Exhibit 2.1
Execution Draft
---------------
AGREEMENT AND PLAN OF MERGER
by and between
SOCRATES ACQUISITION CORPORATION
and
NOBEL LEARNING COMMUNITIES, INC.
Dated as of August 5, 2002
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER ..................................................................... 2
SECTION 1.01 The Merger .................................................. 2
SECTION 1.02 Closing; Effective Time .................................... 2
SECTION 1.03 Effect of the Merger ........................................ 2
SECTION 1.04 Subsequent Actions .......................................... 3
SECTION 1.05 Certificate of Incorporation; By-Laws ...................... 3
SECTION 1.06 Directors and Officers ...................................... 3
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; PAYMENT FOR
SHARES ......................................................................... 3
SECTION 2.01 Effect on Capital Stock ..................................... 3
SECTION 2.02 Payment for Company Common Stock, Company Preferred Stock
Company Stock Options and Company Warrants in the Merger ... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY .................................. 11
SECTION 3.01 Organization and Qualification; Subsidiaries ............... 12
SECTION 3.02 Certificate of Incorporation and By-Laws .................... 12
SECTION 3.03 Capitalization ............................................. 12
SECTION 3.04 Authority Relative to This Agreement ....................... 14
SECTION 3.05 No Conflict; Required Filings and Consents ................. 15
SECTION 3.06 Permits; Compliance ........................................ 16
SECTION 3.07 SEC Filings; Financial Statements .......................... 16
SECTION 3.08 Absence of Certain Changes or Events ........................ 17
SECTION 3.09 Absence of Litigation ....................................... 18
SECTION 3.10 Employee Benefit Matters .................................... 19
SECTION 3.11 Material Contracts .......................................... 21
SECTION 3.12 Environmental Matters ....................................... 22
SECTION 3.13 Title to Properties; Absence of Liens and Encumbrances ...... 23
SECTION 3.14 Intellectual Property ...................................... 23
SECTION 3.15 Taxes ....................................................... 23
SECTION 3.16 Insurance ................................................... 26
SECTION 3.17 State Takeover Statutes; Company Rights Agreement .......... 26
SECTION 3.18 Compliance with Applicable Laws ............................. 27
SECTION 3.19 School Licenses ............................................. 27
SECTION 3.20 Opinion of Financial Advisor ................................ 27
SECTION 3.21 Brokers ..................................................... 27
SECTION 3.22 Fee and Expense Estimate .................................... 28
SECTION 3.23 Employees ................................................... 28
SECTION 3.24 Transactions with Affiliates ................................ 28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER ........................................ 28
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SECTION 4.01 Organization and Qualification; Subsidiaries ................. 28
SECTION 4.02 Ownership of Buyer; No Prior Activities ...................... 28
SECTION 4.03 Authority Relative to this Agreement ......................... 29
SECTION 4.04 No Conflict; Required Filings and Consents. .................. 29
SECTION 4.05 Brokers ...................................................... 29
SECTION 4.06 Financing .................................................... 30
SECTION 4.07 Absence of Litigation ........................................ 30
SECTION 4.08 No Agreements or Understandings to Sell Assets or Stock ...... 30
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER ........................................ 30
SECTION 5.01 Conduct of Business by the Company Pending the Merger ........ 30
SECTION 5.02 Notification of Certain Matters .............................. 33
ARTICLE VI
ADDITIONAL AGREEMENTS ........................................................... 33
SECTION 6.01 Preparation of Proxy Statement; Stockholders Meeting. ........ 33
SECTION 6.02 Access to Information; Confidentiality ....................... 35
SECTION 6.03 No Solicitation of Transactions ............................. 36
SECTION 6.04 Directors' and Officers' Indemnification and Insurance ...... 38
SECTION 6.05 Further Action; Consents; Filings ........................... 39
SECTION 6.06 Public Announcements ......................................... 40
SECTION 6.07 Certain Employee Benefits Matters ............................ 40
SECTION 6.08 Rights Agreement ............................................. 41
SECTION 6.09 Stockholder Litigation ....................................... 41
SECTION 6.10 Solvency ..................................................... 41
ARTICLE VII
CONDITIONS TO THE MERGER ........................................................ 41
SECTION 7.01 Conditions to the Obligations of Each Party .................. 41
SECTION 7.02 Conditions to the Obligations of Buyer ....................... 42
SECTION 7.03 Conditions to the Obligations of the Company ................. 43
ARTICLE VIII
TERMINATION, AMENDMENT, WAIVER AND EXPENSES ..................................... 44
SECTION 8.01 Termination .................................................. 44
SECTION 8.02 Effect of Termination ........................................ 46
SECTION 8.03 Expenses .................................................... 46
ARTICLE IX
GENERAL PROVISIONS .............................................................. 47
SECTION 9.01 Non Survival of Representations, Warranties and Agreements ... 47
SECTION 9.02 Notices ...................................................... 48
SECTION 9.03 Certain Definitions .......................................... 49
SECTION 9.04 Amendment .................................................... 50
SECTION 9.05 Waiver ....................................................... 50
SECTION 9.06 Severability ................................................. 50
SECTION 9.07 Assignment; Binding Effect; Benefit .......................... 51
SECTION 9.08 Specific Performance ......................................... 51
SECTION 9.09 Governing Law; Forum ......................................... 51
SECTION 9.10 Headings ..................................................... 51
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SECTION 9.11 Counterparts ............................................ 51
SECTION 9.12 Entire Agreement ........................................ 51
EXHIBIT 1 Form of Voting Agreement
EXHIBIT 2 Directors of the Surviving Corporation
EXHIBIT 3 "knowledge" Individuals
SCHEDULE I Rollover Shares
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GLOSSARY OF DEFINED TERMS
Location of
Defined Term Definition
------------ -----------
Acquisition Proposal ..................................... Section 6.03(b)
Acquisition Transaction .................................. Section 6.03(a)
Action ................................................... Section 3.09
Affiliate or affiliate ................................... Section 9.03(a)
Affiliated Group ......................................... Section 3.15(j)
Agreement ................................................ Preamble
Appraisal Shares ......................................... Section 2.01(e)
Business Combination ..................................... Section 8.03(e)
business day ............................................. Section 9.03(b)
Buyer .................................................... Preamble
Buyer Class C Common Stock ............................... Section 2.01(d)
Buyer Class P Common Stock ............................... Section 2.01(d)
Buyer Confidentiality Agreement .......................... Section 6.03(b)(i)
Buyer Material Adverse Effect ............................ Section 4.01
Buyer Shares ............................................. Section 2.01(d)
Buyer Stockholder ........................................ Section 2.02(c)
Certificate of Merger .................................... Section 1.02(b)
Certificates ............................................. Section 2.02(b)
Closing .................................................. Section 1.02(a)
Closing Date ............................................. Section 1.02(a)
Code ..................................................... Section 2.02(j)
Commitment Letter ........................................ Section 4.06
Company .................................................. Preamble
Company Balance Sheet .................................... Section 3.07(b)
Company Board ............................................ Recitals
Company By-Laws .......................................... Section 3.02
Company Capital Stock .................................... Section 3.03(a)
Company Charter .......................................... Section 2.01(b)
Company Common Stock ..................................... Recitals
Company Disclosure Schedule .............................. Article III
Company Intellectual Property ............................ Section 3.14(b)
Company Material Contracts ............................... Section 3.11(a)
Company Option Plans ..................................... Section 2.01(f)
Company Permits .......................................... Section 3.06(a)
Company Preferred Stock .................................. Section 3.03(a)
Company Rights ........................................... Section 2.01
Company Rights Agreement ................................. Section 2.01
Company SEC Reports ...................................... Section 3.07(a)
Company Series A Junior Preferred Stock .................. Section 3.03(a)
Company Series A Preferred Stock ......................... Section 3.03(a)
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Company Series C Preferred Stock .......................... Section 3.03(a)
Company Series D Preferred Stock .......................... Section 3.03(a)
Company Stock Options ..................................... Section 2.01(f)
Company Stockholder Approval .............................. Section 3.04(c)
Company Stockholders Meeting .............................. Section 6.01(b)
Company Subsidiary ........................................ Section 9.03(c)
Company Warrants .......................................... Section 2.01(g)
Confidentiality Agreement ................................. Section 6.03(b)(i)
Consent ................................................... Section 3.05(b)
Contract .................................................. Section 3.15(f)
control ................................................... Section 9.03(d)
Controlled Group of Corporations .......................... Section 3.10(h)
DGCL ...................................................... Section 1.01
Effective Time ............................................ Section 1.02(b)
Employee Benefit Plan ..................................... Section 3.10(h)
Employee Pension Benefit Plan ............................. Section 3.10(h)
Employee Welfare Benefit Plan ............................. Section 3.10(g)
Environmental Laws ........................................ Section 9.03(e)
Environmental Permits ..................................... Section 3.13
ERISA ..................................................... Section 3.10(a)
Exchange Act .............................................. Section 3.07(a)
Expenses .................................................. Section 8.03(a)
Fiduciary ................................................. Section 3.10(g)
Filed Company SEC Documents ............................... Section 3.08
Financing ................................................. Section 4.06
Governmental Entity ....................................... Section 2.02(h)
Hazardous Substances ...................................... Section 9.03(f)
HSR Act ................................................... Section 3.05(b)
Intellectual Property ..................................... Section 9.03(g)
Judgment .................................................. Section 3.05(a)
knowledge ................................................. Section 9.03(h)
Law ....................................................... Section 1.02(b)
Liability ................................................. Section 3.10(h)
Licensed Intellectual Property ............................ Section 3.14(c)
Liens ..................................................... Section 3.01(b)
Material Adverse Effect ................................... Section 9.03(i)
Maximum Premium ........................................... Section 6.04(b)
Merger .................................................... Recitals
Merger Consideration ...................................... Section 2.01(b)
Multiemployer Plan ........................................ Section 3.10(h)
Option Agreement .......................................... Section 2.02(d)
Option Consideration ...................................... Section 2.01(f)
Order ..................................................... Section 7.01(b)
Paying Agent Section 2.02(a)
Payment Fund .............................................. Section 2.02(a)
PBGC ...................................................... Section 3.10(h)
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Person or person .......................................... Section 9.03(j)
Prohibited Transaction .................................... Section 3.10(h)
Proxy Statement ........................................... Section 3.05(b)
Rollover Shares ........................................... Section 2.01(c)
Rollover Options .......................................... Section 2.01(f)
Rollover Stockholder ...................................... Recitals
Schedule 13E-3 ............................................ Section 6.01(e)
Scheduled Options ......................................... Section 2.01(f)
SEC ....................................................... Section 3.05(b)
Securities Act ............................................ Section 3.07(a)
Special Committee ......................................... Recitals
subsidiary ................................................ Section 9.03(k)
Superior Proposal ......................................... Section 6.03(b)
Surviving Corporation ..................................... Section 1.01
Surviving Corporation Class C Common Stock ................ Section 2.01(c)
Surviving Corporation Class P Common Stock ................ Section 2.01(c)
Tax Return ................................................ Section 3.15(j)
Tax or Taxes .............................................. Section 3.15(j)
Transactions .............................................. Recitals
Trademarks ................................................ Section 9.03(l)
U.S. GAAP ................................................. Section 3.07(b)
Voting Company Debt ....................................... Section 3.03(c)
Warrant Consideration ..................................... Section 2.01(g)(i)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of August 5, 2002 (this
"Agreement") is by and between SOCRATES ACQUISITION CORPORATION, a Delaware
corporation ("Buyer"), and Nobel Learning Communities, Inc., a Delaware
corporation (the "Company"). All terms not otherwise defined herein shall have
the meanings ascribed to them in Section 9.03 hereof.
WHEREAS, a special committee of the Board of Directors of the Company
(the "Company Board") consisting solely of disinterested directors (the "Special
Committee"), subject to the terms and conditions set forth herein, has
unanimously (i) determined that (A) the merger (the "Merger") of Buyer with and
into the Company is advisable and in the best interests of the Company and its
public stockholders (other than those stockholders of the Company identified on
Schedule I hereto (each, a "Rollover Stockholder" and collectively, the
"Rollover Stockholders")), and (B) the cash consideration to be received for
outstanding shares of common stock, par value $0.001 per share, of the Company
(the "Company Common Stock") and outstanding shares of Company Preferred Stock
(as defined in Section 3.03 hereof) in the Merger is fair to the stockholders of
the Company who will be entitled to receive such cash consideration (other than
the Rollover Stockholders), (ii) recommended that the Company Board approve and
adopt this Agreement, the Merger and the other transactions contemplated hereby
(collectively, the "Transactions") and (iii) recommended approval and adoption
by the stockholders of the Company of this Agreement and the Transactions;
WHEREAS, the Company Board, subject to the terms and conditions set
forth herein and after the unanimous recommendation of the Special Committee,
has (i) determined that (A) the Merger is advisable and in the best interests of
the Company and its public stockholders (other than the Rollover Stockholders),
and (B) the cash consideration to be received for outstanding shares of Company
Common Stock and Company Preferred Stock in the Merger is fair to the
stockholders of the Company who will be entitled to receive such cash
consideration (other than the Rollover Stockholders), (ii) approved and adopted
this Agreement and the Transactions and (iii) recommended approval and adoption
by the stockholders of the Company of this Agreement and the Transactions;
WHEREAS, the Board of Directors of Buyer has unanimously approved this
Agreement and the Transactions;
WHEREAS, the Rollover Stockholders shall retain all or a portion of
their equity interest in the Company in connection with the Merger, as more
fully described herein;
WHEREAS, Buyer and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and the
Transactions and also to prescribe various conditions to the Merger; and
WHEREAS, certain stockholders of the Company have, concurrently with
the execution of this Agreement, executed voting agreements, dated as of the
date hereof, pursuant to which such stockholders have agreed to vote any shares
of Company Common Stock and Company
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Preferred Stock owned by such stockholders in favor of the approval and
adoption of this Agreement and the Transactions.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms of this Agreement and subject
to the conditions set forth in Article VII, and in accordance with the Delaware
General Corporation Law (the "DGCL"), at the Effective Time (as defined in
Section 1.02(b) hereof), Buyer shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Buyer shall cease and
the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Delaware.
SECTION 1.02 Closing; Effective Time.
(a) The closing of the Merger (the "Closing") shall take place
(i) at 10:00 a.m. (Eastern Daylight Savings Time) at the offices of Ropes &
▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ as soon as practicable,
but in any event within three (3) business days after the day on which the last
to be fulfilled or waived of the conditions set forth in Article VII (other than
those conditions that by their nature are to be fulfilled at the Closing, but
subject to the fulfillment or waiver of such conditions) shall be fulfilled or
waived in accordance with this Agreement or (ii) at such other place and time or
on such other date as Buyer and the Company may agree in writing (the "Closing
Date").
(b) At the Closing, the Company and Buyer shall cause a
certificate of merger (the "Certificate of Merger") to be executed and filed
with the Secretary of State of the State of Delaware as provided in Section 251
of the DGCL and make all other filings or recordings required by applicable
statute, law (including principles of common law), legislation, legally binding
interpretation, ordinance, rule or regulation of any Governmental Entity,
domestic or foreign (collectively, "Laws") in connection with the Merger. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of the State of Delaware or at such later time
as is specified in the Certificate of Merger in accordance with the DGCL (the
"Effective Time").
SECTION 1.03 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Buyer shall vest in the
Surviving Corporation, and all obligations, debts, liabilities and duties of the
Company and Buyer shall become the obligations, debts, liabilities and duties of
the Surviving Corporation.
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SECTION 1.04 Subsequent 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 other actions or 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 either of the Company or Buyer or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger 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 each of the Company and Buyer, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of each
of the Company and Buyer or otherwise, 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.
SECTION 1.05 Certificate of Incorporation; By-Laws.
(a) At the Effective Time, the Certificate of Incorporation of
the Company shall be amended to be identical to that of Buyer, as in effect
immediately prior to the Effective Time, except that Article I shall state that
the name of the Company is Nobel Learning Communities, Inc. Such Certificate of
Incorporation, as so amended, shall be the Certificate of Incorporation of the
Surviving Corporation, until thereafter amended, subject to the requirements of
Section 6.04 hereof, in accordance with the terms thereof and of the DGCL.
(b) At the Effective Time, the By-Laws of Buyer, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended, subject to Section 6.04 hereof, in
accordance with the terms thereof, and of the Certificate of Incorporation of
the Surviving Corporation and of the DGCL.
