undisclosed Material Liabilities 18
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT
3.1. Organization and Good Standing 19
3.2. Authorization; Binding Agreement 19
3.3. Governmental Approvals 19
3.4. No Violations 19
3.5. Proxy Statement 20
3.6. Finders and Investment Bankers 20
3.7. Financing Arrangements 20
3.8. No Prior Activities 20
3.9. Litigation 20
ARTICLE IV.
ADDITIONAL COVENANTS OF THE COMPANY
4.1. Conduct of Business of the Company 21
4.2. Notification of Certain Matters 23
4.3. Access and Information 23
4.4. Stockholder Approval 23
4.5. Best Efforts 24
4.6. Public Announcements 24
4.7. Compliance 24
4.8. No Solicitation 24
4.9. SEC and Shareholder Filings 26
4.10. Takeover Statutes 26
4.11. Related Party Agreements 26
4.12. Employee Stock Purchase Plan 26
4.13. Special Committee of the Directors 26
ARTICLE V.
ADDITIONAL COVENANTS OF PARENT
5.1. Best Efforts 26
5.2. Public Announcements 27
5.3. Compliance 27
5.4. Employee Benefit Plans 27
5.5. Indemnification, Exculpation and Insurance 27
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ARTICLE VI.
MERGER CONDITIONS
6.1. Stockholder Approval 28
6.2. No Injunction or Action 28
6.3. Other Approvals 28
6.4. Conditions of Obligations of Parent and Merger Sub 28
6.5. Conditions of Obligations of the Company 29
ARTICLE VII.
TERMINATION AND ABANDONMENT
7.1. Termination 29
7.2. Effect of Termination and Abandonment 31
ARTICLE VIII.
MISCELLANEOUS
8.1. Confidentiality 32
8.2. Amendment and Modification 32
8.3. Waiver of Compliance; Consents 32
8.4. Survival 33
8.5. Notices 33
8.6. Binding Effect; Assignment 34
8.7. Expenses 34
8.8. Governing Law 34
8.9. Counterparts 34
8.10. Interpretation 34
8.11. Entire Agreement 34
8.12. Severability 34
8.13. Specific Performance 35
8.14. Third Parties 35
8.15. Disclosure Letters 35
8.16. Tax Consequences of the Merger 36
ANNEX
Annex I: Stockholders party to Common Shareholders Agreements A-1
Annex II: List of Certain Contracts A-2
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GLOSSARY OF DEFINED TERMS
Acquisition Agreement..............................25
Affiliate..........................................34
Agreement...........................................1
Benefit Plan.......................................12
Certificate of Merger...............................2
Closing.............................................2
Closing Date........................................2
Common Shareholders Agreement.......................1
Company.............................................1
Company Benefit Plan...............................12
Company Disclosure Letter...........................8
Company Filed Documents............................10
Company Financial Statements.......................10
Company Material Adverse Effect.....................8
Company Material Contract..........................11
Company Options.....................................5
Company Permits....................................11
Company Proposals..................................23
Company Securities Filings.........................10
Company Stock.......................................1
Company Subsidiary..................................8
Confidentiality Agreement..........................32
Consent.............................................9
Dissenting Shares...................................3
Effective Time......................................2
Environmental Claim................................15
Environmental Laws.................................16
Environmental Permit...............................16
ERISA..............................................12
Exchange Agent......................................3
Financial Advisor...................................6
Governmental Authority..............................9
Hazardous Materials................................16
Key Employees......................................11
knowledge..........................................12
Law................................................10
Litigation.........................................11
Merger..............................................1
Merger Consideration................................2
Merger Sub..........................................1
Multiemployer Plan.................................12
NASD...............................................23
Parent..............................................1
Parent Disclosure Letter...........................19
Parent Expenses....................................32
Parent Filed Documents.............................20
Parent Group.......................................27
Parent Information.................................20
Per Share Amount....................................1
Person.............................................34
Preferred Purchase Agreement........................1
Preferred Shares....................................1
Preferred Stockholder...............................1
Proxy Statement.....................................6
Related Party......................................17
Rhode Island Act....................................2
SEC.................................................6
Securities Act.....................................11
Securities Exchange Act.............................6
Securities Filings Contracts.......................11
Shares..............................................1
Special Meeting.....................................6
Subsidiary.........................................34
Superior Proposal..................................25
Surviving Corporation...............................2
Surviving Corporation Common Stock..................3
Takeover Proposal..................................24
Takeover Statute...................................26
Tax................................................14
Tax Return.........................................14
Termination Fee....................................32
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This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of June 6, 2001, by and among Network Six, Inc., a Rhode Island
corporation (the "Company"), TRW Inc., an Ohio corporation ("Parent"), and NSI
Systems Inc., a Rhode Island corporation and wholly owned subsidiary of Parent
("Merger Sub").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Company, Merger
Sub and Parent have approved the acquisition by Parent of the Company in
accordance with the provisions of this Agreement;
WHEREAS, in furtherance of such acquisition, the respective Boards
of Directors of the Company, Merger Sub and Parent have each approved the merger
(the "Merger") of Merger Sub with and into the Company in accordance with the
laws of the State of Rhode Island and the provisions of this Agreement, whereby
each outstanding share (the "Shares") of common stock, $.10 par value, of the
Company ("Company Stock") will be converted into the right to receive $3.60 per
share (the "Per Share Amount"), net to the shareholder in cash, without
interest, subject to any dissenters rights;
WHEREAS, Parent and Merger Sub are unwilling to enter into this
Agreement (and effect the transactions contemplated hereby) unless, immediately
after the execution and delivery hereof, each of the holders of Shares listed on
Annex I hereto enter into an agreement (the "Common Shareholders Agreements")
providing for certain matters with respect to their Shares, and certain other
actions relating to the transactions contemplated by this Agreement;
WHEREAS, Parent and Merger Sub are unwilling to enter into this
Agreement (and effect the transactions contemplated hereby) unless, immediately
after the execution and delivery hereof, the holder (the "Preferred
Stockholder") of the outstanding Series A Convertible Preferred Stock of the
Company (the "Preferred Shares") enters into a purchase and sale and voting
agreement (the "Preferred Purchase Agreement") providing for the sale to the
Merger Sub of the Preferred Shares, and certain other actions relating to the
transactions contemplated by this Agreement;
WHEREAS, the Board of Directors of the Company has approved this
Agreement, has resolved to recommend approval of the Merger to the holders of
Shares and has determined that the consideration to be paid for each Share in
the Merger is fair to the holders of such Shares and to recommend that the
holders of such Shares approve the Merger and adopt this Agreement and the
transactions contemplated hereby; and
WHEREAS, the Board of Directors of the Company has taken such action
as is necessary so that the restrictions set forth in the Rhode Island Business
Combination Act of 1990 do not apply and will not apply to Parent, Merger Sub or
affiliates or associates of Parent as a result of the transactions contemplated
by this Agreement;
WHEREAS, the Company, Merger Sub and Parent desire to make certain
representations, warranties and agreements in connection with, and establish
various conditions precedent to, the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I.
MERGER
1.1. THE MERGER. Upon the terms and subject to the conditions of
this Agreement, the Merger shall be consummated in accordance with the Business
Corporation Act of Rhode Island (the "Rhode Island Act"). At the Effective Time
(as defined in Section 1.2 hereof), upon the terms and subject to the conditions
of this Agreement, Merger Sub shall be merged with and into the Company in
accordance with the Rhode Island Act and the separate existence of Merger Sub
shall thereupon cease, and the Company, as the surviving corporation in the
Merger (the "Surviving Corporation"), shall continue its corporate existence
under the laws of the State of Rhode Island as a subsidiary of Parent. At
Parent's election, any direct or indirect subsidiary of Parent other than Merger
Sub may be merged with and into the Company instead of Merger Sub. In the event
of such an election, the parties agree to execute an appropriate amendment to
this Agreement to reflect such election. The parties shall prepare and execute
articles of merger in order to comply in all respects with the requirements of
the Rhode Island Act and with the provisions of this Agreement or, if
applicable, a certificate of ownership and merger (each, a "Certificate of
Merger").
1.2. EFFECTIVE TIME. The Merger shall become effective at the time
of the filing of the Certificate of Merger with the Secretary of State of Rhode
Island in accordance with the applicable provisions of the Rhode Island Act or
at such later time as may be specified in the Certificate of Merger. As soon as
practicable after all of the conditions set forth in Article VI of this
Agreement have been satisfied or waived by the party or parties entitled to the
benefit of the same, the parties hereto shall cause the Merger to become
effective. Parent and the Company shall mutually determine the time of such
filing and the place where the closing of the Merger (the "Closing") shall
occur. The time when the Merger shall become effective is herein referred to as
the "Effective Time" and the date on which the Effective Time occurs is herein
referred to as the "Closing Date."
1.3. CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holder of any of the following securities:
(a) Each Share issued and outstanding immediately before the
Effective Time (other than any Shares to be cancelled pursuant to Section 1.3(b)
hereof and any Dissenting Shares (as hereinafter defined)) shall be cancelled
and extinguished and be converted into the right to receive the Per Share Amount
(the "Merger Consideration") in cash payable to the holder thereof, without
interest, promptly upon surrender of the certificate representing such Share or
appropriate proof of lost certificates, in accordance with Section 1.5 hereof.
From and after the Effective Time, the holders of certificates evidencing
ownership of any such Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares except as otherwise
provided for herein or by applicable Law.
(b) Each Share held in the treasury of the Company and each Share
owned by Parent or any direct or indirect wholly owned Subsidiary of Parent
(other than Shares held by TRW Investment Management Co., its advisors or
employee benefit plans of Parent or any of its Subsidiaries) immediately before
the Effective Time, including without limitation Merger Sub, shall be cancelled
and extinguished and no payment or other consideration shall be made with
respect thereto. Each share of
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the Series A Convertible Preferred Stock owned by Parent or any direct or
indirect wholly owned subsidiary of Parent immediately before the Effective
Time, including without limitation Merger Sub, shall be cancelled and
extinguished and no payment or other consideration shall be made with respect
thereto.
(c) The shares of Merger Sub common stock outstanding immediately
prior to the Merger shall be converted into 8,000 validly issued, fully paid and
non-assessable shares of common stock of the Surviving Corporation, or such
other number of such Shares as Parent may determine with notice to the Company
prior to the Effective Time (the "Surviving Corporation Common Stock"), which
8,000 shares (or such other number of shares) of the Surviving Corporation
Common Stock shall constitute all of the issued and outstanding capital stock of
the Surviving Corporation and shall be owned by Parent.
1.4. DISSENTING SHARES. (a) Notwithstanding any provision of this
Agreement to the contrary, any Shares issued and outstanding immediately prior
to the Effective Time and held by a holder who has demanded and perfected his
demand for appraisal of his Shares in accordance with the Rhode Island Act
(including but not limited to ss.7-1.1-74 thereof) and as of the Effective Time
has neither effectively withdrawn nor lost his right to such appraisal
("Dissenting Shares") shall not be converted into or represent a right to
receive the Merger Consideration, but the holder thereof shall be entitled to
only such rights as are granted by the Rhode Island Act.
(b) Notwithstanding the provisions of Section 1.4(a) hereof, if any
holder of Shares who demands appraisal of his Shares under the Rhode Island Act
shall effectively withdraw or lose (through failure to perfect or otherwise) his
right to appraisal, then as of the Effective Time or the occurrence of such
event, whichever occurs later, such holder's Shares shall automatically be
converted into and represent only the right to receive the Merger Consideration,
without interest thereon, upon surrender of the certificate or certificates
representing such Shares or appropriate proof of lost certificate.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Shares, withdrawals of
such demands, and any other instruments served pursuant to the Rhode Island Act
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the Rhode Island Act.
