EXHIBIT 1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
among
AVERT, INC.,
AUTOMATIC DATA PROCESSING, INC.
and
ADP COLORADO, INC.
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Dated as of June 15, 2001
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 THE MERGER ..........................................................2
Section 1.1 The Merger..........................................2
Section 1.2 Closing.............................................2
Section 1.3 Effective Time......................................2
Section 1.4 The Articles of Incorporation.......................2
Section 1.5 The By-Laws.........................................2
Section 1.6 Directors of Surviving Corporation..................3
Section 1.7 Officers of Surviving Corporation...................3
ARTICLE 2 EFFECT OF THE MERGER ON CAPITAL STOCK; PAYMENT FOR COMPANY SHARES....3
Section 2.1 Effect on Capital Stock.............................3
Section 2.2 Payment for Company Shares..........................4
Section 2.3 Treatment of Company Stock Options..................5
Section 2.4 Dissenting Shares...................................7
Section 2.5 Adjustments to Prevent Dilution.....................8
Section 2.6 Withholding Rights..................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................8
Section 3.1 Organization and Qualification; Subsidiaries........8
Section 3.2 Articles of Incorporation and By-Laws...............9
Section 3.3 Capitalization......................................9
Section 3.4 Authority..........................................10
Section 3.5 No Conflict........................................10
Section 3.6 Governmental Required Filings and Consents.........11
Section 3.7 Permits; Compliance................................12
Section 3.8 Securities Exchange Commission ("SEC") Filings;
Financial Statements ..............................12
Section 3.9 Absence of Certain Changes or Events...............13
Section 3.10 Employee Benefit Plans.............................14
Section 3.11 [Reserved.]........................................16
Section 3.12 Litigation.........................................16
Section 3.13 Environmental Matters..............................16
Section 3.14 Intellectual Property..............................18
Section 3.15 Taxes..............................................20
Section 3.16 Material Contracts.................................22
Section 3.17 Certain Agreements.................................23
Section 3.18 Real Property......................................23
Section 3.19 Labor Matters......................................24
Section 3.20 Insurance..........................................24
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Section 3.21 Customers..........................................25
Section 3.22 Investment Company Act.............................25
Section 3.23 Opinion of Financial Advisor.......................25
Section 3.24 Brokers............................................26
Section 3.25 Certain Statutes...................................26
Section 3.26 Information........................................26
Section 3.27 Vote Required......................................26
Section 3.28 Consumer Reporting Agency Laws.....................26
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB.........28
Section 4.1 Organization and Qualification.....................28
Section 4.2 Capitalization of Merger Sub.......................28
Section 4.3 Authority..........................................28
Section 4.4 No Conflict........................................29
Section 4.5 Governmental Required Filings and Consents.........29
Section 4.6 Brokers............................................29
Section 4.7 Information........................................30
Section 4.8 Board Approval.....................................30
Section 4.9 Vote Required......................................30
Section 4.10 Interim Operations of Merger Sub...................30
ARTICLE 5 COVENANTS ..........................................................30
Section 5.1 Conduct of Business of the Company.................30
Section 5.2 Other Actions......................................33
Section 5.3 Notification of Certain Matters....................33
Section 5.4 Proxy Statement....................................33
Section 5.5 Company Shareholders Meeting.......................34
Section 5.6 Access to Information; Confidentiality.............34
Section 5.7 No Solicitation....................................35
Section 5.8 [Reserved].........................................37
Section 5.9 Directors' and Officers' Indemnification...........37
Section 5.10 [Reserved].........................................38
Section 5.11 Reasonable Best Efforts............................38
Section 5.12 Consents; Filings; Further Action..................38
Section 5.13 Intellectual Property Assignment Agreements........40
Section 5.14 Public Announcements...............................40
Section 5.15 Obligations of Merger Sub..........................40
Section 5.16 De-Listing.........................................40
Section 5.17 Expenses...........................................40
Section 5.18 Takeover Statutes..................................41
Section 5.19 Employee Benefits..................................41
Section 5.20 Form S-8...........................................41
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ARTICLE 6 CONDITIONS .........................................................42
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger .................................42
Section 6.2 Conditions to Obligations of the Parent
and Merger Sub ....................................42
Section 6.3 Conditions to Obligation of the Company............44
ARTICLE 7 TERMINATION ........................................................45
Section 7.1 Termination........................................45
Section 7.2 Effect of Termination..............................46
Section 7.3 Amendment..........................................46
Section 7.4 Waiver.............................................46
Section 7.5 Expenses following Termination.....................47
ARTICLE 8 MISCELLANEOUS ......................................................48
Section 8.1 Certain Definitions................................48
Section 8.2 Non-Survival of Representations, Warranties
and Agreements ....................................49
Section 8.3 Counterparts.......................................49
Section 8.4 GOVERNING LAW; WAIVER OF JURY TRIAL................49
Section 8.5 Notices............................................50
Section 8.6 Entire Agreement...................................51
Section 8.7 No Third Party Beneficiaries.......................51
Section 8.8 Obligations of the Parent and of the Company.......51
Section 8.9 Severability.......................................51
Section 8.10 Interpretation.....................................51
Section 8.11 Assignment.........................................52
Section 8.12 Specific Performance...............................52
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EXHIBITS
Exhibit A Form of Voting Agreement
Exhibit B-1 Forms of ▇▇▇▇ ▇. ▇▇▇▇▇▇ Termination and Release Agreement and
Employment Letter
Exhibit B-2 Forms of ▇▇▇▇▇ ▇▇▇▇▇▇▇ Suposs Termination and Release
Agreement and Employment Letter
Exhibit C Form of Plan of Merger
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INDEX OF DEFINED TERMS
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TERM SECTION
---- -------
Acquisition Proposal...................................... 5.8(f)
Affected Employee......................................... 5.19
Affiliate................................................. 8.1(a)
Affiliate Letters......................................... 5.8
Agreement................................................. Title
Articles of Merger........................................ 1.3
Benefit Plans............................................. 3.10(a)
Blue Sky Laws............................................. 3.6
Business day.............................................. 8.1(b)
CBCA...................................................... Recitals
Certificate............................................... 2.1(a)
Claims.................................................... 3.12
Closing................................................... 1.2
Closing Date.............................................. 1.2
COBRA..................................................... 3.10(f)
Code...................................................... 2.3(a)
Company................................................... Title
Company Benefit Plans..................................... 3.10(a)
Company Charter Documents................................. 3.2
Company Common Stock...................................... 2.1(a)
Company Disclosure Letter................................. 3.1(a)
Company Financial Advisor................................. 3.23
Company Governmental Consents............................. 3.6
Company Option Plans...................................... 3.3(a)
Company Permits........................................... 3.7
Company Preferred Stock................................... 3.3(a)
Company Real Property Leases.............................. 3.18
Company SEC Reports....................................... 3.8(a)
Company Share............................................. 2.1(a)
Company Shareholders Meeting.............................. 5.4(a)
Company Shares............................................ 2.1(a)
Company Stock Options..................................... 3.3(a)
Contracts................................................. 3.5(a)(iii)
Control................................................... 8.1(a)
Controlled by............................................. 8.1(a)
Controlling............................................... 8.1(a)
Director Option Holder.................................... 2.3
Effective Time............................................ 1.3
Employment Arrangements................................... Recitals
Environment............................................... 3.13
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TERM SECTION
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Environmental Claims...................................... 3.13
ERISA..................................................... 3.10(a)
ERISA Affiliate........................................... 3.10(a)
Excess Parent Shares...................................... 2.2(d)(i)
Exchange Act.............................................. 3.6
Exchange Agent............................................ 2.2(a)(i)
Exchange Ratio............................................ 2.1(a)
Exchange Trust............................................ 2.2(d)(i)
Excluded Company Shares................................... 2.1(a)
Expenses.................................................. 7.5(a)
FCRA...................................................... 3.28
GAAP...................................................... 3.8(b)
GCL....................................................... Recitals
Governmental Entity....................................... 3.6
Group..................................................... 8.1(d)
Hazardous Substance....................................... 3.13
HSR Act................................................... 3.6
Including................................................. 8.1(c)
Indemnified Liabilities................................... 5.9(a)
Indemnified Parties....................................... 5.9(a)
Indemnifying Party........................................ 5.9(a)
Intellectual Property..................................... 3.14(a)(ii)
Investment Company Act.................................... 3.22
IP Assignment Agreement................................... 5.13
IP Employee............................................... 5.13
IP Licenses............................................... 3.14(a)(ii)
IRS....................................................... 3.10(a)
Law....................................................... 3.5(a)(ii)
Liens..................................................... 8.1
Material Adverse Effect on the Company.................... 3.1(a)
Material Adverse Effect on the Parent..................... 4.1(a)
Material Contracts........................................ 3.16(a)
Merger.................................................... Recitals
Merger Consideration...................................... 2.1(a)
Merger Sub................................................ Title
NYSE...................................................... 2.2(d)(ii)
Option Consideration...................................... 2.3
Option Exchange Ration.................................... 2.3
Parent.................................................... Title
Parent Charter Documents.................................. 4.2
Parent Common Stock....................................... 2.1(a)
Parent Disclosure Letter.................................. 4.1(b)
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TERM SECTION
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Parent Expenses........................................... 7.5(b)
Parent Governmental Consents.............................. 4.6
Parent Preferred Stock.................................... 4.3(a)
Parent SEC Reports........................................ 4.7(a)
Parent Stock Options...................................... 4.3(a)
Parent Subsidiaries....................................... 4.1(a)
Person.................................................... 8.1(d)
Proxy Materials........................................... 5.4(a)
Proxy Statement........................................... 5.4(a)
Release................................................... 3.13
Representatives........................................... 5.7(a)
Requisite Company Vote.................................... 3.4(a)
Safety and Environmental Laws............................. 3.13
Securities Act............................................ 3.6
Series A Preferred Stock.................................. 3.3(a)
significant subsidiary.................................... 8.1(e)
Software.................................................. 3.14(a)(ii)
Sub Common Stock.......................................... 4.3(c)
Subsidiary................................................ 8.1(f)
Subsidiaries.............................................. 8.1(f)
Superior Proposal......................................... 5.7(a)
Surviving By-Laws......................................... 1.5
Surviving Charter......................................... 1.4
Surviving Corporation..................................... 1.1
Systems................................................... 3.14(g)
Takeover Statute.......................................... 3.25
Tax Returns............................................... 3.15(b)
Taxes..................................................... 3.15(a)
Technology................................................ 3.14(a)(ii)
Terminating Company Breach................................ 7.1(f)
Terminating Parent Breach................................. 7.1(g)
Termination Amount........................................ 7.5(b)
under common control with................................. 8.1(a)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
June 15, 2001 among Avert, Inc., a Colorado corporation (the "COMPANY"),
Automatic Data Processing, Inc., a Delaware corporation (the "PARENT"), and ADP
Colorado, Inc., a Colorado corporation and a wholly owned subsidiary of the
Parent ("MERGER SUB").
RECITALS
WHEREAS, the respective boards of directors of each of the
Parent, Merger Sub and the Company have determined that it is in the best
interests of their respective shareholders to combine the respective businesses
of the Parent and the Company, and consequently have approved the merger of
Merger Sub with and into the Company (the "MERGER") and approved and adopted the
Merger, in accordance with the General Corporation Law of the State of Delaware
(the "GCL") and the Colorado Business Corporation Act (the "CBCA") and upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, concurrently with the execution of this Agreement, as
a condition to the willingness of the Parent to enter into this Agreement, the
Parent and certain shareholders of the Company are entering into a Voting
Agreement, a copy of which is attached to this Agreement as Exhibit A (the
"VOTING AGREEMENT"), providing for the agreement by such shareholders to vote in
favor of this Agreement and the Merger;
WHEREAS, concurrently with the execution and delivery of this
Agreement, as a condition to the willingness of Parent to enter into this
Agreement, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ have executed and delivered
termination and release agreements and employment letters with the Company,
copies of which are attached to this Agreement as Exhibits B-1 and B-2,
respectively (collectively, the "EMPLOYMENT ARRANGEMENTS");
WHEREAS, certain terms used in this Agreement which are not
capitalized have the meanings specified in Section 8.1; and
WHEREAS, the Company, the Parent and Merger Sub desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
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ARTICLE 1
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined
below), Merger Sub shall be merged with and into the Company and the separate
corporate existence of Merger Sub shall cease. The Company shall be the
surviving corporation in the Merger (sometimes referred to as the "SURVIVING
CORPORATION") and shall continue to be governed by the laws of the State of
Colorado, and the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger. The Merger shall have the effects set forth in Section ▇-▇▇▇-▇▇▇
of the CBCA. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.2 CLOSING. The closing of the Merger (the
"CLOSING") shall take place (a) at the offices of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 a.m. on the
business day on which the last to be fulfilled or waived of the conditions set
forth in Article 6 (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions) shall be satisfied or waived in accordance with this Agreement or
(b) at such other place and time and/or on such other date as the Company and
the Parent may agree in writing (the "CLOSING DATE").
SECTION 1.3 EFFECTIVE TIME. As soon as practicable
following the Closing, the Company and the Parent will cause an Articles of
Merger (the "ARTICLES OF MERGER") to be signed, acknowledged and delivered for
filing with the Secretary of State of the State of Colorado as provided in
Section ▇-▇▇▇-▇▇▇ of the CBCA. The Articles of Merger shall include a Plan of
Merger as required under Section ▇-▇▇▇-▇▇▇ of the CBCA. The form of the Plan of
Merger is attached hereto as Exhibit C. The Merger shall become effective at the
time when the Articles of Merger have been duly filed with the Secretary of
State of the State of Colorado or such other time as shall be agreed upon by the
parties and set forth in the Articles of Merger and in accordance with the CBCA
(the "EFFECTIVE TIME").
SECTION 1.4 THE ARTICLES OF INCORPORATION. The articles
of incorporation of Merger Sub in effect immediately prior to the Effective Time
shall, from and after the Effective Time, be the articles of incorporation of
the Surviving Corporation (the "SURVIVING CHARTER"), until duly amended as
provided in the Surviving Charter or by applicable law.
SECTION 1.5 THE BY-LAWS. The by-laws of Merger Sub in
effect at the Effective Time shall, from and after the Effective Time, be the
by-laws of the Surviving
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Corporation (the "SURVIVING BY-LAWS"), until duly amended as provided in the
Surviving By-Laws or by applicable law.
SECTION 1.6 DIRECTORS OF SURVIVING CORPORATION. The
directors of Merger Sub at the Effective Time shall, from and after the
Effective Time, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving Charter
and the Surviving By-Laws.
SECTION 1.7 OFFICERS OF SURVIVING CORPORATION. The
officers of the Company shall, from and after the Effective Time, be the
officers of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Charter and the Surviving By-Laws.
ARTICLE 2
EFFECT OF THE MERGER ON CAPITAL STOCK;
PAYMENT FOR COMPANY SHARES
SECTION 2.1 EFFECT ON CAPITAL STOCK. At the Effective
Time, as a result of the Merger and without any action on the part of the holder
of any capital stock of the Company:
(a) MERGER CONSIDERATION. Each share (each a
"COMPANY SHARE" and together the "COMPANY SHARES") of the common stock, without
par value, of the Company (the "COMPANY COMMON STOCK") issued and outstanding
immediately prior to the Effective Time (other than Company Shares that are
owned by the Parent, Merger Sub or any other Parent Subsidiary (as defined
below) or Company Shares that are owned by the Company and in each case not held
on behalf of third parties (collectively, "EXCLUDED COMPANY SHARES")) shall be
converted by virtue of the Merger and without any action on the part of the
holder thereof into the right to receive and become exchangeable for $22.00 in
cash (the "MERGER CONSIDERATION"), without interest thereon. The amount of the
Merger Consideration shall be subject to adjustment as provided in Section 2.5.
