EXHIBIT 2.01
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
CADENCE DESIGN SYSTEMS, INC.,
a Delaware corporation;
WYOMING ACQUISITION SUB, INC.,
a Delaware corporation;
and
▇▇▇▇▇▇ & CHYAN TECHNOLOGY, INC.,
a Delaware corporation
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Dated as of October 28, 1996
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TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION................................... 2
1.1 Merger of Merger Sub into the Company............................ 2
1.2 Effect of the Merger............................................. 2
1.3 Closing; Effective Time.......................................... 2
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.. 2
1.5 Conversion of Shares............................................. 3
1.6 Closing of the Company's Transfer Books.......................... 4
1.7 Exchange of Company Stock Certificates........................... 4
1.8 Tax Consequences................................................. 5
1.9 Accounting Consequences.......................................... 5
1.10 Further Action................................................... 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 6
2.1 Due Organization; Subsidiaries; Etc.............................. 6
2.2 Certificate of Incorporation and Bylaws. ........................ 6
2.3 Capitalization, Etc.............................................. 7
2.4 SEC Filings; Financial Statements................................ 8
2.5 Absence of Changes............................................... 9
2.6 Title to Assets.................................................. 11
2.7 Equipment; Leaseholds............................................ 11
2.8 Proprietary Assets............................................... 12
2.9 Contracts........................................................ 14
2.10 Liabilities...................................................... 16
2.11 Compliance with Legal Requirements............................... 16
2.12 Certain Business Practices....................................... 16
2.13 Governmental Authorizations...................................... 16
2.14 Tax Matters...................................................... 17
2.15 Employee and Labor Matters; Benefit Plans........................ 18
2.16 Environmental Matters............................................ 20
2.17 Insurance........................................................ 20
2.18 Transactions with Affiliates..................................... 21
2.19 Legal Proceedings; Orders........................................ 21
2.20 Authority; Inapplicability of Anti-takeover Statutes; Binding
Nature of Agreement.............................................. 21
2.21 Section 203 of the DGCL Not Applicable........................... 22
2.22 No Existing Discussions.......................................... 22
2.23 Accounting Matters............................................... 22
2.24 Vote Required.................................................... 22
2.25 Non-Contravention; Consents...................................... 22
2.26 Fairness Opinion................................................. 23
2.27 Financial Advisor................................................ 23
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TABLE OF CONTENTS
(CONTINUED)
PAGE
2.28 Full Disclosure.................................................. 24
SECTION 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...... 24
3.1 Organization, Standing and Power................................. 24
3.2 Capitalization, Etc.............................................. 25
3.3 SEC Filings; Financial Statements................................ 26
3.4 Absence of Certain Changes or Events............................. 27
3.5 Title to Assets.................................................. 27
3.6 Proprietary Assets............................................... 27
3.7 Liabilities...................................................... 28
3.8 Compliance with Legal Requirements............................... 28
3.9 Governmental Authorizations...................................... 28
3.10 Legal Proceedings; Orders........................................ 29
3.11 Vote Required.................................................... 29
3.12 Authority; Binding Nature of Agreement........................... 29
3.13 Non-Contravention; Consents...................................... 29
3.14 Valid Issuance................................................... 30
3.15 Accounting Matters............................................... 30
3.16 Full Disclosure.................................................. 30
SECTION 4. CERTAIN COVENANTS OF THE PARTIES............................. 31
4.1 Access and Investigation......................................... 31
4.2 Operation of the Company's Business. ............................ 32
4.3 No Solicitation.................................................. 35
4.4 Notification by Parent........................................... 36
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES.......................... 36
5.1 Registration Statement; Prospectus/Proxy Statement............... 36
5.2 Company Stockholders' Meeting.................................... 37
5.3 Regulatory Approvals............................................. 38
5.4 Stock Options.................................................... 39
5.5 Indemnification of Officers and Directors........................ 40
5.6 Pooling of Interests............................................. 41
5.7 Additional Agreements............................................ 42
5.8 Disclosure....................................................... 42
5.9 Affiliate Agreements............................................. 43
5.10 Tax Matters...................................................... 43
5.11 Letter of the Company's Accountants.............................. 44
5.12 Employment Matters............................................... 44
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.13 Parent Plans and Benefit Arrangements............................ 44
5.14 NYSE Listing..................................................... 44
5.15 Resignation of Officers and Directors............................ 45
5.16 FIRPTA Matters................................................... 45
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT
AND MERGER SUB................................................... 45
6.1 Accuracy of Representations...................................... 45
6.2 Performance of Covenants......................................... 45
6.3 Effectiveness of Registration Statement.......................... 46
6.4 Stockholder Approval............................................. 46
6.5 Consents......................................................... 46
6.6 Agreements and Documents......................................... 46
6.7 Employees........................................................ 47
6.8 No Material Adverse Change....................................... 47
6.9 FIRPTA Compliance................................................ 47
6.10 HSR Act.......................................................... 47
6.11 Listing.......................................................... 47
6.12 No Restraints.................................................... 48
6.13 No Governmental Litigation....................................... 48
6.14 No Other Litigation.............................................. 48
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY............ 48
7.1 Accuracy of Representations...................................... 48
7.2 Performance of Covenants......................................... 49
7.3 Effectiveness of Registration Statement.......................... 49
7.4 Documents........................................................ 49
7.5 No Material Adverse Change....................................... 49
7.6 HSR Act.......................................................... 49
7.7 Listing.......................................................... 49
7.8 No Restraints.................................................... 50
SECTION 8. TERMINATION.................................................. 50
8.1 Termination...................................................... 50
8.2 Effect of Termination............................................ 51
8.3 Expenses; Termination Fees....................................... 52
SECTION 9. MISCELLANEOUS PROVISIONS..................................... 53
9.1 Amendment........................................................ 53
9.2 Waiver........................................................... 53
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TABLE OF CONTENTS
(CONTINUED)
PAGE
9.3 No Survival of Representations and Warranties.................... 53
9.4 Entire Agreement; Counterparts; Applicable Law................... 54
9.5 Disclosure Schedule.............................................. 54
9.6 Attorneys' Fees.................................................. 54
9.7 Assignability.................................................... 54
9.8 Notices.......................................................... 54
9.9 Cooperation...................................................... 55
9.10 Construction..................................................... 55
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EXHIBITS
Exhibit A - Certain definitions
Exhibit B - Form of Certificate of Incorporation of Surviving Corporation
Exhibit C - Form of Affiliate Agreement
Exhibit D - Form of Continuity of Interest Certificate
Exhibit E - Form of Employment Agreement
Exhibit F - Form of Option Agreement
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of October 28, 1996, by and among: CADENCE DESIGN SYSTEMS,
INC., a Delaware corporation ("Parent"); WYOMING ACQUISITION SUB, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"); and
▇▇▇▇▇▇ & CHYAN TECHNOLOGY, INC., a Delaware corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement and the Delaware General
Corporation Law (the "Merger"). Upon consummation of the Merger, Merger Sub
will cease to exist, and the Company will become a wholly owned subsidiary of
Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger
be treated as a "pooling of interests."
C. The respective boards of directors of Parent, Merger Sub and the
Company have approved this Agreement and the Merger.
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AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law (the "DGCL").
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of ▇▇▇▇▇▇ Godward LLP, Five Palo Alto Square, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m. on a date to be designated by Parent (the "Closing
Date"), which (subject to the satisfaction or waiver of the conditions set forth
in Sections 6 and 7) shall be no later than the fifteenth business day after
satisfaction of the latest to occur of the conditions set forth in Sections 6.4,
6.10 and 6.11. Contemporaneously with or as promptly as practicable after the
Closing, a properly executed certificate of merger conforming to the
requirements of the DGCL (the "Certificate of Merger") shall be filed with the
Secretary of State of the State of Delaware. The Merger shall take effect at
the time the Certificate of Merger is filed with the Secretary of State of the
State of Delaware or at such later time as may be specified in the Certificate
of Merger (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time to conform to
Exhibit B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as
in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the respective individuals
who are directors and officers of Merger Sub immediately prior to the
Effective Time.
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1.5 CONVERSION OF SHARES.
(a) Subject to Section 1.5(d), at the Effective Time, by virtue of
the Merger and without any further action on the part of Parent, Merger Sub, the
Company or any stockholder of the Company:
(I) any shares of Company Common Stock then held by the Company
or any subsidiary of the Company (or held in the Company's treasury) shall
be canceled;
(II) any shares of Company Common Stock then held by Parent,
Merger Sub or any other subsidiary of Parent shall be canceled;
(III) except as provided in clauses "(i)" and "(ii)" above
and subject to Section 1.5(b), each share of Company Common Stock then
outstanding shall be converted into the right to receive eighty-five
hundredths (0.85) of a share of Parent Common Stock; and
(IV) each share of the common stock, par value $0.001 per share,
of Merger Sub then outstanding shall be converted into one share of common
stock of the Surviving Corporation.
(b) The fraction of a share of Parent Common Stock into which each
outstanding share of Company Common Stock is to be converted pursuant to
Section 1.5(a)(iii) (as such fraction may be adjusted in accordance with this
Section 1.5(b)) is referred to as the "Exchange Ratio." If, between the date of
this Agreement and the Effective Time, the outstanding shares of Company Common
Stock or Parent Common Stock are changed into a different number or class of
shares by reason of any stock split, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction, then the
Exchange Ratio shall be appropriately adjusted.
(c) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Common Stock
will also be unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends. The
Company shall take all action that may be necessary to ensure that, from and
after the Effective Time, Parent is entitled to exercise any such repurchase
option or other right set forth in any such restricted stock purchase agreement
or other agreement.
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of Company
Common Stock who would otherwise be entitled to receive a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of
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Parent Common Stock issuable to such holder) shall, upon surrender of such
holder's Company Stock Certificate(s) (as defined in Section 1.6), be paid in
cash the dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the closing price of a share of
Parent Common Stock on the NYSE on the date the Merger becomes effective.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time: (a)
all shares of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and shall cease to exist, and all
holders of certificates representing shares of Company Common Stock that were
outstanding immediately prior to the Effective Time shall cease to have any
rights as stockholders of the Company; and (b) the stock transfer books of the
Company shall be closed with respect to all shares of Company Common Stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of Company Common Stock shall be made on such stock transfer books
after the Effective Time. If, after the Effective Time, a valid certificate
previously representing any of such shares of Company Common Stock (a "Company
Stock Certificate") is presented to the Exchange Agent (as defined in Section
1.7) or to the Surviving Corporation or Parent, such Company Stock Certificate
shall be canceled and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF COMPANY STOCK CERTIFICATES.
(a) Prior to the Closing Date, Parent shall select a reputable bank
or trust company to act as exchange agent in the Merger (the "Exchange Agent").
Promptly after the Effective Time, Parent shall deposit with the Exchange Agent
(i) certificates representing the shares of Parent Common Stock issuable
pursuant to this Section 1 and (ii) cash sufficient to make payments in lieu of
fractional shares in accordance with Section 1.5(d). The shares of Parent
Common Stock and cash amounts so deposited with the Exchange Agent, together
with any dividends or distributions received by the Exchange Agent with respect
to such shares, are referred to collectively as the "Exchange Fund."
(b) As soon as practicable after the Effective Time, the Exchange
Agent will mail to the registered holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such provisions as Parent
may reasonably specify (including a provision confirming that delivery of
Company Stock Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Subject to Section 1.5(d), upon surrender of
a Company Stock Certificate to the Exchange Agent for exchange, together with a
duly executed letter of transmittal and such other documents as may be
reasonably required by the Exchange Agent or Parent, (1) the holder of such
Company Stock Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of shares of Parent Common Stock that such
holder has the right to receive pursuant to the provisions of Section
1.5(a)(iii), and (2) the Company Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.7(b), each
Company Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive shares of Parent Common Stock (and cash in
lieu of any fractional share of Parent Common Stock) as contemplated
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by Section 1. If any Company Stock Certificate shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
issuance of any certificate representing Parent Common Stock, require the owner
of such lost, stolen or destroyed Company Stock Certificate to provide an
appropriate affidavit and to deliver a bond (in such sum as Parent may
reasonably direct) as indemnity against any claim that may be made against the
Exchange Agent, Parent or the Surviving Corporation with respect to such Company
Stock Certificate.
(c) No dividends or other distributions declared or made with respect
to Parent Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, until such holder surrenders
such Company Stock Certificate in accordance with this Section 1.7 (at which
time such holder shall be entitled to receive all such dividends and
distributions, without interest).
(d) Any portion of the Exchange Fund that remains undistributed to
holders of Company Stock Certificates on the first anniversary of the date on
which the Merger becomes effective shall be delivered to Parent upon demand, and
any holders of Company Stock Certificates who have not theretofore surrendered
their Company Stock Certificates in accordance with Section 1.7(b) shall
thereafter look only to Parent for satisfaction of their claims for Parent
Common Stock, cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock.
(e) Each of the Exchange Agent, Parent and the Surviving Corporation
shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable pursuant to this Agreement to any holder or former holder
of Company Common Stock such amounts as may be required to be deducted or
withheld therefrom under the Code or under any provision of state, local or
foreign tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Person to whom such amounts would otherwise have been paid.
(f) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of Company Common Stock with respect to any shares
of Parent Common Stock (or dividends or distributions with respect thereto), or
for any cash amounts, delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law.
1.8 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.9 ACCOUNTING CONSEQUENCES. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.10 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or
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to vest the Surviving Corporation with full right, title and possession of and
to all rights and property of Merger Sub and the Company, the officers and
directors of the Surviving Corporation and Parent shall be fully authorized (in
the name of Merger Sub, in the name of the Company and otherwise) to take such
action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except
as set forth in the Company SEC Documents (as defined in Section 2.4(a)),
excluding the exhibits thereto, or in the disclosure schedule that has been
prepared by the Company in accordance with the requirements of Section 9.5 and
that has been delivered by the Company to Parent on the date of this Agreement
and signed by the President of the Company (the "Company Disclosure Schedule"):
2.1 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) Part 2.1 of the Company Disclosure Schedule identifies each
Entity in which the Company owns any shares of capital stock, or in which the
Company owns any equity interest of any nature, together with the number of
shares owned by and the percentage ownership held by the Company. (The Company
and each of its direct and indirect majority-owned subsidiaries are referred to
collectively in this Agreement as the "Acquired Corporations"). None of the
Acquired Corporations has agreed or is obligated to make any future investment
in or capital contribution to any Entity. None of the Acquired Corporations
has, at any time, been a general partner of any general partnership, limited
partnership or other Entity.
(b) Each of the Acquired Corporations is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary power and authority: (i)
to conduct its business in the manner in which its business is currently being
conducted;(ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Contracts by which it is bound.
(c) Each of the Acquired Corporations is qualified to do business as
a foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business requires such qualification and
where the failure to so qualify would have a Material Adverse Effect on the
Acquired Corporations.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has delivered to
Parent accurate and complete copies of the certificate of incorporation, bylaws
and other charter and organizational documents of the respective Acquired
Corporations, including all amendments thereto.