The Company shall not voluntarily make any payment with respect to any demands
for appraisal and shall not, except with the prior written consent of Parent,
settle or offer to settle any such demands.
1.5. SURRENDER OF SHARES. (a) Prior to the Closing Date, Parent
shall appoint Equiserve Limited Partnership or another agent reasonably
acceptable to the Company to act as exchange agent (the "Exchange Agent") for
the Merger. As of the Effective Time, Parent shall deposit with the Exchange
Agent for the benefit of holders of Shares, the aggregate consideration to which
such holders shall be entitled at the Effective Time pursuant to Section 1.3
hereof. Such funds shall be invested by the Exchange Agent as directed by Parent
or, after the Effective Time, the Surviving Corporation, provided that such
investments shall be in obligations of or guaranteed by the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by ▇▇▇▇▇'▇
Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $500 million. Any net profit resulting
from, or interest or income produced by, such investments will be payable to the
Merger Sub, the Surviving Corporation or Parent, as Parent directs.
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(b) On the Closing Date, Parent shall instruct the Exchange Agent to
mail to each holder of record of a certificate representing any Shares cancelled
upon the Merger pursuant to Section 1.3(a) hereof, promptly after receiving from
the Company a list of such holders of record, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates shall pass, only upon delivery of the certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the certificates. Each holder of a certificate or certificates representing any
Shares cancelled upon the Merger pursuant to Section 1.3(a) hereof may
thereafter surrender such certificate or certificates to the Exchange Agent, as
agent for such holder, to affect the surrender of such certificate or
certificates on such holder's behalf for a period ending one hundred eighty
(180) days after the Effective Time. Upon the surrender of certificates
representing the Shares, Parent shall cause the Exchange Agent to promptly pay
the holder of such certificates in exchange therefor cash in an amount equal to
the Per Share Amount multiplied by the number of Shares represented by such
certificate subject to Sections 1.5(c) and 1.5(e) hereof. Until so surrendered,
each such certificate (other than certificates representing Dissenting Shares or
Shares held by Parent or any direct or indirect wholly owned Subsidiary of
Parent other than Shares held by TRW Investment Management Co., its advisors or
employee benefit plans of Parent or any of its Subsidiaries or in the treasury
of the Company) shall represent solely the right to receive the aggregate Merger
Consideration relating thereto.
(c) If payment of cash in respect of cancelled Shares is to be made
to a person other than the person in whose name a surrendered certificate or
instrument is registered, it shall be a condition to such payment that the
certificate or instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other Taxes (as hereinafter defined)
required by reason of such payment in a name other than that of the registered
holder of the certificate or instrument surrendered or shall have established to
the satisfaction of Parent or the Exchange Agent that such Tax either has been
paid or is not payable.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and no transfer of Shares shall be made thereafter, other than
transfers of Shares that have occurred prior to the Effective Time. In the event
that, after the Effective Time, certificates for Shares are presented to the
Surviving Corporation, its transfer agent or the Exchange Agent, they shall be
cancelled and exchanged for cash as provided in Section 1.3(a) hereof. No
interest shall accrue or be paid on any cash payable upon the surrender of a
certificate or certificates that immediately before the Effective Time
represented outstanding Shares. From and after the Effective Time, the holders
of certificates evidencing ownership of Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided for herein or by applicable Law.
(e) The Merger Consideration paid in the Merger shall be net to the
holder of Shares in cash, subject to reduction only for any applicable federal
back-up withholding or, as set forth in Section 1.5(c) hereof, stock transfer
Taxes payable by such holder.
(f) Promptly following the date which is 180 calendar days after the
Effective Time, the Exchange Agent shall deliver to Parent all cash (including
interest received with respect thereto), certificates and other documents in its
possession relating to the transactions contemplated hereby, and the Exchange
Agent's duties shall terminate. Thereafter, each holder of a certificate
representing Shares (other than certificates representing Dissenting Shares and
certificates representing Shares to be cancelled pursuant to Section 1.3(b)
hereof) shall be entitled to look to Parent only as a general creditor
4
with respect to the aggregate Merger Consideration relating thereto payable upon
surrender of such certificate, without any interest or dividends thereon
(subject to applicable abandoned property, escheat and similar Laws).
(g) None of the Company, Merger Sub, Parent or the Exchange Agent
shall be liable to any holder of Shares for cash delivered to a public official
pursuant to any abandoned property, escheat or similar law, rule, regulation,
statute, order, judgment or decree.
1.6. OPTIONS. (a) The Company hereby represents and warrants, and
based thereon Parent and Merger Sub hereby acknowledge, that (i) Section 2.14 of
the Company Disclosure Letter (as hereinafter defined) lists all of the stock
option plans under which outstanding options to purchase Shares have been
granted, (ii) that Section 2.14 of the Company Disclosure Letter lists all of
the outstanding options to purchase Shares (the "Company Options") granted under
the Company's stock option plans, the vesting schedule for such options, and the
exercise prices of such options. Each Company Option, whether or not then
exercisable or vested, shall, as a result of the Merger, be fully exercisable
and vested immediately prior to the Effective Time and (iii) all Company Options
which are outstanding immediately prior to the Effective Time shall be cancelled
as of the Effective Time and the holders thereof shall be entitled to receive
from the Surviving Company (or, at Parent's option, Parent) at the Effective
Time, in respect of each Share subject to such Company Option, an amount in cash
equal to the excess, if any, of the Merger Consideration over the exercise price
per share thereof (such payment to be net of applicable withholding taxes),
PROVIDED that the holder of any such Company Option shall, as a condition to any
payment and prior to the Effective Time, deliver an executed Amendment to Stock
Option Awards agreement included as part of Section 2.14 of the Company
Disclosure Letter. At the Effective Time, Parent shall provide the Surviving
Corporation with the funds necessary to satisfy any of its obligations under
this Section 1.6(a).
(b) The Company shall cause the Company Option Plans to terminate as
of the Effective Time.
1.7. ARTICLES OF INCORPORATION AND BYLAWS. At the Effective Time,
the Articles of Incorporation and the Bylaws of the Surviving Corporation shall
be the Articles of Incorporation and the Bylaws of Merger Sub in effect at the
Effective Time (subject to any subsequent amendments); provided, however, the
name of the Surviving Corporation shall be "Network Six, Inc."
1.8. DIRECTORS AND OFFICERS. At the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, and the officers of the Merger Sub immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, in each
case until their successors are duly elected or appointed and qualified.
1.9. OTHER EFFECTS OF MERGER. The Merger shall have all further
effects as specified in the applicable provisions of the Rhode Island Act.
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1.10. PROXY STATEMENT. (a) The Company, acting through its Board of
Directors, shall duly call, give notice of, convene and hold a special meeting
(the "Special Meeting") of shareholders as soon as practicable for the purpose
of considering and taking action upon this Agreement and the Merger.
(b) As promptly as practicable after the date hereof, but in no
event later than ten (10) business days after the date hereof, the Company shall
prepare and file with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"),
and shall use its best efforts to have cleared by the SEC, and promptly
thereafter shall mail to stockholders, a proxy statement in connection with a
meeting of the Company's stockholders to consider the Merger or an information
statement, as appropriate (such proxy statement or information statement, as
amended or supplemented, the letter to the Company's stockholders, the notice of
meeting and form of proxy to be distributed to the Company's stockholders and
any annexes, schedules and exhibits required to be filed with the SEC in
connection therewith are collectively herein referred to as the "Proxy
Statement"). The Proxy Statement shall contain the recommendation of the Board
of Directors of the Company in favor of the Merger and the fairness opinion of
Delta Financial Group, Inc. (the "Financial Advisor") and such other disclosures
as are required by Law (as defined in Section 2.6 hereof).
(c) The shareholder vote required for the adoption of this Agreement
and the Merger shall be the vote required by the Rhode Island Act. The Company
will use its best efforts to solicit from its shareholders proxies in favor of
adoption and approval of the Merger and to take all other reasonable action
necessary or, in the judgment of Parent, helpful to secure the vote of
shareholders required by the Rhode Island Act to effect the Merger and the
conversion into cash of the outstanding Shares pursuant to Section 1.3 hereof.
(d) Parent will furnish the Company with such information concerning
Parent and its subsidiaries as is necessary in order to cause the Proxy
Statement, insofar as it relates to Parent and its subsidiaries, to comply with
applicable Law. Parent agrees promptly to advise the Company if, at any time
prior to the Special Meeting, any information provided by it specifically for
inclusion in the Proxy Statement is or becomes incorrect or incomplete in any
material respect and to provide the Company with the information needed to
correct such inaccuracy or omission. Parent will furnish the Company with such
supplemental information as may be necessary in order to cause the Proxy
Statement, insofar as it relates to Parent and its subsidiaries, to comply with
applicable Law after the mailing thereof to the stockholders of the Company.
(e) The Company and Parent agree to cooperate in making any
preliminary filings of the Proxy Statement with the SEC, as promptly as
practicable, pursuant to Rule 14a-6 under the Securities Exchange Act.
(f) The Company shall provide Parent for its review a copy of the
Proxy Statement at least such amount of time prior to each filing thereof as is
customary in transactions of the type contemplated hereby. Parent authorizes the
Company to utilize in the Proxy Statement the information concerning Parent and
its subsidiaries provided to the Company in connection with, or contained in,
the Proxy Statement.
1.11. ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or
6
things are necessary or desirable to vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of Merger Sub or the Company or
otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of Merger Sub or the Company, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
Merger Sub or the Company, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out this Agreement.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that,
except as set forth in the correspondingly numbered Sections of the letter,
dated the date hereof, from the Company to Parent (the "Company Disclosure
Letter"):
2.1. ORGANIZATION AND GOOD STANDING. The Company is a corporation or
partnership duly organized, validly existing and in good standing under the laws
of the State of Rhode Island and has all requisite corporate power and authority
and any necessary governmental approval to own, lease and operate its properties
and to carry on its business as now being conducted. The Company is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the character of the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not, individually or in the aggregate, have or be reasonably
likely in the future to have a material adverse effect on the business, assets,
condition (financial or otherwise), liabilities, results of operations or
prospects of the Company taken as a whole ("Company Material Adverse Effect") or
prevent or delay the consummation of the Merger. The Company has heretofore made
available to Parent accurate and complete copies of the Articles of
Incorporation and Bylaws, as currently in effect, of the Company.
2.2. CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of (a) 4,000,000 shares of Company Stock, and (b)
857,142.86 shares of Series A Convertible Preferred Stock, par value $3.50 per
share. As of the close of business on the day immediately preceding the date
hereof, (a) 816,991 shares of Company Stock were issued and outstanding, (b)
714,285.71 shares of Series A Convertible Preferred Stock were issued and
outstanding, (c) 8,693 shares of Company Stock were issued and held in the
treasury of the Company, (d) Company Options to purchase 222,875 shares of
Company Stock had been granted and not exercised and (e) warrants to purchase
11,500 (Business Development Company of Rhode Island) and 10,000 (Citizens Trust
Company) shares of Company Stock had been granted and not exercised. No other
capital stock of the Company is authorized or issued. All issued and outstanding
shares of the Company Stock are duly authorized, validly issued, fully paid and
non-assessable and free of preemptive or similar rights. Except as set forth in
Section 2.2 of the Company Disclosure Letter, as of the date hereof there were
no, and as of the Effective Time there will be no, outstanding rights,
subscriptions, warrants, puts, calls, unsatisfied preemptive rights, options or
other agreements of any kind relating to any of the outstanding, authorized but
unissued, unauthorized or treasury shares of the capital stock or any other
interest in the ownership or earnings of the Company or other security of the
Company, and there is no authorized or outstanding security of any kind
convertible into or exchangeable for any such capital stock or other security.