At the Effective Time, all Company Shares shall no longer be
outstanding, shall be canceled and retired and shall cease to exist, and each
certificate (a "CERTIFICATE") formerly representing any Company Shares (other
than Excluded Company Shares) shall thereafter represent only the right to
receive the Merger Consideration.
(b) CANCELLATION OF SHARES. Each Excluded
Company Share issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
of such Excluded Company Share, no longer be outstanding, shall be canceled and
retired without payment of any consideration therefor and shall cease to exist.
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(c) MERGER SUB. At the Effective Time, each
share of common stock, par value $.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock, par value
$.01 per share, of the Surviving Corporation, and the Surviving Corporation
shall be a wholly owned subsidiary of the Parent.
SECTION 2.2 PAYMENT FOR COMPANY SHARES.
(a) Prior to the Closing, Parent will cause
Merger Sub to make available to a bank or trust company designated by Parent
(the "PAYING AGENT") sufficient funds to make the payments pursuant to Section
2.1(a) hereof on a timely basis to holders of Company Shares (other than
Excluded Shares) that are issued and outstanding immediately prior to the
Effective Time (such amounts being hereinafter referred to as the "PAYMENT
FUND"). The Paying Agent shall make the payments provided for in the preceding
sentence out of the Payment Fund. The Payment Fund shall not be used for any
other purpose, except as provided in this Agreement.
(b) As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Paying Agent to mail
to each record holder (other than holders of Excluded Shares), as of the
Effective Time, of an outstanding Certificate, a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Paying Agent) and instructions for use in effecting the surrender of the
Certificate and receiving payment therefor. Following surrender to the Paying
Agent of a Certificate, together with such letter of transmittal duly executed
and such other documents as may be reasonably required by the Paying Agent, the
holder of such Certificate shall be paid in exchange therefor cash in an amount
(subject to any applicable withholding tax as specified in Section 2.6) equal to
the product of the number of Company Shares represented by such Certificate
multiplied by the Merger Consideration, and each such Certificate shall
forthwith be canceled. No interest shall be paid or accrued on the cash payable
upon the surrender of the Certificates. If payment is to be made to a Person
other than the Person in whose name the Certificate surrendered is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment (A) pay any transfer or other taxes required by
reason of the payment to a Person other than the registered holder of the
Certificate surrendered or (B) establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. From and after the
Effective Time and until surrendered in accordance with the provisions of this
Section 2.2, each Certificate (other than Certificates representing Excluded
Shares) shall represent for all purposes solely the right to receive, in
accordance with the terms hereof, the Merger Consideration in cash multiplied by
the number of Company Shares evidenced by such Certificate, without any interest
thereon.
(c) If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be
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lost, stolen or destroyed and, if required by the Surviving Corporation in its
reasonable judgment based on the financial wherewithal of the person claiming
such Certificate to be lost, stolen, or destroyed, the posting by such person of
a bond in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent will deliver in exchange for such affidavit, the
applicable Merger Consideration with respect to the Company Shares formerly
represented by such Certificate.
(d) Any portion of the Merger Consideration made
available to the Paying Agent to pay for Company Shares for which appraisal
rights have been perfected shall be returned to the Parent upon demand. Any
portion of the Payment Fund (including the proceeds of any investments thereof)
that remains unclaimed by the former shareholders of the Company for six (6)
months after the Effective Time shall be repaid to the Surviving Corporation.
Any former shareholders of the Company who have not complied with Section 2.2
hereof prior to the end of such six (6) month period shall thereafter look only
to the Surviving Corporation (subject to abandoned property, escheat or other
similar laws) but only as general creditors thereof for payment of their claim
for the Merger Consideration, without any interest thereon, upon due surrender
of the Certificates held by them. Neither Parent, the Surviving Corporation nor
the Paying Agent, shall be liable to any holder of Company Shares for any monies
delivered from the Payment Fund or otherwise to a public official pursuant to
any applicable abandoned property, escheat or similar Law. If any Certificates
shall not have been surrendered prior to two (2) years after the Effective Time
(or such earlier date as shall be immediately prior to the date that such
unclaimed funds would otherwise become subject to any abandoned property,
escheat or similar law) unclaimed funds payable with respect to such
certificates 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.
(e) At the close of business on the day of the
Effective Time, the stock transfer books of the Company shall be closed. At and
after the Effective Time, there shall be no registration of transfers of Company
Shares which were outstanding immediately prior to the Effective Time on the
stock transfer books of the Surviving Corporation. From and after the Effective
Time, the holders of Company Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares except
as otherwise provided in this Agreement or by applicable Law. All cash paid upon
the surrender of Certificates in accordance with the terms of this Article II
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the Company Shares previously represented by such Certificates. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged for cash as provided in this
Article II.
SECTION 2.3 TREATMENT OF COMPANY STOCK OPTIONS.
(a) The Parent and the Company shall take such
actions as are necessary to provide that at the Effective Time each outstanding
Company Stock Option (as defined in Section 3.3(a)) (other than Company Stock
Options held by a Person listed
6
in Section 2.3 of the Company Disclosure Letter) shall be assumed by the Parent
and adjusted in accordance with the terms thereof and this Agreement to be
exercisable to purchase shares of Parent Common Stock, as provided below.
Immediately following the date hereof, the Company shall cause each of the
Company Option Plans (as defined in Section 3.3(a)) to be amended in form and
substance satisfactory to Parent so that following the Effective Time, each such
Company Stock Option shall continue to have, and shall be subject to, the same
terms and conditions set forth in the Company Option Plans or any other
agreement pursuant to which such Company Stock Option was subject immediately
prior to the Effective Time, as the case may be, except that (i) each such
Company Stock Option shall be exercisable for that number of whole shares of
Parent Common Stock equal to the product of (x) the aggregate number of shares
of Company Common Stock for which such Company Stock Option was exercisable
immediately prior to the Effective Time multiplied by (y) the Option Exchange
Ratio (as defined below), rounded down to the nearest whole share, if necessary,
and (ii) the exercise price per share of such Company Stock Option shall be
equal to the aggregate exercise price of such Company Stock Option immediately
prior to the Effective Time divided by the number of shares of Parent Common
Stock for which such Company Stock Option shall be exercisable as determined in
accordance with the preceding clause (i), rounded to the nearest cent, if
necessary. "OPTION EXCHANGE RATIO" shall mean the quotient obtained by dividing
(i) the Merger Consideration by (ii) the closing price per share of Parent
Common Stock (as reported in The Wall Street Journal National Edition) on the
Closing Date. The Company also shall take all such actions that are required to
ensure that all restrictions or limitations on transfer and vesting with respect
to such Company Stock Options, shall remain in full force and effect with
respect to such options after giving effect to the Merger and the assumption by
Parent as set forth above. It is the intention of the parties that, to the
extent that any Company Stock Option referred to in this Section 2.3(a)
constituted an incentive stock option immediately prior to the Effective Time,
such option continue to qualify as an incentive stock option to the maximum
extent permitted by section 422 of the Internal Revenue Code of 1986, as amended
(the "CODE"), and that the assumption of the Company Stock Options provided by
this Section 2.3(a) satisfy the conditions of section 424(a) of the Code. The
Parent shall comply with the terms of the Company Option Plans with respect to
such Company Stock Options and ensure, to the extent required by, and subject to
the provisions of, such Company Option Plans, that such Company Stock Options
that qualified as incentive stock options prior to the Effective Time continue
to qualify as incentive stock options after the Effective Time.
(b) On the Effective Date, each holder of a
Company Stock Option that is listed in Section 2.3 of the Company Disclosure
Letter (each, a "DIRECTOR OPTION HOLDER") shall be entitled to receive, in full
satisfaction of a Company Stock Option held by such Director Option Holder, an
amount in cash without interest in respect thereof equal to the product of (i)
the excess, if any, of the Merger Consideration over the per share exercise or
purchase price of such Company Stock Option and (ii) the number of Company
Shares subject to such Company Stock Option, whether vested or unvested (such
amount being hereinafter referred to as the "OPTION CONSIDERATION"), and each
such Company Stock Option held by a Director Option Holder shall be canceled on
the Effective Date. Such payment shall be reduced by any income or employment
tax
7
withholding required under the Code or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the
Director Option Holder. The Company's Non-Employee Director's Stock Option Plan
shall terminate as of the Effective Date. All administrative and other rights
and authorities granted under the Company's Non-Employee Director's Stock Option
Plan to the Company, the Board of Directors of the Company or any Committee or
designee thereof, shall, following the Effective Date, reside with the Surviving
Corporation.
(c) The Company shall take all reasonable
actions required to qualify for the exemption contemplated by Rule 16b-3 under
the Exchange Act for (i) the treatment of the Company Stock Options held by a
Director Option Holder contemplated in Section 2.3(b) and (ii) the assumption
and adjustment referred to in Section 2.3(a), including, if necessary or
appropriate, obtaining the approval of the Company's Board of Directors, of the
type described in a pertinent SEC no-action letter dated January 12, 1999.
(d) Prior to the Effective Time, the Company
shall deliver to the holders of Company Stock Options appropriate notices (which
notices shall be subject to the approval of the Parent) setting forth such
holder's rights after giving effect to the Merger and the provisions set forth
in this Section 2.3. As soon as practicable following the Effective Time, the
Parent shall deliver to the holders of Company Stock Options appropriate notices
setting forth such holders' rights after giving effect to the Merger and the
provisions set forth in this Section 2.3. Prior to the Effective Time, the
Company shall make such amendments and take such other actions, if any, to the
Company Option Plans as shall be necessary to permit (i) the assumption and
adjustment referred to in Section 2.3(a) and (ii) the cash payment referred to
in Section 2.3(b).
SECTION 2.4 DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement
to the contrary, Company Shares that are held by any record holder who has not
voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal rights in accordance with Section ▇-▇▇▇-▇▇▇ of the CBCA (the
"DISSENTING SHARES") shall not be converted into the right to receive the Merger
Consideration but shall become the right to receive such consideration as may be
determined to be due in respect of such Dissenting Shares pursuant to the CBCA;
PROVIDED, HOWEVER, that any holder of Dissenting Shares who shall have failed to
perfect or shall have withdrawn or lost their rights to appraisal of such
Dissenting Shares, in each case under the CBCA, shall forfeit the right to
appraisal of such Dissenting Shares, and such Dissenting Shares shall be deemed
to have been converted into the right to receive, as of the Effective Time, the
Merger Consideration without interest. Notwithstanding anything to the contrary
contained in this Section 2.4, if the Merger is rescinded or abandoned, then the
right of any shareholder to be paid the fair value of such shareholder's
Dissenting Shares shall cease. The Surviving Corporation shall comply with all
of its obligations under the CBCA with respect to holders of Dissenting Shares.
8
(b) The Company shall give Parent (i) prompt
notice of any demands for appraisal, and any withdrawals of such demands,
received by the Company and any other related instruments served pursuant to the
CBCA, and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
CBCA. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to any demands for appraisal or negotiate, offer
to settle any such demands.
SECTION 2.5 ADJUSTMENTS TO PREVENT DILUTION. In the
event that prior to the Effective Time there is a change in the number of
Company Shares or securities convertible or exchangeable into or exercisable for
Company Shares issued and outstanding as a result of a distribution,
reclassification, stock split (including a reverse stock split), stock dividend
or distribution or other similar transaction, the Merger Consideration shall be
equitably adjusted to eliminate the effects of that event.
SECTION 2.6 WITHHOLDING RIGHTS. Each of the Surviving
Corporation and Parent shall be entitled to deduct and withhold from any amounts
otherwise payable pursuant to this Agreement to any holder of a Certificate such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provisions of Law (as defined in Section
3.5). To the extent that amounts are so withheld by the Surviving Corporation or
Parent, as the case may be, such withheld amounts shall be treated for purposes
of this agreement as having been paid to the holder of a Certificate in respect
to which such deduction and withholding was made by the Surviving Corporation or
Parent, as the case may be.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and Merger
Sub that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION;
SUBSIDIARIES.
(a) The Company is duly organized and is validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and has the 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
as set forth in Section 3.1(a) of the Disclosure Letter delivered to the Parent
and Merger Sub by the Company prior to the execution of this Agreement (the
"COMPANY DISCLOSURE LETTER"), the Company is duly qualified or licensed 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, individually or in the
aggregate, have not resulted and could not reasonably be expected to result in a
Material Adverse Effect on the Company (as defined below). For purposes of this
Agreement, "MATERIAL ADVERSE EFFECT ON THE COMPANY" means any change in or
effect on the business, assets,
9
properties, results of operations, prospects or condition (financial or
otherwise) of the Company that is or could be materially adverse to the Company
or that could materially impair the ability of the Company to perform its
obligations under this Agreement or consummate the Merger and the other
transactions contemplated hereby.
(b) Except as set forth in Section 3.1(b) of the
Company Disclosure Letter, the Company has no subsidiaries and does not hold any
ownership interest in any person.
SECTION 3.2 ARTICLES OF INCORPORATION AND BY-LAWS. The
copies of the Company's articles of incorporation and by-laws, each as amended
through the date of this Agreement (collectively, the "COMPANY CHARTER
DOCUMENTS") that are incorporated by reference in, as exhibits to, the Company's
annual report on Form 10-K for the year ended December 31, 2000 are complete and
correct copies of those documents. The Company Charter Documents are in full
force and effect. The Company is not in violation of any of the provisions of
its organizational documents.
SECTION 3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company
consists of (i) 9,000,000 shares of Company Common Stock and (ii) 1,000,000
shares of Preferred Stock, par value $.10 per share (the "COMPANY PREFERRED
STOCK"). As of June 14, 2001, (i) 3,266,705 shares of Company Common Stock were
issued and outstanding, all of which were validly issued and are fully paid,
nonassessable and not subject to preemptive rights, (ii) no shares of Company
Preferred Stock were issued or outstanding and (iii) (A) 416,000 shares of
Company Common Stock were reserved for issuance upon the exercise of outstanding
stock options (the "COMPANY STOCK OPTIONS") granted pursuant to the Company's
Amended and Restated 1994 Stock Incentive Plan and Non-Employee Director's Stock
Option Plan (collectively, the "COMPANY OPTION PLANS") and (B) 107,000 shares of
Company Common Stock were reserved for issuance pursuant to options available
for grant under the Company Option Plans. Section 3.3(a) of the Company
Disclosure Letter sets forth a complete and correct list as of June 14, 2001 of
the holders of all Company Stock Options, the number of shares subject to each
such option, the vesting schedule of any such option and the exercise price
thereof. Except as set forth above, as of June 14, 2001, no shares of capital
stock or other voting securities of the Company were issued, reserved for
issuance or outstanding and since such date, no shares of capital stock or other
voting securities or options in respect thereof have been issued except upon the
exercise of the Company Stock Options outstanding on June 14, 2001.
(b) Except for outstanding Company Stock
Options, there are no options, warrants, conversion rights, stock appreciation
rights, redemption rights, repurchase rights or other rights, agreements,
arrangements or commitments of any character to which the Company is a party or
by which the Company is bound relating to the issued or unissued capital stock
of the Company or obligating the Company to issue or sell any shares of capital
stock of, or other equity interests in, the Company. The Company does not have
outstanding any bonds, debentures, notes or other obligations the
10
holders of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with shareholders of the Company on any
matter.