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2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
30,000,000 shares of Company Common Stock, of which 12,986,056 shares have been
issued and are outstanding as of the date of this Agreement; and (ii) 5,000,000
shares of preferred stock, $0.01 par value per share, of which no shares are
outstanding as of the date of this Agreement. All of the outstanding shares of
Company Common Stock have been duly authorized and validly issued, and are fully
paid and nonassessable. As of the date of this Agreement, there are no shares
of Company Common Stock held in treasury by the Company or held by any of the
subsidiaries of the Company. Except as set forth in Part 2.3(b) of the Company
Disclosure Schedule: (i) none of the outstanding shares of Company Common Stock
is entitled or subject to any preemptive right, right of participation, right of
maintenance or any similar right; (ii) none of the outstanding shares of Company
Common Stock is subject to any right of first refusal in favor of the Company;
and (iii) there is no Acquired Corporation Contract relating to the voting or
registration of, or restricting any Person from purchasing, selling, pledging or
otherwise disposing of (or granting any option or similar right with respect
to), any shares of Company Common Stock. Upon consummation of the Merger, (A)
the shares of Parent Common Stock issued in exchange for any shares of Company
Common Stock that are subject to a Contract pursuant to which the Company has
the right to repurchase, redeem or otherwise reacquire any shares of Company
Common Stock will, without any further act of Parent, the Company or any other
Person, become subject to the restrictions, conditions and other provisions
contained in such Contract, and (B) Parent will automatically succeed to and
become entitled to exercise the Company's rights and remedies under any such
Contract. The Company is under no obligation to repurchase, redeem or otherwise
acquire any outstanding shares of Company Common Stock.
(b) As of the date of this Agreement: (i) 47,711 shares of Company
Common Stock are reserved for future issuance pursuant to stock options granted
and currently outstanding under the Company's 1989 Stock Option Plan; (ii)
2,073,660 shares of Company Common Stock are reserved for future issuance
pursuant to stock options granted and currently outstanding under the Company's
1993 Equity Incentive Plan; (iii) 50,000 shares of Company Common Stock are
reserved for future issuance pursuant to stock options granted and currently
outstanding under the Company's 1995 Directors Stock Option Plan; and (iv)
150,000 shares of Company Common Stock are reserved for future issuance under
the Company's 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan").
(Stock options granted by the Company pursuant to the 1989 Stock Option Plan,
the 1993 Equity Incentive Plan and the 1995 Directors Stock Option Plan are
referred to in this Agreement as "Company Options.") Part 2.3(b) of the
Company Disclosure Schedule sets forth the following information with respect to
each Company Option outstanding as of the date of this Agreement: (i) the
particular plan pursuant to which such Company Option was granted; (ii) the name
of the optionee; (iii) the number of shares of Company Common Stock subject to
such Company Option; (iv) the exercise price of such Company Option; (v) the
date on which such Company Option was granted; (vi) the extent to which such
Company Option is vested as of the date of this Agreement; and (vii) the date on
which such Company Option expires. The Company has delivered to Parent accurate
and complete copies of all stock option plans pursuant to which the Company has
ever granted stock options.
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(c) Except as set forth in Part 2.3 of the Company Disclosure
Schedule there is no:(i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company;(ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company;(iii)
stockholder rights plan (or similar plan commonly referred to as a "poison
pill") or Contract under which the Company is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other securities; or (iv)
to the best of the knowledge of the Company, condition or circumstance that may
give rise to or provide a basis for the assertion of a claim by any Person to
the effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of the Company.
(d) All outstanding shares of Company Common Stock, all outstanding
Company Options, and, to the best of the knowledge of the Company, all
outstanding shares of capital stock of each of the subsidiaries of the Company
have been issued and granted in compliance with (i) all applicable securities
laws and other applicable Legal Requirements, and (ii) all requirements set
forth in applicable Contracts.
(e) All of the outstanding shares of capital stock of each of the
subsidiaries of the Company are validly issued, fully paid and nonassessable and
are owned beneficially and of record by the Company, free and clear of any
Encumbrances.
2.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent accurate and complete copies
of each report, registration statement (on a form other than Form S-8) and
definitive proxy statement (excluding copies of exhibits) filed by the Company
with the SEC since October 30, 1995 (the "Company SEC Documents"), including the
Company's Registration Statement on Form S-1 filed with the SEC on October 30,
1995, and the Company's prospectus contained therein. As of the time it was
filed with the SEC (or, if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing): (i) each of the Company
SEC Documents complied in all material respects with the applicable requirements
of the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The financial statements (including any related notes) contained
in the Company SEC Documents: (i) complied as to form in all material respects
with the published rules and regulations of the SEC applicable thereto; (ii)
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC, and except that the unaudited
financial statements may not contain footnotes and are subject to normal and
recurring year-end adjustments which will not, individually or in the aggregate,
be material in amount), and (iii)
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fairly present the consolidated financial position of the Company and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations and cash flows of the Company and its subsidiaries for the periods
covered thereby.
(c) The Company has delivered to Parent an unaudited consolidated
balance sheet of the Company and its subsidiaries as of September 30, 1996 (the
"Company Unaudited Interim Balance Sheet"), and the related unaudited
consolidated income statement, statement of stockholders' equity and statement
of cash flows of the Company for the nine months then ended. The financial
statements referred to in this Section 2.4(c): (i) were prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
the basis on which the financial statements referred to in Section 2.4(b) were
prepared (except that the financial statements referred to in this Section
2.4(c) do not contain footnotes and are subject to normal and recurring year-end
adjustments which will not, individually or in the aggregate, be material in
amount), and (ii) fairly present the consolidated financial position of the
Company and its subsidiaries as of September 30, 1996 and the consolidated
results of operations and cash flows of the Company and its subsidiaries for the
period covered thereby.
2.5 ABSENCE OF CHANGES. Between September 30, 1996 and the date of this
Agreement:
(a) there has not been any material adverse change in the business,
condition, assets, liabilities, operations or financial performance of the
Acquired Corporations taken as a whole, and no event has occurred that
would reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations;
(b) there has not been any loss, damage or destruction to, or any
interruption in the use of, any of the assets of any of the Acquired
Corporations (whether or not covered by insurance) that has had or would
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations;
(c) none of the Acquired Corporations has (i) declared, accrued, set
aside or paid any dividend or made any other distribution in respect of any
shares of capital stock, or (ii) repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities;
(d) none of the Acquired Corporations has sold, issued, granted or
authorized the issuance or grant of (i) any capital stock or other security
(except for Company Common Stock issued upon the exercise of outstanding
Company Options), (ii) any option, call, warrant or right to acquire any
capital stock or any other security (except for Company Options described
in Part 2.3(b) of the Company Disclosure Schedule), or (iii) any instrument
convertible into or exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any of
the Company's
9
stock option plans, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any restricted stock purchase
agreement;
(f) there has been no amendment to the certificate of incorporation,
bylaws or other charter or organizational documents of any of the Acquired
Corporations, and none of the Acquired Corporations has effected or been a
party to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction;
(g) none of the Acquired Corporations has (i) received any
Acquisition Proposal, or (ii) solicited, initiated, encouraged or induced,
or provided any nonpublic information to or entered into any discussions
with any Person for the purpose of soliciting, initiating, encouraging or
inducing, the making or submission of any Acquisition Proposal;
(h) none of the Acquired Corporations has formed any subsidiary or
acquired any equity interest or other interest in any other Entity;
(i) none of the Acquired Corporations has made any capital
expenditure in any calendar month which, when added to all other capital
expenditures made on behalf of the Acquired Corporations in such calendar
month results in such capital expenditures exceeding $100,000 in the
aggregate;
(j) none of the Acquired Corporations has amended or prematurely
terminated, or waived any right or remedy under, any Material Contract (as
defined in Section 2.9), except for amendments, terminations or waivers
that have not had and could not reasonably be expected to have a Material
Adverse Effect on the Acquired Corporations;
(k) none of the Acquired Corporations has (i) acquired, leased or
licensed any material right or other asset from any other Person, except in
ordinary course of business and consistent with past practices, (ii) sold
or otherwise disposed of, or leased or licensed, any material right or
other asset to any other Person, except in the ordinary course of business
and consistent with past practices, or (iii) waived or relinquished any
material right;
(l) none of the Acquired Corporations has written off as
uncollectible, or established any extraordinary reserve with respect to,
any material amount of accounts receivable or other indebtedness;
(m) none of the Acquired Corporations has made any pledge of any of
its assets or otherwise permitted any of its assets to become subject to
any Encumbrance, except for Encumbrances of assets made in the ordinary
course of business and consistent with past practices;
10
(n) none of the Acquired Corporations has (i) lent, or made any
advance of, more than $10,000 to any one Person or more than $100,000 to
all Persons to whom any of the Acquired Corporations has lent money or
otherwise made advances, or (ii) incurred or guaranteed any indebtedness
for borrowed money;
(o) none of the Acquired Corporations has (i) established or adopted
any employee benefit plan, (ii) caused or permitted any employee benefit
plan to be amended in any material respect, or (iii) except for bonus,
profit-sharing and similar payments made in the ordinary course of business
and consistent with past practices, paid any bonus or made any
profit-sharing or similar payment to, materially increased the amount of
commissions payable to, or materially increased the amount of the wages,
salary, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees;
(p) none of the Acquired Corporations has changed any of its methods
of accounting or accounting practices in any material respect;
(q) none of the Acquired Corporations has made any material Tax
election;
(r) none of the Acquired Corporations has commenced or settled any
Legal Proceeding;
(s) none of the Acquired Corporations has entered into any material
transaction or taken any other material action that has had, or would
reasonably be expected to have, a Material Adverse Effect on the Acquired
Corporations; and
(t) none of the Acquired Corporations has agreed or committed to take
any of the actions referred to in clauses "(c)" through "(s)" above.
2.6 TITLE TO ASSETS. The Acquired Corporations own, and have good, valid
and marketable title to, all assets purported to be owned by them, including:
(i) all assets reflected on the Company Unaudited Interim Balance Sheet (except
for assets sold or otherwise disposed of since the date of the Company Unaudited
Interim Balance Sheet); and (ii) all other assets reflected in the books and
records of the Acquired Corporations as being owned by the Acquired
Corporations. All of said assets are owned by the Acquired Corporations free
and clear of any Encumbrances, except for (x) any Encumbrance for current taxes
not yet due and payable, (y) minor Encumbrances that have arisen in the ordinary
course of business, and (z) Encumbrances that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of any of the Acquired Corporations.
2.7 EQUIPMENT; LEASEHOLDS. All material items of equipment and other
tangible assets owned by or leased to the Acquired Corporations are adequate for
the uses to which they are being put, are in good condition and repair (ordinary
wear and tear excepted) and are adequate for the conduct of the business of the
Acquired Corporations in the manner in which such business is currently being
conducted. None of the Acquired Corporations own any real property or any
11
interest in real property, except for the leaseholds created under the real
property leases identified in Part 2.7 of the Company Disclosure Schedule.
12
2.8 PROPRIETARY ASSETS.
(a) Part 2.8(a)(i) of the Company Disclosure Schedule sets forth,
with respect to each Proprietary Asset owned by the Acquired Corporations and
registered with any Governmental Body or for which an application has been filed
with any Governmental Body, (i) a brief description of such Proprietary Asset,
and (ii) the names of the jurisdictions covered by the applicable registration
or application. Part 2.8(a)(ii) of the Company Disclosure Schedule identifies
and provides a brief description of all other Proprietary Assets owned by the
Acquired Corporations that are material to the business of the Acquired
Corporations. The Acquired Corporations have good, valid and marketable title
to all of the Proprietary Assets identified in Parts 2.8(a)(i) and 2.8(a)(ii) of
the Company Disclosure Schedule, free and clear of all liens, pledges, security
interests or hypothecations, except for (i) any lien for current taxes not yet
due and payable, (ii) immaterial liens, pledges, security interests or
hypothecations that have arisen in the ordinary course of business, and (iii)
liens, pledges, security interests or hypothecations that do not (individually
or in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of either of the Acquired
Corporations. The Acquired Corporations have a valid right to use all
Proprietary Assets being used by the Acquired Corporations. None of the
Acquired Corporations has developed jointly with any other Person any
Proprietary Asset that is embodied in or related to any of the Company's
products identified in Part 2.8(a)(ii) of the Company Disclosure Schedule with
respect to which such other Person has any rights (except that such other Person
may have rights to certain Proprietary Assets embodied in translators or
interfaces that are part of the products identified in Part 2.8(a)(ii) of the
Company Disclosure Schedule, which rights do not materially detract from the
value to the Company of any Proprietary Asset owned by any of the Acquired
Corporations or materially impair the business or operations of any of the
Acquired Corporations).
(b) The Acquired Corporations have taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value of
all material Proprietary Assets owned by or licensed to any of the Acquired
Corporations (except for any such Proprietary Assets whose value would be
unimpaired by disclosure). Without limiting the generality of the foregoing,
except as set forth in Part 2.8 of the Company Disclosure Schedule, all current
and former employees, consultants and independent contractors of the Acquired
Corporations who are or were involved in, or who have contributed to, the
creation or development of any material Proprietary Asset owned by or licensed
to any of the Acquired Corporations have executed and delivered to the Acquired
Corporations an agreement that is substantially similar to the form of Invention
Assignment and Proprietary Information Agreement previously delivered by the
Company to Parent, except for current or former employees, consultants or
independent contractors whose failure to execute and deliver such an Employee
Information Assignment and Proprietary Information Agreement has not had and
would not reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations. To the best of the knowledge of the Company, no current
or former employee, officer, director, consultant (who is or was involved in, or
who has contributed to, the creation or development of any material Proprietary
Asset owned by any of the Acquired Corporations) or independent contractor (who
is or was involved in, or who has contributed to, the creation or development
of any material Proprietary Asset
13
owned by any of the Acquired Corporations) has any right, claim or interest
in or with respect to any material Proprietary Asset onwed by any of the
Acquired Corporations.
(c) To the best of the knowledge of the Company: (i) all patents,
trademarks, service marks and copyrights owned by any of the Acquired
Corporations and material to the business of any of the Acquired Corporations
are valid, enforceable and subsisting; (ii) none of the Proprietary Assets owned
by any of the Acquired Corporations and no Proprietary Asset that is currently
being developed by any of the Acquired Corporations (either by itself or with
any other Person) infringes or misappropriates any Proprietary Asset owned by
any other Person, except where any liability, or any restriction on sale, use,
development or licensing of a Proprietary Asset, arising from such infringement,
misappropriation or unlawful use has not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations; (iii)
none of the Acquired Corporations is infringing, misappropriating or making any
unlawful use of any Proprietary Asset owned by any other Person, except where
any liability, or any restriction on sale, use, development or licensing of a
Proprietary Asset, arising from such infringement, misappropriation or unlawful
use has not had and would not reasonably be expected to have a Material Adverse
Effect on the Acquired Corporations; (iv) none of the products that are or have
been designed, created, developed, assembled, manufactured or sold by any of the
Acquired Corporations is infringing, misappropriating or making any unlawful or
unauthorized use of any Proprietary Asset owned or used by any other Person, and
none of such products has at any time infringed, misappropriated or made any
unlawful or unauthorized use of, any Proprietary Asset of any other Person,
except where any liability, or any restriction on sale, use, development or
licensing of a Proprietary Asset, arising from such infringement,
misappropriation or unlawful use has not had and would not reasonable be
expected to have a Material Adverse Effect on the Acquired Corporations; (v)
since September 30, 1995, none of the Acquired Corporations has received any
notice or other communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful or unauthorized
use of, any Proprietary Asset owned or used by any other Person; (vi) no other
Person is infringing, misappropriating or making any unlawful or unauthorized
use of, and no Proprietary Asset owned or used by any other Person infringes any
material Proprietary Asset owned by any of the Acquired Corporations, except
where such infringement, misappropriation or unlawful use has not had and would
not reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations.