Except as set forth in Section 2.2 of the Company Disclosure Letter, there are
no outstanding contractual obligations of the Company or any Company
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Stock or the capital stock of any Company Subsidiary or to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any such subsidiary or any other entity.
2.3. SUBSIDIARIES. There are no Company Subsidiaries. For purposes
of this Agreement, the term "Company Subsidiary" shall mean any corporation,
partnership or other legal entity of which the
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Company (either alone or through or together with any other subsidiary) owns a
majority of the capital stock or other equity interests, and the Company is
entitled to vote for the election of the board of directors or other governing
body of such corporation, partnership or other legal entity.
2.4. AUTHORIZATION; BINDING AGREEMENT. The Company has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including, but not limited
to, the Merger, have been duly and validly authorized by the Company's Board of
Directors and no other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby (other than the adoption of this
Agreement by the stockholders of the Company). This Agreement has been duly and
validly executed and delivered by the Company and constitutes the legal, valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms. The only vote of holders of any class or series of
the Company's capital stock required to adopt this Agreement and approve the
Merger and the transactions contemplated hereby is the affirmative vote of a
majority of (i) the outstanding Shares, voting together as a class with the
Preferred Shares on an as converted basis, and (ii) the outstanding Preferred
Shares, voting as a separate class. The Rhode Island Business Combination Act of
1990 is the only state takeover or control share statute or similar statute or
regulation that applies or purports to apply to the Merger, or any of the
transactions contemplated hereby or thereby. The Board of Directors of the
Company has taken such action as is necessary so that the restrictions set forth
in the Rhode Island Business Combination Act of 1990 do not apply and will not
apply to Parent, Merger Sub or affiliates or associates of Parent as a result of
the transactions contemplated by this Agreement, the Common Shareholders
Agreements and the Preferred Purchase Agreement.
2.5. GOVERNMENTAL APPROVALS. No consent, approval, waiver or
authorization of, notice to or declaration or filing with ("Consent") any nation
or government, any state or other political subdivision thereof, any entity,
authority or body exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including, without
limitation, any governmental or regulatory authority, agency, department, board,
commission, administration or instrumentality, any court, tribunal or arbitrator
and any self-regulatory organization, domestic or foreign ("Governmental
Authority"), on the part of the Company is required in connection with the
execution, delivery or performance by the Company of this Agreement, or the
consummation by the Company of the transactions contemplated hereby other than
(i) the filing of the Certificate of Merger with the Secretary of State of Rhode
Island in accordance with the Rhode Island Act, (ii) filings with the SEC, and
(iii) such filings as may be required in any jurisdiction where the Company is
qualified or authorized to do business as a foreign corporation in order to
maintain such qualification or authorization.
2.6. NO VIOLATIONS. Except as disclosed on Section 2.6 of the
Company Disclosure Letter, the execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by the Company with any of the provisions hereof or thereof will not
(i) conflict with or result in any breach of any provision of the Articles of
Incorporation or Bylaws or other governing instruments of the Company, (ii)
require any Consent under or result in any breach or violation of or constitute
(with or without due notice or lapse of time or both) a default (or an event
which with notice or lapse of time or both could become a default) or result in
the loss of a benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of the Company pursuant to,
any
9
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company is a
party or by which the Company or its respective properties are bound or
affected, except as would not reasonably be expected to result in a Company
Material Adverse Effect, (iii) result in the creation or imposition of any
material lien or encumbrance of any kind upon any of the assets of the Company
or (iv) subject to obtaining the Consents from Governmental Authorities referred
to in Section 2.5 hereof, contravene any applicable provision of any statute,
law, rule or regulation or any order, decision, injunction, judgment, award or
decree ("Law") to which the Company or its assets or properties are subject.
2.7. SECURITIES FILINGS. The Company has timely filed all forms,
reports, statements and documents required to be filed with the SEC since
December 31, 2000, each of which has complied in all material respects with the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") or the Securities Exchange Act, each as in effect on the date
so filed. The Company has made available to Parent true and complete copies of
(i) its Annual Reports on Form 10-K, as amended, for the years ended December
31, 1998, 1999 and 2000, as filed with the SEC, (ii) its proxy statements
relating to all of the meetings of stockholders (whether annual or special) of
the Company since January 1, 1998, as filed with the SEC, and (iii) all other
reports, statements and registration statements and amendments thereto
(including, without limitation, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as amended) filed by the Company with the SEC since January
1, 1998, and prior to the date hereof (collectively, the "Company Filed
Documents"). The reports and statements required to be filed or furnished to
stockholders pursuant to the Securities Exchange Act subsequent to the date
hereof through the Effective Time, collectively with the Company Filed
Documents, are referred to collectively herein as the "Company Securities
Filings." As of their respective dates, or as of the date of the last amendment
thereof, if amended after filing, none of the Company Securities Filings
contained or, as to the Company Securities Filings subsequent to the date
hereof, will contain, any untrue statement of a material fact or omitted or, as
to the Company Securities Filings subsequent to the date hereof through the
Effective Time, will omit, to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has
heretofore furnished or made available to Parent a complete and correct copy of
any amendments or modifications which have not yet been filed with the SEC to
executed agreements, documents or other instruments which previously had been
filed by the Company with the SEC pursuant to the Securities Act or the
Securities Exchange Act.
2.8. COMPANY FINANCIAL STATEMENTS. The audited consolidated
financial statements and unaudited interim financial statements of the Company
included in the Company Securities Filings (the "Company Financial Statements")
have been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles applied on a consistent basis and present fairly,
in all material respects, the consolidated financial position of the Company as
at the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended subject, in the case of the unaudited interim
financial statements, to normal recurring year-end audit adjustments (which
individually or in the aggregate are not material in nature or amount), any
other adjustments described in the Company Filed Documents and the fact that
certain information and notes have been condensed or omitted in accordance with
the Securities Exchange Act.
2.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 2000,
except as disclosed in Section 2.9 of the Company Disclosure Letter or in
Company Filed Documents filed subsequent to such date and prior to date hereof,
the Company has conducted its business only in the ordinary course and in
10
a manner consistent with past practice and, since such date, there has not been:
(i) any event that, individually or in the aggregate, has had or is reasonably
likely in the future to have a Company Material Adverse Effect, (ii) any
declaration, payment or setting aside for payment of any dividend or other
distribution or any redemption or other acquisition of any shares of capital
stock or securities of the Company by the Company, (iii) any material damage or
loss to any material asset or property, whether or not covered by insurance,
(iv) any change by the Company in accounting principles or practices, (v) any
revaluation by the Company of any of its material assets, including but not
limited to, writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business, (vi) any entry by the
Company into any commitment or transactions material to the Company (other than
commitments or transactions entered into in the ordinary course of business), or
(vii) 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 agreement or arrangement, or, any other increase in the
compensation payable or to become payable to any present or former directors or
officers, or any employment, consulting or severance agreement or arrangement
entered into with any such present or former directors, officers or employees of
the Company covered by Section 5.4 of the Company Disclosure Letter ("Key
Employees"). Since January 1, 2001, the Company has not taken, nor failed to
take, any action that would have constituted a breach of Section 4.1 hereof had
the covenants therein applied since that date, except as described in Section
2.9 of the Company Disclosure Schedule.
2.10. COMPLIANCE WITH LAWS. The business and operations of the
Company have been operated in compliance in all material respects with all Laws
applicable thereto.
2.11. PERMITS. (i) The Company has all permits, certificates,
licenses, approvals and other authorizations required in connection with the
operation of its business (collectively, "Company Permits") except where the
failure to have such Permit would not be expected to have a Company Material
Adverse Effect, (ii) the Company is not in violation of any Company Permit and
(iii) no proceedings are pending or, to the knowledge of the Company, threatened
to revoke or limit any Company Permit.
2.12. LITIGATION. There is no suit, action, investigation, claim or
proceeding ("Litigation") pending or, to the best knowledge of the Company,
threatened against the Company which, individually or in the aggregate, has had
or would be reasonably likely in the future to have a Company Material Adverse
Effect, nor is there any judgment, decree, writ, award, injunction, rule or
order of any Governmental Authority outstanding against the Company which,
individually or in the aggregate, has had or would be reasonably likely in the
future to have a Company Material Adverse Effect or prevent or result in a delay
of the consummation of the Merger.
2.13. CONTRACTS. The Company is not a party nor is it subject to any
note, bond, mortgage, indenture, contract, lease, license, agreement or
instrument (each, a "Contract") that is required to be described in or filed as
an exhibit to any Company Securities Filing ("Securities Filings Contract") that
is not so described in or filed as required by the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"), or the
Securities Exchange Act in respect of the Company Filed Documents, as the case
may be. All Securities Filings Contracts and all other Contracts which have a
value in excess of $50,000 (together with Securities Filings Contracts, "Company
Material Contracts") are valid and binding and are in full force and effect and
enforceable against the Company or such
11
subsidiary and, to the best knowledge of the Company, against the other parties
thereto in accordance with their respective terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by principles of equity regarding the availability of
remedies.
2.14. EMPLOYEE BENEFIT PLANS. (a) Section 2.14 of the Company
Disclosure Letter contains a complete and accurate list of all Benefit Plans (as
hereinafter defined) maintained or contributed to by the Company ("Company
Benefit Plan"). A "Benefit Plan" shall include (i) an employee benefit plan as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, together with all regulations thereunder ("ERISA"), even if, because
of some other provision of ERISA, such plan is not subject to any or all of
ERISA's provisions, and (ii) whether or not described in the preceding clause,
any pension, profit sharing, severance, employment, vacation, disability,
change-in-control, bonus, stock bonus, deferred or supplemental compensation,
retirement, thrift, stock purchase or stock option plan or any other
compensation, welfare, fringe benefit or retirement plan, perquisite
arrangement, program, policy or arrangement including any funding mechanism now
in effect or required as a result of this Agreement or otherwise, whether formal
or informal, oral or written, legally binding or not, providing for benefits for
or the welfare of any or all of the current or former employees, independent
contractors or agents of the Company or its beneficiaries or dependents;
provided that Benefit Plans shall not include any Multiemployer Plan, as defined
in Section 3(37) of ERISA (a "Multiemployer Plan"). Each of the Company Benefit
Plans has been maintained in compliance with its terms and all applicable Law,
except where the failure to do so would not be reasonably likely in the future
to result in a Company Material Adverse Effect. The Company does not contribute
to, or have any outstanding liability with respect to, any Multiemployer Plan.
(b) With respect to each Benefit Plan, the Company has delivered or
made available to Purchaser a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent IRS determination letter, if applicable; (iii) any summary plan
description and other written communications by the Company or any Company
Subsidiaries to their employees concerning the extent of the benefits provided
under a Benefit Plan; and (iv) for the three most recent years (A) the Form 5500
and attached schedules, to the extent required to be filed by ERISA or the
Internal Revenue Code of 1986, as amended (the "Code"), (B) audited financial
statements, with attached opinions of independent accountants, (C) actuarial
valuation reports, and (D) the Form PBGC-1 for any Benefit Plan required to file
such Form. The financial statements so delivered fairly present the financial
condition and the results of operations of each of such plans as of such date,
in accordance with generally accepted accounting principles.