(c) All shares of Company Common Stock subject
to issuance, upon issuance prior to the Effective Time on the terms and
conditions specified in the instruments under which they are issuable, will be
duly authorized, validly issued, fully paid, nonassessable and will not be
subject to preemptive rights. Except as set forth in Section 3.3(c) of the
Company Disclosure Letter, there are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or to effect the registration of any shares of Company Common Stock
or other Company securities under the Securities Act (as defined in Section
3.6). Except as set forth in Section 3.3(c) of the Company Disclosure Letter
there are no outstanding material contractual obligations of the Company to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any person.
(d) All unvested shares of Company Common Stock
subject to outstanding Company Stock Options vest immediately upon the Effective
Time.
SECTION 3.4 AUTHORITY.
(a) The Company has all necessary corporate
power and authority to execute and deliver this Agreement to perform its
obligations hereunder and to consummate the Merger and the other transactions
contemplated hereby to be consummated by the Company. The execution and delivery
of this Agreement by the Company and the consummation by the Company of such
transactions have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate such transactions, other
than, with respect to the Merger, the approval of this Agreement by shareholders
of the Company representing a majority of the Company Common Stock entitled to
vote hereon (the "REQUISITE COMPANY VOTE"). This Agreement has been duly
authorized and validly executed and delivered by the Company and constitutes
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
(b) The Board of Directors of the Company (i)
has unanimously adopted the plan of merger set forth in this Agreement and
approved this Agreement and the other transactions contemplated by this
Agreement and (ii) has declared that the Merger and this Agreement and the other
transactions contemplated by this Agreement are advisable and recommended that
the shareholders of the Company adopt this Agreement.
SECTION 3.5 NO CONFLICT.
(a) The execution and delivery of this Agreement
by the Company does not, and the performance of this Agreement by the Company
will not:
11
(i) conflict with or violate any
provision of any Company Charter Document;
(ii) assuming that all consents,
approvals, authorizations and other actions described in Section 3.5(a)(ii) of
the Company Disclosure Letter have been obtained and all filings and obligations
described in Section 3.5(a)(ii) of the Company Disclosure Letter have been made,
conflict with or violate any foreign or domestic law, statute, ordinance, rule,
regulation, order, judgment or decree ("LAW") applicable to the Company or by
which any property or asset of the Company is or may be bound or affected; or
(iii) except as set forth in Section
3.5(a)(iii) of the Company Disclosure Letter, result in any breach of or
constitute a default (or an event which with or without notice or lapse of time
or both would become a default) under, or modification in a manner adverse to
the Company of any material right or benefit under or give to others any right
of termination, amendment, acceleration, repayment or repurchase, increased
payments or cancellation of or result in the creation of a Lien on any property
or asset of the Company under any note, bond, mortgage, indenture, contract,
agreement, commitment, lease, license, permit, franchise or other instrument or
obligation (collectively, "CONTRACTS") to which the Company is a party or by
which its assets or properties is or may be bound or affected;
except, in the case of clauses (ii) and (iii), for such consents, approvals,
authorizations, breaches, defaults or other occurrences which, individually or
in the aggregate, have not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Company.
(b) Except as set forth in Section 3.5(b) of the
Company Disclosure Letter, there are no Contracts to which the Company is a
party or by which the Company or any asset of the Company is bound, which by its
terms limits in any material respect the ability of the Company or, after
consummation of the transactions contemplated by this Agreement, would by its
terms limit in any material respect the ability of the Parent or any of its
affiliates, to engage in any business in any area or for any period. None of the
Company's officers, directors or key employees is a party to any agreement
which, by virtue of such person's relationship with the Company, restricts in
any material respect the Company or any affiliate of the Company from, directly
or indirectly, engaging in any of the businesses in which it engages on the date
hereof.
SECTION 3.6 GOVERNMENTAL REQUIRED FILINGS AND CONSENTS.
The execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
domestic or foreign national, federal, state, provincial or local governmental,
regulatory or administrative authority, agency, commission, court, tribunal or
arbitral body or self-regulated entity (each, a "GOVERNMENTAL ENTITY"), except
(i) for those consents or approvals set forth in Section 3.6 of the Company
Disclosure Letter (the "COMPANY GOVERNMENTAL CONSENTS"), (ii) for applicable
requirements of the Securities Exchange Act of 1934, as
12
amended (together with the rules and regulations promulgated thereunder, the
"EXCHANGE ACT"), and the Securities Act of 1933, as amended (together with the
rules and regulations promulgated thereunder, the "SECURITIES ACT"), (iii)
applicable requirements of state securities or "blue sky" laws ("BLUE SKY
LAWS"), (iv) the pre-merger notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (together with the rules and
regulations promulgated thereunder, the "HSR ACT"), and (v) for the filing of
the Articles of Merger as required by the CBCA.
SECTION 3.7 PERMITS; COMPLIANCE. The Company 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 to own, lease and operate
its properties or to carry on its business as it is now being conducted
(collectively, the "COMPANY PERMITS"), except for Company Permits which the
failure to possess has not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Company; and, as of the date of this
Agreement, no suspension or cancellation of any of the Company Permits is
pending or, to the knowledge of the Company, threatened. The Company is not in
conflict with, or in default or violation of, (i) any Law applicable to the
Company (including, without limitation, the FCRA) or by which any property or
asset of the Company is or may be bound or affected, (ii) any Company Permits,
or (iii) any other Contract to which the Company is a party or by which the
Company or any property or asset of the Company is bound or affected, except for
conflicts, defaults or violations which have not resulted and could not
reasonably be expected to result in a Material Adverse Effect on the Company.
SECTION 3.8 SECURITIES EXCHANGE COMMISSION ("SEC")
FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports,
proxy statements, registration statements and other documents (including all
exhibits, annexes, supplements and amendments to such documents) required to be
filed by it under the Exchange Act and the Securities Act since December 31,
1996 (collectively, including any such documents filed subsequent to the date of
this Agreement, the "COMPANY SEC REPORTS") and the Company has made available to
the Parent each Company SEC Report filed with the SEC. The Company SEC Reports,
including any financial statements or schedules included or incorporated by
reference, (i) comply with the requirements of the Exchange Act or the
Securities Act or both, as the case may be, applicable to those Company SEC
Reports and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated or necessary in order to make the statements made in those Company SEC
Reports, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial
statements included in or incorporated by reference into the Company SEC Reports
(including the related notes and schedules) comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may
13
be indicated in the notes thereto or, in the case of the unaudited interim
financial statements, as permitted by Form 10-Q of the SEC) and fairly present
in all material respects (subject, in the case of the unaudited interim
financial statements, to normal, year-end audit adjustments) the consolidated
financial position of the Company as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended.
(c) Except as and to the extent set forth on the
consolidated financial statements included in or incorporated by reference into
the Company SEC Reports (including the related notes and schedules) or in
Section 3.8(c) of the Company Disclosure Letter, the Company does not have any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet or in
the related notes prepared in accordance with GAAP, except for liabilities or
obligations incurred in the ordinary course of business since the date of the
latest financial statements included in the Company SEC Reports that,
individually or in the aggregate, have not resulted and could not reasonably be
expected to result in a Material Adverse Effect on the Company.
SECTION 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as described in Section 3.9 of the
Company Disclosure Letter, since December 31, 2000, the Company has conducted
its businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not occurred or arisen any change,
effect, event or occurrence that, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect on the Company.
(b) Except as set forth in Section 3.9(b) of the
Company Disclosure Letter, since December 31, 2000, there has not been:
(i) (A) any Contract entered into by the
Company relating to any acquisition or disposition of any assets or business or
(B) any modification, amendment, assignment or termination of or relinquishment
by the Company of any rights under any other Contract (including any insurance
policy naming it as a beneficiary or a loss payable payee) that does or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, other than transactions, commitments, contracts
or agreements in the ordinary course of business consistent with past practice
or those contemplated by this Agreement;
(ii) any (A) grant of any severance or
termination pay to any director, officer or employee of the Company; (B)
entering into of any employment, deferred compensation, consulting or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of or consultant to the Company; (C) increase in
compensation, bonus or other benefits payable under any existing severance or
termination pay policies or employment or consulting agreements; or (D) increase
in compensation, bonus or other benefits payable to directors, officers or
employees of or consultant to the Company who are not parties to
14
employment or consulting agreements with the Company in effect prior to such
date, other than, in the case of clauses (A) through (D), with respect to any
directors, officers, consultants and employees that are not parties to
employment or consulting agreements with the Company, in the ordinary course of
business consistent with past practices or, in the case of clauses (A) through
(D) with respect to any directors, officers, consultants or employees who are
parties to employment or consulting agreements, in accordance with their
respective employment or consulting agreements;
(iii) any damage, destruction or other
casualty loss with respect to any material asset or material property owned,
leased or otherwise used by the Company, not covered by insurance;
(iv) any change by the Company in its
accounting methods, principles or practices;
(v) any declaration, setting aside or
payment of any dividend or distribution in respect of Company Shares or any
redemption, purchase or other acquisition of any of the Company's securities;
(vi) any increase in the eligibility,
compensation or benefits or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation payable or to become
payable to any executive officers of the Company except in the ordinary course
of business consistent with past practice or except as required by applicable
Law;
(vii) (A) any incurrence or assumption by
the Company of any indebtedness for borrowed money or (B) any guarantee,
endorsement or other incurrence or assumption of material liability (whether
directly, contingently or otherwise) by the Company for the obligations of any
other person, other than in the ordinary course of business consistent with past
practice;
(viii) any creation or assumption by the
Company of any Lien on any material asset of the Company, other than in the
ordinary course of business, consistent with past practice; or
(ix) any making of any loan, advance or
capital contribution to or investment in any person by the Company other than in
the ordinary course of business, consistent with past practice.
SECTION 3.10 EMPLOYEE BENEFIT PLANS.
(a) Section 3.10(a)(i) of the Company Disclosure
Letter sets forth a true, correct and complete list of each pension, retirement,
savings, disability, medical, dental, health, life, death benefit, group
insurance, profit sharing, deferred compensation, stock purchase, stock option,
bonus, incentive, employment, severance pay, or other employee benefit plan,
trust, arrangement, contract, commitment, agreement
15
or policy, whether written or oral, contingent or otherwise of the Company
(collectively, "COMPANY BENEFIT PLANS"). Except as set forth in Section
3.10(a)(ii) of the Company Disclosure Schedule, each Company Benefit Plan (i)
has been administered and is in compliance with the terms of such plan and all
applicable laws, rules and regulations, and (ii) no "reportable event" (as such
term is used in Section 4043 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (other than those events for which the 30 day notice
has been waived pursuant to the regulations), "prohibited transaction" (as such
term is used in Section 406 of ERISA or Section 4975 of the Code) or
"accumulated funding deficiency" (as such term is used in Section 412 or 4971 of
the Code) has heretofore occurred with respect to any Company Benefit Plan or
any of its affiliates and any trade or business which is or has ever been under
common control or which is or has ever been treated as a single employer with
any of them under Section 414(b), (c), (m) or (o) of the Code (an "ERISA
AFFILIATE").
(b) There is no litigation or administrative or
other proceeding involving any Company Benefit Plan nor has the Company received
notice that any such proceeding is threatened. Neither the Company nor any ERISA
Affiliate of the Company has any obligation or liability with respect to any
Benefit Plan subject to Title IV of ERISA, including, without limitation, any
"multiemployer plan" (within the meaning of Section 3(37) of ERISA).
(c) True, correct and complete copies of the
following documents, with respect to each of the Company Benefit Plans, have
been made available or delivered to Parent by the Company, to the extent
applicable: (i) any plans, all amendments thereto and related trust documents,
and amendments thereto; (ii) the most recent Form 5500 and all schedules thereto
and the most recent and accurate actuarial report, if any; (iii) the most recent
IRS determination letter; (iv) summary plan descriptions; (v) written
communications to employees relating to the Company Benefit Plans; and (vi)
written descriptions of all non-written agreements relating to the Company
Benefit Plans.
(d) Except as set forth in Section 3.10(d) of
the Company Disclosure Letter, the Company Benefit Plans intended to qualify
under Section 401 of the Code are so qualified and the trusts maintained
pursuant thereto are exempt from federal income taxation under Section 501 of
the Code, and nothing has occurred with respect to the operation of the Company
Benefit Plans which could cause the loss of such qualification or exemption or
the imposition of any liability, penalty or tax under ERISA or the Code.
(e) Except as set forth in Section 3.10(e) of
the Company Disclosure Letter and except as individually or in the aggregate do
not result or could not reasonably be expected to result in a material liability
to the Company, all contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Company Benefit Plans or by Law (without regard to any waivers granted under
Section 412 of the Code), to any funds or trusts established thereunder or in
connection therewith have been made by the due date thereof (including any valid
extension), and all contributions for any period ending on or before
16
the Effective Time which are not yet due will have been paid or accrued on or
prior to the Effective Time.
(f) None of the Company Benefit Plans provide
for post-employment life or health insurance, benefits or coverage for any
participant or any beneficiary of a participant, except as may be required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA")
and at the expense of the participant or the participant's beneficiary. Except
as set forth in Section 3.10(f) of the Company Disclosure Letter and except as
individually or in the aggregate do not result or could not reasonably be
expected to result in a material liability to the Company, each of the Company
and any ERISA Affiliate which maintains a "group health plan" within the meaning
Section 5000(b)(1) of the Code has complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder.
(g) Except as set forth in Section 3.10(g) of
the Company Disclosure Letter, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment becoming due to any employee (current, former or retired)
of the Company, (ii) increase any benefits otherwise payable under any Company
Benefit Plan or (iii) result in the acceleration of the time of payment or
vesting of any such benefits under any such plan.
(h) Except as set forth in Section 3.10(h) of
the Company Disclosure Letter there is no contract, plan or arrangement (written
or otherwise) covering any employee or former employee of the Company or any
Subsidiary that, individually or collectively, will give rise to the payment of
any amount that would not be deductible by the Company by reason of Section 280G
or Section 162(m) of the Code.
SECTION 3.11 [RESERVED.]
SECTION 3.12 LITIGATION. Except as described in Section
3.12 of the Company Disclosure Letter or in any Company SEC Reports filed prior
to the date hereof, there is no suit, claim, action, proceeding or investigation
(collectively, "CLAIMS") pending or, to the knowledge of the Company, threatened
or contemplated against the Company before any Governmental Entity nor are there
any investigations or reviews by any Governmental Entity pending or, to the
Company's knowledge threatened or contemplated against, relating to or affecting
the Company, that, if adversely determined, individually or in the aggregate,
has resulted or could reasonably be expected to result in a Material Adverse
Effect on the Company. The Company is not subject to any outstanding order,
writ, injunction or decree of any court or Governmental Entity which,
individually or in the aggregate, has resulted or could reasonably be expected
to result in a Material Adverse Effect on the Company.