SECTION 1.06 Directors and Officers. The individuals set forth on
Exhibit 2 hereto shall be the directors of the Surviving Corporation, each to
hold office in accordance with the Certificate of Incorporation and By-Laws of
the Surviving Corporation, and the officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
PAYMENT FOR SHARES
SECTION 2.01 Effect on Capital Stock. For purposes of this Section
2.01, references to Company Common Stock, Company Preferred Stock and Rollover
Shares (as defined in Section 2.01(c) hereof) include the rights (the "Company
Rights") issued pursuant to the Rights Agreement dated as of May 16, 2000 (as
amended and in effect as of the date hereof, the "Company Rights Agreement")
between the Company and Stocktrans, Inc., a Pennsylvania corporation, as Rights
Agent, that are associated with such Company Common Stock, Company Preferred
Stock and Rollover Shares. At the Effective Time, by virtue of the Merger and
without
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any action on the part of the holder of any shares of Company Common Stock,
Company Preferred Stock or any shares of capital stock of Buyer:
(a) Cancellation of Treasury Stock and Buyer-Owned Stock. Each share
of Company Common Stock or Company Preferred Stock that, immediately prior to
the Effective Time, is owned directly by the Company or Buyer shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and no other consideration shall be delivered or deliverable in exchange
therefor.
(b) Conversion of Company Common Stock and Company Preferred Stock.
Except as otherwise set forth in Sections 2.01(a), 2.01(c) and 2.01(e) hereof,
by virtue of the Merger and without any action on the part of holder thereof:
(i) each issued share of Company Common Stock shall be converted into the right
to receive $7.75 in cash and (ii) each issued share of Company Preferred Stock
shall be converted into the right to receive $7.75 in cash for each whole share
of Company Common Stock into which such share of Company Preferred Stock is then
convertible pursuant to the Company's Certificate of Incorporation, as amended
to date (the "Company Charter") plus the amount determined by multiplying $7.75
by the fraction (rounded to the nearest one-hundredth of a share) representing
any fractional share of Company Common Stock in which any share of Company
Preferred Stock is then convertible pursuant to the Company Charter, in each
case subject to adjustment for any stock split, stock dividend or combination of
stock that may occur from the date hereof and prior to the Effective Time. The
cash payable upon the conversion of each share of Company Common Stock or
Company Preferred Stock, as the case may be, pursuant to this Section 2.01(b) is
referred to as the "Merger Consideration". As of the Effective Time, all such
shares of Company Common Stock and Company Preferred Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock or Company Preferred Stock shall cease to have any rights with
respect thereto, except the right to receive Merger Consideration upon surrender
of such certificate in accordance with this Section 2.01(b), without interest.
(c) Rollover Shares. Each issued share of Company Common Stock or
Company Preferred Stock held by a Rollover Stockholder and designated on
Schedule I under the column designated "Rollover Shares" (each a "Rollover
Share" and together the "Rollover Shares") shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive (i) the aggregate number of shares of Class C Common Stock, par
value $.01 per share, of the Surviving Corporation (the "Surviving Corporation
Class C Common Stock") and (ii) the aggregate number of shares of Class P Common
Stock, par value $.01 per share, of the Surviving Corporation ("Surviving
Corporation Class P Common Stock") set forth on Schedule I next to the name of
each such Rollover Stockholder in the columns designated "Surviving Corporation
Class C Common Stock" and "Surviving Corporation Class P Common Stock,"
respectively. All such Rollover Shares, by virtue of the Merger and without any
action on the part of the holders thereof, shall no longer be outstanding and
shall be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such Rollover Shares shall thereafter cease to have
any rights with respect to such Rollover Shares, except the right to receive the
Surviving Corporation Class C Common Stock and the Surviving Corporation Class P
Common Stock for such Rollover Shares as set forth in Schedule I upon the
surrender of such certificate in accordance with this Section 2.01(c).
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(d) Capital Stock of Buyer. Each issued and outstanding share of
Class C Common Stock, par value $.01 per share, of Buyer (the "Buyer Class C
Common Stock") shall be converted into and become one fully paid and
non-assessable shares of Surviving Corporation Class C Common Stock, and each
issued and outstanding share of Class P Common Stock, par value $.01 per share,
of Buyer (the "Buyer Class P Common Stock") shall be converted into and become
one fully paid and non-assessable shares of Surviving Corporation Class P Common
Stock. All such shares of Buyer Class C Common Stock and Buyer Class P Common
Stock (collectively "Buyer Shares"), by virtue of the Merger and without any
action on the part of the holders thereof, shall no longer be outstanding and
shall be cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such Buyer Shares shall thereafter cease to have
any rights with respect to such Buyer Shares, except the right to receive
Surviving Corporation Class C Common Stock or Surviving Corporation Class P
Common Stock as set forth above.
(e) Appraisal Rights. Notwithstanding any provisions of this
Agreement to the contrary, shares of Company Common Stock and Company Preferred
Stock which are issued and outstanding immediately prior to the Effective Time
and which are held by any Person who has not voted such shares of Company Common
Stock or Company Preferred Stock in favor of the Merger, who shall have
delivered a written demand for appraisal of such shares of Company Common Stock
or Company Preferred Stock in the manner provided by the DGCL and who, as of the
Effective Time, shall not have effectively withdrawn or lost such right to
appraisal (the "Appraisal Shares") shall not be converted into a right to
receive the Merger Consideration. The holders thereof shall be entitled only to
such rights as are granted by Section 262 of the DGCL. Each holder of Appraisal
Shares who becomes entitled to payment for such shares of Company Common Stock
or Company Preferred Stock pursuant to Section 262 of the DGCL shall receive
payment therefor from the Surviving Corporation in accordance with the DGCL;
provided, however, that (i) if any such holder of Appraisal Shares shall have
failed to establish its entitlement to appraisal rights as provided in Section
262 of the DGCL, (ii) if any such holder of Appraisal Shares shall have
effectively withdrawn its demand for appraisal of such shares of Company Common
Stock or Company Preferred Stock or lost its right to appraisal and payment for
its shares of Company Common Stock or Company Preferred Stock under Section 262
of the DGCL, or (iii) if neither any holder of Appraisal Shares nor the
Surviving Corporation shall have filed a petition demanding a determination of
the value of all Appraisal Shares within the time provided in Section 262 of the
DGCL, such holder shall forfeit the right to appraisal of such shares of Company
Common Stock or Company Preferred Stock and each such share of Company Common
Stock and Company Preferred Stock shall be treated as if such share of Company
Common Stock or Company Preferred Stock had been converted, as of the Effective
Time, into a right to receive the Merger Consideration, without interest
thereon, from the Surviving Corporation as provided in Section 2.01(b) hereof.
The Company shall give Buyer prompt notice of any demands received by the
Company for appraisal of Company Common Stock or Company Preferred Stock, and,
until the Effective Time, Buyer shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Buyer, make any payment with
respect to, or settle or offer to settle, any such demands.
(f) Company Stock Options. As part of the Transactions, the Company
and the Surviving Corporation shall cause any outstanding options to purchase
Company Common
5
Stock ("Company Stock Options") granted pursuant to the Company's 1986 Stock
Option and Stock Grant Plan, 1988 Stock Option and Stock Grant Plan, 1995 Stock
Incentive Plan and 2000 Stock Option Plan for Consultants (collectively the
"Company Option Plans") and the other Company Stock Options disclosed in Section
3.03(d) of the Company Disclosure Schedule (the "Scheduled Options") to be
treated as follows:
(i) Except as set forth in clause (ii) below, at the Effective Time,
all then outstanding Company Stock Options shall be canceled and in lieu
thereof, each holder of a Company Stock Option shall receive from the
Surviving Corporation, an amount in cash (if any) equal to the product of
(i) the excess, if any, of the per share Merger Consideration over the per
share exercise price of such Company Stock Option and (ii) the number of
shares of Company Common Stock subject to such Company Stock Option
exercisable as of the Effective Time, net of any applicable withholding
taxes (the "Option Consideration").
(ii) Each Company Stock Option held by a Rollover Stockholder and
designated on Schedule I under the column designated "Rollover Options"
(each a "Rollover Option" and together the "Rollover Options") shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive the aggregate number of
options for Surviving Corporation Class C Common Stock and the aggregate
number of options for Surviving Corporation Class P Common Stock set forth
on Schedule I next to the name of each such Rollover Stockholder in the
columns designated "Surviving Corporation Class C Options" and "Surviving
Corporation Class P Options", respectively. All such Rollover Options, by
virtue of the Merger and without any action on the part of the holders
thereof, shall no longer be outstanding and shall be canceled and retired
and shall cease to exist, and each holder of a certificate or agreement
representing any such Rollover Options shall thereafter cease to have any
rights with respect to such Rollover Options, except the right to receive
options for the Surviving Corporation Class C Common Stock and options for
the Surviving Corporation Class P Common Stock for such Rollover Options as
set forth in Schedule I upon the surrender of such certificate or agreement
in accordance with this Section 2.01(f).
(iii) Each of the Company and the Surviving Corporation, as the case
may be, covenants that prior to the Effective Time it will use all
commercially reasonable efforts to take all actions necessary to provide
that the cancellation and cash-out and/or rollover of Company Stock Options
pursuant to this Section 2.01(f) will qualify for exemption under Rule
16b-3(d) or (e), as applicable, under the Exchange Act (as defined in
Section 3.07(a) hereof).
(iv) The Company shall use all commercially reasonable efforts to
obtain all necessary consents, waivers or releases from holders of Company
Stock Options and shall take such action as may be reasonably necessary to
give effect to, and accomplish, the transactions contemplated by this
Section 2.01(f); provided, however, that in no event shall this Section
2.01(f)(iv) require the Company to pay any consideration to the holders of
the Company Stock Options to obtain such consents, waivers or releases.
6
(v) Except as otherwise provided herein or agreed to by the parties,
the Company Option Plans shall terminate effective as of the Effective Time
and the Company shall use all commercially reasonable efforts to cause the
provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of
the Company or any Company Subsidiary to be canceled as of the Effective
Time.
(g) Company Warrants. As part of the Transactions, the Company and
theSurviving Corporation shall cause any outstanding warrants to purchase
Company Common Stock ("Company Warrants") granted pursuant to the Common Stock
Purchase Warrant dated August 30, 1995 held by Allied Capital Corporation and
the Common Stock Purchase Warrant dated June 30, 1998 held by Allied Capital
Corporation to be treated as follows:
(i) At the Effective Time, all then outstanding Company Warrants
shall be canceled and in lieu thereof, each holder of Company Warrants
shall receive from the Surviving Corporation, an amount in cash (if any)
equal to the product of (i) the excess, if any, of the per share Merger
Consideration over the per share exercise price of such Company Warrant and
(ii) the number of shares of Company Common Stock subject to such Company
Warrant exercisable as of the Effective Time, net of any applicable
withholding taxes (the "Warrant Consideration").
(ii) The Company shall use all commercially reasonable efforts to
obtain all necessary consents, waivers or releases from holders of Company
Warrants and shall take such action as may be reasonably necessary to give
effect to, and accomplish, the transactions contemplated by this Section
2.01(g); provided, however, that in no event shall this Section 2.01(g)(ii)
require the Company to pay any consideration to the holders of the Company
Warrants to obtain such consents, waivers or releases.
(iii) Except as otherwise provided herein or agreed to by the parties,
the Company Warrants shall terminate effective as of the Effective Time.
SECTION 2.02 Payment for Company Common Stock, Company Preferred Stock
Company Stock Options and Company Warrants in the Merger.
(a) Paying Agent. Prior to the Effective Time, Buyer shall select a
bank or trust company in the United States, reasonably acceptable to the
Company, to act as paying agent (the "Paying Agent") for the payment of the
Merger Consideration upon surrender of certificates representing Company Common
Stock and Company Preferred Stock and, at the option of the Surviving
Corporation, of the Option Consideration and the Warrant Consideration. Buyer
shall take all steps necessary to provide to the Paying Agent at the Effective
Time cash necessary to pay for the shares of Company Common Stock and Company
Preferred Stock, and, if the Surviving Corporation elects to use the Paying
Agent for such payments, for the Company Stock Options and the Company Warrants
converted into the right to receive cash pursuant to Section 2.01 hereof (such
cash being hereinafter referred to as the "Payment Fund"). If for any reason
(including losses) the Payment Fund is inadequate to pay the amounts to which
holders of shares of Company Common Stock and Company Preferred Stock, and, if
the Surviving Corporation elects to use the Paying Agent for such payments, for
the Company Stock Options and the
7
Company Warrants shall be entitled under Section 2.01 hereof, the Surviving
Corporation shall promptly, but in any event within five (5) business days,
deposit in trust additional cash with the Paying Agent sufficient to make all
payments required under Section 2.01 hereof, and the Surviving Corporation shall
in any event be liable for payment thereof. The Payment Fund shall not be used
for any purpose except as expressly provided in this Agreement.
(b) Payment Procedures for Company Common Stock and Company Preferred
Stock. Promptly after the Effective Time, the Surviving Corporation shall cause
the Paying Agent to mail to each holder of record of a certificate or
certificates (the "Certificates") that immediately prior to the Effective Time
represented outstanding shares of Company Common Stock or Company Preferred
Stock (other than holders of Rollover Shares), whose shares were converted into
the right to receive Merger Consideration pursuant to Section 2.01 hereof, (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 Paying Agent and shall be in such form and have such other
provisions as Buyer may reasonably specify), and (ii) instructions for use in
effecting the surrender of the Certificates, other than Rollover Shares, in
exchange for Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the Paying
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor the amount of cash into which the shares of Company Common Stock or
Company Preferred Stock theretofore represented by such Certificate shall have
been converted pursuant to Section 2.01 hereof, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Company Common Stock or Company Preferred Stock that is not registered in the
transfer records of the Company, payment may be made to a Person other than the
Person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a Person other than the registered
holder of such Certificate or establish to the satisfaction of Buyer that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.02, each Certificate, other than those with respect to Rollover
Shares, shall be deemed at any time after the Effective Time to represent only
the right to receive upon such surrender the amount of cash, without interest,
into which the shares of Company Common Stock or Company Preferred Stock
theretofore represented by such Certificate have been converted pursuant to
Section 2.01(b) hereof. If any holder of shares of Company Common Stock or
Company Preferred Stock shall be unable to surrender such holder's Certificates
because such Certificates have been lost, mutilated or destroyed, such holder
may deliver in lieu thereof an affidavit and, if required by the Paying Agent,
an indemnity bond in form and substance and with surety reasonably satisfactory
to the Surviving Corporation. No interest shall be paid or accrue on the cash
payable upon surrender of any Certificate.
(c) Buyer and Rollover Procedures. At the Closing, each holder of
Buyer Shares (each, a "Buyer Stockholder" and collectively, the "Buyer
Stockholders") and each Rollover Stockholder shall surrender the certificate(s)
representing the Buyer Shares or the Rollover Shares held by such Buyer
Stockholder or Rollover Stockholder and the Surviving Corporation shall issue to
each such Buyer Stockholder and Rollover Stockholder a certificate or
certificates representing the number of shares of Surviving Corporation Class C
Common Stock
8
and Surviving Corporation Class P Common Stock to which such Buyer Stockholder
and Rollover Stockholder is entitled pursuant to Sections 2.01(c) and 2.01(d)
hereof and Schedule I hereto.
(d) Procedures for Company Stock Options and Company Warrants.
Promptly after the Effective Time, the Surviving Corporation shall or shall
cause the Paying Agent to mail to each holder of an option agreement (each, an
"Option Agreement") that immediately prior to the Effective Time represented
Company Stock Options, whose Company Stock Options were converted into the right
to receive Option Consideration pursuant to Section 2.01(f) hereof, such
materials and instructions for use in effecting the surrender of such Option
Agreement in exchange for Option Consideration. Promptly after the Effective
Time, the Surviving Corporation shall or shall cause the Paying Agent to mail to
each holder of a Company Warrant that was converted into the right to receive
Warrant Consideration pursuant to Section 2.01(g) hereof, such materials and
instructions for use in effecting the surrender of such Company Warrant in
exchange for Warrant Consideration. Upon surrender of an Option Agreement to the
Paying Agent or the Surviving Corporation, as the case may be, together with
such other documents as may reasonably be required by the Paying Agent or the
Surviving Corporation, the holder of such Option Agreement shall be entitled to
receive in exchange therefor the amount of cash into which the Company Stock
Options theretofore represented by such Option Agreement shall have been
converted pursuant to Section 2.01(f). Upon surrender of a Company Warrant to
the Paying Agent or the Surviving Corporation, as the case may be, together with
such other documents as may reasonably be required by the Paying Agent or the
Surviving Corporation, the holder of such Company Warrant shall be entitled to
receive in exchange therefor the amount of cash into which the Company Warrant
shall have been converted pursuant to Section 2.01(g) hereof. Until surrendered
as contemplated by this Section 2.02(d), each Option Agreement and Company
Warrant shall be deemed at any time after the Effective Time to represent only
the right to receive upon such surrender the amount of cash, without interest,
into which the Company Options theretofore represented by such Option Agreement
shall have been converted pursuant to Section 2.01(f) hereof or into which the
Company Warrant shall have been converted pursuant to Section 2.01(g) hereof. If
any holder of Company Stock Options or Company Warrants shall be unable to
surrender such holder's Option Agreement or Company Warrant because such Option
Agreement or Company Warrant has been lost, mutilated or destroyed, such holder
may deliver in lieu thereof an affidavit and indemnity bond in form and
substance and with surety reasonably satisfactory to the Surviving Corporation.