(c) (i) Each Benefit Plan has been established and administered in
accordance with its terms, and in material compliance with applicable provisions
of ERISA, the Code, and other applicable laws, rules and regulations; each
Benefit Plan which is intended to be qualified within the meaning of Code
section 401(a) is so qualified in form and operation and has received a
favorable determination letter as to its qualification, and nothing has
occurred, whether by action or failure to act, that would cause the loss of such
qualification; (iii) to the best knowledge (which means, for purposes of this
agreement, actual knowledge, after due inquiry, of any officer of the Company)
of the Company, no event has occurred and no condition exists that would subject
the Company, either directly or by reason of its affiliation with an ERISA
Affiliate, as hereinafter defined, to any tax, fine, lien or penalty imposed by
ERISA, the Code or other applicable laws, rules and regulations; (iv) for each
Benefit Plan with respect
12
to which a Form 5500 has been filed, no material change has occurred with
respect to the matters covered by the most recent Form since the date thereof;
and (v) no "reportable event" (as such term is defined in ERISA section 4043),
"prohibited transaction" (as such term is defined in ERISA section 406 and Code
section 4975), "accumulated funding deficiency" (as such term is defined in
ERISA section 302 and Code section 412 (whether or not waived)) or failure to
make by its due date a required installment under Code section 412(m) has
occurred with respect to any Benefit Plan or any other plan maintained for
employees of any ERISA Affiliate of the Company. "ERISA Affiliate," as applied
to any person, means (i) any corporation which is a member of a controlled group
of corporations within the meaning of Code section 414(b) of which that person
is a member, (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Code section 414(c) of which that person is a member, and (iii) any
member of an affiliated service group within the meaning of Code section 414(m)
and (o) of which that person, any corporation described in clause (i) above or
any trade or business described in clause (ii) above is a member.
(d) Neither the Company nor any ERISA Affiliate participates in, or
has participated in, any plan subject to Title IV of ERISA;
(e) The Company has not ever contributed to or had an obligation to
contribute to any Multiemployer Plan. No ERISA Affiliate has withdrawn from any
such Multiemployer Plan in a complete or partial withdrawal under Subtitle E of
Title IV of ERISA with respect to which there is any outstanding liability as of
the date hereof, or received notice from any such Multiemployer Plan that it is
in reorganization or insolvency pursuant to ERISA sections 4241A or 4045 or that
it intends to terminate or has terminated under ERISA section 4041 or 4042.
(f) With respect to any Benefit Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the knowledge of the Company, threatened, and (ii) no facts or
circumstances exist, to the knowledge of the Company, that could give rise to
any such actions, suits or claims.
(g) No Benefit Plan exists that could result in the payment to any
present or former employee of the Company of any money or other property or
accelerate or provide any other rights or benefits to any present or former
employee of the Company as a result of the transaction contemplated by this
Agreement, whether or not such payment would constitute a parachute payment
within the meaning of Code section 280G.
(h) Each of the Benefit Plans can be terminated by the Company
within a period of 30 days, without payment of any additional compensation or
amount or the additional vesting or acceleration of any benefits.
(i) All group health plans of the Company and any ERISA Affiliate
have been operated in compliance with Parts 6 and 7 of Title I of ERISA, to the
extent such requirements are applicable. Except to the extent required under
ERISA section 601, the Company does not provide health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees.
2.15. TAXES AND RETURNS. (a) The Company and any consolidated,
combined, unitary or aggregate group for tax purposes of which the Company is or
has been a member has timely filed, or caused to be timely filed all Tax Returns
(as hereinafter defined) required to be filed by it, and has paid,
13
collected or withheld, or caused to be paid, collected or withheld, all Taxes
required to be paid, collected or withheld, other than such Taxes for which
adequate reserves in the Company Financial Statements have been established in
accordance with generally accepted accounting principles, consistently applied,
or which are being contested in good faith. All such Tax Returns were true,
correct and complete in all material respects. There are no claims or
assessments pending against the Company for any alleged deficiency in any Tax,
and the Company has not been notified in writing of any proposed Tax claims or
assessments against the Company (other than in each case, claims or assessments
for which adequate reserves in the Company Financial Statements have been
established or which are being contested in good faith and are immaterial in
amount). The Company does not have any waivers or extensions of any applicable
statute of limitations to assess any Taxes. There are no outstanding requests by
the Company for any extension of time within which to file any Tax Return or
within which to pay any material amounts of Taxes shown to be due on any return.
To the best knowledge of the Company, there are no liens for Taxes on the assets
of the Company except for statutory liens for current Taxes not yet due and
payable.
(b) For purposes of this Agreement, the term "Tax" shall mean any
federal, state, local, foreign or provincial income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, alternative or
added minimum, ad valorem, transfer or excise tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty imposed by any Governmental
Authority. The term "Tax Return" shall mean a report, return or other
information (including any attached schedules or any amendments to such report,
return or other information) required to be supplied to or filed with a
governmental entity with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
2.16. INTELLECTUAL PROPERTY. The Company owns, or is licensed or
otherwise possesses legal enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights and any applications therefor,
technology, know-how, trade secrets, computer software programs or applications,
domain names and tangible or intangible proprietary information or materials
that are used in the business of the Company as currently conducted, except for
any such failures to own, be licensed or possess that, individually or in the
aggregate, has not had and is not reasonably likely in the future to have a
Company Material Adverse Effect. All patents, trademarks, trade names, service
marks and copyrights held by the Company which are material to its business are
valid and subsisting.
2.17. ENVIRONMENTAL MATTERS. (a) Except as specifically described
in Section 2.17 of the Company Disclosure Letter:
(i) (A) the Company is, and within the period of all
applicable statutes of limitation has been, in compliance in all material
respects with all Environmental Laws applicable to any of its current or former
operations; and (B) the Company believes that it will, and will not incur
material expense in excess of the amounts reflected in the Company's statements
and capital budgets to, maintain compliance in all material respects with all
Environmental Laws applicable to any of its current or former operations or
properties or attain and maintain such compliance with respect to any of its
planned operations over the next three years;
(ii) (A) the Company holds all Environmental Permits (each of
which is in full force and effect) required for any of its current operations
and for any property owned, leased, or otherwise operated by it, and is, and
within the period of all applicable statues of limitation has been, in
14
compliance in all material respects with the terms of all such Environmental
Permits; and (B) the Company has no knowledge that over the next three years:
any of its Environmental Permits will not be, or will entail material expense to
be, timely renewed or complied with; any additional Environmental Permits
required of it for current operations or for any property owned, leased, or
otherwise operated by it, or for any of its planned operations, will not be
timely granted or complied with; or any transfer or renewal of, or reapplication
for, any Environmental Permit required as a result of the Merger will not be,
timely effected;
(iii) no review by, or approval of, any Governmental Authority
or other person is required under any Environmental Law in connection with the
execution or delivery of this Agreement;
(iv) the Company has not received any Environmental Claim
against it, and the Company has no knowledge of any such Environmental Claim
being threatened or contemplated;
(v) to the best of the Company's knowledge, Hazardous
Materials that are reasonably likely to form the basis of any Environmental
Claim against the Company are not present on any property owned, leased, or
operated by it;
(vi) no material Environmental Claim is pending or, to the
best knowledge of the Company, threatened, and, to the best of the Company's
knowledge, there exists no Hazardous Materials that is reasonably likely to form
the basis of any Environmental Claim, in any case against any person or entity
(including without limitation any predecessor of the Company) whose liability
the Company has or may have retained or assumed either contractually or by
operation of law, or , to the best of the Company's knowledge, against any real
or personal property which the Company formerly owned, leased, or operated, in
whole or in part which would result in a Company Material Adverse Effect; and
(vii) to the best of the Company's knowledge, there are no
facts which the Company reasonably believes could form the basis of a material
Environmental Claim against it arising out of the non-compliance or alleged
non-compliance with any Environmental Law, or the presence or suspected presence
of Hazardous Materials at any location; the Company does not expect to incur any
material costs to comply with Environmental Laws during the next three years;
the Company does not expect to incur any material costs for ongoing, and
reasonably anticipated, investigation and remediation of Hazardous Materials
(including, without limitation, any payments to resolve any threatened or
asserted Environmental Claim for investigation and remediation costs)..
(b) For purposes of this Agreement, the terms below shall have the
following meanings:
"Environmental Claim" means any claim, demand, action, suit, complaint,
proceeding, directive, investigation, lien, demand letter, or notice (written or
oral) of alleged noncompliance, violation, or liability, by any person or entity
asserting liability or potential liability (including without limitation,
liability or potential liability for enforcement, investigatory costs,
remediation costs, operation and maintenance costs, governmental response costs,
natural resource damages, property damage, personal injury, fines or penalties),
regardless of legal theory, arising out of, based on or resulting from (i) the
presence, discharge, emission, release or threatened release of any Hazardous
Materials at any location, (ii) circumstances forming the basis of any violation
or alleged violation of any Environmental Laws or Environmental Permits, or
(iii) otherwise relating to obligations or liabilities under any Environmental
Law.
15
"Environmental Laws" means any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees, or other legally
enforceable requirement (including, without limitation, common law) of any
foreign government, the United States, or any state, local, municipal or other
governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of human health (including, without
limitation, employee health and safety) or the environment (including without
limitation indoor air, ambient air, surface water, groundwater, land surface,
subsurface strata, or plant or animal species).
"Environmental Permits" means all permits, licenses, registrations,
approvals, exemptions and other filings with or authorizations, by any
Governmental Authority under any Environmental Law.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity (including, without
limitation, a court) exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof),
petroleum products, asbestos, asbestos-containing materials, pollutants,
contaminants, radioactivity, electromagnetic fields and all other materials,
whether or not defined as such, that are regulated pursuant to any Environmental
Laws or that could result in liability under any applicable Environmental Laws.
2.18. PROXY STATEMENT. The Proxy Statement will comply in all material
respects with the applicable requirements of the Securities Exchange Act except
that no representation or warranty is being made by the Company with respect to
any information supplied to the Company by Parent or Merger Sub specifically for
inclusion in the Proxy Statement. The Proxy Statement will not, at the time the
Proxy Statement is filed with the SEC or first sent to stockholders, at the time
of the Company's stockholders' meeting or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the meeting of the Company's stockholders held
for approval of the Merger which has become false or misleading. No
representation is made by the Company with respect to written information
supplied by Parent or Merger Sub specifically for inclusion in the Proxy
Statement.
2.19. LABOR MATTERS. The Company is not a party to any collective
bargaining agreement, memorandum of understanding, settlement or other labor
agreement with any union or labor organization and no union or labor agreement
with any union or labor organization has been recognized by the Company as an
exclusive bargaining representative for employees of the Company. There is no
current union representation matter involving employees of the Company, nor, to
the best of the Company's knowledge, any significant activity or proceeding of
any labor organization (or representative thereof) or employee group to organize
any such employees; there is no material labor dispute, strike, picketing or
work stoppage, or any lockout, involving employees of the Company pending or, to
the best of the Company's knowledge, threatened against or involving the Company
or and Company Subsidiary there is no (i) arbitration, unfair labor practice,
investigation, employment discrimination or other labor or employment related
charge, complaint or claim against the Company pending or, to the best of the
Company's knowledge, threatened before any court, arbitrator, mediator or
governmental agency or tribunal, or (ii) adjudication by any court, arbitrator,
mediator or
16
governmental agency or tribunal that, in the case of either clause (i) or (ii)
above, has or would reasonably be expected to have a Company Material Adverse
Effect.
2.20. FINDERS AND INVESTMENT BANKERS. Neither the Company nor any of
its officers or directors has employed any broker, finder or financial advisor
or otherwise incurred any liability for any brokerage fees, commissions or
financial advisors' or finders' fees in connection with the transactions
contemplated hereby, other than pursuant to agreements with the Financial
Advisor and Bentley Associates, L.P., copies of which have been provided to
Parent.