SECTION 3.13 ENVIRONMENTAL MATTERS. Except as disclosed
on Section 3.13 of the Company Disclosure Letter or in any Company SEC Reports
filed prior to the date hereof, and except, individually or in the aggregate, as
could not reasonably be expected to have a Material Adverse Effect on the
Company:
17
(a) The Company is not and has not been in
violation of any applicable Safety and Environmental Law (as defined below);
(b) The Company has all Company Permits required
pursuant to Safety and Environmental Laws that are material to the conduct of
the business of the Company, all such Permits are in full force and effect, no
action or proceeding to revoke, limit or modify any of such Permits is pending,
and the Company is in compliance with all terms and conditions thereof;
(c) The Company has not received, and does not
expect to receive, due to the consummation of the Agreement, any Environmental
Claim (as defined below);
(d) To the Company's knowledge, there is not now
and has not been at any time in the past a Release (as defined below) or
threatened Release of Hazardous Substances (as defined below) into the
Environment (as defined below) for which the Company may be directly or
indirectly responsible; and
(e) To the Company's knowledge, there is not now
and has not been at any time in the past at, on or in any of the real properties
owned, leased or operated by the Company, and, to the Company's knowledge, was
not at, on or in any real property previously owned, leased or operated by the
Company or any predecessor: (i) any generation, use, handling, Release,
treatment, recycling, storage or disposal of any Hazardous Substances, (ii) any
underground storage tank, surface impoundment, lagoon or other containment
facility (past or present) for the temporary or permanent storage, treatment or
disposal of Hazardous Substances, (iii) any asbestos-containing material in a
condition requiring abatement, (iv) any Release or threatened Release, or any
visible signs of Releases or threatened Releases, of a Hazardous Substance to
the Environment in form or quantity requiring remedial action under Safety and
Environmental Laws, or (v) any Hazardous Substances present at such property,
excepting such quantities as are handled in accordance with all applicable
manufacturer's instructions and Safety and Environmental Laws and in proper
storage containers, and as are necessary for the operations of the Company.
For purposes of this Agreement, the following terms have the
following meanings:
(a) "ENVIRONMENT" means navigable waters, waters
of the contiguous zone, ocean waters, natural resources, surface waters, ground
water, drinking water supply, land surface, subsurface strata, ambient air, both
inside and outside of buildings and structures, man-made buildings and
structures, and plant and animal life on earth.
(b) "ENVIRONMENTAL CLAIMS" means any
notification, whether direct or indirect, formal or informal, written or oral,
pursuant to Safety and Environmental Laws or principles of common law relating
to pollution, protection of the
18
Environment or health and safety, at any of the current or past operations of
any of the Parent, any Parent Subsidiary, or the Company, as the case may be.
(c) "HAZARDOUS SUBSTANCE" means any toxic waste,
pollutant, hazardous substance, toxic substance, hazardous waste, special waste,
industrial substance or waste, petroleum or petroleum-derived substance or
waste, radioactive substance or waste, or any constituent of any such substance
or waste, or any other substance regulated under or defined by any Safety and
Environmental Law.
(d) "RELEASE" means any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into or through the indoor or outdoor Environment or into,
through or out of any property, including the movement of Hazardous Substances
through or in the air, soil, surface water, ground water or property.
(e) "SAFETY AND ENVIRONMENTAL LAWS" means all
federal, state and local Laws and Orders relating to pollution, protection of
the Environment, public or worker health and safety, or the emission, discharge,
release or threatened release of pollutants, contaminants or industrial, toxic
or hazardous substances or wastes into the Environment or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or industrial, toxic or
hazardous substances or wastes, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 ▇.▇.▇.▇▇. 9601 ET
SEQ., the Resource Conservation and Recovery Act, 42 ▇.▇.▇.▇▇. 6901 ET SEQ., the
Toxic Substances Control Act, 15 U.S.C. ss. 2601 ET SEQ., the Federal Water
Pollution Control Act, 33 ▇.▇.▇.▇▇. 1251 ET SEQ., the Clean Air Act, 42
▇.▇.▇.▇▇. 7401 ET SEQ., the Federal Insecticide, Fungicide and Rodenticide Act,
7 ▇.▇.▇.▇▇. 121 ET SEQ., the Occupational Safety and Health Act, 29 ▇.▇.▇.▇▇.
651 ET SEQ., the Asbestos Hazard Emergency Response Act, 15 ▇.▇.▇.▇▇. 2601 ET
SEQ., the Safe Drinking Water Act, 42 ▇.▇.▇.▇▇. 300f ET SEQ., the Oil Pollution
Act of 1990 and analogous state acts.
SECTION 3.14 INTELLECTUAL PROPERTY.
(a) (i) Section 3.14(a)(i) of the Company
Disclosure Letter sets forth all domestic and foreign patents and patent
applications, trademark and service ▇▇▇▇ registrations and applications,
Internet domain name registrations and applications, copyright registrations and
applications, and all other material Intellectual Property (as defined below)
owned by the Company, specifying as to each item, as applicable: (A) the nature
of the item, including the title; (B) the owner of the item; (C) the
jurisdictions in which the item is issued or registered or in which an
application for issuance or registration has been filed; and (D) the issuance,
registration or application numbers and dates.
(ii) Section 3.14(a)(ii) of the Company
Disclosure Letter sets forth, and the Company has heretofore made available to
the Parent correct and complete copies of, all licenses, sublicenses, and other
agreements or permissions ("IP LICENSES") under which the Company is a (x)
licensor or (y) licensee or otherwise is
19
authorized to use or practice any Intellectual Property. For purposes of this
Agreement, "INTELLECTUAL PROPERTY" means all of the following as they exist in
all jurisdictions throughout the world, in each case, to the extent owned by,
licensed to, or otherwise used by the Company: (A) patents, patent applications,
and other patent rights (including any divisions, continuations,
continuations-in-part, substitutions, or reissues thereof, whether or not
patents are issued on any such applications and whether or not any such
applications are modified, withdrawn, or resubmitted); (B) trademarks, service
marks, trade dress, trade names, brand names, Internet domain names, designs,
logos, or corporate names, whether registered or unregistered, and all
registrations and applications for registration thereof; (C) copyrights,
including all renewals and extensions, copyright registrations and applications
for registration, and non-registered copyrights; (D) trade secrets, concepts,
ideas, designs, research, processes, procedures, techniques, methods, know-how,
data, mask works, discoveries, inventions, modifications, extensions,
improvements, and other proprietary rights or information (whether or not
patentable or subject to copyright, mask work, or trade secret protection)
(collectively, "TECHNOLOGY"); and (E) computer software programs, including all
source code, object code, and documentation related thereto (the "SOFTWARE").
(b) The Company owns or otherwise possess
legally enforceable rights to use, sell, license and sublicense, free and clear
of any and all Liens or material restrictions, any and all Intellectual Property
that is material to its business and operations.
(c) All of the Company's material Intellectual
Property rights are valid and enforceable. The Company has not infringed upon or
otherwise violated the intellectual property rights of any third party or
received any Claim alleging any such infringement or other violation. The
Company has not, during the five years preceding the date hereof, been a party
to any Claim, nor, to the knowledge of the Company, is any Claim threatened or
is there any valid ground for a Claim that challenges the validity,
enforceability, ownership, or the Company's right to use, sell, and license any
Intellectual Property that is material to the Company's business and operations.
No third party is infringing in any material respect upon any Intellectual
Property material to its business and operations.
(d) The Company has taken all necessary and
desirable actions to maintain and protect each item of Intellectual Property
owned by the Company that is material to the Company's business and operations.
(e) The Company has taken all reasonable
precautions to protect the secrecy, confidentiality, and value of their trade
secrets and the proprietary nature and value of the Technology and the Software
that is material to the Company's business and operations.
(f) All material Software used, sold, or
licensed by the Company is free from any material software defect, performs in
all material respects in conformance with its documentation, and does not
contain any bugs or viruses or any code or mechanism that could be used to
materially interfere with its operation.
20
(g) Except as set forth in Section 3.14(g) of
the Company Disclosure Letter, the Company is not, nor, as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, will be, in material violation of any agreement relating
to any Intellectual Property material to the Company's business and operations.
Except as set forth in Section 3.14(g) of the Company Disclosure Letter, after
the completion of the transactions contemplated by this Agreement, the Company
will continue to own all right, title, and interest in and to or have a license
to use all Intellectual Property (including all Software) on identical terms and
conditions as the Company enjoyed immediately prior to such transactions.
(h) Except as set forth in Section 3.14(h) of
the Company Disclosure Letter, each present or past employee, officer,
consultant or any other person who developed any part of any Company product or
any Intellectual Property that is or will be made, used or sold by the Company
has executed a valid and enforceable agreement with the Company that (i) conveys
any and all right, title and interest in and to all Intellectual Property
developed by such person in connection with such person's employment or contract
to the Company, (ii) requires such person, during and after the term of
employment or contract, to cooperate with the Company in the prosecution of any
patent applications filed in connection with such Intellectual Property, (iii)
to the extent such person is an author of a copyrighted work created in
connection with such person's employment or contract, such work is a "work made
for hire," as set forth in 17 U.S.C. ss. 101, (iv) establishes a covenant by
such person that no process, technique, innovation or other work product
provided to the Company is derived from or otherwise the proprietary information
of a prior employer or contractor, in contravention of any prior confidentiality
agreement, and (v) obligates the employee or contractor to keep any Company
confidential information, including Trade Secrets, confidential both during and
after the term of employment or contract. Except as set forth on Schedule 3.14
(h), no such employee, consultant or other person has excluded works or
inventions made prior to his employment with or work for the Company from his
assignment of inventions pursuant to such proprietary invention agreements.
(i) Set forth in Section 3.14(i) of the Company
Disclosure Letter is a true and complete list of each of the employees of the
Company and any other persons who were primarily involved in the development of
the material Intellectual Property of the Company.
SECTION 3.15 TAXES.
(a) Except as set forth in Section 3.15(a) of
the Company Disclosure Letter, all federal, state, county, local, foreign and
other taxes (including, without limitation, income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance,
capital levy, production, transfer, withholding, employment, unemployment
compensation, payroll related and property taxes, import duties and other
governmental charges and assessments), whether or not measured in whole or in
part by net income, and including deficiencies, interest, additions to tax or
interest, and penalties with respect thereto (including amounts required to be
paid respect to taxes as a result of any tax sharing agreement or similar
arrangement
21
described in paragraph (d) of this Section 3.15) (hereinafter "TAXES" or,
individually, a "TAX") have been timely paid, and any Taxes required to be paid
by or with respect to the Company after the date hereof and on or before the
Effective Time shall be timely paid.
(b) Except as set forth in Section 3.15(b) of
the Company Disclosure Letter, all returns and reports required to be filed by
or with respect to the Company with respect to Taxes (hereinafter "TAX RETURNS"
or, individually, a "TAX RETURN") on or before the date hereof have been timely
filed. All Tax Returns required to be filed by or with respect to the Company
after the date hereof and on or before the Effective Time shall be prepared and
timely filed, in a manner consistent with prior years and all applicable laws
and regulations. All such Tax Returns and amendments thereto are, or with
respect to Tax Returns not yet due, will be true, complete and correct in all
respects. No penalties or other charges are or will become due with respect to
the late filing of any Tax Return of the Company or payment of any Tax of the
Company, required to be filed or paid on or before the Effective Time. Prior to
the date hereof, the Company has provided to the Parent all revenue agents'
reports and other written assertions of deficiencies or other liabilities for
Taxes of the Company with respect to past periods for which the applicable
statute of limitations has not expired. The Company will provide to the Parent
copies of any such reports or written assertions received after the date hereof
within ten (10) days of their first being received by it.
(c) With respect to all Tax Returns filed by or
with respect to the Company, except as set forth in Section 3.15(c) of the
Company Disclosure Letter: (A) to the best of the Company's knowledge the
statute of limitations for the assessment of corporate income taxes has expired
for all years prior to 1998, and there are no outstanding waivers extending the
statutory period of limitations relating to the assessment or payment of Taxes
due from the Company for any taxable period ending prior to the date hereof
which are expected to be outstanding as of the date hereof; (B) no audit or
other investigation for the collection of Taxes is in progress, the Company has
not been notified that any audit will commence with respect to Taxes due from
the Company, and no extension of time has been executed with respect to any date
on which any Tax Return was or is to be filed; and (C) there is no deficiency or
adjustment for any Taxes proposed or threatened in writing against the Company.
(d) Except as set forth in Section 3.15(d) of
the Company Disclosure Letter, the Company has not been and is not a party to
any tax sharing agreement or similar arrangement with any person.
(e) Except as set forth in Section 3.15(e) of
the Company Disclosure Letter, the Company, (i) is not now and has never been a
member of any consolidated, combined or unitary group, other than a group of
which the Company is the common parent, for purposes of filing Tax Returns or
paying Taxes, or (ii) other than as a result of being a member of a
consolidated, combined or unitary group of which the Company is the common
parent, is not liable for the Taxes of any other person, under Treasury
Regulations Section 1.1502-6 (or any similar provision of foreign, state or
local law) or as a transferee, successor or otherwise.
22
(f) Except as set forth in Section 3.15(f) of
the Company Disclosure Letter, no "consent" within the meaning of Section 341(f)
of the Code has been filed with respect to the Company.
(g) Except as set forth in Section 3.15(g) of
the Company Disclosure Letter, the Company (a) has not agreed to and is not
required to make any adjustment pursuant to Section 481 of the Code (or any
predecessor provision of other laws or regulations) by reason of a change in
accounting method or otherwise, (b) does not have knowledge that any taxing
authority has proposed any such adjustment or change, which proposal is
currently pending, and (c) does not have an application pending with any taxing
authority requesting permission for any change in accounting methods that
relates to its business and operations.
(h) Except as set forth in Section 3.15(h) of
the Company Disclosure Letter, no property of the Company is required to be
treated as owned by any person (other than the Company) pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954 (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is "tax-exempt use property" within
the meaning of Section 168 of the Code.
(i) There are no Tax rulings, request for
rulings, or closing agreements relating to the Company which could affect their
liability for Taxes for any period after the Closing Date.
(j) No Taxes are delinquent or constitute a lien
against the Company, except for the current year's ad valorem Taxes not yet due
and payable, and except with respect to Taxes being contested in good faith by
appropriate proceedings (all of which are disclosed on Section 3.15(j) of the
Company Disclosure Letter) and for payment of which Taxes adequate reserves have
been established.
(k) The Company is not a party to any contract,
agreement, plan, or arrangement that, individually or collectively, could give
rise to the payment of any amount that would not be deductible by the Company by
reason of Section 280G of the Code.
(l) The Company does not own any "corporate
acquisition indebtedness" within the meaning of Section 279 of the Code.
SECTION 3.16 MATERIAL CONTRACTS.
(a) The Company has heretofore made available to
the Parent correct and complete copies of all Contracts (and all amendments,
modifications and supplements thereto and all side letters to which the Company
is a party affecting the obligations of any party thereunder) to which the
Company is a party or by which any of its properties or assets are bound that
are material to the business, properties or assets of the Company and its
subsidiaries taken as a whole, including, without limitation, all: (i)
partnership or joint venture agreements; (ii) Contracts for the acquisition,
sale or lease of material properties or assets of the Company (by merger,
purchase or sale of assets or stock or otherwise) entered into since December
31, 1997; (iii) Contracts with any
23
Governmental Entity other than those entered into in the ordinary course of
business consistent with past practice; (iv) loan or credit agreements,
mortgages, indentures or other agreements or instruments evidencing indebtedness
of the Company for borrowed money or evidencing indebtedness of any Person to
the Company or any such Contracts pursuant to which indebtedness for borrowed
money may be incurred; (v) Contracts that purport to limit, curtail or restrict
in any material respect the ability of the Company to compete in any geographic
area or line of business other than those entered into in the ordinary course of
business consistent with past practice; (vi) Contracts that would be required to
be filed as an exhibit to a Form 10-K filed by the Company with the SEC on the
date hereof; (vii) Contracts with customers that generated revenues in excess of
$100,000 during the 12 month period ended December 31, 2000; and (viii)
commitments and agreements to enter into any of the foregoing (collectively, the
"MATERIAL CONTRACTS").
(b) Each of the Material Contracts constitutes
the valid and legally binding obligation of the Company enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar Laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. There is no
default under any Material Contract by the Company or, to the Company's
knowledge, by any other party thereto, and, to the Company's knowledge, no event
has occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by the Company or, to the Company's knowledge,
any other party.