(d) The Proprietary Assets owned by or licensed to the Acquired
Corporations constitute all the Proprietary Assets necessary to enable the
Acquired Corporations to conduct their business substantially in the manner in
which such business has been and is being conducted.
(e) Except as set forth in Part 2.8(e) of the Company Disclosure
Schedule, none of the Acquired Corporations has disclosed or delivered to any
Person, or permitted the disclosure or delivery to any escrow agent or other
Person of, the source code, or any material portion or aspect of the source
code, or any material proprietary information or algorithm contained in any
source code, of any material Proprietary Asset owned by any of the Acquired
Corporations. No event has occurred, and no circumstance or condition exists,
that (with or
14
without notice or mere lapse of time) will, or would reasonably be expected to,
result in the disclosure or delivery to any Person of the source code, or any
material portion or aspect of the source code, or any material proprietary
information or algorithm contained in any source code, of any material
Proprietary Asset owned by or licensed to any of the Acquired Corporations.
Part 2.8(e) of the Company Disclosure Schedule identifies each Contract pursuant
to which the Company has deposited or is required to deposit with an
escrowholder or any other Person the source code, or any material portion or
aspect of the source code, or any material proprietary information or algorithm
contained in or relating to any source code, of any material Proprietary Asset
owned by any of the Acquired Corporations, and further describes whether the
execution of this Agreement or the consummation of any of the transactions
contemplated hereby, in and of itself, would reasonably be expected to result in
the release from escrow of the source code, or any material portion or aspect of
the source code, or any material proprietary information or algorithm contained
in or relating to any source code, of any material Proprietary Asset owned by
any of the Acquired Corporations.
2.9 CONTRACTS.
(a) Part 2.9(a) of the Company Disclosure Schedule identifies each
Acquired Corporation Contract that constitutes a "Material Contract." (For
purposes of this Agreement, each of the following shall be deemed to constitute
a "Material Contract":
(i) any Contract providing for the employment of, or the
performance of services by, any employee or consultant (to the extent such
consultant may not be terminated without penalty on no more than 30 days
notice), and any Contract pursuant to which any of the Acquired
Corporations is required to make any severance, termination or similar
payment, relocation payment or any other payment (including any bonus
payment, but excluding payments in respect of salary or commissions earned
by employees of the Company in the ordinary course of business and
consistent with past practices) in excess of $25,000, to any current or
former employee or director of any of the Acquired Corporations;
(ii) any Contract (A) relating to the acquisition, transfer,
development, sharing, license (to or by any of the Acquired Corporations),
use or other exploitation of any Proprietary Asset (except for any Contract
pursuant to which (1) any Proprietary Asset is licensed to the Acquired
Corporations under any third party software license generally available to
the public, and (2) any Proprietary Asset is licensed by any of the
Acquired Corporations to any Person on a non-exclusive basis); or (B) of
the type referred to in Section 2.8(e);
(iii) any Contract which provides for indemnification of any
officer, director, employee or agent of any of the Acquired Corporations;
(iv) any Contract imposing any restriction on the right or
ability of any Acquired Corporation (A) to compete with any other Person,
(B) to acquire any product or other asset or any services from any other
Person, to sell any product or other asset to
15
or perform any services for any other Person or to transact business or
deal in any other manner with any other Person, or (C) develop or
distribute any technology;
(v) any Contract (A) relating to the acquisition, issuance,
voting, registration, sale or transfer of any securities, (B) providing any
Person with any preemptive right, right of participation, right of
maintenance or any similar right with respect to any securities, or (C)
providing the Company with any right of first refusal with respect to, or
right to repurchase or redeem, any securities;
(vi) any Contract requiring that the Company give any notice
or provide any information to any Person prior to accepting any Acquisition
Proposal;
(vii) any Contract (A) that contemplates or involves the
payment or delivery of cash or other consideration in an amount or having a
value in excess of $25,000 in the aggregate, or contemplates or involves
the performance of services having a value in excess of $25,000 in the
aggregate, and (B) that has a term of more than 90 days and that may not be
terminated by such Acquired Corporation (other than for breach of any such
Contract and, in any event, without penalty) within 90 days after the
delivery of a termination notice by such Acquired Corporation; and
(viii) any Contract (not otherwise identified in clauses
"(i)" through "(vii)" of this sentence) that is or would be material to any
of the Acquired Corporations, to the business, condition, capitalization or
operations of any of the Acquired Corporations or to any of the
transactions contemplated by this Agreement.
There is no Acquired Corporation Contract to which any Governmental Body is a
party or under which any Governmental Body has any rights or obligations.
(b) Each Material Contract is valid and in full force and effect, and
is enforceable by an Acquired Corporation in accordance with its terms, subject
to (i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(c) (i) none of the Acquired Corporations has violated or breached,
or committed any default under, any Acquired Corporation Contract, except for
defaults that have not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations; and, to the best of the
knowledge of the Company, no other Person has violated or breached, or committed
any default under, any Company Contract, except for defaults that have not had
and would not reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations; (ii) to the best of the knowledge of the Company, no
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, or would reasonably be expected to,
(A) result in a violation or breach of any of the provisions of any Acquired
Corporation Contract, (B) give any Person the right to declare a default or
exercise any remedy under any Acquired Corporation Contract, (C) give any Person
the right to a rebate, chargeback, penalty or change in delivery schedule under
any Acquired Corporation Contract,
16
(D) give any Person the right to accelerate the maturity or performance of any
Acquired Corporation Contract, or (E) give any Person the right to cancel,
terminate or modify any Acquired Corporation Contract, except in each such case
for defaults, acceleration rights, termination rights and other rights that have
not had and would not reasonably be expected to have a Material Adverse Effect
on the Acquired Corporations; and (iii) since December 31, 1995, none of the
Acquired Corporations has received any notice or other communication regarding
any actual or possible violation or breach of, or default under, any Acquired
Corporation Contract, except in each such case for defaults, acceleration
rights, termination rights and other rights that have not had and would not
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations.
2.10 LIABILITIES. None of the Acquired Corporations has any accrued,
contingent or other liabilities of any nature, either matured or unmatured (of
the type required to be reflected in a balance sheet of the Acquired
Corporations prepared in accordance with generally accepted principles), except
for: (a) liabilities identified as such in the "liabilities" column of the
Company Unaudited Interim Balance Sheet; (b) normal and recurring liabilities
that have been incurred by the Acquired Corporations since September 30, 1996 in
the ordinary course of business and consistent with past practices; and (c)
liabilities that have not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations.
2.11 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of the Acquired Corporations
is, and has at all times since September 30, 1995 been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations. Since September 30, 1995,
none of the Acquired Corporations has received any notice or other communication
from any Governmental Body regarding any actual or possible violation of, or
failure to comply with, any Legal Requirement.
2.12 CERTAIN BUSINESS PRACTICES. None of the Acquired Corporations nor any
director, officer, agent or employee of any of the Acquired Corporations has (i)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment.
2.13 GOVERNMENTAL AUTHORIZATIONS. The Acquired Corporations hold all
Governmental Authorizations necessary to enable the Acquired Corporations to
conduct their respective businesses in the manner in which such businesses are
currently being conducted, except where the failure to hold such Governmental
Authorizations has not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations. All such Governmental
Authorizations are valid and in full force and effect. Each Acquired
Corporation is, and at all times since September 30, 1995 has been, in
compliance with the terms and requirements of such Governmental Authorizations,
except where the failure to be in compliance with the terms and requirements of
such Governmental Authorizations has not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations. Since
17
September 30, 1995, none of the Acquired Corporations has received any notice or
other communication from any Governmental Body regarding (a) any actual or
possible violation of or failure to comply with any term or requirement of any
material Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
material Governmental Authorization.
2.14 TAX MATTERS.
(a) All material Tax Returns required to be filed by or on behalf of
the respective Acquired Corporations with any Governmental Body with respect to
any taxable period ending on or before the Closing Date (the "Acquired
Corporation Returns") (i) have been or will be filed on or before the applicable
due date (including any extensions of such due date), and (ii) have been, or
will be when filed, prepared in all material respects in compliance with all
applicable Legal Requirements. All amounts shown on the Acquired Corporation
Returns to be due on or before the Closing Date have been or will be paid on or
before the Closing Date.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles, except
where the failure to accrue such liabilities has not had and would not
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations. Each Acquired Corporation will establish, in the ordinary course
of business and consistent with its past practices, reserves adequate for the
payment of all Taxes for the period from September 30, 1996 through the Closing
Date.
(c) No Acquired Corporation Return has been examined or audited by
any Governmental Body since December 31, 1994. No extension or waiver of the
limitation period applicable to any of the Acquired Corporation Returns has been
granted (by the Company or any other Person), and no such extension or waiver
has been requested from any Acquired Corporation.
(d) No claim or Legal Proceeding is pending or, to the best of the
knowledge of the Company, has been threatened against or with respect to any
Acquired Corporation in respect of any material Tax. There are no unsatisfied
liabilities for material Taxes (including liabilities for interest, additions to
tax and penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by any Acquired Corporation with respect
to any material Tax (other than liabilities for Taxes asserted under any such
notice of deficiency or similar document which are being contested in good faith
by the Acquired Corporations and with respect to which adequate reserves for
payment have been established). There are no liens for material Taxes upon any
of the assets of any of the Acquired Corporations except liens for current Taxes
not yet due and payable. None of the Acquired Corporations has entered into or
become bound by any agreement or consent pursuant to Section 341(f) of the Code.
None of the Acquired Corporations has been, and none of the Acquired
Corporations will be, required to include any adjustment in taxable income for
any tax period (or portion thereof) pursuant to Section 481 or 263A of the Code
or any comparable provision under state or foreign Tax laws as
18
a result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of any of the Acquired Corporations that, considered
individually or considered collectively with any other such Contracts, will, or
would reasonably be expected to, give rise directly or indirectly to the payment
of any amount that would not be deductible pursuant to Section 280G or
Section 162 of the Code. None of the Acquired Corporations is, or has ever
been, a party to or bound by any tax indemnity agreement, tax sharing agreement,
tax allocation agreement or similar Contract.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Company Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by any of the
Acquired Corporations for the benefit of any current or former employee of any
of the Acquired Corporations.
(b) Except as set forth in Part 2.15(a) of the Company Disclosure
Schedule, none of the Acquired Corporations maintains, sponsors or contributes
to, and none of the Acquired Corporations has at any time in the past
maintained, sponsored or contributed to, any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of employees or former
employees of any of the Acquired Corporations (a "Pension Plan").
(c) Except as set forth in Part 2.15(a) of the Company Disclosure
Schedule, none of the Acquired Corporations maintains, sponsors or contributes
to any: (i) employee welfare benefit plan (as defined in Section 3(1) of ERISA,
whether or not excluded from coverage under specific Titles or Merger Subtitles
of ERISA) for the benefit of any employees or former employees of any of the
Acquired Corporations (a "Welfare Plan"), or (ii) self-funded medical, dental or
other similar Plan. None of the Plans identified in the Company Disclosure
Schedule is a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) None of the Acquired Corporations is or has ever been required to
be treated as a single employer with any other Person under Section 4001(b)(1)
of ERISA or Section 414(b), (c), (m) or (o) of the Code. None of the Acquired
Corporations has ever been a member of an "affiliated service group" within the
meaning of Section 414(m) of the Code. None of the Acquired Corporations has
ever made a complete or partial withdrawal from a multiemployer plan, as such
term is defined in Section 3(37) of ERISA, resulting in "withdrawal liability,"
as
19
such term is defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207 or 4208 of
ERISA).
(e) None of the Acquired Corporations has any plan or commitment to
create any Welfare Plan or any additional Pension Plan, or to modify or change
any existing Pension Plan (other than to comply with applicable law) in a manner
that would affect any employee of any of the Acquired Corporations.
(f) Except as set forth in Part 2.15 of the Company Disclosure
Schedule, no Plan provides death, medical or health benefits (whether or not
insured) with respect to any current or former employee of any of the Acquired
Corporations after any such employee's termination of service (other than
(i) benefit coverage mandated by applicable law, including coverage provided
pursuant to Section 4980B of the Code, (ii) benefits accrued as liabilities on
the Company Unaudited Interim Balance Sheet, and (iii) benefits the full cost of
which are borne by current or former employees of any of the Acquired
Corporations (or the employees' beneficiaries)).
(g) With respect to any Plan constituting a group health plan within
the meaning of Section 4980B(g)(2) of the Code, the provisions of Section 4980B
of the Code ("COBRA") have been complied with in all material respects. None of
the Acquired Corporations has any obligation or liability as of the date of this
Agreement under any of the provisions of COBRA which would reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations.
(h) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
(i) Each of the Plans intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the Internal Revenue
Service, and the Company is not aware of any reason why any such determination
letter should be revoked.
(j) Neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions contemplated
by this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former employee or director of
any of the Acquired Corporations (whether or not under any Plan), or materially
increase the benefits payable under any Plan, or result in any acceleration of
the time of payment or vesting of any such benefits.
(k) Part 2.15(k) of the Company Disclosure Schedule contains a list
of all salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. None of the Acquired Corporations is a party to any collective
bargaining contract or other Contract with a labor union involving any of its
employees. Except
20
as set forth in Part 2.15 of the Company Disclosure Schedule, all of the
employees of the Acquired Corporations are "at will" employees.
(l) To the best of the knowledge of the Company, there is no employee
of the Company who is not fully available to perform work because of disability
or other leave.
(m) Each of the Acquired Corporations is in compliance in all
material respects with all applicable Legal Requirements and Contracts relating
to employment, employment practices, wages, bonuses and terms and conditions of
employment, including employee compensation matters, except with respect to any
back payment that might be required to be made by the Company because of the
possible characterization of independent contractors as employees of the
Company.
(n) Each of the Acquired Corporations has good labor relations, and
none of the Acquired Corporations has any knowledge of any facts indicating that
(i) the consummation of the Merger or any of the other transactions contemplated
by this Agreement will have a material adverse effect on the labor relations of
any of the Acquired Corporations, or (ii) any of the employees of any of the
Acquired Corporations intends to terminate his or her employment with the
Acquired Corporation with which such employee is employed.
2.16 ENVIRONMENTAL MATTERS. To the best of the knowledge of the Company,
each of the Acquired Corporations is in compliance in all respects with all
applicable Environmental Laws (as defined in this Section 2.16) (which
compliance includes the possession by each of the Acquired Corporations of all
permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof),
except where the failure to comply has not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations. None
of the Acquired Corporations has received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that any of the Acquired Corporations is not
in compliance with any Environmental Law, and, to the best of the knowledge of
the Company, there are no circumstances that may prevent or interfere with the
compliance by any of the Acquired Corporations with any Environmental Law in the
future. To the best of the knowledge of the Company, no current or prior owner
of any property leased or controlled by any of the Acquired Corporations has
received any notice or other communication (in writing or otherwise), whether
from a Government Body, citizens group, employee or otherwise, that alleges that
such current or prior owner or any of the Acquired Corporations is not in
compliance with any Environmental Law. To the best of the knowledge of the
Company, all property that is leased to, controlled by or used by the Company,
and all surface water, groundwater and soil associated with or adjacent to such
property is in clean and healthful condition and is free of any material
environmental contamination of any nature. (For purposes of this Section 2.16:
(i) "Environmental Law" means any federal, state, local or foreign Legal
Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal,
21
transport or handling of Materials of Environmental Concern; and (ii) "Materials
of Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now or hereafter regulated by any Environmental Law or that is otherwise a
danger to health, reproduction or the environment.)