2.21. FAIRNESS OPINION. The Company's Board of Directors has received
from the Financial Advisor a written opinion addressed to it to the effect that,
as of the date hereof, the consideration to be paid to the Company's common
stockholders pursuant to the Merger is fair to such stockholders from a
financial point of view.
2.22. RELATED PARTY TRANSACTIONS. Except as set forth in the Company
Filed Documents, no director, officer or affiliate of the Company, including for
these purposes, any controlling shareholder or director, officer or partner of
any such affiliate (each a "Related Party") (i) has outstanding any indebtedness
or other similar obligation to the Company or (ii) other than employment-related
benefits contemplated by or disclosed in this Agreement, is a party to any
legally binding material contract, commitment or obligation to, from or with the
Company .
2.23. YEAR 2000 COMPLIANCE. (a) Except as specifically described in
Section 2.23 of the Company Disclosure Letter, the Information Technology (as
defined below) of the Company is Year 2000 Compliant (as defined below) and will
not cause an interruption in the ongoing operations of the business of the
Company or give rise to liability, including product liability, due to a problem
arising from a failure of the Information Technology relating to Year 2000
Compliance (as defined below), except where such failures individually or in the
aggregate, will not or are not reasonably likely to in the future have a Company
Material Adverse Effect. Section 2.23 of the Company Disclosure Letter sets
forth correct and complete lists of all of the hardware, software, firmware,
network systems, embedded systems, telecommunication systems, and other
Information Technology of the Company which is not Year 2000 Compliant.
(b) The Company has been, is and on the Closing Date will continue to
be, in compliance in all respects with all applicable laws requiring disclosure
of the Year 2000 Compliance status of the Information Technology of the business
of the Company, the Year 2000 Compliance efforts of the Company and other Year
2000 related disclosures.
(c) As used in this Agreement, "Year 2000 Compliant" and "Year 2000
Compliance" mean, with respect to Information Technology, that the Information
Technology accurately processes date/time data and date-related data (including,
but not limited to, calculating, comparing, and sequencing) from, into, and
between the twentieth and twenty-first centuries, and during the twenty-first
century, the years 1999 and 2000 and leap year calculations, to the extent that
Information Technology is used in combination with other Information Technology,
such Information Technology properly exchanges date/time data with such other
Information Technology, and the Information Technology has been tested to verify
these capabilities.
17
(d) As used in this Agreement, "Information Technology" means all
software, hardware, firmware, telecommunications systems, network systems,
embedded systems, and other systems or components that are owned or used by the
Company.
(e) The Company (i) has made a full and complete assessment of the Year
2000 Issues (as defined below) and (ii) does not reasonably anticipate that Year
2000 Issues will have a Company Material Adverse Effect on its operations,
business, financial condition or results of operations.
(f) As used in this Agreement, "Year 2000 Issues," means anticipated
costs, problems and uncertainties associated with being Year 2000 Compliant,
including the ability of certain computer applications to effectively handle
data including dates on and after January 1, 2000, as such ability affects the
business, operations, and financial condition of the Company and of the
Company's material customers, suppliers and vendors.
2.24. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE POLICIES. Section
2.24 of the Company disclosure Letter sets forth a full and complete list of all
directors' and officers' liability insurance policies maintained by or on behalf
of the Company on the date thereof.
2.25. EXISTING CONTRACTS. The Company has not received any notices
of default or termination with respect to any contract listed on Annex II
hereto.
2.26. NO UNDISCLOSED MATERIAL LIABILITIES. There are no liabilities
of the Company of any kind whatsoever, whether accrued, contingent, absolute,
determined or determinable, other than: (a) liabilities disclosed in the
Company's Form 10-Q for the quarter ended March 31, 2001 included in the Company
Filed Documents; and (b) liabilities incurred in the ordinary course of business
consistent with past practice since March 31, 2001, which individually or in the
aggregate, would not have a Company Material Adverse Effect.
18
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that, except as set forth
in the correspondingly numbered Sections of the letter, dated the date hereof,
from Parent to the Company (the "Parent Disclosure Letter"):
3.1. ORGANIZATION AND GOOD STANDING. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority and any necessary governmental authority to own, lease and operate
its properties and to carry on its business as now being conducted.
3.2. AUTHORIZATION; BINDING AGREEMENT. Parent and Merger Sub have all
requisite corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, including, but not
limited to, the Merger, have been duly and validly authorized by the respective
Boards of Directors of Parent and Merger Sub, and by Parent as sole shareholder
of Merger Sub, and no other corporate proceedings on the part of Parent, Merger
Sub or any other subsidiary of Parent are necessary to authorize the execution
and delivery of this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by each
of Parent and Merger Sub and constitutes the legal, valid and binding agreements
of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in
accordance with its terms.
3.3. GOVERNMENTAL APPROVALS. No Consent from or with any Governmental
Authority on the part of Parent or Merger Sub is required in connection with the
execution or delivery by Parent and Merger Sub of this Agreement or the
consummation by Parent and Merger Sub of the transactions contemplated hereby
other than (i) the filing of the Certificate of Merger with the secretary of
State of Rhode Island in accordance with the Rhode Island Act, (ii) filings with
the SEC, (iii) those Consents that, if they were not obtained or made, would not
prevent or delay consummation of the Merger or otherwise prevent Parent or
Merger Sub from performing their obligations under this Agreement and (iv) such
filings as may be required in any jurisdiction where Parent is qualified or
authorized to do business as a foreign corporation in order to maintain such
qualification or authorization.
3.4. NO VIOLATIONS. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by Parent and Merger Sub with any of the provisions hereof will not
(i) conflict with or result in any breach of any provision of the charter
documents or Bylaws or other governing instruments of Parent or any of Parent's
Subsidiaries, (ii) require any Consent under or result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any material contract,
instrument, permit, license or franchise to which the Parent is a party or by
which Parent or any of its assets or property is subject, (iii) result in the
creation or imposition of any material lien or encumbrance of any kind upon any
of the assets of Parent or any subsidiary of Parent or (iv) subject to obtaining
the Consents from Governmental Authorities referred to in Section 3.3 hereof,
contravene any Law to which Parent or any subsidiary of Parent or its or any of
their respective assets or properties are subject, except, in the
19
case of clauses (ii), (iii) and (iv) above, for any deviations from the
foregoing which would not, individually or in the aggregate, have or be
reasonably likely in the future to have a material adverse effect on the
business, assets, condition (financial or otherwise), liabilities or results of
operations of Parent and its subsidiaries taken as a whole.
3.5. PROXY STATEMENT. None of the information supplied by Parent, its
officers, directors, representatives, agents or employees (the "Parent
Information"), specifically for inclusion in the Proxy Statement will, on the
date the Proxy Statement is first mailed to stockholders, at the time of the
Special Meeting or at the Effective Time, contain any statement which, at such
time and in light of the circumstances under which it will be made, will be
false or misleading with respect to any material fact, or will omit to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for such stockholders' meeting which
has become false or misleading. Notwithstanding the foregoing, neither Parent
nor Merger Sub makes any representation or warranty with respect to any
information that has been supplied by the Company or its accountants, counsel or
other authorized representatives for use in any of the foregoing documents.
3.6. FINDERS AND INVESTMENT BANKERS. Neither Parent nor any of its
officers or directors has employed any broker, finder or financial advisor or
otherwise incurred any liability for any brokerage fees, commissions or
financial advisors' or finders' fees in connection with the transactions
contemplated hereby.
3.7. FINANCING ARRANGEMENTS. At the Effective Time, Parent will have
funds available to it (exclusive of any funds in the Company's accounts at the
Effective Time) sufficient to purchase the Shares in accordance with the terms
of this Agreement.
3.8. NO PRIOR ACTIVITIES. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement, the Common Shareholders Agreements and the
Preferred Purchase Agreement and the transactions contemplated hereby and
thereby, Merger Sub has not incurred any obligations or liabilities, and has not
engaged in any business or activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person or entity.
3.9 LITIGATION. Except as disclosed in any report, statement or
other document filed by Parent with the SEC prior to the date hereof ("Parent
Filed Documents"), there is (i) no Litigation pending or, to the best knowledge
of Parent and Merger Sub, threatened against Parent or Merger Sub which,
individually or in the aggregate, has had or would be reasonably likely in the
future to have a prevent or result in a delay of the consummation of the Merger,
and (ii) no judgment, decree, writ, award, injunction, rule or order of any
Governmental Authority outstanding against Parent or Merger Sub which,
individually or in the aggregate, has had or would be reasonably likely in the
future to prevent or result in a delay of the consummation of the Merger.
20
ARTICLE IV.
ADDITIONAL COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
4.1. CONDUCT OF BUSINESS OF THE COMPANY. (a) Except as expressly
contemplated by Section 4.1 of the Company Disclosure Letter, during the period
from the date of this Agreement to the Effective Time, (i) the Company shall
conduct its business in the ordinary course and consistent with past practice,
and the Company shall use best efforts to preserve intact its business
organization, keep available the services of its officers and employees and
preserve intact the present commercial relationships of the Company with all
persons with whom it does business and (ii) without limiting the generality or
effect of the foregoing, the Company will not:
(A) amend or propose to amend its Articles of Incorporation or
Bylaws (or comparable governing instruments);
(B) authorize for issuance, issue, deliver, grant, sell,
pledge, dispose of or propose to issue, deliver, grant, sell, pledge or
dispose of any shares of, or any options, warrants, commitments,
subscriptions or rights of any kind to acquire or sell any shares of,
the capital stock or other securities of the Company including, but not
limited to, stock appreciation rights, phantom stock, any securities
convertible into or exchangeable for shares of stock of any class of
the Company, except for the issuance of up to 222,875 Shares pursuant
to the exercise of either incentive or non-qualified stock options,
including management stock options, outstanding on the close of
business on the day immediately preceding the date of this Agreement
and listed in Section 2.2 of the Company Disclosure Schedule in
accordance with their present terms;
(C) split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock (except that the Company may, with prior
notice to Parent, pay accrued and unpaid dividends through, but not
beyond, March 31, 2001 on the Preferred Stock), or directly or
indirectly redeem, purchase or otherwise acquire or offer to acquire,
directly or indirectly, any shares of its capital stock or other
securities;
(D) (a) other than in the ordinary course of business
consistent with past practice, (i) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any person or (ii)
make any loans, advances or capital contributions to, or investments
in, any other person (other than customary travel, relocation or
business advances to employees); (b) acquire the stock or the assets
of, or merge or consolidate with, any other person; (c) voluntarily
incur any material liability or obligation (absolute, accrued,
contingent or otherwise) other than in the ordinary course of business
and in a manner consistent with past practice; or (d) sell, transfer,
mortgage, pledge or otherwise dispose of, or encumber, or agree to
sell, transfer, mortgage, pledge or otherwise dispose of or encumber,
any assets or properties, real, personal or mixed material to the
Company other than sales of products in the ordinary course of business
and in a manner consistent with past practice; (e) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become
responsible for, the
21
obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any other person (other than in
the ordinary course of business consistent with past practice); (f)
enter into any contract or agreement other than in the ordinary course
of business consistent with past practice; or (g) enter into a
commitment to make any single capital expenditure which is in excess of
$5,000 or enter into commitments to make capital expenditures (during
any two-month period) which are, in the aggregate, in excess of
$10,000;
(E) increase in any manner the compensation of any of its
directors, officers or employees or enter into, establish, amend or
terminate any employment, consulting, retention, change in control,
collective bargaining, bonus or other incentive compensation, profit
sharing, health or other welfare, stock option or other equity,
pension, retirement, vacation, severance, deferred compensation or
other compensation or benefit plan, policy, agreement, trust, fund or
arrangement with, for or in respect of, any shareholder, officer,
director, other employee, agent, consultant or affiliate other than (i)
as required pursuant to the terms of agreements in effect on the date
of this Agreement and set forth in or contemplated by Section 4.1 of
the Company Disclosure Schedule, (ii) increases in salaries of
employees who are not directors or officers of the Company or Key
Employees made in the ordinary course of business consistent with past
practice or (iii) increases in salaries of Key Employees with Parent's
prior written consent;
(F) except as may be required as a result of a change in Law
or in generally accepted accounting principles, change any of the
accounting practices or principles used by it;
(G) make any material Tax election, settle or compromise any
material federal, state, local or foreign Tax liability, or waive any
statute of limitations for any Tax claim or assessment or change its
fiscal year;
(H) settle or compromise any pending or threatened suit,
action or claim which is material or which relates to the transactions
contemplated hereby;
(I) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company (other than the Merger);
(J) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction (a) in
the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the financial statements
of the Company or incurred in the ordinary course of business and
consistent with past practice and (b) of liabilities required to be
paid, discharged or satisfied pursuant to the terms of any contract in
existence on the date hereof (including, without limitation, benefit
plans relating to directors) or entered into in accordance with this
Section 4.1;
(K) permit any insurance policy naming the Company as a
beneficiary or a loss payable payee to be cancelled or terminated
without the prior consent of the Parent, except in the ordinary course
of business and consistent with past practice; or
(L) take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Section 4.1(a) or
any action which would make any of the representations or warranties of
the Company contained in this Agreement untrue and incorrect as of the
date when made if such action had then been taken, or would result in
any of the Conditions not being satisfied.