No interest shall be paid or accrue on the cash payable upon surrender of any
Option Agreement or Company Warrant.
(e) No Further Ownership Rights in Company Common Stock, Company
Preferred Stock, Rollover Shares, Company Stock Options or Company Warrants. The
Merger Consideration, Option Consideration and Warrant Consideration paid in
accordance with the terms of this Article II and the exchange of Rollover Shares
for shares of the Surviving Corporation in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all rights
pertaining to such shares of Company Common Stock, Company Preferred Stock,
Rollover Shares, Company Stock Options or Company Warrants, and after the
Effective Time there shall be no further registration on the stock transfer
books of the Surviving Corporation (i) of transfers of shares of Company Common
Stock, Company Preferred Stock or Rollover Shares or (ii) of the exercise of
Company Stock Options or Company Warrants, in any
9
case that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, any certificates formerly representing shares of Company
Common Stock or Company Preferred Stock, any Option Agreements formerly
representing Company Stock Options or any Company Warrants are presented to the
Surviving Corporation or the Paying Agent for any reason, they shall be canceled
and exchanged as provided in this Article II.
(f) Payment Fund for Appraisal Shares. Any portion of the Payment Fund
made available to the Paying Agent pursuant to Section 2.02(a) hereof to pay for
shares of Company Common Stock or Company Preferred Stock that become Appraisal
Shares shall be returned to the Surviving Corporation upon written demand.
(g) Termination of Payment Fund. Any portion of the Payment Fund that
remains undistributed to the holders of Company Common Stock, Company Preferred
Stock, Company Stock Options or Company Warrants for nine months after the
Effective Time shall be delivered to Buyer or the Surviving Corporation, upon
demand, and any holder of Company Common Stock, Company Preferred Stock, Company
Stock Options or Company Warrants who has not theretofore complied with this
Article II shall thereafter look only to Surviving Corporation for payment of
its claim for Merger Consideration, Option Consideration or Warrant
Consideration as the case may be, without interest or dividends thereon.
(h) No Liability. None of Buyer, the Company, the Surviving
Corporation or the Paying Agent, nor any of their respective officers,
directors, employees, agents or counsel, shall be liable to any Person in
respect of any cash from the Payment Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law. If any
Certificate, Option Agreement or Company Warrant has not been surrendered prior
to five years after the Effective Time (or immediately prior to such earlier
date on which Merger Consideration, Option Consideration or Warrant
Consideration in respect of such Certificate, Option Agreement or Company
Warrant, as the case may be, would otherwise escheat to or become the property
of any federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (each, a "Governmental
Entity")), any such shares, cash, dividends or distributions in respect of such
Certificate shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any Person previously entitled thereto.
(i) Investment of Payment Fund. The Paying Agent shall invest any cash
included in the Payment Fund, as directed by the Surviving Corporation, on a
daily basis. Any interest and other income resulting from such investments shall
be paid to the Surviving Corporation.
(j) Withholdings. Buyer or the Surviving Corporation, as the case may
be, shall be entitled to deduct and withhold from the consideration otherwise
payable to any holder of Company Common Stock, Company Preferred Stock, Company
Stock Options or Company Warrants pursuant to this Agreement such amounts as may
be required to be deducted and withheld with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the "Code"), or
under any provision of state, local or foreign tax Law. To the extent that
amounts are so withheld by the Surviving Corporation or Buyer, as the case may
be,
10
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock, Company
Preferred Stock, Company Stock Options or Company Warrants in respect of which
such deduction and withholding was made by the Surviving Corporation or Buyer,
as the case may be.
(k) Adjustments Regarding Dilution.
(i) In the event that prior to the Effective Time, solely as a result
of a reclassification, stock split (including a reverse split), or stock
dividend or stock distribution, made on a pro rata basis to all holders of
such class of stock of the entity making such a stock dividend or stock
distribution, there is a change in the number of shares of Company Common
Stock, Company Preferred Stock, Buyer Class C Common Stock or Buyer Class P
Common Stock outstanding or issuable upon the conversion, exchange or
exercise of securities or rights convertible or exchangeable into or
exercisable for shares of Company Common Stock, Company Preferred Stock,
Buyer Class C Common Stock or Buyer Class P Common Stock, then the Merger
Consideration, Option Consideration, Warrant Consideration, and the number
of shares of Surviving Corporation Class C Common Stock and Surviving
Corporation Class P Common Stock into which the Rollover Shares and Buyer
Shares are entitled to be converted pursuant to Sections 2.01(c) and
2.01(d) hereof and Schedule I hereto shall all be equitably adjusted to
eliminate the effects of such event.
(ii) In the event that prior to the Effective Time there occurs a
"Distribution Date" (as defined in the Company Rights Agreement), (X) the
Merger Consideration, Option Consideration and Warrant Consideration shall
be equitably adjusted such that the aggregate amounts to be paid in respect
of the shares of Company Common Stock and Company Preferred Stock pursuant
to Section 2.01(b) hereof and the aggregate amounts to be paid to the
holders of Company Stock Options or Company Warrants pursuant to Sections
2.01(f) and (g) shall be equal to the aggregate amounts that would have
been payable to all such holders of Company Common Stock, Company Preferred
Stock, Company Stock Options and Company Warrants had such Distribution
Date not occurred and (Y) the number of shares of Surviving Corporation
Class C Common Stock and Surviving Corporation Class P Common Stock into
which the Rollover Shares are entitled to be converted pursuant to Sections
2.01(c) and 2.01(d) hereof and Schedule I hereto shall be equitably
adjusted to eliminate the effects of such event. In the event there shall
be any rights that have separated from the Common Stock or shares of Series
A Preferred Stock outstanding as a result of a Distribution Date, the
provisions of Section 2 shall be deemed to be amended to provide for the
pro rata payment to rights or the Series A Preferred Stock holders taking
into account this clause (i).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer that, except as
specified in the applicable section of the Disclosure Schedule furnished by the
Company to Buyer prior to the execution of this Agreement (the "Company
Disclosure Schedule") corresponding to the Sections and subsections set forth
below:
11
SECTION 3.01 Organization and Qualification; Subsidiaries.
(a) Except as set forth in Section 3.01(a) of the Company
Disclosure Schedule, the Company and each Company Subsidiary is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or formation and has all
requisite corporate power and corporate authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be organized, existing, in good standing or to have such
power or authority has not had or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or would not, or
would not reasonably be likely to, prevent or delay the consummation of the
Merger. Except as set forth in Section 3.01(a) of the Company Disclosure
Schedule, each of the Company and the Company Subsidiaries is duly qualified or
licensed as a foreign corporation or organization to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that have not had or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect or would not,
or would not reasonably be likely to, prevent or delay the consummation of the
Merger.
(b) Section 3.01(b) of the Company Disclosure Schedule lists each
Company Subsidiary and its jurisdiction of organization. All of the outstanding
shares of capital stock of each Company Subsidiary have been validly issued and
are fully paid and nonassessable and, except as set forth in Section 3.01(b) of
the Company Disclosure Schedule, are owned by the Company, free and clear of all
pledges, liens, charges, mortgages, encumbrances and security interests of any
kind or nature whatsoever (collectively, "Liens"). Except for its interests in
the Company Subsidiaries and except for the ownership of interests set forth in
Section 3.01(b) of the Company Disclosure Schedule, the Company does not own,
directly or indirectly, or have any outstanding contractual obligation to
acquire, any capital stock, membership interest, partnership interest, joint
venture interest or other equity interest in any corporation, partnership, joint
venture or other business association or entity.
SECTION 3.02 Certificate of Incorporation and By-Laws. The Company has
heretofore provided or made available to Buyer a complete and correct copy of
the Company Charter and the Company's By-Laws, as amended to date ("Company
By-Laws"). The Company Charter and Company By-Laws are in full force and effect.
The Company is not in violation of any of the provisions of the Company Charter
or Company By-Laws. The Company has provided or made available to Buyer complete
copies of the charter, By-Laws or organizational documents of each Company
Subsidiary and, except as set forth in Section 3.02 of the Company Disclosure
Schedule, no Company Subsidiary is in violation of such documents, except for
such violations that have not had or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or would not, or
would not be reasonably likely to, prevent or delay the consummation of the
Merger.
SECTION 3.03 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
20,000,000 shares of Company Common Stock and (ii) 10,000,000 shares of
preferred stock, consisting of
12
(A) 2,484,320 shares of Series A preferred stock, par value $0.001 per share
("Company Series A Preferred Stock"), (B) 2,500,000 shares of Series C preferred
stock, par value $0.001 per share ("Company Series C Preferred Stock"), (C)
1,063,830 shares of Series D preferred stock, par value $0.001 per share
("Company Series D Preferred Stock" and collectively with the Company Series A
Preferred Stock and the Company Series C Preferred Stock, the "Company Preferred
Stock") and (D) 120,000 shares of Series A junior preferred stock, par value
$0.001 per share ("Company Series A Junior Preferred Stock" and collectively
with the Company Common Stock and the Company Preferred Stock, the "Company
Capital Stock"). At the close of business on August 2, 2002 (i) 6,544,953 shares
of Company Common Stock were issued and outstanding, (ii) 1,023,694.11 shares of
Series A Preferred Stock were issued and outstanding, which shares were
convertible into 300,966 shares of Company Common Stock in accordance with the
terms of the Company Charter, (iii) 2,499,940 shares of Series C Preferred Stock
were issued and outstanding, which shares were convertible into 624,985 shares
of Company Common Stock in accordance with the terms of the Company Charter,
(iv) 1,063,830 shares of Series D Preferred Stock were issued and outstanding,
which shares were convertible into 265,957.5 shares of Company Common Stock in
accordance with the terms of the Company Charter, (v) 230,510 shares of Company
Common Stock were held in the Company's treasury, (vi) no shares of Company
Preferred Stock were held in the Company's treasury, (vii) 597,737 shares of
Company Common Stock were subject to Company Stock Options granted pursuant to
the Company Option Plans, (viii) 243,250 shares of Company Common Stock were
subject to Scheduled Options, (ix) 840,298 shares of Company Common Stock were
subject to outstanding Company Warrants, and (x) 120,000 shares of Company
Series A Junior Preferred Stock were reserved for issuance (but not issued and
outstanding) in connection with the Company Rights. The Company has made
available to Buyer a complete and correct copy of the Company Rights Agreement,
as amended to the date of this Agreement.
(b) Except as set forth above, at the close of business on August 2,
2002 no shares of the Company's capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. All outstanding
shares of Company Capital Stock are, and all such shares that may be issued
prior to the Effective Time will be when issued upon the terms and conditions
specified in the instruments pursuant to which they are issuable, duly
authorized, validly issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the DGCL, the Company Charter, the Company By-Laws or any Company Material
Contract (as defined in Section 3.11 hereof) to which the Company is a party or
otherwise bound.
(c) There are not any bonds, debentures, notes or other indebtedness
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which holders of
Company capital stock may vote ("Voting Company Debt").
(d) Except as set forth above or as set forth in Section 3.03(d) of
the Company Disclosure Schedule, as of the date of this Agreement, there are not
any options, warrants, rights, convertible or exchangeable securities, "phantom"
stock rights, stock appreciation rights, stock-based performance units,
commitments, Contracts, arrangements or undertakings of any kind to which the
Company or any Company Subsidiary currently is a party or by which any of them
13
currently is bound (i) obligating the Company or any Company Subsidiary to issue
or sell, or cause to be issued or sold, additional shares of capital stock or
other equity interests in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other equity interest in, the Company
or of any Company Subsidiary or any Voting Company Debt; (ii) obligating the
Company or any Company Subsidiary to issue, grant, extend or enter into any such
option, warrant, right, security, stock appreciation right, stock-based
performance unit, commitment, Contract, arrangement or undertaking; or (iii)
that give any Person the right to receive any economic benefit or right similar
to or derived from the economic benefits and rights occurring to holders of
Company Capital Stock. Section 3.03(d) of the Company Disclosure Schedule sets
forth the total number of outstanding Company Stock Options and the exercise
prices thereof, and lists all Company Warrants and the exercise prices thereof.
The Company has provided Buyer with a Schedule of all of the Company Stock
Options, including the relevant vesting times, exercise prices and exercise
periods, and copies of all Company Option Plans and forms of Option Certificates
granted thereunder, and copies of all Company Warrants and documents related to
the Scheduled Options.
(e) Except as set forth in Section 3.03(e) of the Company Disclosure
Schedule, there are no outstanding contractual obligations of the Company or of
any Company Subsidiary, contingent or otherwise, to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or any Company
Subsidiary other than as provided in the Company Charter. Except as set forth in
the Company Charter, the Company Rights Agreement and in Section 3.03(e) of the
Company Disclosure Schedule, there are no issued and outstanding shares of
Company Capital Stock that are subject to a repurchase or redemption right in
favor of the Company.
SECTION 3.04 Authority Relative to This Agreement.
(a) The Company has all requisite corporate power and corporate
authority to execute and deliver this Agreement and, subject to the Company
Stockholder Approval (as defined in Section 3.04(c)) with respect to the Merger,
to consummate the transactions contemplated hereby. The execution and delivery
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of the Merger,
to receipt of the Company Stockholder Approval. The Company has duly executed
and delivered assuming the due authorization, execution and delivery by Buyer,
this Agreement, and this Agreement constitutes its legal, valid and binding
obligation (subject to the Company Stockholder Approval with respect to the
Merger), enforceable against it in accordance with its terms.
(b) The Company Board, on August 5, 2002, and the Special Committee,
on August 5, 2002, in each case at a meeting duly called and held, duly adopted
resolutions (i) approving this Agreement and the Merger, (ii) determining that
the terms of the Merger are fair to and in the best interests of the Company and
its stockholders (other than the Rollover Stockholders), (iii) determining that
the Merger Agreement is fair to the stockholders of the Company (other than the
Rollover Stockholders) and (iv) recommending that the Company's stockholders
approve this Agreement and directing that this Agreement and the Merger be
14
submitted for consideration by the Company's stockholders at the Company
Stockholders' Meeting.
(c) The only vote of holders of any class or series of Company Capital
Stock necessary to approve and adopt this Agreement and the Merger is the
approval of this Agreement by the holders of not less than a majority of the
outstanding shares of Company Common Stock and Company Preferred Stock (voting
on an as-converted basis pursuant to the Company Charter), voting together as a
single class (the "Company Stockholder Approval").
SECTION 3.05 No Conflict; Required Filings and Consents.
(a) Except as set forth in Section 3.05(a) of the Company Disclosure
Schedule, the execution and delivery by the Company of this Agreement do not,
and the consummation of the transactions contemplated hereby and compliance with
the terms hereof will not, result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or to increased, additional, accelerated or guaranteed
rights or entitlements of any Person under, or result in the creation of any
Lien upon any of the properties or assets of the Company or any Company
Subsidiary under, any provision of (i) the Company Charter, the Company By-Laws
or the comparable charter or organizational documents of any Company Subsidiary,
(ii) Company Material Contract (as defined in Section 3.11 hereof) or (iii)
subject to the filings and other matters referred to in Section 3.05(b) hereof,
any judgment, order, injunction or decree, domestic or foreign, of any
Governmental Entity (each a "Judgment"), or Law, applicable to the Company or
any Company Subsidiary or their respective properties or assets, other than, in
the case of clauses (ii) and (iii) above, any such items that, individually or
in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect or would not, or would not reasonably be likely to,
prevent or delay the consummation of the Merger.
(b) Except as set forth in Section 3.05(b) of the Company Disclosure
Schedule, no consent, approval, license, permit, order or authorization (each, a
"Consent") of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made by the Company or any Company
Subsidiary in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, other
than (i) if required, compliance with and filing of a pre-merger notification
report under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) the filing with the U.S. Securities and Exchange
Commission (the "SEC") of a proxy statement relating to the approval of this
Agreement by the Company's stockholders (the "Proxy Statement"), (iii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of the other
jurisdictions in which the Company is qualified to do business, (iv) compliance
with and filings under the Laws of any foreign jurisdictions, if and to the
extent required, and (v) such other items that, individually and in the
aggregate, would not and would not reasonably be expected to have a Material
Adverse Effect or would not, or would not reasonably be likely to, prevent or
delay the consummation of the Merger.