2.17 INSURANCE. The Company has delivered to Parent a copy of each
material insurance policy and each material self insurance program relating to
the business, assets or operations of any of the Acquired Corporations. Each
such insurance policy is in full force and effect. Since December 31, 1993,
none of the Acquired Corporations has received any notice or other communication
regarding any actual or possible (a) cancellation or invalidation of any
insurance policy, (b) refusal of any coverage or rejection of any material claim
under any insurance policy, or (c) material adjustment in the amount of the
premiums payable with respect to any insurance policy. There is no pending
claim (including any workers' compensation claim) under or based upon any
insurance policy of any of the Acquired Corporations; and no event has occurred,
and no condition or circumstance exists, that might (with or without notice or
lapse of time) directly or indirectly give rise to or serve as a basis for any
such claim, except where such claim has not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations.
2.18 TRANSACTIONS WITH AFFILIATES. Except as set forth in the Company SEC
Documents, since the date of the Company's last proxy statement filed with the
SEC, no event has occurred that would be required to be reported by the Company
pursuant to Item 404 of Regulation S-K promulgated by the SEC. Part 2.18 of the
Company Disclosure Schedule identifies each person who is an "affiliate" (as
that term is used in Rule 145 promulgated under the Securities Act) of the
Company as of the date of this Agreement.
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) There is no material pending Legal Proceeding, and, to the best
of the knowledge of the Company, no Person has since September 30, 1995
threatened to commence any material Legal Proceeding that involves any of the
Acquired Corporations or any of the assets owned or used by any of the Acquired
Corporations. Without limiting the generality of the foregoing, to the best of
the knowledge of the Company, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that would reasonably be expected to
cause or provide a basis for a director, officer or other Representative of any
of the Acquired Corporations to seek indemnification from, or commence a Legal
Proceeding against or involving, any of the Acquired Corporations.
(b) There is no order, writ, injunction, judgment or decree to which
any of the Acquired Corporations, or any of the assets owned or used by any of
the Acquired Corporations, is subject, except for any orders, writs,
injunctions, judgments or decrees which have not had and would not be reasonably
expected to have a Material Adverse Effect on the Acquired Corporations. To the
best of the knowledge of the Company, no officer or other employee of any of the
Acquired Corporations is subject to any order, writ, injunction, judgment or
decree that
22
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the business of any of the Acquired
Corporations.
2.20 AUTHORITY; INAPPLICABILITY OF ANTI-TAKEOVER STATUTES; BINDING NATURE
OF AGREEMENT. The Company has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement.
The Board of Directors of the Company (at a meeting duly called and held) has
(a) unanimously determined that the Merger is advisable and fair and in the best
interests of the Company and its stockholders, (b) unanimously approved the
execution, delivery and performance of this Agreement by the Company and has
unanimously approved the Merger, and (c) unanimously recommended the adoption
and approval of this Agreement and the Merger by the holders of Company Common
Stock and directed that this Agreement and the Merger be submitted for
consideration by the Company's stockholders at the Company Stockholders' Meeting
(as defined in Section 5.2). This Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
2.21 SECTION 203 OF THE DGCL NOT APPLICABLE. As of the date hereof and at
all times on or prior to the Effective Time, the restrictions applicable to
business combinations contained in Section 203 of the DGCL are, and will be,
inapplicable to the execution, delivery and performance of this Agreement and to
the consummation of the Merger and the other transactions contemplated by this
Agreement. Prior to the execution of those certain Voting Agreements of even
date herewith between Parent and each of ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the Board of Directors of the
Company approved: (a) said Voting Agreements and the transactions contemplated
thereby; and (b) the Option Agreements (in the form of Exhibit F) which may be
executed by Parent and each of ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, and the
transactions contemplated thereby.
2.22 NO EXISTING DISCUSSIONS. None of the Acquired Corporations, and no
Representative of any of the Acquired Corporations, is engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating to
any Acquisition Proposal.
2.23 ACCOUNTING MATTERS. To the best of the knowledge of the Company,
neither the Company nor any of its affiliates has taken or agreed to, or plans
to, take any action that would prevent Parent from accounting for the Merger as
a "pooling of interests." Ernst & Young LLP has confirmed in a letter the date
of this Agreement and addressed to the Company, Parent and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
an executed copy of which has been delivered to Parent, that Ernst & Young LLP
is not aware of any fact concerning the Company that would preclude Parent from
accounting for the Merger as a "pooling of interests."
2.24 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding on the record date for the
Company Stockholders' Meeting (the "Required Vote") is the only vote of the
holders of any class or series of the Company's
23
capital stock necessary to adopt and approve this Agreement, the Merger and the
other transactions contemplated by this Agreement.
2.25 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance by the Company of this Agreement, nor (2) the consummation by the
Company of the Merger, will directly or indirectly (with or without notice or
lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the certificate of incorporation, bylaws or other charter
or organizational documents of any of the Acquired Corporations, or (ii)any
resolution adopted by the stockholders, the board of directors or any
committee of the board of directors of any of the Acquired Corporations;
(b) contravene, conflict with or result in a violation of any Legal
Requirement or any order, writ, injunction, judgment or decree to which any
of the Acquired Corporations, or any of the assets owned or used by any of
the Acquired Corporations, is subject (it being understood that no
representation or warranty is being made by the Company regarding
compliance with any federal or state antitrust or fair trade law or any
other similar Legal Requirement);
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by any of the Acquired Corporations or that
otherwise relates to the business of any of the Acquired Corporations or to
any of the assets owned or used by any of the Acquired Corporations;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Acquired Corporation
Contract that is or would constitute a Material Contract, or give any
Person the right to (i) declare a default or exercise any remedy under any
such Acquired Corporation Contract, (ii) a rebate, chargeback, penalty or
change in delivery schedule under any such Acquired Corporation Contract,
(iii) accelerate the maturity or performance of any such Acquired
Corporation Contract, or (iv) cancel, terminate or modify any term of such
Acquired Corporation Contract, except for any default, remedy, rebate,
chargeback, penalty, change in delivery schedule, acceleration,
cancellation, termination or modification which has not had and would not
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations;
(e) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by any of the Acquired Corporations
(except for minor Encumbrances that will not, in any case or in the
aggregate, materially detract from the value of the assets subject thereto
or materially impair the operations of any of the Acquired Corporations);
or
24
(f) result in, or increase the likelihood of, the disclosure or
delivery to any escrowholder or other Person (other than Parent or Merger
Sub) of the source code, or any portion or aspect of the source code, or
any proprietary information or algorithm contained in or relating to any
source code, of any material Proprietary Asset owned by or licensed to any
of the Acquired Corporations, or the transfer of any material asset of any
of the Acquired Corporations to any Person (other than Parent or Merger
Sub).
Except as may be required by the Exchange Act, the DGCL, the HSR Act and the
Bylaws of the National Association of Securities Dealers, Inc. (the "NASD") (as
they relate to the S-4 Registration Statement and the Prospectus/Proxy
Statement, as defined in Section 2.28(b)), none of the Acquired Corporations
was, is or will be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with the execution, delivery
or performance of this Agreement, or the consummation of the Merger.
2.26 FAIRNESS OPINION. The Company's Board of Directors has received the
written opinion of Alex. ▇▇▇▇▇ & Sons Incorporated, financial advisor to the
Company, dated the date of this Agreement, to the effect that the Exchange Ratio
is fair to the stockholders of the Company from a financial point of view.
2.27 FINANCIAL ADVISOR. Except for Alex. ▇▇▇▇▇ & Sons Incorporated, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or any of the other
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any of the Acquired Corporations. The total of all fees,
commissions and other amounts that have been paid by the Company to Alex. ▇▇▇▇▇
& Sons Incorporated and all fees, commissions and other amounts that may become
payable to Alex. ▇▇▇▇▇ & Sons Incorporated by the Company if the Merger is
consummated will not exceed the amount described in that certain letter
agreement dated September 16, 1996, between the Company and Alex. ▇▇▇▇▇ & Sons
Incorporated, an accurate and complete copy of which has been delivered to
Parent prior to the date of this Agreement.
2.28 FULL DISCLOSURE.
(a) This Agreement (including the Company Disclosure Schedule) does
not, and the certificate referred to in Section 6.6(k) will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information contained and to be
contained herein and therein (in the light of the circumstances under which such
representations, warranties and information were or will be made or provided)
not false or misleading.
(b) None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of Parent Common Stock in the Merger (the "S-4
Registration Statement") will, at the time the S-4 Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit
25
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. None of the information supplied or to be
supplied by or on behalf of the Company for inclusion or incorporation by
reference in the Prospectus/Proxy Statement to be filed with the SEC as part of
the S-4 Registration Statement (the "Prospectus/Proxy Statement"), will, at the
time the Prospectus/Proxy Statement is mailed to the stockholders of the
Company, at the time of the Company Stockholders' Meeting or as of the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. The Prospectus/Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that, except as
set forth in the Parent SEC Documents (as defined in Section 3.3(a)), excluding
the exhibits thereto:
3.1 ORGANIZATION, STANDING AND POWER. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary power and authority: (a) to
conduct its business in the manner in which its business is currently being
conducted; (b) to own and use its assets in the manner in which its assets are
currently owned and used; and (c) to perform its obligations under all Contracts
by which it is bound. Each of Parent and Merger Sub is duly qualified to do
business as a foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business requires such qualification
and where the failure to be so qualified would have a Material Adverse Effect on
Parent. Parent has delivered to the Company accurate and complete copies of the
certificate of incorporation and bylaws of Parent, including all amendments
thereto.
3.2 CAPITALIZATION, ETC.
(a) The authorized capital stock of Parent consists of: (a)
150,000,000 shares of Parent Common Stock, of which 77,637,647 shares (excluding
shares of Parent Common Stock held in treasury) were outstanding as of October
15, 1996; and (b) 2,000,000 shares of Preferred Stock, $0.01 par value per
share, of which no shares are outstanding as of the date of this Agreement. All
of the outstanding shares of Parent Common Stock have been duly authorized and
validly issued, and are fully paid and nonassessable. As of October 15, 1996:
(i) 9,562,052 shares of Parent Common Stock were reserved for future issuance
pursuant to stock options granted and outstanding under Parent's 1987 Stock
Option Plan, as amended; (ii) 9,374,978 shares of Parent Common Stock were
reserved for future issuance pursuant to stock options granted and outstanding
under Parent's 1993 Nonstatutory Stock Option Plan; (iii) 123,750 shares of
Parent Common Stock were reserved for future issuance pursuant to stock options
granted and outstanding under Parent's 1988 Directors Stock Option Plan; (iv)
191,250 shares of Parent
26
Common Stock were reserved for future issuance pursuant to stock options granted
and outstanding under Parent's 1993 Directors Stock Option Plan; (v) 315,000
shares of Parent Common Stock were reserved for future issuance pursuant to
stock options granted and outstanding under Parent's 1995 Directors Stock Option
Plan; (vi) 128,028 shares of Parent Common Stock were reserved for future
issuance pursuant to stock options granted and outstanding other than under the
stock option plans referred to in clauses "(i)" through "(v)" of this Section
3.2; (vii) 1,347,149 shares of Parent Common Stock were reserved for future
issuance under Parent's 1990 Employee Stock Purchase Plan; (viii) 120,000 shares
of Parent Common Stock were reserved for future issuance pursuant to outstanding
warrants to purchase shares of Parent Common Stock held by Comdisco Systems,
Inc.; and (ix) 2,433,002 shares of Parent Common Stock were reserved for future
issuance pursuant to certain outstanding put warrants and call options. All
outstanding shares of Parent Common Stock, all outstanding options to purchase
shares of Parent Common Stock, and all outstanding shares of capital stock of
each subsidiary of Parent have been issued and granted in compliance with (i)
all applicable securities laws and other applicable Legal Requirements, and (ii)
all requirements set forth in applicable Contracts.
(b) Between October 15, 1996 and the date of this Agreement, there
has been: (i) no material change in the number of outstanding shares of Parent
Common Stock (other than as a result of the exercise of options referred to in
Section 3.2(a)); and (ii) no change in the number of shares of Parent Common
Stock reserved for future issuance under the stock option plans or the stock
purchase plan referred to in Section 3.2(a).
(c) As of the date of this Agreement: (i) there are no outstanding
options or rights to purchase shares of Parent Common Stock, other than the
options, warrants and other rights referred to in Section 3.2(a), certain
options granted between October 15, 1996 and the date of this Agreement under
the stock option plans referred to in Section 3.2(a) and the rights outstanding
under that certain Rights Agreement dated as of February 9, 1996 between Parent
and ▇▇▇▇▇▇ Trust and Savings Bank; and (ii) Parent is not obligated to issue any
shares of Parent Common Stock or any rights to acquire shares of Parent Common
Stock, other than pursuant to (A) the options, warrants and rights referred to
in Section 3.2(a) and certain options granted between October 15, 1996 and the
date of this Agreement under the stock option plans referred to in Section
3.2(a), (B) the rights outstanding under that certain Rights Agreement dated as
of February 9, 1996 between Parent and ▇▇▇▇▇▇ Trust and Savings Bank, (C) the
terms of this Agreement or any other agreement referred to in this Agreement,
and (D) that certain Agreement and Plan of Merger and Reorganization dated as
of October 3, 1996, among Parent, Harbor Acquisition Sub, Inc. and High Level
Design Systems, Inc.
3.3 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete copies
of each report, registration statement (on a form other than Form S-8) and
definitive proxy statement (excluding copies of exhibits) filed by Parent with
the SEC between January 1, 1996 and the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Parent SEC Documents complied in all material
respects with the
27
applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements (including any related
notes) contained in the Parent SEC Documents: (i) complied as to form in all
material respects with the published rules and regulations of the SEC applicable
thereto; (ii) were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered (except
as may be indicated in the notes to such financial statements and, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
normal and recurring year-end audit adjustments which will not, individually or
in the aggregate, be material in amount); and (iii) fairly present the
consolidated financial position of Parent and its subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows of Parent and its subsidiaries for the periods covered thereby.
(c) Parent has delivered to the Company an unaudited consolidated
balance sheet of Parent and its subsidiaries as of September 28, 1996 (the
"Parent Unaudited Interim Balance Sheet"), and the related consolidated
unaudited income statement and statement of cash flows of Parent and its
subsidiaries for the nine months then ended. The financial statements referred
to in this Section 3.3(c): (i) were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the basis on
which the financial statements referred to in Section 3.3(b) were prepared
(except that the financial statements referred to in this Section 3.3(c) do not
contain footnotes and are subject to normal and recurring year-end adjustments
which will not, individually or in the aggregate, be material in amount), and
(ii) fairly present the consolidated financial position of Parent and its
subsidiaries as of September 28, 1996 and the consolidated results of operations
and cash flows of Parent and its subsidiaries for the period covered thereby.