22
(M) pay the legal fees or other expenses of the Preferred
Stockholder in connection with the transactions contemplated by this
Agreement or otherwise or reimburse the Preferred Stockholder for such
fees or expenses in an aggregate amount in excess of $50,000.
(b) The Company shall use its best efforts to comply in all
material respects with all Laws applicable to it or any of its properties,
assets or business and maintain in full force and effect all the Company Permits
necessary for, or otherwise material to, such business.
4.2. NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent if any of the following occur after the date of this Agreement:
(i) receipt of any notice or other communication in writing from any third party
alleging that the Consent of such third party 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 Authority (including,
but not limited to, the National Association of Securities Dealers (the "NASD")
or any securities exchange) in connection with the transactions contemplated by
this Agreement; (iii) the occurrence of an event which would or would be
reasonably likely in the future to (A) have a Company Material Adverse Effect or
prevent or delay the consummation of the Merger or (B) cause any Merger
condition (as set forth in Article VI) to be unsatisfied at any time prior to
the consummation of the Merger; (iv) any breach by the Company of any provision
hereof; or (v) the commencement or, to its knowledge, threat of any Litigation
involving or affecting the Company or any of its respective properties or
assets, or, to its knowledge, any employee, agent, director or officer, in his
or her capacity as such, of the Company which, if pending on the date hereof,
would have been required to have been disclosed in this Agreement or which
relates to the consummation of the Merger.
4.3. ACCESS AND INFORMATION. Between the date of this Agreement and the
Effective Time, the Company will give, and shall cause its accountants and legal
counsel to give, Parent and its respective authorized representatives
(including, without limitation, its financial advisors, accountants and legal
counsel), at all reasonable times, access as reasonably requested to all
personnel, offices and other facilities and to all contracts, agreements,
commitments, books and records (including Tax Returns) of or pertaining to the
Company, will permit the foregoing to make such reasonable inspections as they
may require and will cause its officers promptly to furnish Parent with (a) such
financial and operating data and other information with respect to the business
and properties of the Company as Parent may from time to time reasonably
request, and (b) a copy of each report, schedule and other document filed or
received by the Company pursuant to the requirements of applicable securities
laws or the NASD.
4.4. STOCKHOLDER APPROVAL. As soon as practicable following the date
hereof, the Company will take all steps necessary to duly call, give notice of,
convene and hold a meeting of its stockholders for the purpose of voting upon
the approval and adoption of this Agreement and the transactions contemplated
hereby (the "Company Proposals"). Except as otherwise contemplated by this
Agreement, (i) the Board of Directors of the Company will recommend to the
stockholders of the Company that they approve the Company Proposals, (ii) the
Company will include in the Proxy Statement the unanimous recommendation of the
Company's Board of Directors that the stockholders of the Company vote in favor
of the adoption of this Agreement and the transactions contemplated hereby and
the written opinion of the Financial Advisor that the consideration to be
received by the common stockholders of
23
the Company pursuant to the Merger is fair from a financial point of view and
(iii) the Company will use its best efforts to obtain any necessary approval by
the Company's stockholders of the Company Proposals.
4.5. BEST EFFORTS. Subject to the terms and conditions herein provided,
the Company agrees to use its best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including, but not limited to, (i)
obtaining all Consents from Governmental Authorities and other third parties
required for the consummation of the Merger and the transactions contemplated
thereby and (ii) having vacated, dismissed or withdrawn any order, stay, decree,
judgment or injunction of any Governmental Authority which temporarily,
preliminarily or permanently prohibits or prevents the transactions contemplated
by this Agreement. Upon the terms and subject to the conditions hereof, the
Company agrees to use its best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary to satisfy the
other conditions of the closing set forth herein.
4.6. PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, the
Company shall not, and shall cause its officers, directors and authorized
representatives not to, issue or cause the publication of any press release or
any other announcement with respect to the Merger or the transactions
contemplated hereby without the consent of Parent, except for such of the
foregoing as the Company determines that such release or announcement is
required by applicable Law or pursuant to any applicable listing agreement with,
or rules or regulations of, the NASD, in which case the Company, prior to making
such announcement, will, if practicable in the circumstances, consult with
Parent regarding the same.
4.7. COMPLIANCE. In consummating the transactions contemplated
hereby, the Company shall comply, in all material respects, with all applicable
Laws.
4.8 NO SOLICITATION. (a) The Company shall, and shall cause its
officers, directors, employees, representatives and agents to, immediately cease
any discussions or negotiations with any parties that may be ongoing with
respect to a Takeover Proposal (as hereinafter defined). The Company shall not,
nor shall it authorize or permit any of its officers, directors or employees or
any investment banker, financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly, (i) solicit, initiate
or encourage (including by way of furnishing information), or take any other
action designed or reasonably likely to facilitate, any inquiries or the making
of any proposal which constitutes, or may reasonably be expected to lead to, any
Takeover Proposal or (ii) participate in any discussions or negotiations
regarding any Takeover Proposal; PROVIDED, HOWEVER, that if, at any time prior
to the Effective Time and following the receipt of a Superior Proposal, the
Board of Directors of the Company determines in good faith, based upon the
advice of outside counsel, that such action is necessary for the Board of
Directors to comply with its fiduciary duties to the Company's stockholders
under applicable Law, the Company may, in response to a Superior Proposal that
was made in circumstances not otherwise involving a breach of this Agreement,
and subject to compliance with Section 4.8(c), (x) furnish information with
respect to the Company to a bona fide third party which has made a Superior
Proposal pursuant to a confidentiality agreement having terms substantially the
same as the Confidentiality Agreement (as hereinafter defined), provided that
the Company advises Parent of all such nonpublic information delivered to such
person concurrently with its delivery to the requesting party, and (y)
participate in negotiations regarding such Superior Proposal. "Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of
24
10% or more of the assets of the Company or 10% or more of any class of equity
securities of the Company, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 10% or more of any
class of equity securities of the Company, any merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company, other than the transactions
contemplated by this Agreement.
(b) Except as set forth in this Section 4.8, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors or such committee of the
Merger or the Company Proposals, (ii) approve or recommend, or propose publicly
to approve or recommend, any Takeover Proposal or (iii) cause the Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, an "Acquisition Agreement") related to any
Takeover Proposal. Notwithstanding the foregoing, in the event that prior to the
Effective Time the Board of Directors of the Company determines in good faith,
in response to a Superior Proposal that was made in circumstances not otherwise
involving a breach of this Agreement, after consultation with outside counsel,
that such action is necessary for the Board of Directors to comply with its
fiduciary duties to the Company's stockholders under applicable law, the Board
of Directors of the Company may (subject to this and the following sentences)
(x) withdraw or modify its approval or recommendation of the Merger or the
Company Proposals or (y) approve or recommend a Superior Proposal, PROVIDED,
HOWEVER, that any actions described in clauses (x) and (y) may be taken only at
a time that is after the fifth business day following Parent's receipt of
written notice advising Parent that the Board of Directors of the Company has
received a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal, identifying the person making such Superior Proposal and
providing notice of the determination of the Board of Directors of the Company
of what action referred to herein the Board of Directors of the Company has
determined to take, PROVIDED, FURTHER, that the foregoing proviso shall not
prevent the Board of Directors of the Company from taking any actions described
in clause (x) within five business days of the Special Meeting so long as the
notice described in the foregoing proviso is received by Parent prior to Noon,
New York time, on the date of the Special Meeting. For purposes of this
Agreement, a "Superior Proposal" means a bona fide written Takeover Proposal
which (i) a majority of the disinterested members of the Board of Directors of
the Company determines, in their good faith judgment (based on the opinion of
independent financial advisors) that the value of the consideration provided for
in such proposal exceeds 110% of the Per Share Amount, and, considering all
relevant factors, is as or more favorable to the Company and its stockholders
than the Merger and (ii) for which financing, to the extent required, is then
fully committed or which, in the good faith judgment of a majority of the
disinterested members of the Board of Directors (based on the advice of
independent financial advisors), is reasonably capable of being financed by such
third party.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.8, the Company shall immediately advise
Parent orally and in writing of any request for information or of any Takeover
Proposal, the material terms and conditions of such request or the Takeover
Proposal and the identity of the person making such request or Takeover Proposal
and shall keep Parent promptly advised of all significant developments which
could reasonably be expected to culminate in the Board of Directors of the
Company withdrawing, modifying or amending its recommendation of the Merger and
the transactions contemplated by this Agreement.
25
(d) Nothing contained in this Section 4.8 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Securities Exchange Act or from making any
disclosure to the Company's stockholders; PROVIDED, HOWEVER, neither the Company
nor its Board of Directors nor any committee thereof shall, except as in
accordance with Section 4.8(b), withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to the Merger or the Company
Proposals or approve or recommend, or propose publicly to approve or recommend,
a Takeover Proposal.
4.9. SEC AND SHAREHOLDER FILINGS. The Company shall send to Parent a
copy of, or notify Parent of the filing and availability on ▇▇▇▇▇ of, all public
reports and materials as and when it sends the same to its stockholders, the SEC
or any state or foreign securities commission.
4.10. TAKEOVER STATUTES. If any "fair price," "moratorium," "control
share acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws in the United States (each a "Takeover Statute") is
or may become applicable to the Merger, the Company and the members of its Board
of Directors will use best efforts to grant such approvals, and take such
actions as are necessary so that the transactions contemplated by this Agreement
and the Company Proposals may be consummated as promptly as practicable on the
terms contemplated hereby and otherwise act to eliminate or minimize the effects
of any Takeover Statute on any of the transactions contemplated hereby.
4.11. RELATED PARTY AGREEMENTS. Except as set forth in Section 4.11 of
the Company Disclosure Letter and except for employment-related agreements or
obligations contemplated by or disclosed in this Agreement, the Company shall
take all actions necessary to terminate, effective as of the Effective Time, all
contracts, commitments or obligations to, from or with the Company, on the one
hand, and any Related Party, on the other hand.