15
SECTION 3.06 Permits; Compliance.
(a) Except (i) as disclosed in Section 3.06(a) of the Company
Disclosure Schedule; or (ii) to the extent that the lack of possession of any
such Company Permits (as defined below), individually or in the aggregate, would
not and would not reasonably be expected to have a Material Adverse Effect or
would not, or would not reasonably be likely to, prevent or delay the
consummation of the Merger; (A) each of the Company and the Company Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for the Company or any Company Subsidiary
to own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Company Permits"), and (B) no suspension or
cancellation of any of the Company Permits is pending or, to the knowledge of
the Company, overtly threatened.
(b) Except (i) as disclosed in Section 3.06(b) of the Company
Disclosure Schedule; or (ii) to the extent such conflicts, defaults or
violations, individually or in the aggregate, would not, and would not
reasonably be expected to have a Material Adverse Effect or would not, or would
not be reasonably likely to, prevent or delay the consummation of the Merger,
neither the Company nor any Company Subsidiary is in conflict with, or in
default or violation of, any Company Permits.
SECTION 3.07 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents required to
be filed by it with the SEC since June 30, 2000, including (i) all Annual
Reports on Form 10-K, (ii) all Quarterly Reports on Form 10-Q, (iii) all proxy
statements relating to meetings of stockholders (whether annual or special) and
(iv) all Reports on Form 8-K, (v) all other reports or registration statements
(collectively, the "Company SEC Reports"). The Company SEC Reports, as well as
all forms, reports and documents to be filed by the Company with the SEC after
the date hereof and prior to the Effective Time, (i) were, at the time filed,
and, in the case of Company SEC Reports filed after the date hereof, will at the
time they are filed be prepared in all material respects in accordance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and in each
case the published rules and regulations of the SEC thereunder, each as
applicable to such Company SEC Reports and (ii) did not as of the time they were
filed, and in the case of such forms, reports and documents filed by the Company
with the SEC after the date of this Agreement, will not as of the time they are
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were and
will be made, not misleading. No Company Subsidiary is subject to the periodic
reporting requirements of the Exchange Act. To the knowledge of the Company,
there is no material unresolved violation of the Exchange Act or the published
rules and regulations of the SEC asserted by the SEC with respect to the Company
SEC Reports.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Company SEC Reports was prepared in
accordance with the published rules and regulations of the SEC and United States
generally accepted accounting
16
principles ("U.S. GAAP") applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q under the Exchange Act) and each
presented at the time they were filed or, in the case of Company SEC Reports
filed after the date hereof, will present fairly at the time they are filed, in
all material respects, the consolidated financial position, results of
operations and cash flows of the Company and the consolidated Company
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which are not
expected to be material, individually or in the aggregate). The balance sheet of
the Company contained in the Company SEC Reports as of June 30, 2001 is
hereinafter referred to as the "Company Balance Sheet".
(c) The Company has heretofore furnished to Buyer a complete and
correct copy of any effective amendments or modifications (which have not yet
been filed with the SEC but which are required to be filed) to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Securities Act or the Exchange Act.
SECTION 3.08 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports filed and publicly available prior to the date of this
Agreement (the "Filed Company SEC Documents") or in Section 3.08 of the Company
Disclosure Schedule, or actions expressly contemplated by this Agreement, from
the date of the Company Balance Sheet, the Company has conducted its business
only in the ordinary course consistent with past practice, and during such
period there has not been:
(i) any event, change, effect or development that, individually or
in the aggregate, has had or would reasonably be expected to have a
Material Adverse Effect or that would, or would reasonably be likely to,
prevent or delay the consummation of the Merger;
(ii) any authorization, declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any Company Capital Stock or any repurchase or redemption for
value by the Company of any Company Capital Stock;
(iii) any split, combination or reclassification of any Company
Capital Stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
Company Capital Stock;
(iv) any issuance by the Company or any Company Subsidiary of any
notes, bonds or other debt securities or any capital stock or other equity
securities or any securities convertible, exchangeable or exercisable into
any capital stock or other equity securities, except for the issuance of
any shares of Company Common Stock pursuant to the exercise of any stock
options pursuant to the Company Option Plans, the exercise of any Scheduled
Options or the exercise of Company Warrants;
17
(v) (A) any granting by the Company or any Company Subsidiary to
any current or former director, officer or employee of the Company or any
Company Subsidiary of any increase in their compensation, except to the
extent required under employment agreements in effect as of the date of the
Company Balance Sheet, or with respect to employees (other than directors,
officers or regional vice presidents) in the ordinary course of business
consistent with prior practice and except for Company Stock Options that
are reflected as outstanding in clause (vii) of Section 3.03(a) hereof, (B)
any granting by the Company or any Company Subsidiary to any current or
former director, officer or regional vice president of any increase in
severance or termination pay, except as was required under any employment,
severance or termination policy, practice or agreements in effect as of the
date of the Company Balance Sheet or (C) any entry by the Company or any
Company Subsidiary into, or any amendment of, any employment, severance or
termination agreement with any such director, officer or employee, except
for such agreements or amendments with employees (other than directors,
officers or regional vice presidents) that were entered into in the
ordinary course of business consistent with prior practice;
(vi) any termination of employment or departure of any officer or
regional vice president of the Company or any Company Subsidiary;
(vii) any entry by the Company or any Company Subsidiary into any
commitment or transaction material to the Company and the Company
Subsidiaries taken as a whole;
(viii) any material revaluation by the Company of any material asset
(including any writing down of the value of inventory or writing off of
notes or accounts receivable);
(ix) any change in accounting methods, principles or practices by
the Company or any Company Subsidiary materially affecting the consolidated
assets, liabilities or results of operations of the Company, except insofar
as may have been required by a change in U.S. GAAP;
(x) any elections with respect to Taxes (as defined in Section 3.15
hereof) by the Company or any Company Subsidiary or settlement or
compromise by the Company or any Company Subsidiary of any material Tax
liability or refund;
(xi) any occurrence of any action or event described in Section
5.01(b)(i) - (iii), (vi)-(x), (xii), (xiv)-(xv); or
(xii) any agreement by the Company or any Company Subsidiary to take
any of the actions described in this Section 3.08 except as expressly
contemplated by this Agreement.
SECTION 3.09 Absence of Litigation. Except as specifically disclosed in the
Filed Company SEC Documents or in Section 3.09 of the Company Disclosure
Schedule, (i) there is no litigation, suit, claim, action, proceeding or
investigation (an "Action") pending or, to the knowledge of the Company, overtly
threatened against the Company or any Company
18
Subsidiary, or any property or asset of the Company or any Company Subsidiary,
before any court, arbitrator or Governmental Entity, domestic or foreign, that,
individually or in the aggregate, would have or would reasonably be expected to
have a Material Adverse Effect, or would, or would be reasonably likely to,
prevent or delay the consummation of the Merger (and the Company is not aware of
any basis for any such Action); nor (ii) is there any Judgment outstanding
against the Company or any Company Subsidiary that, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect or that would, or would reasonably be likely to, prevent or delay the
consummation of the Merger.
SECTION 3.10 Employee Benefit Matters.
(a) Section 3.10(a) of the Company Disclosure Schedule lists each
Employee Benefit Plan other than those Employee Benefit Plans set forth in the
Company SEC Documents. The Company has delivered or made available to Buyer
correct and complete copies of the plan documents and of any summary plan
descriptions, the most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report (for which annual
reports are required), and all related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee Benefit Plan.
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) conforms in all material respects to, and is
being administered and operated in material compliance with, the applicable
requirements of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), the Code, and other applicable Laws.
(ii) Except as set forth in Section 3.10(a)(ii) of the Company
Disclosure Schedule, all required reports and descriptions (including Form
5500 Annual Reports and PBGC-l's) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
Section 4980B have been met with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan subject to such Part.
(iii) Except as set forth in Section 3.10(a)(iii) of the Company
Disclosure Schedule, the Company and each Company Subsidiary has made all
contributions which are due under each Employee Benefit Plan and all
contributions for any period ending on or before the Closing Date which are
not yet due have been paid to each such Employee Pension Benefit Plan or
accrued in accordance with the past custom and practice of the Company. All
premiums or other payments for all periods ending on or before the Closing
Date have been paid with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
(iv) Except as set forth in Section 3.10(a)(iv) of the Company
Disclosure Schedule, any Employee Benefit Plan that is intended to be
qualified under Code Section 401(a) and exempt from tax under Code Section
501(a) has been determined by the Internal Revenue Service to be so
qualified or exempt and, to the knowledge of the Company, no reason
currently exists for such determination to be revoked.
19
(b) No Employee Pension Benefit Plan is, or since July 1, 1996 has
been, subject to Title IV of ERISA and none of the Company, the Company
Subsidiaries or any member of the Controlled Group of Corporations that
includes the Company and the Company Subsidiaries since July 1, 1996 has
incurred or has any reason to expect that any of the Company and the
Company Subsidiaries will incur, any liability (contingent or otherwise)
(or to the knowledge of the Company and the Company Subsidiaries on or
prior to July 1, 1996 has incurred any liability (contingent or otherwise)
but only to the extent any such liability (contingent or otherwise)
continues past June 30, 1996) to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
liability, contingent or otherwise) or under the Code with respect to any
such Employee Benefit Plan which is an Employee Pension Benefit Plan.
(c) There have been no Prohibited Transactions involving any such
Employee Benefit Plan that could subject the Company or any Company
Subsidiary to any material penalty or material tax imposed under the Code
or ERISA. There are no pending or, to the knowledge of the Company,
threatened claims by or on behalf of any Employee Benefit Plan, or by or on
behalf of any individual participants or beneficiaries of any Employee
Benefit Plan, alleging any breach of fiduciary duty on the part of the
Company or any Company Subsidiary under ERISA or any other applicable
regulations, or claiming benefits payments other than those made in the
ordinary operation of such plans.
(d) Except as set forth in Section 3.10(d) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary has or since
January 1, 1996 has had an obligation to contribute to any Multiemployer
Plan, and to the knowledge of the Company and the Company Subsidiaries,
prior to January 2, 1996, neither the Company nor any Company Subsidiary
has become subject to an obligation to contribute to any Multiemployer Plan
other than such obligations satisfied prior to July 1, 1996.
(e) Except as set forth in Section 3.10(e) of the Company Disclosure
Schedule, none of the Company and the Company Subsidiaries maintains or
since January 1, 1996 has maintained or been required to contribute to any
Employee Welfare Benefit Plan (and, to the knowledge of the Company and the
Company Subsidiaries, none of the Company and Company Subsidiaries, prior
to July 1, 1996 maintained or have been required to contribute to any
Employee Welfare Benefit Plan, other than any such plans where the Company
and Company Subsidiaries did not have any liability in respect of after
June 30, 1996) providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance
with Code Section 4980B).
(f) No binding promise or commitment to amend or improve any Employee
Benefit Plan for the benefit of current or former directors, officers, or
employees of the Company or any Company Subsidiary which is not reflected
in the documentation provided or made available to Buyer has been made.
(g) Except as set forth in Section 3.10(g) of the Company Disclosure
Schedule, the transactions contemplated by this Agreement shall not alone
or upon the occurrence of any additional or subsequent event, result in any
payment, of severance or
20
otherwise, or acceleration, vesting or increase in benefits under any Employee
Benefit Plan for the benefit of any current or former director, officer, or
employee of the Company or any of the Company Subsidiaries.
(h) For purposes of this Agreement:
(i) "Controlled Group of Corporations" has the meaning set forth in
Code Section 1563.
(ii) "Employee Benefit Plan" means any material "employee benefit
plan" as defined in Section 3(3) of ERISA and any profit sharing, stock
option, stock purchase, equity, stock appreciation, incentive deferred
compensation, severance plan, material fringe benefit, material bonus or
other material benefit plan (other than any agreements referred to in
Section 3.11(a)(i) hereof), sponsored or maintained by the Company or any
Company Subsidiary or for which the Company or any Company Subsidiary may
have any liability.
(i) "Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
(ii) "Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(l).
(iii) "Multiemployer Plan" has the meaning set forth in ERISA Section
3(37).
(iv) "PBGC" means the Pension Benefit Guaranty Corporation.
(v) "Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
SECTION 3.11 Material Contracts.
(a) Subsections (i) through (viii) of Section 3.11(a) of the Company
Disclosure Schedule contain a list of the following types of contracts and
agreements (including all amendments thereto) to which the Company or a Company
Subsidiary is currently a party, other than those contracts and agreements
listed as exhibits in the Company's Form 10-K for the fiscal year ended June 30,
2001 (such contracts, agreements and arrangements as are required to be set
forth in Section 3.11(a) of the Company Disclosure Schedule, together with all
contracts, agreements and arrangements of the Company or any Company Subsidiary
required to be set forth in Section 3.10(a) of the Company Disclosure Schedule
or listed or required to be listed as exhibits in the Company's Form 10-K for
the fiscal year ended June 30, 2001, being the "Company Material Contracts"):
(i) all employment, consulting, severance, termination or
indemnification agreements between the Company or any Company Subsidiary
and any director, officer or regional vice president of the Company or any
Company Subsidiary;
21
(ii) all contracts, credit agreements, indentures and other similar
agreements evidencing outstanding or currently available indebtedness,
including guaranties, of more than $500,000 individually to unaffiliated
third parties;
(iii) all agreements under which the Company or any Company Subsidiary
has advanced or loaned any funds in excess of $100,000 individually other
than to the Company or to any wholly-owned Subsidiary of the Company;
(iv) all joint venture or other similar material agreements;
(v) all real property lease agreements with annual lease payments in
excess of $200,000 (exclusive of common area maintenance fees and Taxes)
individually and all other lease agreements with annual lease payments in
excess of $200,000 individually;
(vi) agreements that are currently in effect under which the Company
has granted any Person registration rights (including demand and piggy-back
registration rights), preemptive rights, redemption rights, subscription
rights, rights of first refusal, purchase options or call options with
respect to the capital stock of the Company or any Company Subsidiary;
(vii) all written or material oral contracts and agreements with
Affiliates of the Company or any Company Subsidiary.
(b) Except as set forth in Section 3.11(b) of the Company Disclosure
Schedule, or as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect or would not, or would not
reasonably be likely to prevent or delay the consummation of the Merger, (i)
each Company Material Contract is a legal, valid and binding agreement
enforceable against the Company or Company Subsidiary that is a party thereto
and, to the Company's knowledge, the other parties thereto, in accordance with
its terms and (ii) neither the Company nor any Company Subsidiary is in
violation or default, or has received notice that it is in violation or default,
under any Company Material Contract and (iii) to the Company's knowledge no
other party is in default under any Company Material Contract. The Company has
provided the Buyer with, or made available to the Buyer, copies of all Company
Material Contracts.
SECTION 3.12 Environmental Matters. To the knowledge of the Company, except
as described in Section 3.12 of the Company Disclosure Schedule: (a) the Company
and the Company Subsidiaries are not in violation of any Environmental Law
applicable to any of them; (b) neither the Company nor any of the Company
Subsidiaries are liable for any off-site contamination by Hazardous Substances;
(c) the Company and the Company Subsidiaries have all permits, licenses and
other authorizations required under any Environmental Law ("Environmental
Permits"); (d) the Company and the Company Subsidiaries are in compliance in all
material respects with their Environmental Permits; and (e) neither the
execution of this Agreement nor the consummation of the transactions
contemplated herein will require any investigation, remediation or other action
with respect to Hazardous Substances, or any notice to or consent of
Governmental Entities or third parties, pursuant to any applicable Environmental
Law or Environmental Permit, except in each such case for Section 3.12(a)
through (e), for such
22
matters that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect or that would not, or
would not reasonably be likely to, prevent or delay the consummation of the
Merger. To the knowledge of the Company, none of the properties currently or
formerly owned, leased or operated by the Company or the Company Subsidiaries
are contaminated with any Hazardous Substance except for such contamination that
has not had and would not reasonably be expected to have a Material Adverse
Effect. None of the Company or the Company Subsidiaries has received written
notice of a violation of, or any liability under, any Environmental Law (whether
with respect to properties presently or previously owned or used). The Company
and the Company Subsidiaries have made available to Buyer all material
environmental audits, reports and other environmental documents relating to
their properties, facilities or operations which are in their possession or
control. Neither the Company nor any of the Company Subsidiaries has treated,
stored, disposed of, arranged for or permitted the disposal of, handled, or
released any substance, or owned or operated its business or any property or
facility in a manner that has given or would reasonably be expected to give rise
to any Material Adverse Effect. Neither the Company nor any of the Company
Subsidiaries has arranged for the disposal or treatment or for the
transportation for disposal or treatment, of any substance at any off-site
location where such arrangement has had or would reasonably be expected to have
a Material Adverse Effect.