3.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Between September 28, 1996 and
the date of this Agreement: (a) there has not been any material adverse change
in the business, condition, assets, liabilities, operations or financial
performance of Parent and its subsidiaries taken as a whole, and no event has
occurred that would reasonably be expected to have a Material Adverse Effect on
Parent; (b) Parent has not declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any shares of capital stock, or
repurchased, redeemed or otherwise reacquired any shares of capital stock or
other securities; (c) there has not been any loss, damage or destruction to, or
any interruption in the use of, any of the assets of Parent (whether or not
covered by insurance), except for any loss, damage, destruction or interruption
that has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent; (d) Parent has not entered into any material transaction or
taken any other material action that has had, or would reasonably be expected to
have, a Material Adverse Effect on Parent; (e) Parent has not amended its
certificate of incorporation or bylaws; (f) Parent has not effected or been a
party to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction; (g) Parent has not
28
changed any of its methods of accounting or accounting practices in any material
respect; and (h) Parent has not agreed or committed to take any of the actions
referred to in clauses "(a)" through "(g)" of this Section 3.4, except that
Parent has entered into an Agreement and Plan of Merger and Reorganization dated
as of October 3, 1996, contemplating a merger of a subsidiary of Parent with
High Level Design Systems, Inc.
3.5 TITLE TO ASSETS. Parent or its subsidiaries own, and have good, valid
and marketable title to, all assets purported to be owned by them, including:
(i) all assets reflected on the Parent Unaudited Interim Balance Sheet (except
for assets sold or otherwise disposed of since the date of the Parent Unaudited
Interim Balance Sheet); and (ii) all other assets reflected in the books and
records of Parent or its subsidiaries as being owned by Parent or its
subsidiaries. All of said assets are owned by Parent or its subsidiaries free
and clear of any Encumbrances, except for (x) any Encumbrance for current taxes
not yet due and payable, (y) minor Encumbrances that have arisen in the ordinary
course of business, and (z) Encumbrances that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of Parent or any of its subsidiaries.
3.6 PROPRIETARY ASSETS.
(a) To the best of the knowledge of Parent: (i) all patents,
trademarks, service marks and copyrights held by Parent and material to the
business of Parent are valid, enforceable and subsisting; (ii) no Proprietary
Asset owned by Parent and no Proprietary Asset that is currently being developed
by Parent (either by itself or with any other Person) infringes or
misappropriates any Proprietary Asset owned by any other Person, except where
any liability, or any restriction on sale, use, development or licensing of a
Proprietary Asset, arising from such infringement, misappropriation or unlawful
use has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent; (iii) Parent is not infringing, misappropriating or making any
unlawful use of any Proprietary Asset owned by any other Person, except where
any liability, or any restriction on sale, use, development or licensing of a
Proprietary Asset, arising from such infringement, misappropriation or unlawful
use has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent; (iv) none of the products that are or have been designed,
created, developed, assembled, manufactured or sold by Parent is infringing,
misappropriating or making any unlawful or unauthorized use of any Proprietary
Asset owned by any other Person, and none of such products has at any time
infringed, misappropriated or made any unlawful or unauthorized use of, any
Proprietary Asset of any other Person, except where any liability, or any
restriction on sale, use, development or licensing of a Proprietary Asset,
arising from such infringement, misappropriation or unlawful use has not had and
would not reasonably be expected to have a Material Adverse Effect on Parent;
(v) since December 31, 1995, Parent has not received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful or unauthorized use of, any
Proprietary Asset owned or used by any other Person; (vi) no other Person is
infringing, misappropriating or making any unlawful or unauthorized use of any
Proprietary Asset owned by Parent, and no Proprietary Asset owned or used by any
other Person infringes any material Proprietary Asset owned by Parent, except
where such infringement, misappropriation or unlawful
29
use has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent.
(b) The Proprietary Assets owned by or licensed to Parent constitute
all the Proprietary Assets necessary to enable Parent to conduct its business
substantially in the manner in which such business has been and is being
conducted.
3.7 LIABILITIES. Parent has no accrued, contingent or other liabilities
of any nature, either matured or unmatured (of the type required to be reflected
in a balance sheet of Parent prepared in accordance with generally accepted
principles), except for: (a) liabilities identified as such in the "liabilities"
column of the Parent Unaudited Interim Balance Sheet; (b) normal and recurring
liabilities that have been incurred by Parent since September 28, 1996 in the
ordinary course of business and consistent with past practices; and (c)
liabilities that have not had and would not reasonably be expected to have a
Material Adverse Effect on Parent.
3.8 COMPLIANCE WITH LEGAL REQUIREMENTS. Parent is, and has at all times
since December 31, 1995 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent. Since December 31, 1995, Parent has not received any notice
or other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement.
3.9 GOVERNMENTAL AUTHORIZATIONS. Parent holds all Governmental
Authorizations necessary to enable Parent to conduct its business in the manner
in which such business is currently being conducted, except where the failure to
hold such Governmental Authorizations has not had and would not reasonably be
expected to have a Material Adverse Effect on Parent. All such Governmental
Authorizations are valid and in full force and effect. Parent is, and at all
times since December 31, 1995 has been, in compliance with the terms and
requirements of such Governmental Authorizations, except where the failure to be
in compliance with the terms and requirements of such Governmental
Authorizations has not had and would not reasonably be expected to have a
Material Adverse Effect on Parent. Since December 31, 1995, Parent has not
received any notice or other communication from any Governmental Body regarding
(a) any actual or possible violation of or failure to comply with any term or
requirement of any material Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any material Governmental Authorization.
3.10 LEGAL PROCEEDINGS; ORDERS. There is no material pending Legal
Proceeding, and, to the best of the knowledge of Parent, no Person has since
December 31, 1995 threatened to commence any material Legal Proceeding, that
involves Parent or any of the assets owned or used by Parent. There is no
order, writ, injunction, judgment or decree to which Parent, or any of the
assets owned or used by Parent, is subject, except for any orders, writs,
injunctions, judgments or decrees which have not had and would not reasonably be
expected to have a Material Adverse Effect on Parent.
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3.11 VOTE REQUIRED. No vote of the holders of Parent Common Stock is
required to authorize the Merger.
3.12 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to enter into and to
perform their obligations under this Agreement. The board of directors of
Parent (at a meeting duly called and held) has unanimously approved the
execution, delivery and performance of this Agreement by Parent and unanimously
approved the Merger. The board of directors of Merger Sub (by written consent)
has unanimously approved the execution, delivery and performance of this
Agreement by Merger Sub and unanimously approved the Merger. This Agreement
constitutes the legal, valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.13 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance by Parent of this Agreement, nor (2) the consummation by Parent and
Merger Sub of the Merger will directly or indirectly (with or without notice or
lapse of time) (a) contravene, conflict with or result in a violation of (i) any
of the provisions of the certificate of incorporation or bylaws of Parent or
Merger Sub, or (ii) any resolution adopted by the stockholders, the board of
directors or any committee of the board of directors of Parent or Merger Sub;
(b) contravene, conflict with or result in a violation of any Legal Requirement
or any order, writ, injunction, judgment or decree to which Parent, or any of
the assets owned or used by Parent, is subject (it being understood that no
representation or warranty is being made by Parent or Merger Sub regarding
compliance with any federal or state antitrust or fair trade law or any other
similar Legal Requirement); (c) contravene, conflict with or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by Parent or that otherwise relates to
the business of Parent or to any of the assets owned or used by Parent; (d)
contravene, conflict with or result in a violation or breach by Parent or Merger
Sub of, or result in a default by Parent or Merger Sub under, any provision of
any material Contract to which Parent or Merger Sub is a party, or give any
Person the right to (i) declare a default or exercise any remedy under any such
material Contract, (ii) accelerate the maturity or performance of any such
material Contract, or (iii) cancel, terminate or modify any term of such
material Contract, except for any default, acceleration, cancellation,
termination or modification which has not had and would not reasonably be
expected to have a Material Adverse Effect on Parent; or (e) result in the
imposition or creation of any Encumbrance upon or with respect to any asset
owned or used by Parent (except for minor Encumbrances that would not, in any
case or in the aggregate, materially detract from the value of the assets
subject thereto or materially impair the operations of Parent). Except as may
be required by the Securities Act, the Exchange Act, state securities or "blue
sky" laws, the DGCL, the HSR Act, the NASD Bylaws (as they relate to the S-4
Registration Statement and the Prospectus/Proxy Statement) and the rules and
regulations of the NYSE (as they relate to the S-4 Registration Statement and
the Prospectus/Proxy Statement), Parent is not and will not be required to make
any filing with or give any notice to, or to obtain any Consent from, any Person
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in connection with the execution, delivery or performance of this Agreement or
the consummation of the Merger.
3.14 VALID ISSUANCE. The Parent Common Stock to be issued in the Merger,
when issued in accordance with the provisions of this Agreement: (a) will be
validly issued, fully paid and nonassessable; and (b) will not be subject to any
restrictions on resale under the Securities Act, other than restrictions imposed
by Rule 145 promulgated under the Securities Act.
3.15 ACCOUNTING MATTERS. To the best of the knowledge of Parent, neither
Parent nor any of its affiliates has taken or agreed to, or plans to, take any
action that would prevent Parent from accounting for the Merger as a "pooling of
interests." Parent has received a letter dated the date of this Agreement, from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, a copy of which has been delivered to the Company,
regarding ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇ belief (subject to the qualifications contained in
such letter) that the Merger should be treated as a "pooling of interests" in
conformity with generally accepted accounting principles, as described in
Accounting Principles Board Opinion No. 16 and the applicable rules and
regulations of the SEC.
3.16 FULL DISCLOSURE.
(a) This Agreement does not, and the certificate referred to in
Section 7.4(c) will not, (i) contain any representation, warranty or information
that is false or misleading with respect to any material fact, or (ii) omit to
state any material fact necessary in order to make the representations,
warranties and information contained and to be contained herein and therein (in
the light of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
(b) None of the information supplied or to be supplied by or on
behalf of Parent for inclusion or incorporation by reference in the S-4
Registration Statement will, at the time the S-4 Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the
information supplied or to be supplied by or on behalf of Parent for inclusion
or incorporation by reference in the Prospectus/Proxy Statement will, at the
time the Prospectus/Proxy Statement is mailed to the stockholders of the
Company, at the time of the Company Stockholders' Meeting or as of the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. The S-4 Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations promulgated by the SEC thereunder.
SECTION 4. CERTAIN COVENANTS OF THE PARTIES
4.1 ACCESS AND INVESTIGATION.
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(a) During the period from the date of this Agreement through the
Effective Time (the "Pre-Closing Period"), the Company shall, and shall cause
the respective Representatives of the Acquired Corporations to: (i) provide
Parent and Parent's Representatives with reasonable access to the Acquired
Corporations' Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to the Acquired Corporations; and (ii) provide Parent and Parent's
Representatives with such copies of the existing books, records, Tax Returns,
work papers and other documents and information relating to the Acquired
Corporations, and with such additional financial, operating and other data and
information regarding the Acquired Corporations, as Parent may reasonably
request. Without limiting the generality of the foregoing, promptly after the
execution of this Agreement, the Company shall deliver to Parent with respect to
each Plan sponsored, maintained, contributed to or required to be contributed to
by any of the Acquired Corporations for any current or former employee of any of
the Acquired Corporations: (1) an accurate and complete copy of such Plan
(including all amendments thereto); (2) an accurate and complete copy of the
annual report, if required under ERISA, with respect to such Plan for each of
the last two years; (3) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan; (4) if such Plan is funded
through a trust or any third party funding vehicle, an accurate and complete
copy of the trust or other funding agreement (including all amendments thereto)
and accurate and complete copies the most recent financial statements thereof;
and (5) an accurate and complete copy of the most recent determination letter
received from the Internal Revenue Service with respect to such Plan (if such
Plan is intended to be qualified under Section 401(a) of the Code).
(b) Without limiting the generality of anything contained in Section
4.1(a), during the Pre-Closing Period, the Company shall promptly provide Parent
with copies of:
(i) all material operating and financial reports prepared by
the Company for its senior management, including (A) copies of the unaudited
monthly consolidated balance sheets of the Acquired Corporations and the
related unaudited monthly consolidated income statements, statements of changes
in stockholders' equity and statements of cash flows and (B) copies of any
sales forecasts, marketing plans, development plans, discount reports, write-
off reports, hiring reports and capital expenditure reports prepared for the
Company's senior management;
(ii) any written materials or communications sent by or on
behalf of the Company to its stockholders;
(iii) any material notice, document or other communication sent
by or on behalf of any of the Acquired Corporations to any party to any
Material Contract or sent to any of the Acquired Corporations by any party to
any Material Contract (other than any communication that relates solely to
commercial transactions between the Company and the other party to any such
Material Contract and that is of the type sent in the ordinary course of
business and consistent with past practices);
33
(iv) any notice, report or other document filed with or sent
to any Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement; and
(v) any material notice, report or other document received by
any of the Acquired Corporations from any Governmental Body.
(c) Notwithstanding anything to the contrary contained in this
Section 4.1, the Company shall not be required under this Section 4.1 to take
any action that would cause the Company to violate the HSR Act.
4.2 OPERATION OF THE COMPANY'S BUSINESS.
(a) During the Pre-Closing Period: (i) the Company shall ensure that
each of the Acquired Corporations conducts its business and operations (A) in
the ordinary course and in accordance with past practices and (B) in compliance
with all applicable Legal Requirements and the requirements of all Material
Contracts;(ii) the Company shall use reasonable efforts to ensure that each of
the Acquired Corporations preserves intact its current business organization,
keeps available the services of its current officers and employees and maintains
its relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with the respective Acquired Corporations;(iii) the Company shall keep in full
force all insurance policies referred to in Section 2.17;(iv) the Company shall
provide all reasonable notices, assurances and support required by any Acquired
Corporation Contract relating to any Proprietary Asset in order to ensure that
no condition under such Acquired Corporation Contract occurs which would result
in (A) any transfer or disclosure by any Acquired Corporation of any source code
materials or other Proprietary Asset, or (B) a release from any escrow of any
source code materials or other Proprietary Asset which have been deposited or
are required to be deposited in escrow under the terms of such Acquired
Corporation Contract; (v) the Company shall comply with Parent's reasonable
directions with respect to exercising any rights or remedies under any Material
Contract of the type referred to in clause "(v)" of Section 2.9(a); and (vi) the
Company shall (to the extent reasonably requested by Parent) cause its officers
to report regularly to Parent concerning the status of the Company's business.