4.12. EMPLOYEE STOCK PURCHASE PLAN. Promptly following the execution
hereof and in all cases prior to any public announcement concerning this
Agreement, the Company will terminate its ss.423 employee stock purchase plan
and refund to participating employees any funds contributed thereto but not yet
utilized for the purchase of Company Stock.
4.13. SPECIAL COMMITTEE OF THE DIRECTORS. Promptly following the
execution hereof the Board of Directors will adopt a resolution to provide that
no fees shall accrue to the Special Committee of the Board of Directors after
the date hereof.
ARTICLE V.
ADDITIONAL COVENANTS OF PARENT
PARENT COVENANTS AND AGREES AS FOLLOWS:
5.1. BEST EFFORTS. Subject to the terms and conditions herein provided,
Parent agrees to use its best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, including, but not limited to, (i) obtaining all
Consents from Governmental Authorities and other third parties required for the
consummation of the Merger and the
26
transactions contemplated thereby and (ii) having vacated, dismissed or
withdrawn any order, stay, decree, judgment or injunction of any Governmental
Authority which temporarily, preliminarily or permanently prohibits or prevents
the transactions contemplated by this Agreement. Upon the terms and subject to
the conditions hereof, Parent agrees to use its best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary to
satisfy the other conditions of the closing set forth herein. Notwithstanding
any other provision hereof, in no event will Parent, Merger Sub or any of their
Affiliates (collectively, the "Parent Group") be required to take or fail to
take any action in order to obtain or make a Consent arising out of any
contractual or legal obligation of or applicable to the Company, and in no event
will any member of the Parent Group be required to enter into or offer to enter
into any divestiture, hold-separate, business limitation or similar agreement or
undertaking in connection with this Agreement, or the transactions contemplated
hereby.
5.2. PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect,
Parent shall not, and shall cause its officers, directors and authorized
representatives not to, issue or cause the publication of any press release or
any other announcement with respect to the Merger or the transactions
contemplated hereby without the consent of the Company, except for such of the
foregoing as to which Parent determines that such release or announcement is
required by applicable Law or pursuant to any applicable listing agreement with,
or rules or regulations of, any stock exchange on which shares the Parent's
capital stock are listed or the NASD, in which case Parent, prior to making such
announcement, will, if practicable in the circumstances, consult with the
Company regarding the same.
5.3. COMPLIANCE. In consummating the transactions contemplated hereby,
Parent shall comply in all material respects with all applicable Laws.
5.4. EMPLOYEE BENEFIT PLANS. As of the Effective Time, Parent shall
cause the Surviving Corporation to take such actions with respect to the Company
Benefit Plans and the Key Employees as are set forth in Section 5.4 of the
Parent Disclosure Letter.
5.5. INDEMNIFICATION, EXCULPATION AND INSURANCE. (a) All rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time existing in favor of the current or former
directors, officers or employees of the Company (the "Indemnified Parties") to
the maximum extent as provided in the Company's articles of incorporation or
bylaws (as the same now exists or hereafter may be amended, but in the case of
such amendment only to the extent such amendment permits broader rights), the
Rhode Island Act (as the same now exists or hereafter may be amended, but in the
case of such amendment only to the extent such amendment permits broader
rights), or in separate indemnity agreements between the Company and such
indemnified parties, will be assumed by the Surviving Corporation and Parent
will cause the Surviving Corporation to honor such obligations in accordance
with the terms thereof, to the extent permitted by applicable law, without
further action, as of the Effective Time, and such rights will continue in full
force and effect in accordance with their respective terms. In addition, from
and after the Effective Time, directors and officers of the Company who become
directors or officers of Parent will be entitled to the same indemnity rights
and protections (including those provided by directors' and officers' liability
insurance) as are afforded to other directors and officers of Parent.
Notwithstanding any other provision hereof, the provisions of this Section 5.5
are (i) intended to be for the benefit of, and will be enforceable by, each
Indemnified Party, his or her heirs and his or her representatives and (ii) are
in addition to, and not in substitution for, any other rights to indemnification
or contribution that any such person may have by contract or otherwise.
27
(b) Parent will, and will cause the Surviving Corporation to, maintain
in effect for a period of six years after the Effective Time policies of
directors' and officers' liability insurance equivalent in all material respects
to those maintained by or on behalf of the Company on the date hereof (and
having coverage and containing terms and conditions which in the aggregate are
not less advantageous to the persons currently covered by such policies as
insured) with respect to claims arising from any actual or alleged wrongful act
or omission occurring prior to the Effective Time for which a claim has not been
made against any director or officer of the Company and/or any director or
officer of the Company Subsidiaries prior to the Effective Time; PROVIDED,
HOWEVER, that if the aggregate premiums for such insurance exceeds 200% of the
per annum rate of premium currently paid by the Company for such insurance on
the date of this Agreement, then Parent will cause the Surviving Corporation to,
and the Surviving Corporation will, provide the maximum coverage that will then
be available at an aggregate premium equal to 200% of such rate, provided,
further, however, that, notwithstanding such 200% limitation, such directors'
and officers' coverage , or equivalent "tail" or "discovery period" coverage,
will in any event be provided for a minimum of three years following the
Effective Time.
ARTICLE VI.
MERGER CONDITIONS
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver at or prior to the Effective Time of the
following conditions, PROVIDED that the obligation of each party to effect the
Merger shall not be relieved by the failure of any such conditions if such
failure is the proximate result of any breach by such party of any of its
material obligations under this Agreement:
6.1. STOCKHOLDER APPROVAL. The Company Proposals shall have been
approved at or prior to the Effective Time by the requisite vote of the
stockholders of the Company in accordance with the Rhode Island Act and the
Company's Articles of Incorporation, which the Company has represented shall be
solely the affirmative vote of a majority of the outstanding Shares, voting
together as a class with Preferred Shares on an as converted basis, and a
majority of the Preferred Shares, voting as a separate class.
6.2. NO INJUNCTION OR ACTION. No order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been enacted,
entered, promulgated or enforced by any court or other Governmental Authority
which temporarily, preliminarily or permanently prohibits or prevents the
consummation of the Merger which has not been vacated, dismissed or withdrawn
prior to the Effective Time.
6.3. OTHER APPROVALS. On or prior to the Closing Date, the Consents
specified in Section 2.5 of the Company Disclosure Letter, and Section 3.3 of
the Parent Disclosure Letter, if any, shall have been obtained.
6.4. CONDITIONS OF OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of the following conditions (which may be waived in whole or in
part by Parent): (a) the Company shall have performed all of the obligations
required to be performed by it under this Agreement on or before the Closing
Date; (b) the representations and warranties of the Company shall be true and
correct as of the date hereof and, except to the extent such
28
representations and warranties speak as of an earlier date, as of the Effective
Time, as though made at and as of the Effective Time; (c) the Company shall have
obtained all Consents required from Governmental Authorities and other third
parties required for the consummation of the Merger and the transactions
contemplated hereby; (d) the Company and the Parent shall have received written
communications from the parties to the contracts listed on Annex II stating that
such party is aware of the proposed transfer of ownership of the Company to the
Parent and that such transfer will not cause such party to terminate the
contract or refuse assignment of the contract, or containing such other language
that is acceptable to the Parent in its sole reasonable discretion; (e) that the
Company shall have received, prior to the Effective Time, from the holder of
each Company Option and from the holder of each Restricted Stock Unit, an
executed Amendment form included as part of Section 2.14 of the Company
Disclosure Letter, (f) the Parent shall have received a certificate dated the
Closing Date signed on behalf of the Company by its Chief Executive Officer or
the Chief Financial Officer confirming the matters set forth in clauses (a),
(b), (c), (d) and (e) of this Section 6.4; (g) the Financial Advisor shall not
have withdrawn or modified its written opinion referred to in Section 2.21; (h)
that each of the Stockholders listed on Annex I have executed and delivered to
Parent a Common Shareholders Agreement and the Preferred Stockholder has
executed and delivered to Parent the Preferred Purchase Agreement; (i) Merger
Sub shall have acquired all the Preferred Shares from the Preferred Stockholder
pursuant to the Preferred Purchase Agreement; (j) that the holders of the
Warrants referred to in Section 2.2 shall have agreed in writing that such
Warrants shall be cancelled at the Effective Time; (k) that the Company
employees listed on Schedule 5.4 of the Parent Disclosure Schedule shall have
executed and delivered to Parent and the Company agreements (and, as applicable,
releases) in the forms included as part of Schedule 5.4 of the Parent Disclosure
Letter (and the revocation period provided for in any such release shall have
expired); and (l) the Company shall have delivered to the Parent an opinion of
▇▇▇▇▇ & ▇▇▇▇▇▇▇, LTD, dated the Closing Date, to the effect that the Company is
duly incorporated, validly existing and in good standing under the State of
Rhode Island and that this Agreement has been duly authorized, executed and
delivered by the Company and is enforceable against the Company in accordance
with its terms.
6.5 CONDITIONS OF OBLIGATIONS OF THE COMPANY. The obligations of the
Company to effect the Merger are subject to the satisfaction of the following
conditions (which may be waived in whole or in part by the Company): (a) Parent
and Merger Sub shall have performed all of the obligations required to be
performed by it under this Agreement on or before the Closing Date; (b) the
representations and warranties of Parent and Merger Sub shall be true and
correct as of the date hereof and, except to the extent such representations and
warranties speak as of an earlier date, as of the Effective Time, as though made
at and as of the Effective Time; and the Company shall have received a
certificate from an authorized officer of Parent and Merger Sub concerning the
matters set forth in clauses (a) and (b) of this Section 6.5; and (c) Parent and
Merger Sub shall have obtained all Consents required from Governmental
Authorities and other third parties, if any, required for the consummation of
the Merger and the transactions contemplated hereby.
ARTICLE VII.