SECTION 3.13 Title to Properties; Absence of Liens and Encumbrances.
Except as described in Section 3.13(a) of the Company Disclosure Schedule, each
of the Company and the Company Subsidiaries has good and valid title to, or, in
the case of leased properties and assets, valid leasehold interests in, all of
its respective properties and assets, real, personal and mixed, owned, used or
held for use in its business, free and clear of any Liens except (i) statutory
liens, security interests, mortgages, charges or encumbrances arising out of
operation of law with respect to a liability incurred in the ordinary course of
business and which is not delinquent or is not material, (ii) such liens,
security interests, mortgages, charges or encumbrances and other imperfections
of title as do not materially detract from the value or impair the use of the
property subject thereto, provided that there are adequate reserves for any such
liens, security interests, mortgages, charges or encumbrances set forth on the
face of the Company Balance Sheet to the extent such liens, security interests,
mortgages, charges or encumbrances are required to be reserved for in accordance
with GAAP, (iii) liens for Taxes not yet subject to penalties for nonpayment of
which are being actively contested in good faith by appropriate proceedings,
provided that there are adequate reserves for any such liens set forth on the
face of the Company Balance Sheet, (iv) mechanics', materialmen's, workmen's,
warehousemen's, carrier's repairmen's, landlords' or other like liens and
security obligations that are not delinquent or that are not material and (v) as
reflected in the financial statements contained in the Filed Company SEC
Documents. Except as described in Section 3.13(b) of the Company Disclosure
Schedule, the Company neither owns nor leases any real property. The real
property listed in Sections 3.13(a) and 3.13(b) of the Company Disclosure
Schedule constitutes all of the real property used, leased or occupied by the
Company or any Company Subsidiary as of the date hereof.
SECTION 3.14 Intellectual Property.
(a) To the knowledge of the Company, (i) except as set forth in
Section 3.14(a) of the Company Disclosure Schedule, the Company and the Company
Subsidiaries own or otherwise have the right to use all Intellectual Property
necessary for the operation of the
23
Company's business as presently conducted and (ii) each item of Intellectual
Property owned or used by the Company or any Company Subsidiary will be owned or
available for use by the Surviving Corporation on identical terms and conditions
immediately subsequent to the Closing, in either case except where the inability
to own or use such Intellectual Property would not have or would not reasonably
be expected to have a Material Adverse Effect and in either case with the
exception that no representations or warranties are made with respect to
commercial licensed computer software, databases, or systems or to software or
databases which were developed solely for the Company and are not material to
the Company's operations. Except as set forth in Section 3.14(a) of the Company
Disclosure Schedule, the Company is not in receipt of any pending written claims
that its use or the use by any Company Subsidiary of the Intellectual Property
currently used in operating its properties or carrying on its business as
presently conducted infringes any Intellectual Property rights of a third party,
and has not made any pending written claims that any third party has infringed
the Intellectual Property rights of the Company, except where such claim of
infringement would not have or would not reasonably be expected to have a
Material Adverse Effect. Section 3.14(a) of the Company Disclosure Schedule sets
forth an accurate list of each material patent, registered trademark and service
▇▇▇▇, and registered copyright owned by the Company.
(b) The Company and the Company Subsidiaries have taken reasonable
steps in accordance with normal industry practice to maintain the
confidentiality of their material trade secrets and other confidential
Intellectual Property. To the knowledge of the Company, since August 1, 2001 (i)
there has been no misappropriation or improper disclosure of any material trade
secrets or other confidential Intellectual Property of the Company or any
Company Subsidiary by any Person, (ii) no employee of the Company or any Company
Subsidiary has misappropriated any material trade secrets of any other Person in
the course of such performance as an employee, and (iii) no employee of the
Company or any Company Subsidiary is in material default or material breach of
any term of any provision relating to trade secrets or confidential Intellectual
Property in the employment agreements, non-disclosure agreements, or assignment
of invention agreements listed in Section 3.11(a)(i) 3-11 of the Company
Disclosure Schedule.
SECTION 3.15 Taxes.
(a) Each of the Company and the Company Subsidiaries has filed on a
timely basis all Tax Returns required to be filed by it. All such Tax Returns
were correct and complete in all material respects. All Taxes owed by any of the
Company and the Company Subsidiaries (whether or not shown on any Tax Return)
have been timely paid in full, except for any Taxes being contested in good
faith as described in Section 3.15(a) of the Company Disclosure Schedule, to the
extent they are reflected as a reserve for current tax liability on the Company
Balance Sheet. The Company and the Company Subsidiaries have complied with all
requirements for timely extensions to file Tax Returns. No claim has been made
in writing by an authority in a jurisdiction where any of the Company and the
Company Subsidiaries does not file Tax Returns that they may be subject to
taxation by that jurisdiction. There are no material liens or other encumbrances
on any of the assets of any of the Company and the Company Subsidiaries that
arose in connection with any failure (or alleged failure) to pay any Tax.
(b) Each of the Company and the Company Subsidiaries has complied in
all material respects with all reporting requirements and has withheld and paid
all Taxes required to
24
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(c) There is no ongoing dispute, audit, investigation, proceeding or
claim concerning any Liability with respect to Taxes of the Company or the
Company Subsidiaries either (i) claimed or raised by any authority in writing or
(ii) as to which the Company has knowledge based upon contact with any such
authority. Except as set forth in Section 3.15(c) of the Company Disclosure
Schedule, (i) none of the federal, state, local, and foreign income Tax Returns
filed with respect to the Company and the Company Subsidiaries have been the
subject of an audit for any taxable year beginning after December 31, 1998 and
(ii) none are currently the subject of audit or notice of intention to audit.
The Company has delivered or made available to Buyer correct and complete copies
of all federal, state, local and foreign income Tax Returns, examination reports
and statements of deficiencies assessed against or agreed to by any of the
Company and the Company Subsidiaries for the last three taxable years.
(d) None of the Company or any of the Company Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency, which waiver or
extension remains outstanding.
(e) Since December 31, 1998, none of the Company or any of the
Company Subsidiaries is or has been a party to any Tax allocation or sharing
agreement or a member of an Affiliated Group filing a consolidated federal
income Tax Return (other than the Affiliated Group the common parent of which is
the Company). The Company does not have any Liability for the Taxes of any
Person other than the Company and the Company Subsidiaries under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a
transferee or successor, by contract, or otherwise.
(f) None of the Company or any of the Company Subsidiaries has filed
a consent under Code Section 341(f) concerning collapsible corporations. None of
the Company and the Company Subsidiaries has made any payments, is obligated to
make any payments, or is a party to any contract, lease, license, indenture,
note, bond, agreement, permit, concession, franchise or other instrument (each a
"Contract") that as a result of either prior transactions or the Merger could
obligate it to make any payments that will not be deductible under Code Sections
162(m) or 280G or that will be subject to an excise tax under Code Section 4999.
(g) None of the Company or any of the Company Subsidiaries has been
a "distributing corporation" or a "controlled corporation" in connection with a
distribution that the parties involved treated as described in Section 355 of
the Code within the past two years.
(h) No closing agreements, private letter rulings, technical advice
memoranda or similar agreements or rulings that have continuing effect have been
entered into or issued by any taxing authority with or in respect of the Company
or any Company Subsidiary.
(i) To the Company's knowledge, the unpaid Taxes of the Company and
the Company Subsidiaries (1) did not, as of June 30, 2001, exceed the reserve
for Tax liability (excluding any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face of
the Company Balance Sheet (rather than in any
25
notes thereto) and (2) will not exceed that reserve as adjusted for operations
and transactions through the Closing Date in accordance with the past custom and
practice of the Company and the Company Subsidiaries in filing their Tax
Returns.
(j) For the purposes of this Agreement:
(i) "Affiliated Group" means any affiliated group within the meaning
of Code Section 1504(a) or any similar group defined under a similar
provision of state, local, or foreign Law.
(ii) "Tax" or "Taxes" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social security (or
similar, including FICA), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including
any interest, penalty, or addition thereto, whether disputed or not.
(iii) "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
SECTION 3.16 Insurance. Section 3.16 of the Company Disclosure Schedule
sets forth a complete and accurate list of all material insurance policies in
force naming the Company, or, to the Company's knowledge, any Company Subsidiary
or directors or executive officers thereof as a loss payee, for which the
Company or, to the Company's knowledge, any Company Subsidiary has paid or is
obligated to pay all or part of the premiums. Except as set forth on Section
3.16 of the Company Disclosure Schedule neither the Company nor any Company
Subsidiary has received written notice of any pending or overtly threatened
cancellation or premium increase (retroactive or otherwise) with respect
thereto, and to the Company's knowledge, each of the Company and the Company
Subsidiaries is in compliance with all material conditions contained therein.
SECTION 3.17 State Takeover Statutes; Company Rights Agreement.
(a) The Company has taken such actions, if any, as it reasonably
determined necessary for the consummation of the Transactions under Section 203
of the DGCL and to permit Buyer, Gryphon Partners II, L.P., ▇▇▇▇▇▇▇ Investment
Partners, Inc., the Rollover Stockholders and their respective spouses,
associates, affiliates and subsidiaries, or any combination thereof, to become
"interested stockholders" (within the meaning of Section 203 of the DGCL), in
connection with developing agreements, arrangements or understandings among
themselves relating to the participation of all or any of them in the
Transactions and by taking any and all actions relating to the consummation of,
and by consummating, the Transactions.
(b) Except for the Company Rights Agreement, neither the Company nor
any of the Company Subsidiaries is a party to any "stockholder rights" plan or
any similar anti-takeover plan or device. The Company and the Company Board have
taken all action
26
necessary to (i) render the Company Rights inapplicable to this Agreement and
the transactions contemplated hereby and (ii) ensure that (A) neither Buyer nor
any of its stockholders, Affiliates or associates, or any Rollover Stockholders
is or will become an "Acquiring Person" (as defined in the Company Rights
Agreement) by reason of this Agreement or the Merger, (B) a "Distribution Date"
(as defined in the Company Rights Agreement) shall not occur by reason of this
Agreement or the Merger and (C) the Company Rights shall expire immediately
prior to the Effective Time.
SECTION 3.18 Compliance with Applicable Laws. Except as disclosed in the
Filed Company SEC Documents or in Section 3.18 of the Company Disclosure
Schedule, to the Company's knowledge the Company and the Company Subsidiaries
are in compliance with all Laws applicable to the Company or the Company
Subsidiaries or by which any property or asset of the Company or any Company
Subsidiary is bound or affected, including those relating to labor and
employment, occupational health and safety and the environment, except where
such noncompliance would not and would not reasonably be expected to have a
Material Adverse Effect or would not, or would not reasonably be likely to,
delay the consummation of the Merger. Except as set forth in the Filed Company
SEC Documents or in Section 3.20 of the Company Disclosure Schedule, to the
Company's knowledge neither the Company nor any Company Subsidiary has received
any written communication during the past two years from a Governmental Entity
that alleges that the Company or a Company Subsidiary is not in compliance in
any material respect with any applicable Law, which failure to be in compliance
remains uncured.
SECTION 3.19 School Licenses. Except as set forth in Section 3.19 of the
Company Disclosure Schedule, to the Company's knowledge, the Company and each of
the Company Subsidiaries possess and are in compliance with all school licenses
necessary to operate its facilities and conduct its business and have not
received any written notices from any Governmental Entity of violations with
respect to any such school licenses that remain uncured, except where the
failure to possess or be in compliance with any such school licenses,
individually or in the aggregate, has not had, or would not reasonably be
expected to have a Material Adverse Effect or would not, or would not be
reasonably likely to, prevent or delay the consummation of the Merger.
SECTION 3.20 Opinion of Financial Advisor. The Company has received the
written opinion of ▇▇▇▇ ▇▇▇▇▇ dated the date of this Agreement to the effect
that, as of the date of this Agreement, the consideration to be received in the
Merger by the holders of Company Common Stock and Company Preferred Stock, other
than holders of Rollover Shares, is fair to such holders from a financial point
of view, and a copy of the signed opinion has been provided to Buyer.
SECTION 3.21 Brokers. No broker, investment banker, financial advisor or
other Person, other than ▇▇▇▇ ▇▇▇▇▇, financial advisor to the Special Committee,
the fees and expenses of which will be paid by the Company, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Company. The Company has delivered to Buyer a
complete and accurate copy of all agreements pursuant to which ▇▇▇▇
27
▇▇▇▇▇ is entitled to any fees and expenses payable directly or indirectly by the
Company in connection with any of the transactions contemplated by this
Agreement.
SECTION 3.22 Fee and Expense Estimate. Section 3.22 of the Company
Disclosure Schedule sets forth a list of the fees and expenses, estimated in
good faith as of the date of this Agreement, incurred and to be incurred by the
Company and any of the Company Subsidiaries in connection with the transactions
contemplated hereby (including without limitation the fees and expenses of ▇▇▇▇
▇▇▇▇▇ and of the Company's legal counsel and accountants) and noting which fees
and expenses, if any, have been paid as of the date hereof or accrued as of the
date hereof.
SECTION 3.23 Employees. To the knowledge of the Company, no officer or
regional vice president has any plans to terminate employment with the Company
or any Company Subsidiaries. The Company and the Company Subsidiaries have not
experienced any labor disputes or work stoppages due to labor disagreements. The
Company and the Company Subsidiaries are not, nor have any of them ever been, a
party to any collective bargaining agreements and to the knowledge of the
Company none of the Company or any of the Company Subsidiaries has been the
subject of any organizational activity.
SECTION 3.24 Transactions with Affiliates. Except as set forth in the
Filed Company SEC Documents, since the date of the Company's last proxy
statement filed with the SEC, no event has occurred that would be required to be
reported by the Company pursuant to Item 404 of Regulation S-K promulgated by
the SEC. Section 3.24 of the Company Disclosure Schedule identifies each Person
who is (or who may be deemed to be) an "affiliate" (as the term is used in Rule
144 under the Securities Act), of the Company as of the date of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrant to the Company that:
SECTION 4.01 Organization and Qualification; Subsidiaries. Buyer is a
corporation duly organized, validly existing and in good standing under the Laws
of the jurisdiction of its incorporation and has all requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be organized, existing, in good standing or to have such
power, authority or governmental approvals would not reasonably be expected to
prevent or materially delay the ability of Buyer to consummate the transactions
contemplated hereby (a "Buyer Material Adverse Effect"). Buyer is duly qualified
or licensed as a foreign corporation or organization to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not reasonably be likely to have a Buyer
Material Adverse Effect.
SECTION 4.02 Ownership of Buyer; No Prior Activities. Buyer was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement. Buyer (i) has not conducted, and will not prior to the Effective Time
conduct, any business and (ii) has no, and prior to the Effective Time will have
no, assets or liabilities, except, in either case, in connection
28
with the Transactions. No shares of Company Common Stock or Company Preferred
Stock are held by Buyer or any subsidiary or Affiliates of Buyer. As of the date
hereof, the authorized capital stock of Buyer, consists of 3,000 shares of
common stock, par value $0.01 per share, 1,000 of which have been validly
issued, are fully paid and nonassessable. All of the issued and outstanding
capital stock of Buyer is owned by Gryphon Partners II, L.P.
SECTION 4.03 Authority Relative to this Agreement. Buyer has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer. Buyer has duly executed and delivered
this Agreement, and this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
SECTION 4.04 No Conflict; Required Filings and Consents.
(a) The execution and delivery by Buyer of this Agreement does not,
and the consummation of the transactions contemplated hereby and compliance with
the terms hereof will not, result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to a loss of a
material benefit under, or to increased, additional, accelerated or guaranteed
rights or entitlements of any Person under, or result in the creation of any
Lien upon any of the properties or assets of Buyer under, any provision of (i)
its charter, by-laws or other organizational documents, (ii) any Contract to
which Buyer is a party or by which any of its respective properties or assets is
bound or (iii) subject to the filings and other matters referred to in Section
4.04(b), any Judgment or Law applicable to Buyer or any of its subsidiaries or
respective properties or assets, other than, in the case of clauses (ii) and
(iii) above, any such items that, individually and in the aggregate, have not
had and would not reasonably be expected to have a Buyer Material Adverse
Effect.
(b) No Consent of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect to
Buyer in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, other
than (i) if required, compliance with and filing of a pre-merger notification
report under the HSR Act, (ii) the filing with the SEC of such reports under
Section 13 of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of the other jurisdictions
in which Buyer is qualified to do business, (iv) compliance with and filings
under the Laws of any foreign jurisdictions, if and to the extent required, and
(v) such other items that, individually and in the aggregate, have not had and
would not reasonably be expected to have a Buyer Material Adverse Effect.