(b) During the Pre-Closing Period, the Company shall not (without the
prior written consent of Parent), and shall not permit any of the other Acquired
Corporations to:
(i) declare, accrue, set aside or pay any dividend or make
any other distribution in respect of any shares of capital stock, or
repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities;
(ii) sell, issue, grant or authorize the issuance or grant of
(i) any capital stock or other security, (ii) any option, call, warrant or
right to acquire any capital stock or other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security
(except that (A) the Company may issue Company Common Stock upon the valid
exercise of Company Options outstanding as of the date of this Agreement,
34
(B) the Company may issue Company Common Stock upon the valid exercise of
"options" outstanding under the 1995 Purchase Plan as of the date of this
Agreement, and (C) the Company may, in the ordinary course of business and
consistent with past practices, grant options under its 1995 Equity Incentive
Plan to purchase no more than 250,000 shares of Company Common Stock to
employees of the Company);
(iii) amend or waive any of its rights under, or accelerate
the vesting under, any provision of any of the Company's stock option plans,
any provision of any agreement evidencing any outstanding stock option or any
restricted stock purchase agreement, or otherwise modify any of the terms of
any outstanding option, warrant or other security or any related Contract;
(iv) amend or permit the adoption of any amendment to its
certificate of incorporation or bylaws or other charter or organizational
documents, or effect or become a party to any merger, consolidation, share
exchange, business combination, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(v) form any subsidiary or acquire any equity interest or
other interest in any other Entity;
(vi) make any capital expenditure in any calendar month
which, when added to all other capital expenditures made on behalf of the
Acquired Corporations in such calendar month results in such capital
expenditures exceeding $100,000 in the aggregate;
(vii) enter into or become bound by, or permit any of the
assets owned or used by it to become bound by, any Material Contract, or amend
or prematurely terminate, or waive or exercise any material right or remedy
(including any right to repurchase shares of Company Common Stock) under, any
Material Contract;
(viii) acquire, lease or license any right or other asset from
any other Person or sell or otherwise dispose of, or lease or license, any
right or other asset to any other Person (except in each case for assets
acquired, leased, licensed or disposed of by the Company in the ordinary course
of business and consistent with past practices), or waive or relinquish any
material right;
(ix) lend money to any Person, or incur or guarantee any
indebtedness;
(x) (A) establish, adopt or amend any employee benefit plan,
or (B) except for bonus, profit-sharing and similar payments made in the
ordinary course of business consistent with past practices, pay any bonus or
make any profit-sharing or similar payment to, or materially increase the
amount of commissions payable to, any of its directors, officers or employees,
or (C) materially increase the amount of the wages, salary, fringe benefits or
other compensation or remuneration payable to, any of its directors, officers
or employees;
35
(xi) (A) hire any new employee having an annual salary in
excess of $75,000, or (B) engage any consultant or independent contractor who
(1) is entitled to receive annual compensation in excess of $75,000, and (2)
may not be terminated by the Company (without penalty) on no more than 30 days
notice;
(xii) change any of its methods of accounting or accounting
practices in any material respect;
(xiii) make any material Tax election;
(xiv) commence or settle any material Legal Proceeding;
(xv) enter into any material transaction or take any other
material action outside the ordinary course of business or inconsistent with
past practices; or
(xvi) agree or commit to take any of the actions described in
clauses "(i)" through "(xv)" of this Section 4.2(b).
Parent agrees that it will not unreasonably withhold its consent to: (1) the
taking of any action described in clauses "(vi)" through "(xi)" or clause
"(xiii)" or "(xiv)" of this Section 4.2(b); or (2) the repurchase by the Company
of shares of Company Common Stock in accordance with the terms of certain
Contracts (in existence as of, and disclosed to Parent prior to, the execution
of this Agreement) pursuant to which the Company has the right to repurchase
shares of Company Common Stock.
(c) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of the discovery by the Company of: (i) any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by the Company in this Agreement; (ii) any
event, condition, fact or circumstance that occurs, arises or exists after the
date of this Agreement and that would cause or constitute a material inaccuracy
in any representation or warranty made by the Company in this Agreement if
(A) such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any material
breach of any covenant or obligation of the Company; and (iv) any event,
condition, fact or circumstance that would make the timely satisfaction of any
of the conditions set forth in Section 6 impossible or unlikely or that has had
or would reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations.
(d) Notwithstanding anything to the contrary contained in this
Section 4.2, the Company shall not be required under this Section 4.2 to take
any action that would cause the Company to violate the HSR Act.
4.3 NO SOLICITATION.
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(a) The Company shall not directly or indirectly, and shall not
authorize or permit any subsidiary of the Company or any Representative of any
of the Acquired Corporations directly or indirectly to,(i) solicit, initiate,
encourage or induce the making, submission or announcement of any Acquisition
Proposal or take any action that could reasonably be expected to lead to an
Acquisition Proposal,(ii) furnish any nonpublic information regarding any of the
Acquired Corporations to any Person in connection with or in response to an
Acquisition Proposal,(iii) engage in discussions with any Person with respect to
any Acquisition Proposal,(iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
Contract contemplating or otherwise relating to any Acquisition Transaction;
PROVIDED, HOWEVER, that this Section 4.3(a) shall not prohibit the Company from
furnishing nonpublic information regarding the Acquired Corporations to, or
entering into discussions with, any Person in response to an unsolicited bona
fide written Acquisition Proposal submitted (and not withdrawn) by such Person
if (1) the Board of Directors of the Company concludes in good faith, based upon
the advice of its financial advisor, that such Acquisition Proposal could
reasonably be expected to result in a transaction that is more favorable from a
financial point of view to the Company's stockholders than the Merger, (2) the
Board of Directors of the Company concludes in good faith, after consultation
with outside legal counsel, that such action is required in order for the Board
of Directors of the Company to comply with its fiduciary obligations to the
Company's stockholders under applicable law, (3) prior to furnishing any such
nonpublic information to, or entering into discussions with, such Person, the
Company gives Parent written notice of the identity of such Person and of the
Company's intention to furnish nonpublic information to, or enter into
discussions with, such Person, and the Company receives from such Person an
executed confidentiality agreement containing customary limitations on the use
and disclosure of all nonpublic written and oral information furnished to such
Person by or on behalf of the Company, and (4) prior to furnishing any such
nonpublic information to such Person, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). Without limiting the
generality of the foregoing, the Company acknowledges and agrees that any
violation of any of the restrictions set forth in the preceding sentence by any
Representative of any of the Acquired Corporations, whether or not such
Representative is purporting to act on behalf of any of the Acquired
Corporations, shall be deemed to constitute a breach of this Section 4.3 by the
Company.
(b) The Company shall promptly advise Parent orally and in writing of
any Acquisition Proposal (including the identity of the Person making or
submitting such Acquisition Proposal and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period.
(c) As of the date of this Agreement, the Company shall immediately
cease and cause to be terminated any existing discussions with any Person that
relate to any Acquisition Proposal.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the Company may give a copy of this Section 4.3 and Section 5.2(c) to
any Person who submits an unsolicited bona fide written Acquisition Proposal to
the Company if, prior to giving a copy of
37
this Section 4.3 and Section 5.2(c) to such Person, the Company gives Parent
written notice that the Company intends to give a copy of this Section 4.3 and
Section 5.2(c) to such Person.
4.4 NOTIFICATION BY PARENT. During the Pre-Closing Period, Parent shall
promptly notify the Company in writing of the discovery by Parent of: (i) any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes a material inaccuracy
in any representation or warranty made by Parent in this Agreement; (ii) any
event, condition, fact or circumstance that occurs, arises or exists after the
date of this Agreement and that would cause or constitute a material inaccuracy
in any representation or warranty made by Parent in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or
(B) such event, condition, fact or circumstance had occurred, arisen or existed
on or prior to the date of this Agreement; (iii) any material breach of any
covenant or obligation of Parent; and (iv) any event, condition, fact or
circumstance that would make the timely satisfaction of any of the conditions
set forth in Section 7 impossible or unlikely or that has had or would
reasonably be expected to have a Material Adverse Effect on Parent.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT; PROSPECTUS/PROXY STATEMENT.
(a) As promptly as practicable after the date of this Agreement, the
Company and Parent shall prepare and cause to be filed with the SEC the S-4
Registration Statement, together with the Prospectus/Proxy Statement and any
other documents required by the Securities Act or the Exchange Act in connection
with the Merger. Each of Parent and the Company shall use reasonable efforts to
cause the S-4 Registration Statement (including the Prospectus/Proxy Statement)
to comply with the rules and regulations promulgated by the SEC, to respond
promptly to any comments of the SEC or its staff and to have the S-4
Registration Statement declared effective under the Securities Act as promptly
as practicable after it is filed with the SEC. The Company shall promptly
furnish to Parent all information concerning the Acquired Corporations and the
Company's stockholders that may be required or reasonably requested in
connection with any action contemplated by this Section 5.1. If any event
relating to any of the Acquired Corporations occurs, or if the Company becomes
aware of any information, that should be set forth in an amendment or supplement
to the S-4 Registration Statement or the Prospectus/Proxy Statement, then the
Company shall promptly inform Parent thereof and shall cooperate with Parent in
filing such amendment or supplement with the SEC and, if appropriate, in mailing
such amendment or supplement to the stockholders of the Company.
(b) Prior to the Effective Time, Parent shall use reasonable efforts
to obtain all regulatory approvals needed to ensure that the Parent Common Stock
to be issued in the Merger will be registered or qualified under the securities
law of every jurisdiction of the United States in which any registered holder of
Company Common Stock has an address of record on the record date for determining
the stockholders entitled to notice of and to vote at the Company Stockholders'
Meeting.
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5.2 COMPANY STOCKHOLDERS' MEETING.
(a) The Company shall take all action necessary under all applicable
Legal Requirements to call, give notice of, hold and convene a meeting of the
holders of Company Common Stock to consider, act upon and vote upon the adoption
of this Agreement and approval of the Merger (the "Company Stockholders'
Meeting"). The Company Stockholders' Meeting will be held as promptly as
practicable and in any event within 60 days after the S-4 Registration Statement
is declared effective by the SEC. The Company shall ensure that the Company
Stockholders' Meeting is called, noticed, convened, held and conducted, and that
all proxies solicited in connection with the Company Stockholders' Meeting are
solicited, in compliance with all applicable Legal Requirements. The Company's
obligation to call, give notice of, hold and convene the Company Stockholders'
Meeting in accordance with this Section 5.2(a) shall not be limited or otherwise
affected by the commencement, disclosure, announcement or submission to the
Company of any Acquisition Proposal.
(b) Subject to Section 5.2(c): (i) the Board of Directors of the
Company shall unanimously recommend that the Company's stockholders vote in
favor of and adopt and approve this Agreement and the Merger at the Company
Stockholders' Meeting; (ii) the Prospectus/Proxy Statement shall include a
statement to the effect that the Board of Directors of the Company has
unanimously recommended that the Company's stockholders vote in favor of and
adopt and approve this Agreement and the Merger at the Company Stockholders'
Meeting; and (iii) neither the Board of Directors of the Company nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify, in a manner adverse to Parent, the unanimous
recommendation of the Board of Directors of the Company that the Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger. For purposes of this Agreement, said recommendation of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous.
(c) Nothing in clause "(iv)" of the first sentence of Section 4.3(a)
or in Section 5.2(b) shall prevent the Board of Directors of the Company from
withdrawing, amending or modifying its unanimous recommendation in favor of the
Merger if (i) an unsolicited bona fide written Acquisition Proposal is submitted
to the Company and is not withdrawn, (ii) the Board of Directors of the Company
concludes in good faith, based upon the advice of its financial advisor, that
such Acquisition Proposal could reasonably be expected to result in a
transaction that is more favorable from a financial point of view to the
Company's stockholders than the Merger, (iii) neither the Company nor any of its
Representatives shall have violated any of the restrictions set forth in Section
4.3, and (iv) the Board of Directors of the Company concludes in good faith,
after consultation with its outside legal counsel, that the withdrawal,
amendment or modification of such recommendation is required in order for the
Board of Directors of the Company to comply with its fiduciary obligations to
the Company's stockholders under applicable law. Nothing in clause "(iv)" of
the first sentence of Section 4.3(a) or in Section 5.2(b) shall prevent the
Board of Directors of the Company from recommending that its stockholders accept
an unsolicited tender offer or exchange offer commenced by a third party with
respect to shares of Company Common Stock if (1) such tender offer or exchange
offer constitutes an Acquisition Proposal, (2) the Board
40
of Directors of the Company shall have withdrawn its recommendation in favor of
the Merger in accordance with and as permitted by the preceding sentence, (3)
the Board of Directors of the Company shall have concluded in good faith, based
upon the advice of its financial advisor, that such tender offer or exchange
offer is more favorable from a financial point of view to the Company's
stockholders than the Merger, (4) neither the Company nor any of its
Representatives shall have violated any of the restrictions set forth in Section
4.3, and (5) the Board of Directors of the Company shall have concluded in good
faith, after consultation with its outside legal counsel, that the
recommendation in favor of acceptance of such tender offer or exchange offer is
required in order for the Board of Directors of the Company to comply with its
fiduciary obligations to the Company's stockholders under applicable law.
Nothing contained in this Section 5.2 shall limit the Company's obligation to
hold and convene the Company Stockholders' Meeting (regardless of whether the
unanimous recommendation of the Board of Directors of the Company shall have
been withdrawn, amended or modified and regardless of whether the Board of
Directors of the Company shall have recommended acceptance of a tender offer or
exchange offer commenced by a third party), it being understood that the Company
shall be required to hold and convene the Company Stockholders' Meeting in
accordance with this Section 5.2 unless the holding of such meeting would
constitute a violation of any applicable court order or statute. The Company
shall use all reasonable efforts to ensure that the holding of the Company
Stockholders' Meeting will not constitute a violation of any applicable court
order or statute.
5.3 REGULATORY APPROVALS. The Company and Parent shall use reasonable
efforts to file, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed with any Governmental
Body with respect to the Merger and the other transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body. Without limiting the generality of the foregoing, the
Company and Parent shall, promptly after the date of this Agreement, prepare and
file the notifications required under the HSR Act in connection with the Merger.
The Company and Parent shall respond as promptly as practicable to (i) any
inquiries or requests received from the Federal Trade Commission or the
Department of Justice for additional information or documentation and (ii) any
inquiries or requests received from any state attorney general or other
Governmental Body in connection with antitrust or related matters. Each of the
Company and Parent shall (1) give the other party prompt notice of the
commencement of any Legal Proceeding by or before any Governmental Body with
respect to the Merger or any of the other transactions contemplated by this
Agreement, (2) keep the other party informed as to the status of any such Legal
Proceeding, and (3) promptly inform the other party of any communication to or
from the Federal Trade Commission, the Department of Justice or any other
Governmental Body regarding the Merger. The Company and Parent will consult and
cooperate with one another, and will consider in good faith the views of one
another, in connection with any analysis, appearance, presentation, memorandum,
brief, argument, opinion or proposal made or submitted in connection with any
Legal Proceeding under or relating to the HSR Act or any other federal or state
antitrust or fair trade law. In addition, except as may be prohibited by any
Governmental Body or by any Legal Requirement, in connection with any Legal
Proceeding under or relating to the HSR Act or any other federal or state
antitrust or fair trade law or any other similar Legal Proceeding, each of the
Company and Parent agrees to permit authorized Representatives of the other
party to be present at each meeting or conference relating to any such Legal
Proceeding and to have access
41
to and be consulted in connection with any document, opinion or proposal made or
submitted to any Governmental Body in connection with any such Legal Proceeding.