SECTION 3.17 CERTAIN AGREEMENTS. Except as set forth in
Section 3.17 of the Company Disclosure Letter, the Company is not a party to any
oral or written (i) agreement with any executive officer or other key employee
of the Company the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
of the nature contemplated by this Agreement or (ii) Company Benefit Plan, any
of the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
SECTION 3.18 REAL PROPERTY. The Company SEC Reports
describe all real property owned by the Company. Except as set forth in Section
3.18 of the Company Disclosure Letter, the Company is the owner of fee title to
the real property described in the Company SEC Reports as being owned by the
Company and to all of the buildings, structures and other improvements located
thereon free and clear of any mortgage, deed of trust, lien, pledge, security
interest, claim, lease, charge, option, right of first refusal, easement,
restrictive covenant, encroachment or other survey defect, encumbrance or other
restriction or limitation except for any of the foregoing which, individually or
in the aggregate, do not and could not reasonably be expected to have a Material
Adverse Effect on the Company. The Company has made available correct and
complete copies of all leases, subleases and other agreements (including all
amendments, modifications and supplements thereto and all side letters to which
the Company is a
24
party affecting the obligations of any party thereunder) (the "COMPANY REAL
PROPERTY LEASES") under which the Company uses or occupies or has the right to
use or occupy, now or in the future, any real property. Each Company Real
Property Lease constitutes the valid and legally binding obligation of the
Company, enforceable in accordance with its terms and is in full force and
effect. All material amounts payable by the Company as tenants under each
Company Real Property Lease are current, no termination event or condition or
uncured default of a material nature on the part of the Company or, to the
Company's knowledge, the landlord, exists under any Company Real Property Lease.
The Company has a good and valid leasehold interest in each parcel of real
property leased by it free and clear of all Liens, except (i) Taxes and general
and special assessments not in default and payable without penalty and interest,
and (ii) other Liens which do not materially interfere with the Company's use
and enjoyment of such real property or materially detract from or diminish the
value thereof.
SECTION 3.19 LABOR MATTERS.
(a) Section 3.19 of the Company Disclosure
Letter sets forth a list of all employment agreements currently in effect
providing for annual base salary and guaranteed bonus in excess of $50,000 or
which extend for more than one year after the Effective Time and any labor or
collective bargaining agreements to which the Company is a party. The Company
has heretofore made available to Parent true and complete copies of (i) the
employment agreements listed on Section 3.19 of the Company Disclosure Letter
and (ii) the labor or collective bargaining agreements listed on Section 3.19 of
the Company Disclosure Letter, together with all amendments, modifications,
supplements and side letters, whether written or oral, affecting the duties,
rights and obligations of any party thereunder.
(b) The Company is not the subject of any suit,
action or proceeding which is pending or, to the knowledge of the Company,
threatened, asserting that the Company has committed an unfair labor practice
(within the meaning of the National Labor Relations Act or applicable state
statues) or seeking to compel the Company to bargain with any labor organization
as to wages and conditions of employment, in any such case, that is reasonably
expected to result in a material liability of the Company. No strike or other
labor dispute involving the Company is pending or, to the knowledge of the
Company, threatened, and, to the knowledge of the Company, there is no activity
involving any employees of the Company seeking to certify a collective
bargaining unit or engaging in any other organizational activity, except for
such dispute or activity which, individually or in the aggregate, has not had or
could not reasonably be expected to have a Material Adverse Effect on the
Company.
SECTION 3.20 INSURANCE.
(a) The Company has obtained insurance for risks
and in amounts that are customary for the industries in which such persons
conduct business. The Company has heretofore made available to the Parent
complete and correct copies of all such insurance policies and binders. Except
as set forth in Section 3.20(a) of the Company Disclosure Letter and except,
individually or in the aggregate, as does not and
25
could not reasonably be expected to have a Material Adverse Effect on the
Company, with respect to each such insurance policy: (A) to the best of the
Company's knowledge, such policy is legal, valid, binding and enforceable in
accordance with its terms and, except for policies that have expired under their
terms in the ordinary course, is in full force and effect; (B) the Company is
not in breach or default (including any breach or default with respect to the
payment of premiums or the giving of notice), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default or
permit termination or modification, under such policy; (C) all premiums charged
for such policy have been paid when payment has become due and payable
thereunder and, there are no unfunded or unpaid premiums, loss costs or
retentions outstanding; (D) all liabilities with respect to such policy are
fully and adequately reflected in accordance with GAAP applied on a consistent
basis on the Company's financial statements as of the respective dates thereof;
(E) no party to such policy has repudiated, or given notice of an intent to
repudiate, any provision thereof and (F) to the knowledge of the Company, no
insurer on such policy has been declared insolvent or placed into receivership,
conservatorship or liquidation or currently has a rating of "B+" or below from
A.M. Best & Co. or a claims paying ability rating of "BBB" or below from
Standard & Poors, Inc.
(b) Except as does not and could not reasonably
be expected to have a Material Adverse Effect on the Company, at no time
subsequent to January 1, 1998 has the Company (i) been denied any material
insurance or indemnity bond coverage which it has requested, (ii) made any
material reduction in the scope or amount of its insurance coverage, or, except
as set forth in Section 3.20(b) of the Company Disclosure Letter, received
written notice from any of its insurance carriers that any insurance premiums
will be subject to increase in an amount materially disproportionate to the
amount of the increases with respect thereto (or with respect to similar
insurance) in prior years or that any insurance coverage currently held by the
Company will not be available in the future substantially on the same terms as
are now in effect or (iii) suffered any extraordinary increase in premium for
renewed coverage.
SECTION 3.21 CUSTOMERS. Except as set forth in Section
3.21 of the Company Disclosure Letter, the relationships of the Company with the
customers to the Contracts described in Section 3.16(a)(vii) of this Agreement
are good commercial working relationships and, except as set forth in Section
3.21 of the Company Disclosure Letter, no such customer within the last twelve
months has terminated or threatened in writing to cancel or otherwise terminate
the relationship of such person with the Company.
SECTION 3.22 INVESTMENT COMPANY ACT. The Company is not
an "investment company," or a company "controlled" by, or an "affiliated
company" with respect to, an "investment company," within the meaning of the
Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT").
SECTION 3.23 OPINION OF FINANCIAL ADVISOR. ▇▇▇▇▇▇
Brothers Inc. (the "COMPANY FINANCIAL ADVISOR") has delivered to the Board of
Directors of the Company its oral opinion to the effect that, as of the date of
this Agreement, the Merger
26
Consideration to be received by the Company's shareholders is fair to the
Company's shareholders from a financial point of view, which opinion was or will
promptly after the date of this Agreement be confirmed in writing and
accompanied by an authorization to include a copy of that opinion in the Proxy
Materials (as defined in Section 5.4(a)). The Company has delivered or will,
promptly after receipt of such written opinion, deliver a signed copy of that
written opinion to the Parent.
SECTION 3.24 BROKERS. No broker, finder or investment
banker, other than the Company Financial Advisor, is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or the other
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. Prior to the date of this Agreement, the Company has
made available to the Parent a complete and correct copy of all agreements
between the Company and the Company Financial Advisor under which the Company
Financial Advisor would be entitled to any payment relating to the Merger or any
other transaction.
SECTION 3.25 CERTAIN STATUTES. No "fair price,"
"moratorium," "control share acquisition" or other similar state or federal
anti-takeover statute or regulation (each a "TAKEOVER STATUTE") is, as of the
date of this Agreement, applicable to the Merger or any other transactions
contemplated by this Agreement.
SECTION 3.26 INFORMATION. None of the information to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement (as defined in Section 5.4(a)) at the time of the mailing of the Proxy
Statement and any amendments or supplements of the Proxy Statement and at the
time of the Company Shareholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated in that
Proxy Statement or necessary in order to make the statements in that Proxy
Statement, in light of the circumstances under which they are made, not
misleading. The Proxy Statement (except for those portions of the Proxy
Statement that relate only to Parent or subsidiaries or affiliates of the
Parent) will comply as to form in all material respects with the provisions of
the Exchange Act.
SECTION 3.27 VOTE REQUIRED. The Requisite Company Vote is
the only vote of the holders of any class or series of the Company's capital
stock necessary (under the Company Charter Documents, the CBCA, other applicable
Law or otherwise) to approve this Agreement, the Merger or the other
transactions contemplated by this Agreement.
SECTION 3.28 CONSUMER REPORTING AGENCY LAWS. Except as
set forth in Section 3.28 of the Company Disclosure Letter, the Company is
currently, and has been at all times, in full compliance in all material
respects with the Fair Credit Reporting Act, 15 U.S.C. ss. 1681 et. seq., as
amended (the "FCRA") and any and all other applicable federal, state, local, and
foreign laws and regulations (collectively, "CONSUMER REPORTING AGENCY LAWS")
which govern the assembly, sale, resale, distribution, reinvestigation, and
correction of "consumer report" information by a "consumer reporting agency," as
those terms are defined in the FCRA. Without limiting the generality of the
foregoing, and except as set forth in Section 3.28 of the Company
27
Disclosure Letter, the Company is current in all material respects with respect
to: (i) the receipt of all certifications of compliance required from
"resellers" and "end users" for consumer reports furnished or to be furnished to
them by the Company; (ii) the timely delivery to end users and consumers, as and
when required by the FCRA, of summaries of consumers' rights under the FCRA, in
the form prescribed by the Federal Trade Commission; and (iii) all requests by
consumers for disclosure, reinvestigation, and/or correction by the Company of
such consumers' information in the files of the Company. In addition, the
Company represents that it has obtained executed User Agreements from all
current and past customers to whom the Company has provided any consumer report
information. Except as disclosed in Section 3.28 of the Company Disclosure
Letter, there are no actions or proceedings pending or, to the Company's
knowledge, threatened alleging failure by the Company to comply with any
Consumer Reporting Agency Laws. Except as disclosed in Section 3.28 of the
Company Disclosure Letter, the Company is not aware of any material
noncompliance by any customer of the Company with the User Agreement between
such customer and the Company or with the customer's obligations to: (x) obtain
prior written authorization from consumers for the Company to furnish consumer
reports to the customer; (y) deliver prior and subsequent notice to consumers of
an "adverse action" by the customer based in whole or in part on a consumer
report furnished by the Company, together with a summary of the consumer's
rights in the form prescribed by the Federal Trade Commission; or (z) use
reports furnished by the Company solely for the "permissible purpose" authorized
by the customer's User Agreement with the Company. All terms in quotation marks
appearing in this Section 3.28 shall have the same meaning given to them in the
FCRA.
28
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB
Each of the Parent and Merger Sub represents and warrants to
the Company that:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Each of the
Parent and Merger Sub has been duly organized and is validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the 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. Each of the Parent and Merger Sub is duly qualified or licensed
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, individually
or in the aggregate, have not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Parent. For purposes of this
Agreement, "MATERIAL ADVERSE EFFECT ON THE PARENT" means any change in or effect
on the business, assets, properties, results of operations, prospects or
condition (financial or otherwise) of the Parent or any significant subsidiary
(as defined in Section 8.1) of the Parent (collectively, the "PARENT
SUBSIDIARIES") that is or could be materially adverse to the Parent and the
Parent Subsidiaries, taken as a whole, or that could materially impair the
ability of the Parent or Merger Sub to perform its obligations under this
Agreement or to consummate transactions contemplated hereby.
SECTION 4.2 CAPITALIZATION OF MERGER SUB. The authorized
capital stock of Merger Sub consists of 1,000 shares of common stock, par value
$.01 per share ("SUB COMMON STOCK"). All of the issued and outstanding shares of
Sub Common Stock are (A) owned by the Parent or another Parent Subsidiary wholly
owned by the Parent and (B) duly authorized, validly issued, fully paid and
nonassessable.
SECTION 4.3 AUTHORITY. Each of the Parent and Merger Sub
has all necessary corporate power and authority to execute and deliver this
Agreement to perform its obligations hereunder and to consummate the
transactions contemplated hereby to be consummated by it. The execution and
delivery of this Agreement by each of the Parent and Merger Sub and the
consummation by each of the Parent and Merger Sub of such transactions have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Parent or Merger Sub are necessary to
authorize this Agreement or to consummate such transactions. This Agreement has
been duly authorized and validly executed and delivered by each of the Parent
and Merger Sub and constitutes the legal, valid and binding obligation of each
of the Parent and Merger Sub, enforceable against each of the Parent and Merger
Sub in accordance with its terms.
29
SECTION 4.4 NO CONFLICT. The execution and delivery of
this Agreement by the Parent and Merger Sub do not, and the performance of this
Agreement by each of the Parent and Merger Sub will not:
(a) conflict with or violate any
provision of any Parent Charter Document or any equivalent
organizational documents of Merger Sub;
(b) assuming that all consents,
approvals, authorizations and other actions described in
Section 4.4(b) of the Parent Disclosure Letter have been
obtained and all filings and obligations described in Section
4.4(b) of the Parent Disclosure Letter have been made,
conflict with or violate any foreign or domestic Law
applicable to the Parent or Merger Sub or by which any
property or asset of the Parent or Merger Sub is or may be
bound or affected; or
(c) except as set forth in Section
4.4(c) of the Parent Disclosure Letter, result in any breach
of or constitute a default (or an event which with or without
notice or lapse of time or both would become a default) under,
or modification in a manner adverse to the Parent and the
Merger Sub of any material right or benefit under or give to
others any right of termination, amendment, acceleration,
repayment or repurchase, increased payments or cancellation
of, or result in the creation of a lien or other encumbrance
on any property or asset of the Parent or Merger Sub under any
Contract to which the Parent or Merger Sub is a party or by
which any of them or their assets or Properties is or may be
bound or affected,
except, in the case of clauses (b) and (c), for such consents, approvals,
authorizations, breaches, defaults or other occurrences which, individually or
in the aggregate, have not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Parent.
SECTION 4.5 GOVERNMENTAL REQUIRED FILINGS AND CONSENTS.
The execution and delivery of this Agreement by the Parent and Merger Sub do
not, and the performance of this Agreement by the Parent and Merger Sub will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any Government Entity except for (i) those consents or
approvals set forth in Section 4.5 of the Parent Disclosure Letter (the "PARENT
GOVERNMENTAL CONSENTS"), (ii) applicable requirements of the Exchange Act and
the Securities Act, (iii) applicable requirements of Blue Sky Laws, (iv) the
rules and regulations of the NYSE and the pre-merger notification requirements
of the HSR Act, and (v) the filing of the Articles of Merger as required by the
CBCA.
SECTION 4.6 BROKERS. Except as set forth in Section 4.6
of the Parent Disclosure Letter, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the other
30
transactions contemplated hereby based upon arrangements made by or on behalf of
the Parent or Merger Sub.
SECTION 4.7 INFORMATION. None of the information to be
supplied by the Parent or Merger Sub for inclusion or incorporation by reference
in the Proxy Statement will, at the time of the mailing of the Proxy Statement
and any amendments or supplements thereto and at the time of the Company
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated in that Proxy Statement or
necessary in order to make the statements in that Proxy Statement, in light of
the circumstances under which they are made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to the Company or affiliates
of the Company) will comply as to form in all material respects with the
provisions of the Exchange Act and the Securities Act, respectively.
SECTION 4.8 BOARD APPROVAL. The Board of Directors of
the Merger Sub, by resolutions duly adopted at a meeting duly called and held or
by unanimous written consent in lieu of a meeting, has approved this Agreement,
the Merger and the other transactions contemplated hereby.
SECTION 4.9 VOTE REQUIRED. No vote of the holders of any
class or series of the Parent's capital stock is necessary to adopt this
Agreement and approve the transactions contemplated hereby.