SECTION 4.05 Brokers. No broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Buyer.
29
SECTION 4.06 Financing. Buyer has provided the Company with a commitment
letter from (i) BNP Paribas, dated as of the date hereof, (ii) Gryphon Partners
II, L.P., dated as of the date hereof and (iii) ▇▇▇▇▇▇▇ Investment Partners,
Inc., dated as of the date hereof (the "Commitment Letters" and the financing to
be provided thereunder, the "Financing"). The obligations to fund the
commitments under the Commitment Letters are not subject to any condition other
than as set forth in the Commitment Letters. Buyer is not aware of any fact or
occurrence existing on the date of this Agreement that makes any of the
assumptions or statements set forth in the Commitment Letters inaccurate or that
causes the Commitment Letters to be ineffective or that precludes the
satisfaction of the conditions set forth in the Commitment Letters. The
Commitment Letters have been duly executed by Buyer and, to the knowledge of
Buyer, all other parties thereto, and are in full force and effect as of the
date hereof. All commitment and other fees required to be paid under the
Commitment Letters on or prior to the date hereof have been paid.
SECTION 4.07 Absence of Litigation. There is no Action pending or, to the
knowledge of Parent or Buyer, overtly threatened against Parent or Buyer, before
any court, arbitrator or Governmental Entity, domestic or foreign, that would,
or would reasonably be likely to, prevent or delay the consummation of the
Merger (and neither Parent nor Buyer is aware of any basis for any such Action),
nor (ii) is there any Judgment outstanding against either Parent or Buyer that
would, or would reasonably be likely to, prevent or delay the consummation of
the Merger.
SECTION 4.08 No Agreements or Understandings to Sell Assets or Stock. As
of the date of this Agreement, neither Parent nor Buyer is a party to any
agreement, arrangement or understanding to sell all or substantially all of the
assets of the Surviving Corporation after the Closing or to sell more than 20%
of the stock of the Surviving Corporation to be owned by Parent and the Rollover
Stockholders.
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 5.01 Conduct of Business by the Company Pending the Merger. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 5.01 of the Company Disclosure Schedule or as
specifically contemplated by any other provision of this Agreement, unless Buyer
shall otherwise consent in writing, which consent shall not be unreasonably
withheld (provided, that for purposes of this Section 5.01 only, any assessment
as to the unreasonableness of any decision of Buyer to withhold consent shall be
made with reference to the perspective of a similarly-situated buyer):
(a) the businesses of the Company and the Company Subsidiaries shall
be conducted only in, and the Company and the Company Subsidiaries shall not
take any action except in, the ordinary course of business and in a manner
consistent with past practice; and
(b) the Company shall use all commercially reasonable efforts to
preserve substantially intact its business organization, to keep available the
services of the current officers, employees and consultants of the Company and
the Company Subsidiaries and to preserve the current relationships of the
Company and the Company Subsidiaries with
30
customers, students, suppliers, licensors, licensees and other Persons with
which the Company or any Company Subsidiary has significant business relations.
By way of amplification and not limitation, except (x) as contemplated by this
Agreement, (y) for transfers of cash among the Company and the Company
Subsidiaries pursuant to the Company's existing cash management policies or (z)
as set forth in Section 5.01 of the Company Disclosure Schedule, neither the
Company nor any Company Subsidiary shall, between the date of this Agreement and
the Effective Time, directly or indirectly, do, or propose to do, any of the
following without the prior written consent of Buyer which consent shall not be
unreasonably withheld (provided, that for purposes of this Section 5.01 only,
any assessment as to the unreasonableness of any decision of Buyer to withhold
consent shall be made with reference to the perspective of a similarly-situated
buyer):
(i) amend or change its Certificate of Incorporation or By-Laws or
equivalent organizational documents;
(ii) transfer, issue, sell, pledge, lease, license, dispose, grant,
encumber, or authorize for transfer, issuance, sale, pledge, lease,
license, disposition, grant or encumbrance (whether to a third party or any
Affiliate) any shares of its stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
such stock, or any other ownership interest (including, without limitation,
any phantom interest), of the Company or any Company Subsidiary (except (a)
for the issuance of shares of Company Common Stock pursuant to the Company
Stock Options or Company Warrants outstanding on the date of this
Agreement, or (b) the conversion of shares of Company Preferred Stock into
Company Common Stock in accordance with the terms of the Company Charter);
(iii) except with respect to trademarks in the ordinary course of
business and consistent with past practice, (a) grant any license in
respect of any Intellectual Property of the Company or any Company
Subsidiary, (b) develop any Intellectual Property jointly with any third
party, or (c) disclose any confidential Intellectual Property of the
Company or any Company Subsidiary other than in the ordinary course of
business and consistent with past practice unless such Intellectual
Property is subject to a confidentiality agreement protecting against any
further disclosure;
(iv) authorize, declare or set aside any dividend payment or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its stock other than the payment of dividends required to be paid
to holders of Company Preferred Stock;
(v) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its stock or issue or
authorize the issuance of any other securities in respect of, or in lieu of
or in substitution for shares of its capital stock;
(vi) acquire or agree to acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets) any interest in
any corporation, partnership, other business organization or any division
thereof or any assets thereof for a purchase price in excess of $250,000;
31
(vii) incur any additional indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse the obligations of any
Person (other than its subsidiaries consistent with past practice), or make
any loans or advances to any Person (other than its subsidiaries and
employees consistent with past practice (provided that such loans or
advances to employees do not exceed $50,000 in the aggregate)), except for
indebtedness under the Company's existing Loan and Security Agreement dated
as of March 9, 1999 between the Company, the Company Subsidiaries, Fleet
National Bank (in its capacity as Agent) and the other financial
institutions signatory thereto, as amended and in effect, incurred in the
ordinary course of business and consistent with past practice and for other
indebtedness with a maturity of not more than one year in a principal
amount not, in the aggregate, in excess of $150,000;
(viii) enter into any contract or agreement requiring the payment, or
receipt of payment, of consideration in excess of $100,000 individually or
$500,000 in the aggregate, or modify, amend, renew, waive any material
provision of, or terminate any existing Company Material Contract, other
than in the ordinary course of business consistent with past practice;
(ix) make or authorize any capital expenditures, other than as set
forth in Section 5.01(ix) of the Company Disclosure Schedule;
(x) waive any stock repurchase or acceleration rights, amend or
change the terms of any options, warrants, or restricted stock, or reprice
options granted under any Company Option Plan or warrants or, except
pursuant to the terms of Company Options or Company Warrants outstanding as
of the date hereof with respect to fractional shares, authorize cash
payments in exchange for any options granted under any Company Option
Plans, any Scheduled Options, or Company Warrants;
(xi) (a) increase the compensation payable or to become payable to
the Company's or any Company Subsidiary's officers or employees, except for
increases in salaries or wages accordance with past practices and
consistent with current budgets, as disclosed in Section 5.01(xi) of the
Company Disclosure Schedule, (b) grant or amend any rights to severance or
termination pay to, or enter into or amend any employment or severance
agreement with, any director, officer or other employee of the Company or
any Company Subsidiary (other than the entering into of employment
agreements with new employees of the Company (other than new officers or
directors) in accordance with the Company's past practice and existing
policies) or (c) forgive any indebtedness of any employee of the Company or
any Company Subsidiary;
(xii) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) in excess of $300,000 in the aggregate (not including any
amounts covered by insurance not resulting in an increase in the premium
under such insurance), other than the payment, discharge or satisfaction,
in the ordinary course of business consistent with past practice, or cancel
any indebtedness in excess of $50,000 in the aggregate or waive any claims
or rights of substantial value, or waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill or similar agreement
to which the Company or any Company Subsidiary is a party;
32
(xiii) make or revoke any Tax elections, adopt or change any method of
Tax accounting, request any ruling or similar determination, enter into any
closing agreement or settle any Tax liabilities or take any action
(including communications with a Governmental Entity) with respect to the
computation of Taxes or the preparation of a Tax Return that is
inconsistent with past practice;
(xiv) take any action, other than as required by U.S. GAAP or by the
SEC, with respect to accounting principles or procedures, including,
without limitation, any revaluation of assets;
(xv) establish, adopt, enter into or amend any collective bargaining
agreement or Employee Benefit Plan other than in the ordinary course of
business consistent with prior practice and except as would not result in
any material increase in the amounts payable by the Company or any Company
Subsidiary thereunder, or make any material determinations not in the
ordinary course of business consistent with prior practice, under any
collective bargaining agreement or Employee Benefit Plan; or
(xvi) agree in writing or otherwise to take any of the actions
described in clauses (i) through (xv) above.
SECTION 5.02 Notification of Certain Matters. Buyer shall give prompt
notice to the Company, and the Company shall give prompt notice to Buyer, of (i)
the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause (A) any representation or warranty contained in
this Agreement made by such Person to be untrue or inaccurate or (B) any
covenant, condition or agreement contained in this Agreement applicable to such
Person not to be complied with or satisfied and (ii) any failure of Buyer or the
Company, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 5.02 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Preparation of Proxy Statement; Stockholders Meeting.
(a) The Company shall, as soon as practicable following the date of
execution of this Agreement, prepare and file with the SEC the Proxy Statement
in preliminary form (provided that Buyer, and its counsel shall be given
reasonable opportunity to review and comment on the Proxy Statement and any
amendments thereto prior to its filing with the SEC), and each of the Company
and Buyer shall use all commercially reasonable efforts to respond as promptly
as practicable to any comments of the SEC with respect thereto. The Company
shall notify Buyer promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or supplements
to the Proxy Statement or for additional information and shall supply Buyer with
copies of all correspondence between the Company or any of its representatives,
on the one hand, and the SEC or its staff, on the other hand, with respect to
the Proxy Statement. If at any time prior to receipt of the Company
33
Stockholder Approval there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its stockholders such an amendment or supplement. The
Company shall use all commercially reasonable efforts to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as practicable
after filing with the SEC. Subject to Section 6.01(d) hereof, unless the Company
shall have terminated this Agreement pursuant to Section 8.01(h) the Proxy
Statement shall contain the recommendation of the Company Board that the
stockholders of the Company vote to adopt and approve this Agreement and the
Merger. If requested to do so by Buyer at any time prior to the Company
Stockholders Meeting (as defined in Section 6.01(b)) and subject to compliance
with applicable Laws, if there shall have been publicly announced an alternative
Acquisition Proposal, the Company Board shall within a reasonable period of time
following such request, but in no event more than ten business days after such
request (and, in any event, prior to the Company Stockholders Meeting) publicly
reaffirm such recommendation and/or shall publicly announce that it is not
recommending that the stockholders of the Company accept an alternative
Acquisition Proposal; provided, however, that if the Company shall fail to
reaffirm such recommendation and/or fail to publicly announce that it is not
recommending that the stockholders of the Company accept an alternative
Acquisition Proposal within such ten business day period following such request,
Buyer shall have no more than 30 days to elect to exercise its rights pursuant
to Section 8.01(d)(v); provided, further, that the failure of Buyer to exercise
its rights pursuant to Section 8.01(d)(v) in one instance shall not be deemed to
constitute a waiver of such rights in any other instance.
(b) The Company shall, as soon as reasonably practicable following
the date of execution of this Agreement, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Company Stockholders Meeting") for the
purpose of seeking the Company Stockholder Approval. Subject to Section 6.01(d)
hereof, unless the Company shall have terminated this Agreement pursuant to
Section 8.01(h), the Company shall, through the Company Board, recommend to its
stockholders that they give the Company Stockholder Approval. Without limiting
the generality of the foregoing, the Company agrees that its obligations
pursuant to the first sentence of this Section 6.01(b) shall not be affected by
the commencement, public proposal, public disclosure or communication to the
Company of any Acquisition Proposal.
(c) Buyer shall cause any and all shares of Company Common Stock or
Company Preferred Stock owned by Buyer, to be voted in favor of the approval of
this Agreement.
(d) Nothing in this Agreement shall prevent the Company Board from
withholding, withdrawing, amending or modifying its recommendation that the
stockholders of the Company vote to adopt and approve this Agreement and the
Merger if the Company Board determines in good faith (after consultation with
legal counsel) that the failure to take such action would reasonably be expected
to constitute a breach by the Company Board of its fiduciary duties to the
Company's stockholders under applicable Law. Unless this Agreement shall have
been terminated in accordance with its terms, nothing contained in this Section
6.01(d) shall limit the Company's obligation to convene and hold the Company
Stockholders Meeting (regardless of whether the Company Board's recommendation
shall have been withheld, withdrawn, amended or modified).
34
(e) None of the information supplied by Buyer for inclusion or
incorporation by reference in the Proxy Statement or a Statement on Schedule
13E-3 ("Schedule 13E-3") shall, at (i) the time filed with the SEC, in the case
of the Schedule 13E-3, (ii) the time the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to the stockholders of the
Company, in the case of the Proxy Statement, (iii) the time of Company's
Stockholders' Meetings, in the case of each of the Schedule 13E-3 and the Proxy
Statement, in each case as then amended or supplemented, and (iv) the Effective
Time, in the case of each of the Schedule 13E-3 and the Proxy Statement, in each
case as then amended or supplemented, contain any untrue statement of a material
fact or fail 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. If, at any time prior to the
Effective Time, any event or circumstance relating to Buyer, or their respective
officers or directors, that should be set forth in an amendment or a supplement
to the Proxy Statement or Schedule 13E-3 should be discovered by Buyer, Buyer
shall promptly inform the Company thereof. All documents that Buyer is
responsible for filing with the SEC in connection with the transactions
contemplated by this Agreement will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(f) None of the information supplied by the Company for inclusion
or incorporation by reference in the Proxy Statement or a Schedule 13E-3 shall,
at (i) the time filed with the SEC, in the case of the Schedule 13E-3, (ii) the
time the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to the stockholders of the Company, in the case of the Proxy
Statement, (iii) the time of Company's Stockholders' Meetings, in the case of
each of the Schedule 13E-3 and the Proxy Statement, in each case as then amended
or supplemented, and (iv) the Effective Time, in the case of each of the
Schedule 13E-3 and the Proxy Statement, in each case as then amended or
supplemented, contain any untrue statement of a material fact or fail 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. If, at any time prior to the Effective Time, any event or
circumstance relating to the Company or any Company Subsidiary, or their
respective officers or directors, that should be set forth in an amendment or a
supplement to the Proxy Statement or Schedule 13E-3 should be discovered by the
Company, the Company shall promptly inform Buyer. All documents that the Company
is responsible for filing with the SEC in connection with the Merger or the
other transactions contemplated by this Agreement will comply as to form and
substance in all material respects with the applicable requirements of the
Securities Act and the rules and regulations thereunder and the Exchange Act and
the rules and regulations thereunder.
SECTION 6.02 Access to Information; Confidentiality. The Company shall,
and shall cause each Company Subsidiary to afford to Buyer, and to Buyer's
officers, employees, accountants, counsel, financial advisors, financing sources
and other representatives, upon reasonable notice, reasonable access during
normal business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, the Company shall, and shall cause each Company Subsidiary
to, promptly make available to Buyer such information concerning its business,
properties, assets, customers, consultants and personnel as Buyer may reasonably
request. The Company hereby consents, and shall cause each Company Subsidiary to
consent, to Buyer and Buyer's
35
officers, employees, accountants, counsel, financial advisors, financing sources
and other representatives contacting, in a reasonable fashion, real estate
developers and landlords of the Company and such Company Subsidiary and will,
upon reasonable notice from Buyer, request such real estate developers and
landlords to cooperate during normal business hours during the period prior to
the Effective Time with any reasonable requests made by or on behalf of Buyer.
Subject to the requirements of Law, Buyer shall, and shall cause its officers,
employees, agents, consultants and affiliates to, hold all information obtained
pursuant to this Agreement in confidence under the Buyer Confidentiality
Agreement, and in the event of termination of this Agreement for any reason,
Buyer shall promptly comply with its obligations under the Buyer Confidentiality
Agreement.
SECTION 6.03 No Solicitation of Transactions.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement in accordance with Section 8.01 hereof, except as
provided in clause (b) below, the Company shall not, and shall not permit any of
the Company Subsidiaries to directly or indirectly, initiate, solicit,
negotiate, encourage or provide nonpublic confidential information to
facilitate, and the Company shall, and shall use its reasonable best efforts to
cause any officer, director or employee of the Company, or any attorney,
accountant, investment banker, financial advisor or other agent retained by it
or any of the Company Subsidiaries, not to directly or indirectly initiate,
solicit, negotiate, encourage or provide nonpublic or confidential information
to facilitate, any proposal or offer to acquire any part of the business or
properties of the Company constituting 30% or more of the net revenues, net
income or the assets of the Company or more than 30% of the capital stock of the
Company (including any capital stock then owned by the Person or group making
such offer or proposal), whether by merger, consolidation, recapitalization,
purchase of assets, tender offer or otherwise and whether for cash, securities
or any other consideration or combination thereof (any such transaction being
referred to herein as an "Acquisition Transaction"). The Company immediately
shall cease and cause to be terminated all activities, discussions or
negotiations with any parties with respect to any Acquisition Proposal as
defined below.