5.4 STOCK OPTIONS.
(a) Subject to Section 5.4(b), at the Effective Time, all rights with
respect to Company Common Stock under each Company Option then outstanding shall
be converted into and become rights with respect to Parent Common Stock, and
Parent shall assume each such Company Option in accordance with the terms (as in
effect as of the date of this Agreement) of the stock option plan under which it
was issued and the stock option agreement by which it is evidenced. From and
after the Effective Time, (i) each Company Option assumed by Parent may be
exercised solely for shares of Parent Common Stock, (ii) the number of shares of
Parent Common Stock subject to each such Company Option shall be equal to the
number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole share (with cash, less the applicable exercise
price, being payable for any fraction of a share), (iii) the per share exercise
price under each such Company Option shall be adjusted by dividing the per share
exercise price under such Company Option by the Exchange Ratio and rounding up
to the nearest cent and (iv) any restriction on the exercise of any such Company
Option shall continue in full force and effect and the term, exercisability,
vesting schedule and other provisions of such Company Option shall otherwise
remain unchanged; PROVIDED, HOWEVER, that (A) in accordance with the terms of
the Employment Agreement between ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and the Company dated December
1, 1994, all unvested Company Options granted to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ pursuant to
said Employment Agreement shall become immediately exercisable as of the
Effective Time, (B) in accordance with the terms of that certain Employment
Agreement between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and the Company dated April 24, 1995, and that
certain Employment Agreement between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and the Company dated
March 3, 1995, certain unvested Company Options granted to Messrs. Selvi and
▇▇▇▇▇▇▇▇ pursuant to said Employment Agreements shall become immediately
exercisable as of the Effective Time, (C) in accordance with the terms of the
Company's 1995 Directors Stock Option Plan, unvested Company Options granted to
outside directors of the Company pursuant to such plan shall become immediately
exercisable as of the Effective Time, and (D) each Company Option assumed by
Parent in accordance with this Section 5.4(a) shall, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, reverse stock split, reclassification, recapitalization
or other similar transaction subsequent to the Effective Time. Parent shall
file with the SEC, no later than five business days after the date on which the
Merger becomes effective, a Registration Statement on Form S-8 relating to the
shares of Parent Common Stock issuable with respect to the Company Options
assumed by Parent in accordance with this Section 5.4(a).
(b) Notwithstanding anything to the contrary contained in this
Section 5.4, in lieu of assuming outstanding Company Options in accordance with
Section 5.4(a), Parent may, at its election, cause such outstanding Company
Options to be replaced by issuing substantially equivalent replacement stock
options in substitution therefor. Parent shall use reasonable efforts to
attempt to ensure that any such replacement stock options issued in substitution
for Company Options that, immediately prior to the Effective Time, qualified as
incentive stock options (as
42
defined in Section 422 of the Code) continue to qualify as incentive stock
options immediately after the Effective Time.
(c) The Company shall take all action that may be necessary (under
the plans pursuant to which Company Options are outstanding and otherwise) to
effectuate the provisions of this Section 5.4 and to ensure that, from and after
the Effective Time, holders of Company Options have no rights with respect
thereto other than those specifically provided in this Section 5.4.
(d) The Company shall terminate the 1995 Purchase Plan and all
outstanding "options" thereunder prior to the Effective Time, and shall take
such actions as may be necessary to ensure that: (i) all outstanding "options"
under the 1995 Purchase Plan terminate on the last trading day preceding the
date on which the Merger becomes effective; (ii) the price per share of the
Company Common Stock purchased pursuant to all such "options" is determined as
if the "Purchase Date" under Section 8 of the 1995 Purchase Plan were the last
trading day preceding the date on which the Merger becomes effective; (iii) any
shares of Company Common Stock purchased pursuant to such "options" are
automatically converted as of the Effective Time into the right to receive
Parent Common Stock on the same basis as all other outstanding shares of Company
Common Stock; and (iv) the 1995 Purchase Plan terminates immediately following
the purchase of shares of Company Common Stock pursuant to such "options."
5.5 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) All rights to indemnification existing in favor of the current
directors and officers of the Company for acts and omissions occurring prior to
the Effective Time, as provided in the Company's Bylaws (as in effect as of the
date of this Agreement) and as provided in the indemnification agreements
between the Company and said directors and officers (as in effect as of the date
of this Agreement), shall survive the Merger and shall be maintained by the
Surviving Corporation for a period of not less than six years from the Effective
Time; PROVIDED, HOWEVER, that the Surviving Corporation's indemnification
obligations will be reduced to the extent of any insurance proceeds paid under
the insurance policy or policies referred to in Section 5.5(d). From and after
the Effective Time, Parent will, to the fullest extent permitted by law, perform
all indemnification obligations of the Surviving Corporation under this Section
5.5(a) (without giving effect to the limitations on the Surviving Corporation's
indemnification obligations imposed by Section 145(b) of the DGCL); PROVIDED,
HOWEVER, that Parent's indemnification obligations shall be reduced (i) to the
extent that the Surviving Corporation performs such obligations, and (ii) to the
extent of any insurance proceeds paid under the insurance policy or policies
referred to in Section 5.5(d).
(b) If (i) on the Closing Date, a Legal Proceeding described in
Section 6.13 or 6.14 is pending before any court of competent jurisdiction, (ii)
any current director or officer of the Company is named as a defendant in such
Legal Proceeding by virtue of any action taken by him prior to the Closing Date
in his capacity as a director or officer of the Company, (iii) the Company has
disclosed to Parent, prior to the Closing Date, the pendency of such Legal
Proceeding, and (iv) Parent waives in writing the condition specified in Section
6.13 or Section
43
6.14 (as the case may be) as it applies to such Legal Proceeding and elects to
proceed with the Closing, then, from and after the Effective Time, Parent shall
hold harmless and indemnify such director or officer from and against all losses
and expenses incurred by such director or officer in connection with such Legal
Proceeding.
(c) Parent shall have (i) the exclusive right, at its election, to
assume and control the defense (with counsel selected by Parent and reasonably
satisfactory to the indemnified parties) of any claim or Legal Proceeding with
respect to which Parent or the Surviving Corporation has any indemnification
obligation under this Section 5.5, and (ii) the right, at its election, to
settle, adjust or compromise any such claim or Legal Proceeding without the
consent of any indemnified party (if the agreement relating to the settlement of
such claim contains a customary release of such indemnified party and other
customary terms).
(d) From the Effective Time until the sixth anniversary of the date
on which the Merger becomes effective, the Surviving Corporation shall maintain
in effect, for the benefit of the current directors and officers of the Company
with respect to acts or omissions occurring prior to the Effective Time, the
directors' and officers' liability insurance policy described in Part 5.5(d) of
the Company Disclosure Schedule (the "Specified Policy"); PROVIDED, HOWEVER,
that (i) the Surviving Corporation may substitute for the Specified Policy a
policy or policies of comparable coverage, and (ii) the Surviving Corporation
shall not be required to pay an annual premium for the Specified Policy (or for
any substitute policy or policies) in excess of $260,000. In the event any
future annual premium for the Specified Policy (or any substitute policy or
policies) exceeds $260,000, the Surviving Corporation shall be entitled to
reduce the amount of coverage of the Specified Policy (or any substitute policy
or policies) to the amount of coverage that can be obtained for an annual
premium equal to $260,000; PROVIDED, HOWEVER, that if the amount of any such
future annual premium payable prior to such sixth anniversary for the Specified
Policy (or for any substitute policy or policies) exceeds $260,000, then: (1)
Parent shall notify ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ of that fact a reasonable time before such
future annual premium becomes due; and (2) in the event that, a reasonable time
before such future annual premium becomes due, the current directors and
officers of the Company pay to Parent, in cash, the amount by which the amount
of such future annual premium exceeds $260,000, Parent shall use the amount
received from such directors and officers to pay such premium in order to avoid
a reduction in the amount of coverage of the Specified Policy (or any substitute
policy or policies).
5.6 POOLING OF INTERESTS.
(a) Each of the Company and Parent agrees (i) not to take any action
during the Pre-Closing Period that would adversely affect the ability of Parent
to account for the Merger as a "pooling of interests," and (ii) to use
reasonable efforts to attempt to ensure that none of its "affiliates" (as that
term is used in Rule 145 promulgated under the Securities Act) takes any action
that could adversely affect the ability of Parent to account for the Merger as a
"pooling of interests."
(b) The parties acknowledge that, in order to permit Parent to
account for the Merger as a "pooling of interests," it may be necessary, in
light of the condition specified in
44
paragraph 47d of Accounting Principles Board Opinion No. 16 (said condition
being referred to as the "Paragraph 47d Condition"), for Parent to issue shares
of Parent Common Stock at or prior to the Effective Time (in addition to the
shares of Parent Common Stock to be issued in the Merger). Subject to Section
5.6(c), Parent agrees that, at or prior to the Closing Date (as designated by
Parent in accordance with Section 1.3), it will issue a number of shares of
Parent Common Stock that is sufficient to cause the Paragraph 47d Condition to
be satisfied (it being understood that the timing of the offering and issuance
of such shares by Parent will be determined by Parent in its sole discretion).
(c) Notwithstanding anything to the contrary contained in Section
5.6(b) or elsewhere in this Agreement (but subject to Section 8.3(e)), Parent
shall not have any obligation under this Agreement to offer or to issue shares
of Parent Common stock if (i) Parent's financial advisor, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.,
shall have advised Parent in writing that, in light of prevailing market
conditions as they relate to Parent, it would be detrimental for Parent to
proceed with the offering or issuance of a sufficient number of shares of Parent
Common Stock to enable Parent to satisfy the Paragraph 47d Condition, and (ii) a
second financial advisor (comparable in stature to ▇▇▇▇▇▇▇, Sachs & Co.) jointly
selected by Parent and the Company is unwilling to commit to offer and sell such
shares on behalf of Parent on terms that are reasonably determined by Parent to
be acceptable.
5.7 ADDITIONAL AGREEMENTS.
(a) Each party to this Agreement (i) shall make all filings (if any)
and give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, and (ii) shall use reasonable efforts to obtain each Consent (if any)
required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement. The Company shall
promptly deliver to Parent a copy of each such filing made, each such notice
given and each such Consent obtained by the Company during the Pre-Closing
Period.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement: (i) to
dispose or cause any of its subsidiaries to dispose of any assets, or to commit
to cause any of the Acquired Corporations to dispose of any assets; (ii) to
discontinue or cause any of its subsidiaries to discontinue offering any
product, or to commit to cause any of the Acquired Corporations to discontinue
offering any product; (iii) to license or otherwise make available, or cause any
of its subsidiaries to license or otherwise make available, to any Person, any
technology, software or other Proprietary Asset, or to commit to cause any of
the Acquired Corporations to license or otherwise make available to any Person
any technology, software or other Proprietary Asset; (iv) to hold separate or
cause any of its subsidiaries to hold separate any assets or operations (either
before or after the Closing Date), or to commit to cause any of the Acquired
Corporations to hold separate any assets or operations; or (v) to make or cause
any of its subsidiaries make any commitment (to any Governmental Body or
otherwise) regarding its future operations or the future operations of any of
the Acquired Corporations.
45
5.8 DISCLOSURE.
(a) The Company shall not, and shall not permit any of its
Representatives to, issue any press release or otherwise publicly disseminate
any document or other written material relating to the Merger or any of the
other transactions contemplated by this Agreement unless (i) Parent shall have
approved such press release or written material (it being understood that Parent
shall not unreasonably withhold its approval of any such press release or
written material), or (ii) the Company shall have been advised by its outside
legal counsel that the issuance of such press release or the dissemination of
such written material is required by any applicable law or regulation, and the
Company shall have consulted with Parent prior to issuing such press release or
disseminating such written material; PROVIDED, HOWEVER, that the Company shall
be entitled to file with the SEC, after the execution and delivery of this
Agreement, a Report on Form 8-K (including a description of the possible sale of
up to 50,000 shares of Company Common Stock by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇), together with a
copy of this Agreement (including the exhibits hereto) and the press release
(which shall have been approved by Parent) announcing this Agreement. The
Company shall use reasonable efforts to ensure that none of its Representatives
makes any public statement that is materially inconsistent with any press
release issued or any written material publicly disseminated by the Company with
respect to the Merger or with respect to any of the other transactions
contemplated by this Agreement.
(b) Parent shall not, and shall not permit any of its Representatives
to, issue any press release or otherwise publicly disseminate any document or
other written material relating to the Merger or any of the other transactions
contemplated by this Agreement unless (i) the Company shall have approved such
press release or written material (it being understood that the Company shall
not unreasonably withhold its approval of any such press release or written
material), or (ii) Parent shall have been advised by its outside legal counsel
that the issuance of such press release or the dissemination of such written
material is required by any applicable law or regulation, and Parent shall have
consulted with the Company prior to issuing such press release or disseminating
such written material; PROVIDED, HOWEVER, that (1) notwithstanding anything to
the contrary contained in this Section 5.8, Parent may, without the approval of
the Company, issue any press release or otherwise disseminate any written
material relating to any offering or issuance of shares of Parent Common Stock
contemplated by Section 5.6(b), and (2) Parent shall be entitled to file with
the SEC, after the execution and delivery of this Agreement, a Report on Form
8-K, together with a copy of this Agreement (including the exhibits hereto) and
the press release (which shall have been approved by the Company) announcing
this Agreement. Parent shall use reasonable efforts to ensure that none of its
Representatives makes any public statement that is materially inconsistent with
any press release issued or any written material publicly disseminated by Parent
with respect to the Merger or with respect to any of the other transactions
contemplated by this Agreement.
5.9 AFFILIATE AGREEMENTS. The Company shall use reasonable efforts to
cause each Person identified in Part 2.18 of the Company Disclosure Schedule and
each other Person who is or becomes an "affiliate" (as that term is used in Rule
145 promulgated under the Securities Act) of the Company to execute and deliver
to Parent, prior to the date of the mailing of the Prospectus/Proxy Statement to
the Company's stockholders, an Affiliate Agreement in the form
46
of Exhibit C. Parent shall use reasonable efforts to cause each of Parent's
"affiliates" (as that term is used in Rule 145 promulgated under the Securities
Act) to execute and deliver to Parent, at least 30 days prior to the date on
which the Merger becomes effective, an "affiliate letter" in customary form
relating to "pooling of interests" accounting requirements.
5.10 TAX MATTERS. The Company shall use reasonable efforts to obtain and
deliver to Parent, as soon as practicable after the date of this Agreement,
Continuity of Interest Certificates in the form of Exhibit D signed by ▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇. At or prior to the Closing, the Company and Parent
shall execute and deliver to ▇▇▇▇▇▇ Godward LLP and to Fenwick & West LLP tax
representation letters in customary form. Parent and the Company shall use
reasonable efforts to cause the Merger to qualify as a tax free reorganization
under Section 368(a)(1) of the Code.
5.11 LETTER OF THE COMPANY'S ACCOUNTANTS. The Company shall use reasonable
efforts to cause to be delivered to Parent a letter of Ernst & Young LLP, dated
no more than two business days before the date on which the S-4 Registration
Statement becomes effective (and reasonably satisfactory in form and substance
to Parent), that is customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the S-4 Registration Statement.