SECTION 4.10 INTERIM OPERATIONS OF MERGER SUB. Merger Sub
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement and has not engaged in any business activities or conducted
any operations other than in connection with the transactions contemplated by
this Agreement.
ARTICLE 5
COVENANTS
SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except
as contemplated by this Agreement or with the prior written consent of the
Parent, during the period from the date of this Agreement to the Effective Time,
the Company will conduct its operations and business only in the ordinary course
of business consistent with past practice and, to the extent consistent
therewith, with no less diligence and effort than would be applied in the
absence of this Agreement, preserve intact its business organization's goodwill,
keep available the services of its officers and key employees, and preserve the
goodwill and business relationships with suppliers, facilities providers,
customers and others having business relationships with it, with the intent that
such goodwill and ongoing business relationships shall be unimpaired in all
material respects at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise contemplated by this Agreement or disclosed
in Section 5.1 of the Company Disclosure Letter, prior to the Effective Time,
the Company will not, without the prior written consent of the Parent:
31
(a) adopt any amendment to the Company Charter
Documents;
(b) issue, reissue or sell, or authorize the
issuance, reissuance or sale of (i) additional shares of capital stock of any
class, or securities convertible into capital stock of any class, or any rights,
warrants or options to acquire any convertible securities or capital stock,
other than the issue of Company Shares, in accordance with the terms of the
instruments governing such issuance on the date hereof, pursuant to the exercise
of Company Stock Options outstanding on the date hereof, or (ii) any other
securities in respect of, in lieu of, or in substitution for, Company Shares
outstanding on the date hereof;
(c) declare, set aside or pay any dividend or
other distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock;
(d) split, combine, subdivide, reclassify or
redeem, purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of its other
securities;
(e) except for (i) increases in salary, wages
and benefits of officers or employees of the Company in the ordinary course of
business and in accordance with past practice, (ii) increases in salary, wages
and benefits granted to officers and employees of the Company in conjunction
with new hires, promotions or other changes in job status in the ordinary course
of business and consistent with past practices, increase or promise to increase
the compensation or fringe benefits payable or to become payable to its
directors, officers or employees (whether from the Company or otherwise), or pay
any benefit not required by any existing plan or arrangement (including the
granting of stock options, stock appreciation rights, shares of restricted stock
or performance units) or grant any severance or termination pay to (except
pursuant to existing agreements, plans or policies), or enter into any
employment or severance agreement with, any director, officer or other employee
of the Company or establish, adopt, enter into, amend or terminate any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, savings, welfare, deferred
compensation, employment, termination, severance or other employee benefit plan,
agreement, trust, fund, policy or arrangement for the benefit or welfare of any
directors, officers or current or former employees, except in each case to the
extent required by applicable Law;
(f) acquire, sell, lease, license, transfer,
pledge, encumber, grant or dispose of (whether by merger, consolidation,
purchase, sale or otherwise) any assets (other than the acquisition and sale of
inventory or the disposition of used or excess equipment and the purchase of
supplies and equipment, in either case in the ordinary course of business
consistent with past practice), with a value in excess of $50,000 or enter into
any commitment or transaction outside the ordinary course of business;
32
(g) (i) incur, assume or prepay any indebtedness
or incur or assume any short-term indebtedness (including, in either case, by
issuance of debt securities), except that the Company may incur, assume or
prepay indebtedness in the ordinary course of business consistent with past
practice under existing lines of credit, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except in the ordinary course
of business, or (iii) make any loans, advances or capital contributions to, or
investments in, any other person except in the ordinary course of business;
(h) terminate, cancel or request any material
change in, or agree to any material change in any Contract which is material to
the Company or enter into any Contract which would be material to the Company,
in either case other than in the ordinary course of business consistent with
past practice; or make or authorize any capital expenditure, other than capital
expenditures that are not, in the aggregate, for any fiscal year, in excess of
the capital expenditures provided for in the Company's budget for the Company
for such fiscal year (a true, correct and complete copy of which budget has been
provided to the Parent);
(i) mortgage or otherwise encumber or subject to
any Lien, or sell, lease, license, transfer or otherwise dispose of, any of its
properties or assets, other than encumbrances and Liens that are incurred in the
ordinary course of business and consistent with past practice and sales, leases,
licenses, transfers, and dispositions of properties and assets in the ordinary
course of business and consistent with past practice;
(j) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company (other than the Merger);
(k) [Intentionally left blank];
(l) enter into any agreement or arrangement that
materially limits or otherwise restricts the Company or any successor thereto,
or that would, after the Effective Time, limit or restrict the Surviving
Corporation and its affiliates (including Parent) or any successor thereto, from
engaging or competing in any line of business or in any geographic area, other
than in the ordinary course of business consistent with past practices;
(m) take any action with respect to accounting
policies or procedures, other than actions in the ordinary course of business
and consistent with past practice or as required pursuant to applicable Law or
GAAP;
(n) waive, release, assign, settle or compromise
any material rights, claims or litigation;
(o) make any material Tax election or settle or
compromise any material federal, state, local or foreign income Tax liability;
or
33
(p) authorize or enter into any formal or
informal written or other agreement or otherwise make any commitment to do any
of the foregoing.
The Parent agrees that it will give an affirmative or negative response to the
Company with respect to any request by the Company for the Parent's consent
under Section 5.1 within 96 hours of the receipt by the Parent of a notice
containing a request for such consent which is given in accordance with Section
8.5.
SECTION 5.2 OTHER ACTIONS. During the period from the
date hereof to the Effective Time, the Company and the Parent shall not, and
shall not permit any of their respective subsidiaries to, take any action that
would, or that could reasonably be expected to, result in any of the conditions
to the Merger set forth in Article 6 hereof not being satisfied.
SECTION 5.3 NOTIFICATION OF CERTAIN MATTERS. The Parent
and the Company shall promptly notify each other of (a) the occurrence or
non-occurrence of any fact or event which could reasonably be expected (i) to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time, (ii) to cause any material covenant, condition or agreement
hereunder not to be complied with or satisfied in all material respects or (iii)
to result in, in the case of Parent, a Material Adverse Effect on the Parent;
and, in the case of the Company, a Material Adverse Effect on the Company, (b)
any failure of the Company or the Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder in any material respect; PROVIDED, HOWEVER, that no such
notification shall affect the representations or warranties of any party or the
conditions to the obligations of any party hereunder, (c) any notice or other
material communications from any Governmental Entity in connection with the
transactions contemplated by this Agreement and (d) the commencement of any
suit, action or proceeding that seeks to prevent or seek damages in respect of,
or otherwise relates to, the consummation of the transactions contemplated by
this Agreement.
SECTION 5.4 PROXY STATEMENT.
(a) As promptly as practicable after the
execution of this Agreement, the Company shall prepare and file with the SEC the
proxy statement of the Company relating to the special meeting of the Company's
shareholders (the "COMPANY SHAREHOLDERS MEETING") to be held to consider
approval and adoption of this Agreement and the Merger (such document, together
with any amendments thereof or supplements thereto, the "PROXY STATEMENT"). The
Parent shall furnish all information concerning the Parent as the Company may
reasonably request in connection with such actions and the preparation of the
Proxy Statement. As promptly as practicable after the execution of this
Agreement, the proxy statements included in the Proxy Statement (collectively,
the "PROXY MATERIALS") will be mailed to the shareholders of the Company. The
Parent and the Company shall cause the Proxy Statement to comply as to form and
substance in all material respects with the applicable requirements of (i) the
Exchange Act, including
34
Sections 14(a) and 14(d) thereof and the respective regulations promulgated
thereunder, (ii) the Securities Act and (iii) the CBCA.
(b) The Proxy Statement shall include the
unanimous and unconditional recommendation of the Board of Directors of the
Company to the shareholders of the Company that they vote in favor of the
adoption of this Agreement and the Merger; PROVIDED, HOWEVER, that the Board of
Directors of the Company may, at any time prior to the Effective Time, withdraw,
modify or change any such recommendation solely in accordance with the
provisions of Section 5.7(d) hereof. In addition, the Proxy Statement and the
Proxy Materials will include a copy of the written opinion of the Company
Financial Advisor referred to in Section 3.23.
(c) The Proxy Statement will not be filed with
the SEC or mailed to the shareholders of the Company, and no amendment or
supplement to the Proxy Statement will be made, without the approval of each of
the Parent and the Company, which approval shall not be unreasonably withheld,
delayed or conditioned.
(d) If at any time prior to the Effective Time
any event or circumstance relating to the Company, or its officers or directors,
should be discovered by the Company that should be set forth in an amendment or
a supplement to the Proxy Statement, the Company shall promptly inform the
Parent. All documents that the Company is responsible for filing with the SEC in
connection with the transactions contemplated hereby will comply as to form and
substance in all material respects with the applicable requirements of the CBCA,
the Securities Act and the Exchange Act.
SECTION 5.5 COMPANY SHAREHOLDERS MEETING. The Company
shall call and hold the Company Shareholders Meeting as promptly as practicable
after the mailing of the Proxy Statement to the Company's shareholders for the
purpose of voting upon the approval of this Agreement and the Parent and the
Company will cooperate with each other to cause the Company Shareholders Meeting
to be held as soon as practicable following the mailing of the Proxy Materials
to the shareholders of the Company. The Company shall use its reasonable best
efforts (through its agents or otherwise) to solicit from its shareholders
proxies in favor of the approval of this Agreement, and shall take all other
action necessary or advisable to secure the Requisite Company Vote, except to
the extent that the Board of Directors of the Company withdraws, modifies or
changes its recommendation in favor of the Merger as provided in Section 5.7(d)
hereof.
SECTION 5.6 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Except as required under any confidentiality
agreement or similar agreement or arrangement to which the Parent or the Company
or any of their respective subsidiaries is a party or under applicable Law or
the regulations or requirements of the NYSE or other self regulatory
organization with whose rules the parties are required to comply, from the date
of this Agreement to the Effective Time, the Parent and the Company shall (and
shall cause their respective subsidiaries to): (i) provide to the other (and its
officers, directors, employees, accountants, consultants, legal counsel,
financial advisors, investment bankers, agents and other representatives
35
(collectively, "REPRESENTATIVES")) access at reasonable times upon prior notice
to the officers, employees, agents, properties, offices and other facilities of
the other and its subsidiaries and to the books and records thereof; and (ii)
furnish promptly such information concerning the business, properties,
Contracts, assets, liabilities, personnel and other aspects of the other party
and its subsidiaries as the other party or its Representatives may reasonably
request. No investigation conducted under this Section 5.6 shall affect or be
deemed to modify any representation or warranty made in this Agreement.
(b) The parties shall comply with, and shall
cause their respective Representatives to comply with, all of their respective
obligations under the Confidentiality Agreement, dated October 27, 1998, between
the Parent and the Company with respect to the information disclosed under this
Section 5.6.
SECTION 5.7 NO SOLICITATION.
(a) From the date hereof until the termination
hereof and except as expressly permitted by the following provisions of this
Section 5.7, the Company will not, nor will it authorize or permit any officer,
director or employee of or any investment banker, attorney, accountant or other
advisor or representative of, the Company to, directly or indirectly, (i)
solicit, initiate or encourage or facilitate any inquiries or the making of any
proposal or offer with respect to any Acquisition Proposal (as hereinafter
defined), (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate (including granting any waiver or release under any standstill or
similar agreement with respect to the securities of the Company), any
Acquisition Proposal or any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
(iii) agree to, approve or recommend an Acquisition Proposal, or (iv) take any
other action inconsistent with the obligations and commitments assumed by the
Company pursuant to this Section 5.7, PROVIDED, HOWEVER, that subject to
compliance by the Company with the provisions of Section 5.7(b), the Company's
Board of Directors, prior to receipt of the Requisite Company Vote, may furnish
information to, or enter into discussions with, any person that makes an
unsolicited bona fide written Acquisition Proposal if, and only to the extent
that (A) the Company's Board of Directors, after consultation with independent
legal counsel, determines in good faith that such action is necessary for the
Company's Board of Directors to comply with its fiduciary duties to the
Company's shareholders under applicable Law, (B) financing for such Acquisition
Proposal, to the extent required, is then committed or which, in the reasonable
judgment of the Company's Board of Directors, is reasonably capable of being
obtained by such third party, (C) the Company's Board of Directors determines in
good faith that such Acquisition Proposal, if accepted, is reasonably likely to
be consummated taking into account all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal, and believes in good
faith, after consultation with and based upon the advice of an independent
nationally recognized financial advisor that such Acquisition Proposal would, if
consummated, result in a transaction more favorable to the Company's
shareholders from a financial point of view than the Merger (any such more
favorable Acquisition Proposal being referred to herein
36
as a "SUPERIOR PROPOSAL"), and (D) prior to taking such action, the Company (x)
provides reasonable notice to Parent to the effect that it is taking such action
and (y) receives from such person an executed confidentiality agreement in
reasonably customary form.
(b) Prior to providing any information to or
entering into discussions with any person in connection with an Acquisition
Proposal by such person as set forth in Section 5.7(a), the Company shall notify
Parent orally and in writing of (i) any Acquisition Proposal (including, without
limitation, the material terms and conditions thereof and the identity of the
person making it) or (ii) any inquiries indicating that any person is
considering making or wishes to make, or with respect to, or which could
reasonably be expected to lead to, an Acquisition Proposal, as promptly as
practicable (but in no case later than 24 hours) after its receipt thereof, and
shall provide Parent with a copy of any written Acquisition Proposal or
amendments or supplements thereto, and shall thereafter inform Parent on a
prompt basis of (x) the status of any discussions or negotiations with any such
third party, and any material changes to the terms and conditions of such
Acquisition Proposal, and shall promptly give Parent a copy of any information
delivered to such person which has not previously been reviewed by Parent and
(y) any request by any person for nonpublic information relating to the
Company's properties, books or records.
(c) Immediately after the execution and delivery
of this Agreement, the Company will, and will cause its subsidiaries and
affiliates, and their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents to, cease and terminate any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any possible Acquisition Proposal and shall notify
each party that it, or any officer, director, investment advisor, financial
advisor, attorney or other representative retained by it, has had discussions
with during the 90 days prior to the date of this Agreement that the Company's
Board of Directors no longer seeks the making of any Acquisition Proposal. The
Company agrees that it will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence of Section 5.7(a) of
the obligations undertaken in this Section 5.7.
(d) The Company's Board of Directors will not
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent, its approval or recommendation of this Agreement or the Merger except in
connection with a Superior Proposal and then only after the termination of this
Agreement pursuant to Section 7.1(d).
(e) Nothing contained in this Section 5.7 shall
prohibit the Company from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's shareholders which, in the good faith reasonable
judgment of the Company's Board of Directors, after consultation with
independent legal counsel, is required under applicable Law; PROVIDED, that
except as otherwise permitted in this Section 5.7, the Company does not withdraw
or modify, or propose to withdraw or modify, its position with respect to the
Merger or approve or recommend, or propose to approve or recommend, an
Acquisition Proposal.
37
(f) For purposes of this Agreement, "ACQUISITION
PROPOSAL" means an inquiry, offer or proposal regarding any of the following
(other than the transactions contemplated by this Agreement) involving the
Company: (i) any merger, consolidation, share exchange, recapitalization,
business combination or other similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of all or
substantially all the assets of the Company in a single transaction or series of
related transactions; (iii) any tender offer or exchange offer for ten percent
(10%) or more of the outstanding shares of Company Common Stock or the filing of
a registration statement under the Securities Act in connection therewith; or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
SECTION 5.8 [RESERVED].