TERMINATION AND ABANDONMENT
7.1. TERMINATION. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
approval of the stockholders of the Company, upon the occurrence of any of the
following:
29
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any Governmental Authority shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement or, for the benefit of Parent only,
the Preferred Purchase Agreement or any of the Common Shareholders Agreements,
and such order, decree or ruling or other action shall have become final and
nonappealable;
(c) by Parent if the Company shall have breached in any material
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement which breach or failure to perform is incapable of
being cured or has not been cured in all material respects by the date that is
one business day prior to the date scheduled for the Special Meeting;
(d) by Parent if (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to Parent
its approval or recommendation of the Merger or any of the Company Proposals, or
failed to reconfirm its recommendation within two business days after a written
request to do so, or approved or recommended any Takeover Proposal or the
Company shall have failed to comply with its agreements set forth in Section
1.10(b) hereof or (ii) the Board of Directors of the Company or any committee
thereof shall have resolved to take any of the foregoing actions;
(e) by the Parent if there shall be in effect an injunction or other
order, decree, judgment or ruling by a Governmental Authority of competent
jurisdiction or a Law shall have been promulgated, enacted, taken or threatened
by a Governmental Authority of competent jurisdiction which in any such case (i)
prohibits or restricts the ownership or operation by Parent (or any of its
Affiliates or Subsidiaries) of any portion of the Company's business or assets,
or compels Parent (or any of its Affiliates or Subsidiaries) to dispose of or
hold separate any portion of the Company's business or assets or (ii) imposes
any material limitations on the ability of Parent or any of its Affiliates or
Subsidiaries effectively to control in any respect the business and operations
of the Company;
(f) by the Parent if any Governmental Authority shall have instituted
any action, suit or proceeding seeking any relief or remedy referred to in
paragraph (e) or material damages as a result of any of this Agreement or any
transactions contemplated hereby;
(g) by the Company if Parent shall have breached in any material
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform is incapable of
being cured or has not been cured in all material respects by the date that is
one business day prior to the date scheduled for the Special Meeting;
(h) by the Company in order to enter into a definitive agreement
providing for a Superior Proposal entered into in accordance with Section 4.8,
provided that prior thereto the Company has paid the Termination Fee and Parent
Expenses in accordance with Section 7.2;
(i) by Parent, if the Company, any of its officers or directors or
financial or legal advisors shall take any of the actions that would be
proscribed by Section 4.8 hereof but for the exceptions therein
30
allowing certain actions to be taken pursuant to the proviso in the second
sentence of Section 4.8(a) hereof or pursuant to the second sentence of Section
4.8(b) hereof;
(j) by either the Company or the Parent if at the Special Meeting
(including any adjournment thereof) this Agreement and the Merger shall fail to
be adopted by the affirmative vote required under the Rhode Island Act and the
Company's Articles of Incorporation;
(k) by the Parent if it shall have been publicly disclosed or Parent
shall have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Securities Exchange Act) of more than 25% of the outstanding Shares has been
acquired by any person (including the Company, any of the Company Subsidiaries
or affiliates thereof) or group (as defined in Section 13(d)(3) of the
Securities Exchange Act), other than Parent or any of its affiliates; provided,
HOWEVER, in the case of any acquisition by any of the parties listed on Annex I
hereto that has previously filed a Schedule 13D with respect to its ownership of
Shares of the Company, such percentage shall be 35% with respect to such party
(together with such party's affiliates or any other person with which such party
forms a "group" for purposes of the rules promulgated under Section 13 of the
Securities Exchange Act);
(l) by the Parent if there shall have occurred any event that,
individually or when considered together with any other matter, has had or is
reasonably likely in the future to have a Company Material Adverse Effect; or
(m) by the Company or the Parent if the Merger shall not have been
consummated on or before the 180th calendar day after the date hereof, PROVIDED
that the terminating party's failure to perform any of its obligations under
this Agreement does not result in the failure of the Merger to be so consummated
by such time.
The party desiring to terminate this Agreement pursuant to the
preceding paragraphs shall give written notice of such termination to the other
party in accordance with Section 8.5 hereof.
7.2. EFFECT OF TERMINATION AND ABANDONMENT. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VII, this Agreement (other than Sections 7.2, 8.1, 8.3, 8.5, 8.6, 8.7,
8.8, 8.11, 8.12, 8.13, 8.14 and 8.15 hereof) shall become void and of no effect
with no liability on the part of any party hereto (or of any of its directors,
officers, employees, agents, legal or financial advisors or other
representatives); PROVIDED, HOWEVER, that no such termination shall relieve any
party hereto from any liability for any breach of this Agreement prior to
termination. If this Agreement is terminated as provided herein, each party
shall hold in confidence in accordance with the terms and conditions of the
Confidentiality Agreement all materials obtained from, or based on or otherwise
reflecting or generated in whole or in part from information obtained from, any
other party hereto in connection with the transactions contemplated by this
Agreement, and shall not use any such materials for the purpose of competing
with the businesses of the other parties hereto, whether obtained before or
after the execution hereof.
(b) In the event that (A) a Takeover Proposal shall have been made
known to the Company or has been made directly to its stockholders generally or
any person shall have publicly announced an intention (whether or not
conditional) to make a Takeover Proposal and thereafter this Agreement is
terminated by either the Company or Parent pursuant to 7.1(j) hereof or by the
Company pursuant to Section 7.1(m)
31
hereof or (B) this Agreement is terminated (x) by the Company pursuant to
Section 7.1(h) hereof, (y) by Parent pursuant to Section 7.1(d), 7.1(i) or
7.1(k) hereof or (z) Parent pursuant to Section 7.1(c) hereof, then the Company
shall promptly, but in no event later than two business days after the date of
such termination, pay Parent a fee equal to $300,000 (the "Termination Fee"),
payable by wire transfer of same day funds; PROVIDED, HOWEVER, that no
Termination Fee shall be payable to Parent pursuant to a termination by the
Company pursuant to Section 7.1(j) or Section 7.1(m) hereof unless and until
within nine months of such termination, the Company or any of the Company
Subsidiaries enters into a definitive agreement providing for any Takeover
Proposal with the person or persons or any of their respective affiliates which
proposed a Takeover Proposal prior to the termination of this Agreement. The
Company acknowledges that the agreements contained in this Section 7.2(b) are an
integral part of the transactions contemplated by this Agreement and that,
without these agreements, Parent would not enter into this Agreement. In the
event the Termination Fee becomes payable pursuant to this Section 7.2(b), the
Company shall promptly pay upon Parent's request all reasonable out-of-pocket
charges and expenses incurred by Parent in connection with this Agreement, the
Common Shareholders Agreements and the Preferred Purchase Agreement and the
transactions contemplated hereby and thereby not to exceed $50,000 (the "Parent
Expenses"), which payments shall be in addition to the Termination Fee.
Notwithstanding the foregoing, the fee or expense reimbursement contemplated
hereby shall be paid pursuant to this Section 7.2(b) regardless of any alleged
breach by Parent of its obligations hereunder, PROVIDED that no payment by the
Company made pursuant to this Section 7.2(b) shall operate or be construed as a
waiver by the Company of any breach of this Agreement by Parent or Merger Sub or
of any rights of the Company in respect thereof.
ARTICLE VIII.
MISCELLANEOUS
8.1. CONFIDENTIALITY. Each of Parent, Merger Sub and the Company will
hold, and will cause its respective officers, employees, accountants, counsel,
financial advisors and other representatives to hold, any nonpublic information
in accordance with the terms of the Confidentiality Agreement dated December 22,
2001, between Parent and the Company (the "Confidentiality Agreement"). As of
the Effective Time, all of Parent's restrictions and obligations under the
Confidentiality Agreement shall terminate.
8.2. AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by a written agreement among the Company, Parent
and Merger Sub.
8.3. WAIVER OF COMPLIANCE; CONSENTS. Any failure of the Company on the
one hand, or Parent and Merger Sub on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by Parent on
the one hand, or the Company on the other hand, only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 8.3.
32
8.4. SURVIVAL. The respective representations, warranties, covenants
and agreements of the Company and Parent contained herein or in any certificates
or other documents delivered prior to or at the Closing shall survive the
execution and delivery of this Agreement, notwithstanding any investigation made
or information obtained by the other party, but shall terminate at the Effective
Time, except for those contained in Sections 1.4, 1.5, 1.6, 1.8, 5.4, 5.5 and
8.1 hereof, which shall survive beyond the Effective Time.
8.5. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when delivered in person,
by facsimile, receipt confirmed, or on the next business day when sent by
overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(i) if to the Company, to:
Network Six, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ phone
Attention: Chief Financial Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇, LTD
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
(ii) if to Parent or Merger Sub, to:
TRW Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Secretary
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
TRW Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Assistant General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
33
8.6. BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned or delegated by any of the parties hereto prior to the Effective Time
without the prior written consent of the other party hereto except that Parent
and Merger Sub may assign or delegate all or any of their respective rights and
obligations hereunder to a direct or indirect wholly-owned subsidiary or
subsidiaries of Parent, PROVIDED, HOWEVER, that no such assignment or
delegation shall relieve the assigning or delegating party of its duties
hereunder.
8.7. EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs or expenses, subject to the rights of Parent
under Section 7.2(b) hereof.
8.8. GOVERNING LAW. This Agreement shall be deemed to be made in, and
in all respects shall be interpreted, construed and governed by the laws of the
State of New York, except to the extent that the terms and consummation of the
Merger is subject to the Rhode Island Act, in which case such law shall govern.
8.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.10. INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity, (ii)
unless otherwise specified herein, the term "Affiliate," with respect to any
person, shall mean and include any person controlling, controlled by or under
common control with such person and (iii) the term "Subsidiary" of any specified
person shall mean any corporation 50 percent or more of the outstanding voting
power of which, or any partnership, joint venture, limited liability company or
other entity 50 percent or more of the total equity interest of which, is
directly or indirectly owned by such specified person.
8.11. ENTIRE AGREEMENT. This Agreement and the documents or instruments
referred to herein including, but not limited to, the Annex(es) attached hereto
and Disclosure Letters referred to herein, which Annex(es) and Disclosure
Letters are incorporated herein by reference, and the Confidentiality Agreement
embody the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings, other than those
expressly set forth or referred to herein or therein. This Agreement supersedes
all prior agreements and the understandings between the parties with respect to
such subject matter.
8.12. SEVERABILITY. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable in a jurisdiction, such provision shall
be modified or deleted, as to the jurisdiction
34
involved, only to the extent necessary to render the same valid, legal and
enforceable, and the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby nor shall
the validity, legality or enforceability of such provision be affected thereby
in any other jurisdiction.
8.13. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement and
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which such party may be entitled under
this Agreement, at law or in equity.
8.14. THIRD PARTIES. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any person that is not a party hereto or thereto or
a successor or permitted assign of such a party; PROVIDED HOWEVER, that the
parties hereto specifically acknowledge that the provisions of Sections 1.6, 5.4
and 5.5 hereof are intended to be for the benefit of, and shall be enforceable
by, the current or former employees, officers and directors of the Company
and/or the Company Subsidiaries affected thereby and their heirs and
representatives and the provisions of Section 1.5(b) are intended to be for the
benefit of, and shall be enforceable by, stockholders of the Company affected
thereby and their heirs and representatives.
8.15. DISCLOSURE LETTERS. The Company and Parent acknowledge that the
Company Disclosure Letter and the Parent Disclosure Letter (i) relate to certain
matters concerning the disclosures required and transactions contemplated by
this Agreement, (ii) are qualified in their entirety by reference to specific
provisions of this Agreement, (iii) are not intended to constitute and shall not
be construed as indicating that such matter is required to be disclosed, nor
shall such disclosure be construed as an admission that such information is
material with respect to the Company or Parent, as the case may be, except to
the extent required by this Agreement, and (iv) disclosure of the information
contained in one Section of the Company Disclosure Letter or Parent Disclosure
Letter shall be deemed proper disclosure for the Section to which specific
reference is made.
35
8.16. TAX CONSEQUENCES OF THE MERGER. The parties hereto acknowledge
that the Merger will NOT qualify as a tax-free reorganization within the meaning
of section 368 of the Internal Revenue Code of 1986, as amended. Parent and
Merger Sub make no representations or warranties to the Company or its
stockholders regarding the tax ramifications of the Merger.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed and delivered by their respective duly authorized
officers as of the date first above written.
TRW INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Title: Executive Vice President, General Counsel
and Secretary
NSI SYSTEMS INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Title: Vice President and Treasurer
NETWORK SIX, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Title: President and Chief Executive Officer
36
ANNEX I
Stockholders Party to Common Shareholders Agreements
a. Alliance Capital Investment Corp.,
Jericho Capital Corp. SEP f/b/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇
b. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Trust - 1993
c. ▇▇▇▇▇ ▇. ▇▇▇▇▇
A-1
ANNEX II
1. Contract dated July 1, 1999 between the Company and the State of Rhode Island
Department of Human Services (INRHODES contract)
2. Contract dated January 27, 2000 between the Company and the State of Rhode
Island Department of Children, Youth and Families (RICHIST contract)
3. Contract dated April, 1997 between the Company and the State of Maine
Department of Human Services (MACWIS contract)
A-2