(b) Notwithstanding the provisions of clause (a) above, the Company
Board or the Special Committee may:
(i) furnish information to any Person in response to an unsolicited
written bona fide offer or proposal with respect to an Acquisition
Transaction (an "Acquisition Proposal") if, and only to the extent that
(I) the Company Board or the Special Committee determines, in good faith
and after consultation with its independent financial advisor and legal
counsel, that such Acquisition Proposal is, or could reasonably be
expected to lead to, a Superior Proposal (as hereinafter defined); (II)
prior to furnishing such information to such Person, the Company provides
written notice to Buyer to the effect that it is furnishing such
information to such Person (which notice shall be in compliance with
clause (c) of this Section 6.03); and (III) the Company Board or the
Special Committee receives, prior to furnishing any such information to
such Person, an executed confidentiality agreement (a "Confidentiality
Agreement") which does not contain exclusivity provisions which would
prevent the Company from complying with its obligations hereunder and
which is substantially similar to the confidentiality
36
agreement between the Company and ▇▇▇▇▇▇▇ Investment Partners dated
November, 2001 (the "Buyer Confidentiality Agreement").
(ii) engage in discussions or negotiations with any Person in
response to an Acquisition Proposal if, and only to the extent that (I)
the Company Board or the Special Committee determines, in good faith and
after consultation with its independent financial advisor and legal
counsel, that such Acquisition Proposal is, or could reasonably be
expected to lead to, a Superior Proposal (as hereinafter defined); (II)
the Company Board or the Special Committee determines in good faith (after
consultation with legal counsel) that the failure to engage in discussions
or negotiations with such person could reasonably be expected to
constitute a breach by the Company Board or the Special Committee of its
fiduciary duties to the Company's stockholders under applicable Law; (III)
prior to engaging in discussions or negotiations with such Person, the
Company provides written notice to Buyer to the effect that it is engaging
in discussions or negotiations with such Person (which notice shall be in
compliance with clause (c) of this Section 6.03 and shall identify the
material terms of the proposal (if different from any notice previously
provided)); and (IV) if not previously obtained, the Company Board or the
Special Committee receives, prior to engaging in discussions or
negotiations with such Person, a Confidentiality Agreement.
(iii) (A) approve, recommend, or propose to approve or recommend any
Acquisition Proposal, (B) cause the Company to accept any Acquisition
Proposal and/or (C) enter into any letter of intent, acquisition agreement
or other similar agreement or arrangement to consummate an Acquisition
Proposal, if and only to the extent that (I) the Company Board or the
Special Committee determines, in good faith and after consultation with
its independent financial advisor and legal counsel, that such Acquisition
Proposal would constitute a Superior Proposal (as hereinafter defined);
(II) the Company Board or the Special Committee determines in good faith
(after consultation with legal counsel) that the failure to take such
action would reasonably be expected to constitute a breach by the Company
Board or the Special Committee of its fiduciary duties to the Company's
stockholders under applicable Law; and (III) prior to taking such action,
the Company complies with the requirements contained in clause (c) of this
Section 6.03.
For purposes of this Agreement, "Superior Proposal" shall mean a bona fide
Acquisition Proposal made by a third party (A) that the Company Board or the
Special Committee determines in its good faith judgment (after consultation with
its financial advisor) to be more favorable to the Company's stockholders (other
than the Rollover Stockholders) from a financial point of view than the Merger
(after taking into account any adjustment to the terms of this Agreement and the
transactions contemplated hereby proposed by Buyer in response to such
Acquisition Proposal), (B) that is expected to result in the acquiring person or
group and any of its or their respective Affiliates owning more than eighty-five
percent of the outstanding shares of Company Common Stock and Company Preferred
Stock (including any capital stock of the Company then owned by such person or
group) or substantially all of the assets of the Company, and (C) that the
Company Board or the Special Committee determines in its good faith judgment is
reasonably likely to be consummated, taking into account all legal and
regulatory aspects of the proposal and all contingencies (including, without
limitation, any financing contingencies) of
37
the proposal. The Company's Board of Directors may take and disclose to the
Company's stockholders a position required by Rule 14e-2 under the Exchange Act.
It is understood and agreed that negotiations and other activities conducted in
accordance with this paragraph (b) shall not constitute a violation of paragraph
(a) of this Section 6.03.
(c) The Company shall notify Buyer orally within one business day and
in writing within two business days after receipt of any Acquisition Proposal,
indication of interest or request for nonpublic information relating to the
Company or a Company Subsidiary in connection with an Acquisition Proposal or
for access to the properties, books or records of the Company or any Company
Subsidiary by any Person or group that informs the Board of Directors of the
Company or such Company Subsidiary or the Special Committee that it is
considering making, or has made, an Acquisition Proposal. Such notice to Buyer
shall indicate in reasonable detail the identity of the offeror and the terms
and conditions of such proposal, inquiry or contact. The Company shall use its
reasonable efforts to keep Buyer informed of the status and details (including
any change to the terms thereof) of any such Acquisition Proposal. In addition,
in the event the Company intends to take any actions set forth in clause
(b)(iii) of this Section 6.03 in connection with a Superior Proposal, the
Company will notify Buyer in writing at least three business days prior to
taking such action, which notice will identify and detail the proposed terms of
such Superior Proposal. The Company may only take any action set forth in clause
(b)(iii) of this Section 6.03 with respect to such Superior Proposal if (a) the
proposal continues to be a Superior Proposal in light of any improved
transaction proposed by Buyer prior to the expiration of the three business day
period and (b) the Company terminates the agreement in accordance with Section
8.01(h) of this Agreement and complies with Section 8.03(b) of this Agreement.
SECTION 6.04 Directors' and Officers' Indemnification and Insurance.
(a) Buyer shall, to the fullest extent permitted by Law, cause the
Surviving Corporation (from and after the Effective Time) to honor all of the
Company's obligations to indemnify, defend and hold harmless (including any
obligations to advance funds for expenses) the current and former directors and
officers of the Company and the Company Subsidiaries against all losses, claims,
damages or liabilities arising out of acts or omissions by any such directors
and officers occurring prior to the Effective Time to the maximum extent that
such obligations of the Company exist on the date of this Agreement, whether
pursuant to the Company Charter, the Company By-Laws, the contractual
obligations set forth on Schedule 6.04 or the DGCL and such obligations shall
survive the Merger and shall continue in full force and effect in accordance
with the terms of the Company Charter, the Company By-Laws, any such contractual
obligations and the DGCL from the Effective Time until the expiration of the
applicable statute of limitations with respect to any claims against such
directors or officers arising out of such acts or omissions. In the event a
current or former director or officer of the Company or any of its subsidiaries
is entitled to indemnification under this Section 6.04(a), such director or
officer shall be entitled to reimbursement from the Surviving Corporation for
reasonable attorney's fees and expenses incurred by such director or officer in
pursuing such indemnification, including payment of such fees and expenses by
the Surviving Corporation in advance of the final disposition of such action
upon receipt of an undertaking by such current or former director or officer to
repay such payment unless it shall be adjudicated that such current or former
director or officer was entitled to such payment.
38
(b) The Company shall maintain, through the Effective Time, the
Company's existing directors' and officers' insurance in full force and effect
without reduction of coverage. From and after the Effective Time and for a
period of six years after the Effective Time, Buyer shall cause to be maintained
in effect the current policies of directors' and officers' liability insurance
maintained by the Company (provided that Buyer may substitute therefore policies
with reputable and financially sound carriers of at least the same coverage and
amounts containing terms and conditions which are no less advantageous to the
insureds) with respect to claims arising from or related to facts or events
which occurred at or before the Effective Time; provided, however, that Buyer
shall not be obligated to make annual premium payments for such insurance to the
extent such premiums exceed 200% of the annual premiums paid as of the date
hereof by the Company for such insurance (such 200% amount, the "Maximum
Premium"). If such insurance coverage cannot be obtained at all, or can only be
obtained at an annual premium in excess of the Maximum Premium, Buyer shall
maintain the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Premium. The Company
represents to Buyer that the last annual premium paid prior to the date of this
Agreement was $66,183.
(c) The Certificate of Incorporation or By-Laws of the Surviving
Corporation shall contain the provisions that are set forth, as of the date of
this Agreement, in Article 4 of the By-Laws of the Company, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at or at any time prior to the Effective Time were
directors, officers, employees or other agents of the Company (and during such
period the Certificate of Incorporation of the Surviving Corporation shall not
be amended, repealed or otherwise modified in any manner that would have the
effect of so amending, repealing or otherwise modifying any such provisions of
the By-Laws).
(d) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
and the continuing or surviving entity does not assume the obligations of the
Surviving Corporation set forth in this Section 6.04, or (ii) transfers all or
substantially all of its properties and assets to any Person, then, and in each
such case, proper provision shall be made so that the successors and assigns of
the Surviving Corporation assume, as a matter of Law or otherwise, the
obligations set forth in this Section 6.04.
SECTION 6.05 Further Action; Consents; Filings.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties shall use all reasonable efforts to take, or
cause to be taken, all reasonable actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things reasonably
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated hereby, including
without limitation (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by,
39
any Governmental Entity, (ii) the obtaining of all necessary consents, approvals
or waivers from third parties, (iii) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby,
including, when reasonable, seeking to have any stay or temporary restraining
order entered by any court or other Governmental Entity vacated or reversed and
(iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated hereby and to carry out fully the
purposes of this Agreement. In connection with and without limiting the
foregoing, the Company and the Company Board shall, at the request of Buyer: (i)
take all action within its power reasonably requested by Buyer as necessary to
ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to this Agreement or the transactions contemplated hereby,
and (ii) if any state takeover statute or similar statute or regulation becomes
applicable to this Agreement or the transactions contemplated hereby, take all
action within its power (unless the taking of such action would reasonably be
expected to be a breach of its fiduciary obligations to the Company's
stockholders), reasonably requested by Buyer as necessary to ensure that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated by this Agreement and otherwise to minimize the effect
of such statute or regulation on the transactions contemplated hereby. Nothing
in this Agreement shall be deemed to require any party to waive any substantial
rights or agree to any substantial limitation on its operations or to dispose of
any significant asset or collection of assets.
(b) Buyer and the Company shall file as soon as practicable after the
date of this Agreement any required notifications under the HSR Act and shall
respond as promptly as practicable to all inquiries or requests that may be made
pursuant to the HSR Act for additional information or documentation and shall
respond as promptly as practicable to all inquiries and requests received from
any State Attorney General or other Governmental Entity in connection with
antitrust matters. The parties shall cooperate with each other in connection
with the making of all such filings or responses, including providing copies of
all such documents to the other party and its advisors prior to filing or
responding.
SECTION 6.06 Public Announcements. Buyer, on the one hand, and the
Company, on the other hand, shall consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements (including any filings with any federal or state
governmental or regulatory agency or with the NASDAQ National Market) with
respect to the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable Law (including foreign regulations
relating to competition), court process or by obligations pursuant to any
listing agreement with any national securities exchange.
SECTION 6.07 Certain Employee Benefits Matters. For a period of one year
following the Effective Time and effective upon the Merger, Buyer shall, or
shall cause the Surviving Company to, provide medical, 401(k), life and
disability benefits and cash compensation to Surviving Company employees (except
to the extent that any such employee is party to a contract covered by Section
3.11(a)(i) that governs such compensation and benefits) that, in the aggregate,
are comparable to the medical, 401(k), life and disability benefits and cash
compensation (other than employee benefit plans, programs, contracts or
arrangements providing
40
for stock options, stock purchase rights, restricted stock, phantom stock or
other stock-based compensation) customarily provided to the similarly situated
employees of comparable companies engaged in for-profit businesses substantially
similar to that of the Company and the Company Subsidiaries.
SECTION 6.08 Rights Agreement. The Company Board has taken all action in
order to render the Company Rights inapplicable to the transactions contemplated
hereby (including, without limitation, the execution and delivery of the Voting
Agreements set forth in Exhibit 1 hereto). Except as approved in writing by
Buyer, the Company Board shall not (i) authorize, approve or effectuate any
amendment to the Company Rights Agreement, (ii) authorize, approve or effectuate
any redemption of the Company Rights or (iii) take any action with respect to,
or make any determination under, the Company Rights Agreement, in each case to
permit or facilitate the consummation of any Acquisition Proposal unless this
Agreement has been terminated in accordance with the terms and conditions set
forth herein.
SECTION 6.09 Stockholder Litigation. The Company shall give Buyer the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and/or its directors relating to this Agreement
or the transactions contemplated hereby; provided, however, that Buyer shall
have the right to prevent the Company from entering into any such settlement
without Buyer's consent, which consent shall not be unreasonably withheld or
delayed.
SECTION 6.10 Solvency. Buyer shall deliver to the Company a certificate
from the Chief Financial Officer of the Surviving Corporation, dated as of the
Closing Date, to the effect that, immediately after the Effective Time and after
giving effect to the Merger, the Financing and the other transactions
contemplated in connection therewith (and any changes in the Surviving
Corporation's assets and liabilities as a result thereof) the Surviving
Corporation: (i) will be solvent (i.e., in that both the fair value of its
assets will not be less than the sum of its debts and that the present fair
saleable value of its assets will not be less than the amount required to pay
its probable liability on its debts as they become absolute and matured); (ii)
will not have unreasonably small capital with which to engage in its business;
and (iii) will not have incurred and does not plan to incur debts beyond its
ability to pay as they become absolute and matured.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to the Obligations of Each Party. The obligations
of the Company and Buyer to consummate the Merger are subject to the
satisfaction or waiver (where permissible) at or prior to the Effective Time of
the following conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(b) No Order. No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law, rule, regulation, judgment, decree, injunction, executive order or award
(an "Order") that is then in effect or
41
pending and has, or would have, the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(c) Antitrust Waiting Periods. Any waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act and any
foreign regulations, if any, shall have expired or been terminated or obtained.
(d) Consents and Authorizations from Governmental Entities. All
consents, approvals and authorizations legally required to be obtained to
consummate the Merger shall have been obtained and made with all Governmental
Entities.
(e) Actions. No Action shall have been brought and remain pending by
any Governmental Entity that seeks to prevent the consummation of the
transactions contemplated by this Agreement.
SECTION 7.02 Conditions to the Obligations of Buyer . The obligations of
Buyer to consummate the Merger are subject to the satisfaction or waiver (where
permissible) at or prior to the Effective Time of the following additional
conditions:
(a) Representations and Warranties.
(i) Each of the representations and warranties of the Company
contained in Sections 3.03, 3.04, 3.17 and 3.21 of this Agreement (A) that
do not have materiality or Material Adverse Effect qualifications shall be
true and correct in all material respects as of the Closing Date, as though
made at and as of the Closing Date, except that those representations and
warranties that address matters only as of a particular date shall remain
true and correct in all material respects as of such date and (B) that have
materiality or Material Adverse Effect qualifications shall be true and
correct in all respects as of the Closing Date, as though made at and as of
the Closing Date, except that those representations and warranties that
address matters as of a particular date shall remain true and correct in
all respects as of such date; and
(ii) each of the representations and warranties of the Company
contained in this Agreement and not listed in clause (i) above shall be
true and correct as of the Closing Date, as though made at and as of the
Closing Date, except that those representations and warranties that address
matters only as of a particular date shall remain true and correct as of
such date except where the failure of any of the representations and
warranties either at the Closing Date or as of such particular date would
not and would not reasonably be expected to have a Material Adverse Effect
and would not and would not be reasonably likely to prevent or delay
consummation of the Merger, (provided, that for purposes of this Section
7.02(a)(ii) only, any materiality or Material Adverse Effect qualifications
to the representations and warranties shall be disregarded).
Buyer shall have received a certificate of the Chief Executive Officer or Chief
Financial Officer of the Company as to the satisfaction of the conditions set
forth in this Section 7.02(a).
42
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time and Buyer shall have received a certificate of the Chief
Executive Officer or Chief Financial Officer of the Company to that effect.
(c) Consents. The consents, approvals and authorizations from third
parties listed on Schedule 7.02(c) required as a result of the transactions
contemplated by this Agreement or the Merger shall have been obtained or Buyer
shall be reasonably satisfied that such consents, approvals and authorizations
are not required.