SECTION 5.9 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) The Company shall, and from and after the
Effective Time, the Parent and the Surviving Corporation (each, an "INDEMNIFYING
PARTY") shall, indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer, director or employee of the Company (collectively,
the "INDEMNIFIED PARTIES") against (i) all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement with
the approval of the Indemnifying Party (which approval shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
the fact that such person is or was a director, officer or employee of the
Company and arising out of actions or omissions, occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("INDEMNIFIED LIABILITIES") and (ii) all Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out of, or
pertaining to this Agreement or the transactions contemplated hereby; PROVIDED,
that in the case of clauses (i) and (ii) above, each Indemnifying Party shall
only be required to indemnify an Indemnified Party pursuant to this Section 5.9
to the extent a corporation is permitted under the law of the state of
incorporation of the Indemnifying Party to indemnify its own directors, officers
and employees, as the case may be (and the Parent and the Surviving Corporation,
as the case may be, will pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the full extent permitted
by law upon receipt of any undertaking required or contemplated by applicable
law).
(b) Each Indemnified Party under this Section
5.9 will, promptly after the receipt of notice of the commencement of any action
or other proceeding against such Indemnified Party in respect of which indemnity
may be sought from an Indemnifying Party under this Section 5.9, notify the
Indemnifying Party in writing of the commencement thereof. The omission of any
Indemnified Party to so notify an Indemnifying Party of any such action shall
not relieve such Indemnifying Party from any liability which it may have to such
Indemnified Party other than pursuant to this Section 5.9, unless, and only to
the extent that, such omission results in such
38
Indemnifying Party's forfeiture of substantive rights or defenses. In case any
such action or other proceeding shall be brought against any Indemnified Party
and it shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein and, to the extent
that it may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party; PROVIDED, HOWEVER, that any Indemnified
Party may, at its own expense, retain separate counsel to participate in such
defense. Notwithstanding the foregoing, in any action or proceeding in which
both the Indemnifying Party and an Indemnified Party is, or is reasonably likely
to become, a party, such Indemnified Party shall have the right to employ
separate counsel at the Indemnifying Party's expense and to control its own
defense of such action or proceeding if, in the reasonable written opinion of
counsel to such Indemnified Party, (a) there are legal defenses available to
such Indemnified Party or to other Indemnified Parties that are different from
or additional to those available to the Indemnifying Party or (b) any conflict
or potential conflict exists between the Indemnifying Party and such Indemnified
Party that would make such separate representation advisable; PROVIDED, HOWEVER,
that in no event shall the Indemnifying Party be required to pay fees and
expenses under this Section 5.9 for more than one firm of attorneys in any
jurisdiction in any one legal action or group of related legal actions. The
Indemnifying Party shall not, without the consent of the Indemnified Party
(which consent shall not be unreasonably withheld), consent to the entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation or which
requires action other than the payment of money by the Indemnifying Party. The
rights accorded to Indemnified Parties hereunder shall be in addition to any
rights that any Indemnified Party may have at common law, by separate agreement
or otherwise.
SECTION 5.10 [RESERVED].
SECTION 5.11 REASONABLE BEST EFFORTS. Subject to the
terms and conditions provided in this Agreement and to applicable legal
requirements, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, in the case of the Company consistent with the fiduciary duties of the
Company's Board of Directors, and to assist and cooperate with the other parties
hereto in doing, as promptly as practicable, all things necessary, proper or
advisable under applicable laws and regulations to ensure that the conditions
set forth in Article 6 are satisfied and to consummate and make effective the
transactions contemplated by this Agreement. If at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, including the execution of additional instruments, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
SECTION 5.12 CONSENTS; FILINGS; FURTHER ACTION.
(a) Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use its reasonable best efforts to (i)
take, or cause to be taken, all appropriate action, and do, or cause to be done,
all things necessary, proper or
39
advisable under applicable Law or otherwise to consummate and make effective the
Merger and the other transactions contemplated hereby, (ii) obtain from
Governmental Entities any Company Governmental Consents and Parent Governmental
Consents and any other consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by the Parent or the
Company or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby, (iii) make as promptly as
practicable after the date hereof all necessary filings, and thereafter make any
other submissions either required or deemed appropriate by each of the parties,
with respect to this Agreement and the Merger and the other transactions
contemplated hereby required under (A) the Securities Act, the Exchange Act and
any other applicable federal or Blue Sky Laws, (B) the HSR Act and any
applicable other foreign antitrust, anti-monopoly or similar Laws, (C) the CBCA,
(D) any other applicable Law and (E) the rules and regulations of the NYSE. The
parties hereto shall cooperate and consult with each other in connection with
the making of all such filings, including by providing copies of all such
documents to the nonfiling party and its advisors prior to filing, and none of
the parties will file any such document if any of the other parties shall have
reasonably objected to the filing of such document. No party to this Agreement
shall consent to any voluntary extension of any statutory deadline or waiting
party or to any voluntary delay of the consummation of the Merger and the other
transactions contemplated hereby at the behest of any Governmental Entity
without the consent and agreement of the other parties to this Agreement, which
consent shall not be unreasonably withheld or delayed.
(b) Without limiting the generality of Section
5.12(a), each party hereto shall promptly inform the others of any material
communication from the Federal Trade Commission, the Department of Justice or
any other domestic or foreign government or governmental or multinational
authority regarding any of the transactions contemplated by this Agreement. If
any party or any affiliate thereof receives a request for additional information
or documentary material from any such government or authority with respect to
the transactions contemplated by this Agreement, then such party will endeavor
in good faith to make, or cause to be made, as soon as reasonably practicable
and after consultation with the other party, an appropriate response in
compliance with such request. The Parent will advise the Company promptly in
respect of any understandings, undertakings or agreements (oral or written)
which the Parent proposes to make or enter into with the Federal Trade
Commission, the Department of Justice or any other domestic or foreign
government or governmental or multinational authority in connection with the
transactions contemplated by this Agreement. In furtherance and not in
limitation of the foregoing, the Parent shall use its reasonable best efforts to
resolve such objections, if any, as may be asserted with respect to the
transactions contemplated by this Agreement under any antitrust, competition or
trade regulatory laws, rules or regulations of any domestic or foreign
government or governmental authority or any multinational authority.
Notwithstanding the foregoing, nothing in this Section 5.12 shall require, or be
construed to require, the Parent or the Company, in connection with the receipt
of any regulatory approval, to proffer to, or agree to (A) sell or hold separate
and agree to sell, divest or to discontinue to or limit, before or after the
Effective Time, any assets, businesses, or interest in any assets or
40
businesses of the Parent, the Company or any of their respective affiliates (or
to the consent to any sale, or agreement to sell, or discontinuance or
limitation by the Parent or the Company, as the case may be, of any of its
assets or businesses) or (B) agree to any conditions relating to, or changes or
restriction in, the operations of any such asset or businesses which, in either
case could reasonably be expected to result in a Material Adverse Effect on the
Parent or a Material Adverse Effect on the Company or to materially and
adversely impact the economic or business benefits to such party of the
transactions contemplated by this Agreement.
SECTION 5.13 INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENTS.
The Company shall request that each employee of the Company execute prior to the
Closing an intellectual property assignment agreement in the form previously
approved by the Parent (the "IP ASSIGNMENT AGREEMENT") and, in connection
therewith, shall talk to and explain the significance of such agreement to each
such employee. Without limitation of the foregoing, with respect to each
employee of the Company who is involved in the creation or development of the
Intellectual Property of the Company, as determined by the Parent (each, an "IP
EMPLOYEE"), the Company shall take such other actions as the Parent may
reasonably request to have each such IP Employee execute prior to the Closing an
IP Assignment Agreement.
SECTION 5.14 PUBLIC ANNOUNCEMENTS. The Parent and Merger
Sub and the Company shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or any of the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except to the extent required by applicable Law or the requirements of the NYSE,
in which case the issuing party shall use its reasonable best efforts to consult
with the other parties before issuing any such release or making any such public
statement.
SECTION 5.15 OBLIGATIONS OF MERGER SUB. The Parent shall
take all actions necessary to cause Merger Sub to perform its obligations under
this Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
SECTION 5.16 DE-LISTING. The parties shall use their
reasonable best efforts to cause the Surviving Corporation to cause the Company
Common Stock to be de-listed from the NASDAQ National Market and de-registered
under the Exchange Act as soon as practicable following the Effective Time.
SECTION 5.17 EXPENSES. Except as otherwise provided in
Section 7.5(b), whether or not the Merger is consummated, all Expenses incurred
in connection with this Agreement and the Merger and the other transactions
contemplated hereby shall be paid by the party incurring such Expense, except
that Expenses incurred in connection with the filing fee for the Proxy Statement
and printing and mailing the Proxy Materials and the filing fee under the HSR
Act shall be shared equally by the Parent and the Company.
41
SECTION 5.18 TAKEOVER STATUTES. If any Takeover Statute
is or may become applicable to the Merger or the other transactions contemplated
hereby, each of the Parent and the Company and its board of directors shall
grant such approvals and take such actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise act to eliminate or minimize the
effects of such statute or regulation on such transactions.
SECTION 5.19 EMPLOYEE BENEFITS.
(a) The Parent agrees that individuals who are
employed by the Company immediately prior to the Closing Date shall remain
employees of the Company as of the Closing Date (each such employee, an
"AFFECTED EMPLOYEE"); PROVIDED, HOWEVER, that nothing contained herein shall
confer upon any Affected Employee the right to continued employment by the
Company for any period of time after the Closing Date which is not otherwise
required by law or contract.
(b) To the extent that any Affected Employees
are moved by the Parent to any employee benefit plan maintained by the Parent or
any Parent Subsidiary (i) the Parent shall, or shall cause such Parent
Subsidiary to, give such Affected Employees full credit solely for the purposes
of eligibility and vesting under such employee benefits plans for such Affected
Employee's service with the Parent, the Company or any affiliate thereof to the
same extent recognized immediately prior to the Closing Date and (ii) such
Affected Employees will not be subject to any limitations regarding preexisting
conditions under any such employee benefit plan; PROVIDED, that the entry dates
into such employee benefit plans for such Affected Employees will be in the
normal course of such plan's administration, which may be the beginning of the
plan year.
(c) After the Effective Time, until the date the
Parent determines in its discretion to move Affected Employees to the Parent's
employee benefit plans, the Parent shall cause the Company to maintain employee
benefit plans (but not bonus or equity-based plans) that are substantially
comparable to the health and welfare plans maintained by the Company on the date
hereof. Without limiting the generality of the foregoing, all 401K benefits,
vacation, holiday, sickness and personal days accrued by the employees of the
Company shall be honored.
Nothing contained in this Section 5.19 shall be construed as
requiring the Parent to continue any specific Company Benefit Plan or to
continue the employment of any employee; PROVIDED, HOWEVER, that any changes
that the Parent may make to any such Company Benefit Plan are consistent with
the prior parts of this Section 5.19, and are permitted by the terms of the
Company Benefit Plan and under any applicable law.
SECTION 5.20 FORM S-8. No later than five (5) business
days after the Effective Time, the Parent shall file with the SEC a registration
statement on an appropriate form or a post-effective amendment to a previously
filed registration statement under the Securities Act, with respect to the
Parent Common Stock issuable in respect of Company Stock Options, and shall use
its reasonable best efforts to maintain
42
the current status of the prospectus contained therein, as well as comply with
any applicable state securities or Blue Sky Laws, for as long as such options
remain outstanding.
ARTICLE 6
CONDITIONS
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO
EFFECT THE MERGER. The respective obligation of each party to effect the Merger
and consummate the other transactions contemplated hereby to be consummated on
the Closing Date is subject to the satisfaction or waiver at or prior to the
Effective Time of each of the following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement
(including the Plan of Merger) and consummation of the Merger shall have been
duly approved by the Requisite Company Vote.
(b) GOVERNMENTAL CONSENTS. The waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated and other than the filing provided for in Section
1.3, all notices, reports and other filings required to be made prior to the
Effective Time by the Company or the Parent or any of their respective
subsidiaries with, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Effective Time by, the
Company or the Parent or any of their respective subsidiaries from, any
Governmental Entity in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby (including, without limitation, all Company Governmental
Consents and Parent Governmental Consents) shall have been made or obtained (as
the case may be) upon terms and conditions that could not reasonably be expected
to result in Material Adverse Effect on the Parent or a Material Adverse Effect
on the Company.
(c) STATUTES, ORDERS, INJUNCTIONS, ETC. No
statute, rule, regulation, executive order, judgment, decree, or injunction
shall have been enacted, entered, promulgated or enforced (and not repealed,
superseded, lifted or otherwise made inapplicable), by any court of competent
jurisdiction or Governmental Entity which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated by this Agreement
(each party agreeing to use its commercially reasonable efforts to avoid the
effect of any such statute, rule, regulation or order or to have any such order,
judgment, decree or injunction lifted) or that would have or would reasonably be
expected to have a Material Adverse Effect on the Parent.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF THE PARENT AND
MERGER SUB. The obligations of each of the Parent and Merger Sub to effect the
Merger and consummate the other transactions contemplated hereby to be
consummated on the Closing Date are also subject to the satisfaction or waiver
by the Parent at or prior to the Effective Time of the following conditions:
43
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company set forth in this Agreement that
are qualified as to "Material Adverse Effect" or another materiality qualifier
shall be true and correct, and the representations and warranties of the Company
set forth in this Agreement that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and as
of the Closing Date, as though made on and as of the Closing Date, except to the
extent the representation or warranty is expressly limited by its terms to
another date, and the Parent shall have received a certificate (which
certificate may be qualified by knowledge to the same extent as the
representations and warranties of the Company contained in this Agreement are so
qualified) signed on behalf of the Company by an executive officer of the
Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY.
The Company shall have performed (i) all obligations required to be performed by
it pursuant to Section 2.3 hereof and (ii) in all material respects all other
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Parent shall have received a certificate signed on
behalf of the Company by an executive officer of the Company to such effect.
(c) MATERIAL ADVERSE EFFECT. Since the date of
this Agreement, there shall have been no Material Adverse Effect on the Company
and the Parent shall have received a certificate of an executive officer of the
Company to such effect.
(d) CONSENTS UNDER AGREEMENTS. The Company shall
have obtained the consents set forth in Section 3.5(a) of the Company Disclosure
Schedule and the consent, approval or waiver of each person whose consent,
approval or waiver shall be required in order to consummate the transactions
contemplated by this Agreement, except those for which the failure to obtain
such consent, approval or waiver, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect on the Company.
(e) LITIGATION MATTERS. (I) There shall not be
any statute, rule, regulation, order, writ, injunction or decree of any court or
Governmental Entity which restrains or prohibits the consummation of the Merger
and (II) there shall not be pending by any Governmental Entity or any other
person any suit, action or proceeding which has a reasonable likelihood of
success (i) that would materially adversely effect the transactions contemplated
by this Agreement taken as a whole or seeking to obtain from the Company or the
Parent any damages that are material in relation to the Company or the Parent
and the Parent Subsidiaries taken as a whole, as applicable, (ii) seeking to
prohibit or limit the ownership or operation by the Company, Parent or any
Parent Subsidiaries of any material portion of the business or assets of the
Company or the Parent and the Parent Subsidiaries, taken as a whole, as
applicable, or to compel the Company, Parent or any of their respective
subsidiaries to dispose of or hold separate any material portion of the business
or assets of the Company or the Parent and the Parent Subsidiaries, taken as a
whole, as applicable, as a result of the Merger or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose limitations on the
44
ability of the Parent to acquire or hold, or exercise full rights of ownership
of, any shares of capital stock of the Company or the Surviving Corporation,
including the right to vote the Company Common Stock, or common stock of the
Surviving Corporation, on all matters properly presented to the shareholders of
the Company or the Surviving Corporation, respectively, (iv) seeking to prohibit
the Parent and the Parent Subsidiaries from effectively controlling in any
material respect the business or operations of the Company or (v) which
otherwise would have or would reasonably be expected to have a Material Adverse
Effect on the Company or a Material Adverse Effect on the Parent.