(d) Material Adverse Effect. There shall have been no circumstance,
event, occurrence, change or effect that, individually or in the aggregate, has
had or would reasonably be expected to have a Material Adverse Effect since the
date of this Agreement.
(e) Actions. No Action shall have been brought and remain pending by
any Governmental Entity or other Person that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(f) Financing. The Financing contemplated in the Commitment Letters
shall have been consummated on the terms set forth therein; provided, however,
that in the event the Financing contemplated in the Commitment Letters shall not
have been consummated on the terms set forth therein, the Buyer shall have used
commercially reasonable efforts to obtain financing with no greater cost of
capital to the Buyer and other terms no less favorable in the aggregate to the
Buyer than the terms contained in the Commitment Letters, in order to consummate
the Merger and the transactions contemplated hereby.
(g) Certified Copies. At the Closing, the Company shall deliver
certified copies of (i) the resolutions duly adopted by the Company Board on
August 5, 2002 and the Special Committee on August 5, 2002 authorizing the
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby applicable to it and the Transactions, (ii) Company Charter
and Company By-Laws and (iii) the tabulation of the stockholder vote taken at
the Stockholders Meeting.
SECTION 7.03 Conditions to the Obligations of the Company. The obligations
of the Company to consummate the Merger are subject to the satisfaction or
waiver (where permissible) at or prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects as of the Closing Date, as though made on and as of the
Closing Date, except that those representations and warranties that address
matters only as of a particular date shall remain true and correct as of such
date except where the failure of any of the representations and warranties
either at the Closing Date or as of such particular date would not and would not
reasonably be expected to have a Buyer Material Adverse Effect, (provided, that
for purposes of this Section 7.03(a) only, any materiality or Buyer Material
Adverse Effect qualifications to the
43
representations and warranties shall be disregarded), and the Company shall have
received a certificate of the Chief Executive Officer or Chief Financial Officer
of Buyer to that effect.
(b) Agreements and Covenants. Buyer shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time and the Company shall have received a certificate of the Chief Executive
Officer or Chief Financial Officer of Buyer to that effect.
(c) Certified Copies. At the Closing, Buyer shall deliver certified
copies of (i) the resolutions duly adopted by Buyer's board of directors
authorizing the execution, delivery and performance of this Agreement and the
other agreements contemplated hereby applicable to it and the Transactions, (ii)
the resolutions duly adopted by Buyer's stockholders approving this Agreement
and the Transactions, and (iii) the certificate of incorporation and the by-laws
of Buyer.
(d) Solvency Certificate. The Company shall have received a
certificate in form and substance satisfactory to the Company, to the effects
set forth in Section 6.10 hereof.
ARTICLE VIII
TERMINATION, AMENDMENT, WAIVER AND EXPENSES
SECTION 8.01 Termination. This Agreement may be terminated and the Merger
and the other transactions contemplated by this Agreement may be abandoned at
any time prior to the Effective Time, notwithstanding any requisite approval and
adoption of this Agreement and the transactions contemplated by this Agreement,
as follows:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Buyer and the Company;
(b) by either Buyer or the Company, if the Effective Time shall not
have occurred on or before December 5, 2002; provided, however, that the right
to terminate this Agreement under this Section 8.01(b) shall not be available to
any party whose improper action or failure to act has caused the failure of the
Merger to occur on or before such date;
(c) by either Buyer or the Company, if there shall be any Law or
Order of a Governmental Authority which is final and nonappealable preventing
the consummation of the Merger;
(d) by Buyer if (X) the Company Board or the Special Committee (i)
withdraws or modifies in a manner adverse to Buyer, or publicly resolves to
withdraw or modify in a manner adverse to Buyer, its approval or recommendation
of this Agreement or the Merger, (ii) fails to recommend to the Company's
stockholders that they approve the Merger and give the Company Stockholder
Approval, (iii) publicly approves or recommends, or resolves to approve or
recommend, any alternative Acquisition Proposal, (iv) enters into any letter of
intent or similar document or any agreement, contract or commitment accepting
any Superior Proposal, or (v) fails to reconfirm the recommendation referred to
in clause (ii) above if requested in accordance with the applicable provisions
of Section 6.01(a), or fails to publicly announce (in accordance
44
with the applicable provisions of Section 6.01(a)) that the Company Board is not
recommending any alternative Acquisition Proposal, (Y) the Company shall have
materially or Intentionally breached its obligations under Section 6.03, or (Z)
a tender offer or exchange offer for 30% or more of the outstanding shares of
the Company Common Stock (assuming conversion of the Company Preferred Stock and
taking into consideration any shares of Company Common Stock and/or Company
Preferred Stock already held by the Person or group commencing such tender or
exchange offer) is commenced, and the Board of Directors or the Special
Committee of the Company fails to recommend against acceptance of such tender
offer or exchange offer by its stockholders (including by taking no position
with respect to the acceptance of such tender offer or exchange offer by its
stockholders) within ten business days from the commencement thereof; provided
that Buyer's right to terminate pursuant to this clause (Z) shall expire if not
exercised within 30 days of such failure;
(e) by either Buyer or the Company if this Agreement shall fail to
receive the requisite vote for approval at the Company Stockholders' Meeting
duly called and held in accordance with Section 6.01(b) hereof;
(f) prior to the Effective Time, by Buyer upon a breach of any
representation, warranty, covenant or agreement (subject to the materiality
threshold, if any, expressed in such representation, warranty, covenant or
agreement) on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth either in Section 7.02(a) or 7.02(b)
hereof would not be satisfied; provided, that the termination right pursuant to
this clause (f) shall not be available if such breach shall have been cured
within 15 days of notification by Buyer to the Company of such breach or such
breach is otherwise waived by Buyer;
(g) prior to the Effective Time, by the Company upon a breach of any
representation, warranty, covenant or agreement (subject to the materiality
threshold, if any, expressed in such representation, warranty, covenant or
agreement) on the part of Buyer set forth in this Agreement, or if any
representation or warranty of Buyer shall have become untrue, in either case
such that the conditions set forth either in Section 7.03(a) or Section 7.03(b)
hereof would not be satisfied; provided, that the termination right pursuant to
this clause (g) shall not be available if such breach shall have been cured
within 15 days of notification by the Company to Buyer of such breach or such
breach is otherwise waived by the Company;
(h) prior to the Stockholder Approval, by the Company (A) if the
Board of Directors of the Company shall have authorized the Company, subject to
complying with the terms of this Agreement (including without limitation,
Section 6.03), to enter into a definitive agreement with respect to a Superior
Proposal and the Company shall have notified Buyer in writing pursuant to
Section 6.03(c) that it intends to enter into such an agreement, and (B) the
Superior Proposal on which the agreement is based continues to be a Superior
Proposal after taking into account any adjustment to the terms and conditions
hereof proposed in writing by Buyer within three business days of receipt of the
Company's written notification of its intention to enter into such definitive
agreement with respect to the Superior Proposal; provided, however, that such
termination pursuant to this clause (h) shall not be effective unless and until
the Company shall have paid to Buyer the fee described in Section 8.03(b)
hereof.
45
SECTION 8.02 Effect of Termination. Except as provided in Section 9.01
hereof, in the event of termination of this Agreement pursuant to Section 8.01
hereof, this Agreement shall forthwith become void, there shall be no liability
under this Agreement on the part of Buyer or the Company or any of their
respective officers or directors, and all rights and obligations of each party
hereto shall cease, subject to the obligations set forth in Section 8.03 hereof;
provided, however, that nothing herein shall relieve any party from liability
for the willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
SECTION 8.03 Expenses.
(a) Except as set forth below, all Expenses (as defined below)
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses. "Expenses" as
used in this Agreement shall include all reasonable out of pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation, negotiation, execution and performance of
this Agreement, the preparation, printing, filing and mailing of the Schedule
13E-3 and the Proxy Statement, the solicitation of stockholder approval, the
filing of any required notices under the HSR Act or other similar regulations
and all other matters related to the closing of the Merger and the other
transactions contemplated by this Agreement.
(b) The Company agrees to pay to Buyer a non-refundable fee equal
to $1,500,000 plus all Expenses not to exceed $1,500,000 incurred by Buyer if:
(i) Buyer terminates this Agreement pursuant to Section 8.01(d);
(ii) (A) Buyer or the Company terminates this Agreement pursuant to
Section 8.01(e), (B) prior to the time of such termination an Acquisition
Proposal had been made known to the Company's stockholders generally or
any Person shall have publicly announced its intention (whether or not
conditional) to make an Acquisition Proposal; and (C) on or prior to the
12-month anniversary of the termination of this Agreement, the Company or
any of the Company Subsidiaries or affiliates (x) enters into an agreement
or letter of intent (or if the Company Board resolves or announces an
intention to do so) with respect to any Business Combination with any
Person, entity or group or (y) consummates any Business Combination with
any Person, entity or group;
(iii) The Company terminates this Agreement pursuant to Section
8.01(h); or
(iv) Buyer terminates this agreement pursuant to Section 8.01(f) and
within 12 months of such termination, the Company (x) enters into an
agreement or letter of intent (or if the Company Board resolves or
announces an intention to do so) with respect to any Business Combination
with any Person, entity or group or (y) consummates any Business
Combination with any Person, entity or group.
(c) Any payment required to be paid pursuant to Section 8.03(a)
shall be made by wire transfer of same day funds:
46
(i) prior to the occurrence of (a) any event described in Section
8.03(b)(iii), (b) any event described in subclause (x) or (y) of Section
8.03(b)(ii) in the case of termination by the Company or Buyer pursuant to
such Section 8.03(b)(ii) or (c) any event described in subclause (x) or
(y) of Section 8.03(b)(iv) in the case of termination by Buyer pursuant to
such Section 8.03(b)(iv); or
(ii) within two business days of a termination by Buyer pursuant to
Section 8.03(b)(i).
(d) Without duplication of any payment required by Section 8.03(b),
if Buyer terminates this Agreement pursuant to Section 8.01(f), the Company
agrees to reimburse Buyer for all Expenses not to exceed $1,500,000 incurred by
Buyer, such payment to be made by wire transfer of same day funds within two
business days of such termination.
(e) For purposes of this Section 8.03, "Business Combination" means
(i) a merger, consolidation, share exchange, business combination or similar
transaction involving the Company as a result of which the Company stockholders
prior to such transaction cease to own at least 50% of the voting securities of
the entity surviving or resulting from such transaction (or the ultimate parent
entity thereof) in the proportion they owned such shares prior to such
transaction, (ii) a sale, lease, exchange, transfer, public offering in respect
of, or other disposition of more than 50% of the assets of the Company and the
Company Subsidiaries, taken as a whole, in either case, in a single transaction
or a series of related transactions, or (iii) the acquisition, by a Person
(other than Buyer or any affiliate thereof) or group of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the Company
Common Stock (assuming conversion of the Company Preferred Stock and taking into
consideration any shares of Company Common Stock and/or Company Preferred Stock
already held by such Person or group), in either case, whether by tender or
exchange offer or otherwise.
(f) The Company acknowledges that the agreements contained in this
Section 8.03 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Buyer would not enter into this
Agreement; accordingly, if the Company fails to pay the amounts due pursuant to
this Section 8.03, and, in order to obtain any such payment, Buyer commences a
legal proceeding which results in a judgment against the Company for the amounts
set forth in this Section 8.03, the Company shall pay to Buyer its costs and
expenses (including attorneys' fees) in connection with such proceeding,
together with interest on the amounts set forth in this Section 8.03 at the
prime rate of Citibank N.A. in effect on the date any such payment was required
to be made.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Non Survival of Representations, Warranties and Agreements.
The representations and warranties in this Agreement and in any certificate
delivered pursuant hereto shall terminate at the Effective Time or upon
termination of this Agreement pursuant to Article VIII hereof. The covenants and
agreements in this Agreement shall survive the Effective Time in accordance with
their terms.
47
SECTION 9.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given (i) five
days after mailing by certified mail (postage prepaid, return receipt
requested), (ii) when delivered by hand, (iii) upon confirmation of receipt by
facsimile, delivered during normal business hours, or (iv) one business day
after sending by overnight delivery service to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.02):
if to Buyer:
Socrates Acquisition Corporation
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Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇
with a copy to:
Ropes & ▇▇▇▇
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Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
if to the Company:
Nobel Learning Communities, Inc.
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Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
Nobel Learning Communities, Inc.
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Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Dechert
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Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
SECTION 9.03 Certain Definitions. For purposes of this Agreement, the term:
(a) "Affiliate" of a specified Person means a Person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with such specified Person;
(b) "business day" means any day on which both the principal offices
of the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day (other than a Saturday or a
Sunday) on which banks are not required or authorized to close in The City of
New York;
(c) "Company Subsidiary" means any subsidiary of the Company.
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "Environmental Laws" means any federal, state, local or foreign
Laws relating to (A) releases or overtly threatened releases of Hazardous
Substances or materials containing Hazardous Substances; (B) the manufacture,
handling, transport, use, treatment, storage or disposal of Hazardous Substances
or materials containing Hazardous Substances; or (C) otherwise relating to
pollution or protection of the environment, health, safety or natural resources;
(f) "Hazardous Substances" means (i) those substances defined in or
regulated under the following federal statutes and their state counterparts and
all regulations thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking
Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products,
including crude oil and any fractions thereof; (iii) natural gas, synthetic gas,
and any mixtures thereof; (iv) polychlorinated biphenyls, asbestos and radon;
(v) any other contaminant; and (vi) any substance, material or waste regulated
by any federal, state, local or foreign Governmental Entity pursuant to any
Environmental Law;
(g) "Intellectual Property" means patents, patent applications,
copyrights, trade secrets, inventions, know-how, confidential information and
data, trademarks, service marks, trade names, domain names, rights of privacy
and publicity and moral rights.
(h) "Intentionally" means deliberately acting or failing to act with
the purpose of causing a result, whether such result is achieved or not.
49
(i) "knowledge" means, with respect to the Company, the actual
knowledge, after reasonable inquiry, of any of the persons set forth on Section
(A) of Exhibit 3 hereto and with respect to Buyer, the actual knowledge, after
reasonable inquiry, of any of the persons set forth on Section (B) of Exhibit 3
hereto.
(j) "Material Adverse Effect" means any circumstance, event,
occurrence, change or effect that materially and adversely affects the business,
operations, condition (financial or otherwise), assets (tangible or intangible)
or results of operations of the Company and the Company Subsidiaries taken as a
whole other than any circumstance, event, occurrence, change or effect resulting
from the public announcement of the transactions contemplated by this Agreement.
(k) "person" or "Person" means an individual, corporation,
partnership, limited partnership, syndicate, Person (including, without
limitation, a "Person" as defined in section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government; and
(l) "subsidiary" or "subsidiaries" of any Person means any
corporation, partnership, joint venture or other legal entity of which such
Person (either alone or through or together with any other subsidiary) owns,
directly or indirectly, more than 50% of the stock or other equity interests,
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other legal
entity.
SECTION 9.04 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors and by
the Special Committee at any time prior to the Effective Time; provided,
however, that after this Agreement is adopted by the Company's stockholders, no
such amendment shall be made that reduces the amount or changes the type of
consideration into which each share of Company Common Stock or Company Preferred
Stock shall be converted upon consummation of the Merger without the further
approval of the Company's stockholders. This Agreement may not be amended,
except by an instrument in writing signed by the parties hereto.
SECTION 9.05 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby; provided, however, that any
such waiver by the Company shall be effective only if authorized or approved by
the Special Committee. The failure of any party to this Agreement to assert any
of its rights under this Agreement shall not constitute a waiver of such rights.
SECTION 9.06 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect as long as the economic or legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
50
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
SECTION 9.07 Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of Law or otherwise) without the
prior written consent of the other parties, provided, however, that Buyer shall
be entitled to assign this Agreement and any rights, interests or obligations
hereunder to any of its Affiliates without the consent of the Company, provided
that any such assignment shall not relieve Buyer of its obligations hereunder.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this Agreement to the
contrary, other than the Company's current and former directors and officers in
the case of Section 6.04, nothing in this Agreement, expressed or implied, is
intended to confer on any Person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 9.08 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or in equity.
SECTION 9.09 Governing Law; Forum. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that state and without regard to
any applicable conflicts of law principles.
SECTION 9.10 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.11 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 9.12 Entire Agreement. This Agreement (including the Exhibits the
Company Disclosure Schedule) and the Buyer Confidentiality Agreement constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
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IN WITNESS WHEREOF, Buyer and the Company have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
SOCRATES ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇
Title: Co-President
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Co-President
NOBEL LEARNING COMMUNITIES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Director
Exhibit 3
List of "knowledge" Individuals
Section A
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Section B
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