(f) The holders of not more than 10% of the
Company Common Stock shall have demanded appraisal rights in accordance with
Section ▇-▇▇▇-▇▇▇ of the CBCA.
(g) The Employment Arrangements shall each be in
full force and effect and each such Employment Arrangement shall not have been
breached in any respect by ▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇, as the case may be.
Neither ▇▇▇▇ ▇ ▇▇▇▇▇▇ nor ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have died, become disabled or
incapacitated or otherwise be unable to perform their respective duties as
officers of the Company.
SECTION 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger and consummate the other
transactions contemplated hereby to be consummated on the Closing Date is also
subject to the satisfaction or waiver by the Company at or prior to the
Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each of the Parent and Merger Sub set forth in
this Agreement that are qualified as to "Material Adverse Effect" or another
materiality qualifier shall be true and correct, and the representations and
warranties of the Parent and Merger Sub set forth in this Agreement that are not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date, as though made on and
as of the Closing Date, except to the extent the representation or warranty is
expressly limited by its terms to another date, and the Company shall have
received a certificate (which certificate may be qualified by knowledge to the
same extent as the representations and warranties of each of the Parent and
Merger Sub contained in this Agreement are so qualified) signed on behalf of
each of the Parent and Merger Sub by an executive officer of the Parent to such
effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE PARENT AND
MERGER SUB. Each of the Parent and Merger Sub shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of the Parent and Merger Sub by an executive
officer of the Parent to such effect.
45
ARTICLE 7
TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement, as
follows:
(a) by mutual written consent of the Parent and
the Company duly authorized by their respective boards of directors;
(b) by either the Parent or the Company, if the
Effective Time shall not have occurred on or before November 30, 2001; PROVIDED,
HOWEVER, that (i) the right to terminate this Agreement under this Section
7.1(b) shall not be available to the party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date; and (ii) if
the applicable federal or foreign antitrust authority shall seek an order
injunction or decree with respect to the legality of the Merger under applicable
antitrust Laws, this Agreement may be extended prior to the termination hereof
by written notice of either the Parent or the Company to the other to the date
that is 30 days following the date on which a ruling with respect to such an
order injunction or decree is entered by a trial court or administrative body;
(c) by either the Parent or the Company, if any
order injunction or decree preventing the consummation of the Merger shall have
been entered by any court of competent jurisdiction or Governmental Entity and
shall have become final and nonappealable;
(d) by the Company, if prior to the Requisite
Company Vote, the Board of Directors of the Company shall concurrently approve,
and the Company shall concurrently enter into, a definitive agreement providing
for the implementation of a Superior Proposal; PROVIDED, HOWEVER, that (i) the
Company is not then in breach of Section 5.7, (ii) the Company's Board of
Directors authorizes the Company, subject to complying with the terms of this
Agreement, to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and the Company notifies the Parent in
writing that it intends to enter into such an agreement, attaching the most
current version of such agreement to such notice, (iii) during the seven (7)
business day period after the Company's notice, (A) the Company shall have
offered to negotiate with (and, if accepted, negotiate with), and shall have
caused its respective financial and legal advisors to have offered to negotiate
with (and, if accepted, negotiate with) the Parent to attempt to make such
commercially reasonable adjustments in the terms and conditions of this
Agreement as would enable the Company to proceed with the Merger and the other
transactions contemplated by this Agreement and (B) the Board of Directors of
the Company shall have concluded, after considering the results of such
negotiations and the revised proposals made by the Parent, if any, that any
Superior Proposal giving rise to the Company's notice continues to be a Superior
Proposal; (iv) such termination is within two (2) business days following the
seven (7) business day period referred to above, and
46
(v) no termination pursuant to this Section 7.1(d) shall be effective unless the
Company shall simultaneously make the payment required by Section 7.5;
(e) by the Parent or the Company, if this
Agreement and the Merger shall fail to receive the requisite vote for adoption
at the Company Shareholders Meeting or any adjournment or postponement thereof;
(f) by the Parent, upon a breach of any material
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, or if any representation or warranty of the Company
shall have become untrue, in either case such that the conditions set forth in
either of Section 6.2(a) or 6.2(b) would not be satisfied (a "TERMINATING
COMPANY BREACH"); PROVIDED, HOWEVER, that, if such Terminating Company Breach is
curable by the Company through the exercise of its reasonable best efforts
within 20 days of the receipt of notice of such breach, the Parent may not
terminate this Agreement under this Section 7.1(f) until the end of such 20-day
period; or
(g) by the Company, upon breach of any material
representation, warranty, covenant or agreement on the part of the Parent set
forth in this Agreement, or if any representation or warranty of the Parent
shall have become untrue, in either case such that the conditions set forth in
either of Section 6.3(a) or 6.3(b) would not be satisfied (a "TERMINATING PARENT
BREACH"); PROVIDED, HOWEVER, that, if such Terminating Parent Breach is curable
by the Parent through its reasonable best efforts within 20 days of the receipt
of notice of such breach, the Company may not terminate this Agreement under
this Section 7.1(g) until the end of such 20 business day period.
SECTION 7.2 EFFECT OF TERMINATION. Except as provided in
Section 8.2, in the event of termination of this Agreement pursuant to Section
7.1, this Agreement shall forthwith become void, there shall be no liability
under this Agreement on the part of the Parent, Merger Sub or the Company or any
of their respective Representatives, and all rights and obligations of each
party hereto shall cease, subject to the remedies of the parties set forth in
Sections 7.5(b) and (c); PROVIDED, HOWEVER, that nothing in this Agreement shall
relieve any party from liability for the willful breach of any of its
representations and warranties or the breach of any of its covenants or
agreements set forth in this Agreement which shall survive any such termination.
SECTION 7.3 AMENDMENT. This Agreement may be amended by
the parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; PROVIDED that, after the
approval of this Agreement by the shareholders of the Company, no amendment may
be made that would reduce the amount or change the type of consideration into
which each Company Share shall be converted upon consummation of the Merger.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
SECTION 7.4 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
47
contained in this Agreement or in any document delivered pursuant hereto, and
(c) waive compliance with any agreement or condition contained in this
Agreement. Any waiver of a condition set forth in Section 6.1, or any
determination that such a condition has been satisfied, will be effective only
if made in writing by each of the Company and the Parent and, unless otherwise
specified in such writing, shall thereafter operate as a waiver (or
satisfaction) of such conditions for any and all purposes of this Agreement. 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.
SECTION 7.5 EXPENSES FOLLOWING TERMINATION.
(a) Except as set forth in this Section 7.5, all
Expenses (as defined below) incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid in accordance with the provisions
of Section 5.18. For purposes of this Agreement, "EXPENSES" consist of all
out-of-pocket expenses (including, 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 Proxy Statement and/or the Proxy Materials (as the case may be), the
solicitation of shareholder approvals and all other matters related to the
closing of the transactions contemplated hereby.
(b) If this Agreement is to be terminated
pursuant to Section 7.1(d), Section 7.1(e) or Section 7.1(f), provided that with
respect to a termination pursuant to 7.1(f) the following shall apply only if
the termination is on account of a breach of a covenant or agreement by the
Company, then the Company shall (x) on the date specified in the last sentence
of this Section 7.5(b) in the case of a termination of this Agreement pursuant
to Section 7.1(e) or 7.1(f), or (y) simultaneously with a termination of this
Agreement by the Company pursuant to Section 7.1(d), pay to the Parent (by wire
transfer of immediately available funds to an account designated by the Parent)
a termination fee of $3,250,000 (the "TERMINATION AMOUNT") plus the
reimbursement of all of Parent's actual and documented out-of-pocket expenses
(including all investment banking, legal, accounting and other similar expenses)
up to a maximum reimbursable amount of $1,000,000 (the "PARENT EXPENSES");
PROVIDED, HOWEVER, that the Company shall not be obligated to pay such fee to
the Parent if this Agreement is terminated pursuant to Section 7.1(e) or Section
7.1(f) unless (i) at the time of the Company Shareholder Meeting in the case of
termination pursuant to Section 7.1(e) or on the date the Parent terminates this
Agreement pursuant to Section 7.1(f), the Company has received a bona fide
alternative Acquisition Proposal or a third party has made or publicly announced
its intention to make a bona fide Acquisition Proposal, and (ii) within eighteen
months after the termination of this Agreement, the Company enters into a
definitive agreement providing for an alternative Acquisition Proposal with any
third party or an alternative Acquisition Proposal is consummated with any third
party. If the Termination Amount becomes payable as a result of a termination
pursuant to Section 7.1(e) or 7.1(f), then, in either such case, such
Termination Amount shall be paid promptly (and in any event within two (2) days
of
48
receipt by Company of a written notice from Parent) following the earlier of the
execution of such definitive agreement providing for an alternative Acquisition
Proposal or the consummation of an alternative Acquisition Proposal, as the case
may be.
(c) The Company acknowledges that the agreements
contained in this Section 7.5 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the Parent
would not enter into this Agreement; accordingly, if the Company fails to pay
promptly the Termination Amount, and, in order to obtain such payment, the
Parent commences a suit which results in a judgment against the Company for the
Termination Amount, the Company shall pay the Parent's Expenses in connection
with such suit, together with interest on the amount of the Termination Amount
at the prime rate of The Chase Manhattan Bank in effect on the date such payment
was required to be made plus two percent (2%).
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 CERTAIN DEFINITIONS. For purposes of this
Agreement:
(a) The term "AFFILIATE," as applied to any
person, means any other person directly or indirectly controlling, controlled
by, or under common control with, that person. For the purposes of this
definition, "CONTROL" (including, with correlative meanings, the terms
"CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH"), as applied to
any person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that person, whether
through the ownership of voting securities, by contract or otherwise.
(b) The term "BUSINESS DAY" means any day, other
than Saturday, Sunday or a federal holiday, and shall consist of the time period
from 12:01 a.m. through 12:00 midnight Eastern time. In computing any time
period under this Agreement, the date of the event which begins the running of
such time period shall be included EXCEPT that if such event occurs on other
than a business day such period shall begin to run on and shall include the
first business day thereafter.
(c) The term "INCLUDING" means, unless the
context clearly requires otherwise, including but not limited to the things or
matters named or listed after that term.
(d) The term "LIENS" means any security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's voting rights, charges and other encumbrances or
any nature whatsoever.
(e) The term "PARENT COMMON STOCK" means the
common stock, par value $.10 per share, of the Parent.
(f) The term "PERSON" shall include individuals,
corporations, limited and general partnerships, trusts, limited liability
companies, associations, joint ventures, Governmental Entities and other
entities and groups (which term shall include a "GROUP" as such term is defined
in Section 13(d)(3) of the Exchange Act).
49
(g) The term "SIGNIFICANT SUBSIDIARY" has the
meaning assigned to such term by Regulation S-X (17 ▇.▇.▇.▇▇. 210.1-02).
(h) The term "SUBSIDIARY" or "SUBSIDIARIES"
means, with respect to the Parent, the Company or any other person, any entity
of which the Parent, the Company or such other person, as the case may be
(either alone or through or together with any other subsidiary), owns, directly
or indirectly, stock or other equity interests the holders of which are
generally entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
SECTION 8.2 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS. The representations, warranties and agreements in this Agreement
and in any certificate delivered under this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement under Section 7.1, as
the case may be, except that the agreements set forth in Sections 5.6(b), 5.9,
5.14, 5.17, 7.2 and 7.5 and this Article 8 shall survive termination of this
Agreement. Each party agrees that, except for the representations and warranties
contained in this Agreement, the Company Disclosure Letter and the Parent
Disclosure Letter, no party to this Agreement has made any other representations
and warranties, and each party disclaims any other representations and
warranties, made by itself or any of its officers, directors, employees, agents,
financial and legal advisors or other Representatives with respect to the
execution and delivery of this Agreement or the transactions contemplated by
this Agreement, notwithstanding the delivery of disclosure to any other party or
any party's representatives of any documentation or other information with
respect to any one or more of the foregoing.
SECTION 8.3 COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each such counterpart being deemed to be an
original instrument, and all such counterparts shall together constitute the
same agreement.
SECTION 8.4 GOVERNING LAW; WAIVER OF JURY TRIAL
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN
AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT
OF LAW PRINCIPLES, EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE OF COLORADO
MANDATORILY APPLY.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A
50
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 8.4.
SECTION 8.5 NOTICES. Any notice, request, instruction or
other document to be given hereunder by any party to the others shall be in
writing and delivered personally, sent by reputable overnight courier, sent by
registered or certified mail, postage prepaid, or by facsimile:
IF TO THE PARENT OR MERGER SUB:
Automatic Data Processing, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
WITH COPIES TO:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO THE COMPANY:
Avert, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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WITH COPIES TO:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
SECTION 8.6 ENTIRE AGREEMENT. This Agreement (including
any exhibits to this Agreement), the Plan of Merger, the Voting Agreement, the
Company Disclosure Letter and the Parent Disclosure Letter constitute the entire
agreement and supersede all other prior agreements, understandings,
representations and warranties, both written and oral, among the parties, with
respect to the subject matter of this Agreement.
SECTION 8.7 NO THIRD PARTY BENEFICIARIES. Except for the
provisions of Section 5.9, this Agreement is not intended to confer upon any
person other than the parties to this Agreement any rights or remedies under
this Agreement.
SECTION 8.8 OBLIGATIONS OF THE PARENT AND OF THE
COMPANY. Whenever this Agreement requires a Parent Subsidiary to take any
action, that requirement shall be deemed to include an undertaking on the part
of the Parent to cause that Parent Subsidiary to take that action.
SECTION 8.9 SEVERABILITY. The provisions of this
Agreement shall be deemed severable and the invalidity or unenforceability of
any provision shall not affect the validity or enforceability or the other
provisions of this Agreement. If any provision of this Agreement, or the
application of that provision to any person or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision shall be substituted for
that provision in order to carry out, so far as may be valid and enforceable,
the intent and purpose of the invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of the provision to other
persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of the provision, or the application of that
provision, in any other jurisdiction.
SECTION 8.10 INTERPRETATION. The table of contents and
headings in this Agreement are for convenience of reference only, do not
constitute part of this Agreement and shall not be deemed to limit or otherwise
affect any of the provisions of
52
this Agreement. Where a reference in this Agreement is made to a section,
exhibit or annex, that reference shall be to a section of or exhibit or annex to
this Agreement unless otherwise indicated. Wherever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
SECTION 8.11 ASSIGNMENT. This Agreement shall not be
assignable by operation of law or otherwise, except that the Parent may
designate, by written notice to the Company, another Parent Subsidiary that is
wholly owned directly or indirectly by the Parent to be merged with and into the
Company in lieu of Merger Sub, in which event all references in this Agreement
to Merger Sub shall be deemed references to such other Parent Subsidiary, and in
that case, all representations and warranties made in this Agreement with
respect to Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other Parent Subsidiary
as of the date of such designation.
SECTION 8.12 SPECIFIC PERFORMANCE. The parties to this
Agreement agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise reached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are entitled at law or
in equity.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties to this Agreement as of
the date first written above.
AVERT, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
AUTOMATIC DATA PROCESSING, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
ADP COLORADO, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President