5.12 EMPLOYMENT MATTERS. The employees of the Company identified in Part
5.12A of the Company Disclosure Schedule have executed Employment Agreements
with Parent (which will become effective on the date the Merger becomes
effective). The employees of the Company identified in Part 5.12B of the
Company Disclosure Schedule have executed Noncompetition Agreements in favor of
the Company and Parent (which will become effective on the date the Merger
becomes effective). The Company shall use reasonable efforts to cause each of
the additional employees of the Company identified in Part 5.12C of the Company
Disclosure Schedule to execute and deliver to Parent an employment agreement in
the form of Exhibit E.
5.13 PARENT PLANS AND BENEFIT ARRANGEMENTS. Those Plans identified in Part
2.15(a) of the Company Disclosure Schedule that provide non-discretionary,
non-cash benefits to employees of the Company and that are substantially similar
to benefit plans and benefit arrangements currently maintained by Parent shall,
to the extent practicable, be maintained in effect by the Surviving Corporation
until the Continuing Employees (as defined in this Section 5.13) are allowed to
participate in such similar benefit plans or benefit arrangements maintained by
Parent. Parent shall use reasonable efforts to attempt to ensure that: (a) as
soon as practicable after the Effective Time, Parent's benefit plans and benefit
arrangements will provide benefits to the Continuing Employees that are
comparable to the non-discretionary, non-cash benefits provided to similarly
situated employees of Parent; (b) to the extent practicable, any pre-existing
condition limitations contained in Parent's health plans and health benefit
arrangements for any Continuing Employee who would be deemed under Parent's
health plans and health benefit arrangements to have a disqualifying
pre-existing condition are waived, to the extent such condition was covered by a
Plan immediately prior to the Effective Time (provided that, in the case of
Parent's disability and life insurance plans, such Continuing Employee is
actively at work and is not hospitalized or on disability leave as of the
Effective Time); and (c) to the extent
47
practicable, Parent's benefit plans and benefit arrangements give full credit to
each Continuing Employee for such Continuing Employee's period of service with
the Company prior to the Effective Time for all purposes for which such service
was recognized under the Plans prior to the Effective Time. For purposes of
this Section 5.13, "Continuing Employee" shall mean any employee of the Company
who continues as an employee of the Surviving Corporation or Parent after the
Effective Time.
5.14 NYSE LISTING. Parent shall use reasonable efforts to cause the shares
of Parent Common Stock being issued in the Merger to be approved for listing
(subject to notice of issuance) on the NYSE.
5.15 RESIGNATION OF OFFICERS AND DIRECTORS. The Company shall use
reasonable efforts to obtain and deliver to Parent prior to the Closing the
resignation of each officer and director of the Company.
5.16 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under ▇▇▇▇▇▇▇ ▇.▇▇▇ - ▇(▇)(▇)
▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Treasury Regulations.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS.
(a) The representations and warranties of the Company contained in
this Agreement shall have been accurate in all respects as of the date of this
Agreement, except that any inaccuracies in such representations and warranties
will be disregarded if the circumstances giving rise to all such inaccuracies
(considered collectively) do not constitute, and are not reasonably expected to
result in, a Material Adverse Effect on the Acquired Corporations (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect" qualifications
and other materiality qualifications contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to the
Company Disclosure Schedule made or purported to have been made after the date
of this Agreement shall be disregarded).
(b) The representations and warranties of the Company contained in
this Agreement shall be accurate in all respects as of the Closing Date as if
made on and as of the Closing Date, except that any inaccuracies in such
representations and warranties will be disregarded if the circumstances giving
rise to all such inaccuracies (considered collectively) do
48
not constitute, and are not reasonably expected to result in, a Material Adverse
Effect on the Acquired Corporations (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other materiality qualifications
contained in such representations and warranties shall be disregarded and (ii)
any update of or modification to the Company Disclosure Schedule made or
purported to have been made after the date of this Agreement shall be
disregarded).
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that the
Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
6.4 STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted and
the Merger shall have been duly approved by the Required Vote.
6.5 CONSENTS. All material Consents required to be obtained in connection
with the Merger and the other transactions contemplated by this Agreement shall
have been obtained and shall be in full force and effect.
6.6 AGREEMENTS AND DOCUMENTS. Parent and the Company shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) Affiliate Agreements in the form of Exhibit C, executed by each
Person who is reasonably determined by the Company to be an "affiliate" of
the Company (as that term is used in Rule 145 promulgated under the
Securities Act);
(b) Continuity of Interest Certificates in the form of Exhibit D,
executed by ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇;
(c) the Employment Agreements referred to in the second sentence of
Section 5.12, executed by the individuals identified in Part 5.12A of the
Company Disclosure Schedule;
(d) the Noncompetition Agreements referred to in the first sentence
of Section 5.12, executed by the individuals identified in Part 5.12B of
the Company Disclosure Schedule;
(e) a letter from Ernst & Young LLP, dated as of the Closing Date and
addressed to Parent, reasonably satisfactory in form and substance to
Parent, updating the letter referred to in Section 5.11;
(f) the statement referred to in Section 5.16(a), executed by the
Company;
49
(g) a letter from Ernst & Young LLP, dated as of the Closing Date and
addressed to Parent, the Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, reasonably
satisfactory in form and substance to Parent and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, to
the effect that, after reasonable investigation, Ernst & Young LLP is not
aware of any fact concerning the Company or any of the Company's
stockholders or affiliates that could preclude Parent from accounting for
the Merger as a "pooling of interests" in accordance with generally
accepted accounting principles, Accounting Principles Board Opinion No. 16
and all published rules, regulations and policies of the SEC;
(h) a letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, dated as of the Closing Date
and addressed to Parent, reasonably satisfactory in form and substance to
Parent, to the effect that Parent may account for the Merger as a "pooling
of interests" in accordance with generally accepted accounting principles,
Accounting Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC;
(i) a legal opinion of Fenwick & West LLP, dated as of the Closing
Date, reasonably satisfactory in form and substance to Parent;
(j) a legal opinion of ▇▇▇▇▇▇ Godward LLP, dated as of the Closing
Date and addressed to Parent, to the effect that the Merger will constitute
a reorganization within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, ▇▇▇▇▇▇ Godward LLP may rely
upon the Continuity of Interest Certificates and tax representation letters
referred to in Section 5.10);
(k) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming that the conditions set forth in Sections 6.1,
6.2, 6.4, 6.5, 6.7, 6.8 and 6.9 have been duly satisfied; and
(l) the written resignations of all officers and directors of the
Company, effective as of the Effective Time.
6.7 EMPLOYEES. None of the individuals identified in Part 5.12B of the
Company Disclosure Schedule shall have ceased to be employed by the Company, or
shall have expressed an intention to terminate his or her employment with the
Company or to decline to accept employment with Parent; and not more than 50% of
the individuals identified in Part 5.12C of the Company Disclosure Schedule
shall have ceased to be employed by the Company or shall have expressed an
intention to terminate their employment with the Company or to decline to accept
employment with Parent.
6.8 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the business, condition, assets, liabilities, operations or financial
performance of the Acquired Corporations since the date of this Agreement,
except for (a) any such material adverse change that is demonstrated to have
resulted directly from changes that occurred after the date of this Agreement in
general business conditions in the electronic design automation industry, and
(b) any material adverse change in the Company's financial performance that is
temporary in nature and
50
is demonstrated to have resulted directly from the public announcement or the
pendency of the Merger.
6.9 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.16(b).
6.10 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
6.11 LISTING. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing (subject to notice of issuance) on the
NYSE.
51
6.12 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.13 NO GOVERNMENTAL LITIGATION. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to become
a party or is otherwise involved: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (b) relating to the Merger and seeking to obtain
from Parent or any of its subsidiaries any damages that may be material to
Parent; (c) seeking to prohibit or limit in any material respect Parent's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving Corporation; or (d)
which would materially and adversely affect the right of Parent, the Surviving
Corporation or any subsidiary of Parent to own the assets or operate the
business of the Company.
6.14 NO OTHER LITIGATION. There shall not be pending any Legal Proceeding
in which there is a reasonable possibility of an outcome that would have a
Material Adverse Effect on the Acquired Corporations or on Parent:
(a) challenging or seeking to restrain or prohibit the consummation of the
Merger or any of the other transactions contemplated by this Agreement;
(b) relating to the Merger and seeking to obtain from Parent or any of its
subsidiaries any damages that may be material to Parent; (c) seeking to prohibit
or limit in any material respect Parent's ability to vote, receive dividends
with respect to or otherwise exercise ownership rights with respect to the stock
of the Surviving Corporation; or (d) which would affect adversely the right of
Parent, the Surviving Corporation or any subsidiary of Parent to own the assets
or operate the business of the Company.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS.
(a) The representations and warranties of Parent and Merger Sub
contained in this Agreement shall have been accurate in all respects as of the
date of this Agreement, except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and are not reasonably
expected to result in, a Material Adverse Effect on Parent (it being understood
that, for purposes of determining the accuracy of such representations and
warranties, all materiality qualifications contained in such representations and
warranties shall be disregarded).
52
(b) The representations and warranties of Parent and Merger Sub
contained in this Agreement shall be accurate in all respects as of the Closing
Date as if made on and as of the Closing Date, except that any inaccuracies in
such representations and warranties will be disregarded if the circumstances
giving rise to all such inaccuracies (considered collectively) do not
constitute, and are not reasonably expected to result in, a Material Adverse
Effect on Parent (it being understood that, for purposes of determining the
accuracy of such representations and warranties, all materiality qualifications
contained in such representations and warranties shall be disregarded).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
7.4 DOCUMENTS. The Company shall have received the following documents:
(a) a legal opinion of ▇▇▇▇▇▇ Godward LLP, dated as of the Closing
Date, reasonably satisfactory in form and substance to the Company;
(b) a legal opinion of Fenwick & West LLP, dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within
the meaning of Section 368 of the Code (it being understood that, in
rendering such opinion, Fenwick & West LLP may rely upon the Continuity of
Interest Certificates and tax representation letters referred to in
Section 5.10); and
(c) a certificate executed on behalf of Parent by an executive
officer of Parent, confirming that conditions set forth in Sections 7.1,
7.2 and 7.5 have been duly satisfied.
7.5 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in Parent's business, condition, assets, liabilities, operations or
financial performance since the date of this Agreement, except for (a) any such
material adverse change that is demonstrated to have resulted directly from
changes that occurred after the date of this Agreement in general business
conditions in the electronic design automation industry, and (b) any material
adverse change in Parent's financial performance that is temporary in nature and
is demonstrated to have resulted directly from the public announcement or the
pendency of the Merger.
7.6 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
7.7 LISTING. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing (subject to notice of issuance) on the
NYSE.
53
7.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
the Company shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger by the Company
illegal.
SECTION 8. TERMINATION
8.1 TERMINATION. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of the Merger by the stockholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by 5:00 p.m. (Pacific Time) on May 7, 1997 (unless the failure
to consummate the Merger is attributable to a failure on the part of the
party seeking to terminate this Agreement to perform any material
obligation required to be performed by such party at or prior to the
Effective Time);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger;
(d) by either Parent or the Company if (i) the Company Stockholders'
Meeting shall have been held and (ii) this Agreement and the Merger shall
not have been adopted and approved at such meeting by the Required Vote;
PROVIDED, HOWEVER, that (1) Parent shall not be permitted to terminate this
Agreement pursuant to this Section 8.1(d) if the failure of the Company's
stockholders to adopt and approve this Agreement and the Merger at the
Company Stockholders' Meeting is attributable to a failure on the part of
Parent to perform any material obligation required to have been performed
by Parent under this Agreement, (2) the Company shall not be permitted to
terminate this Agreement pursuant to this Section 8.1(d) if the failure of
the Company's stockholders to adopt and approve this Agreement and the
Merger at the Company Stockholders' Meeting is attributable to a failure on
the part of the Company to perform any material obligation required to have
been performed by the Company under this Agreement, and (3) the Company
shall not be permitted to terminate this Agreement pursuant to this Section
8.1(d) unless the Company shall have paid the fee referred to in clause
"(i)" of Section 8.3(b);
(e) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the Required Vote) if a Triggering Event shall
have occurred;
54
(f) by Parent if any of the Company's representations and warranties
contained in this Agreement shall be or shall have become materially
inaccurate, or if any of the Company's material covenants contained in this
Agreement shall have been breached in any material respect; PROVIDED,
HOWEVER, that if an inaccuracy in the Company's representations and
warranties or a breach of a covenant by the Company is curable by the
Company and the Company is continuing to exercise reasonable efforts to
cure such inaccuracy or breach, then Parent may not terminate this
Agreement under this Section 8.1(f) on account of such inaccuracy or
breach;
(g) by the Company if any of Parent's representations and warranties
contained in this Agreement shall be or shall have become materially
inaccurate, or if any of Parent's material covenants contained in this
Agreement shall have been breached in any material respect; PROVIDED,
HOWEVER, that if an inaccuracy in Parent's representations and warranties
or a breach of a covenant by Parent is curable by Parent and Parent is
continuing to exercise reasonable efforts to cure such inaccuracy or
breach, then the Company may not terminate this Agreement under this
Section 8.1(g) on account of such inaccuracy or breach;
(h) by either Parent or the Company at 5:00 p.m. (Pacific Time) on
the scheduled Closing Date (as designated by Parent in accordance with
Section 1.3) if (i) Parent shall have failed to issue shares of Parent
Common Stock on or prior to the scheduled Closing Date for the purpose of
satisfying the Paragraph 47d Condition, (ii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP is unable
to provide, on the scheduled Closing Date, the letter referred to in
Section 6.6(h) solely as a result of Parent's failure to issue shares of
Parent Common Stock in order to satisfy the Paragraph 47d Condition, and
(iii) all of the conditions set forth in Section 6 have otherwise been
fully satisfied (except for any conditions in Section 6 that have not been
satisfied as a result of Parent's failure to perform any material
obligation required to have been performed by Parent under this Agreement);
PROVIDED, HOWEVER, that (1) Parent shall not be permitted to terminate this
Agreement pursuant to this Section 8.1(h) if Parent's failure to issue
shares of Parent Common Stock for the purpose of satisfying the Paragraph
47d Condition is attributable to a failure on the part of Parent to perform
any material obligation required to have been performed by Parent under
this Agreement, and (2) the Company shall not be permitted to terminate
this Agreement pursuant to this Section 8.1(h) if Parent's failure to issue
shares of Parent Common Stock for the purpose of satisfying the Paragraph
47d Condition is attributable to a failure on the part of the Company to
perform any material obligation required to have been performed by the
Company under this Agreement; or
(i) by Parent at any time on or after November 2, 1996 if ▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ shall not have executed and delivered to Parent
Option Agreements in the form of Exhibit F.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; PROVIDED, HOWEVER, that (i) this Section 8.2, Section 8.3 and
Section 9 shall survive the termination of this Agreement
55
and shall remain in full force and effect, and (ii) the termination of this
Agreement shall not relieve any party from any liability for any breach of this
Agreement.
56
8.3 EXPENSES; TERMINATION FEES.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, whether or
not the Merger is consummated; PROVIDED, HOWEVER, that Parent and the Company
shall share equally all fees and expenses, other than attorneys' fees, incurred
in connection with the printing and filing of the S-4 Registration Statement and
the Prospectus/Proxy Statement and any amendments or supplements thereto.
(b) If this Agreement is terminated by Parent or the Company pursuant
to Section 8.1(d), or if this Agreement is terminated by Parent pursuant to
Section 8.1(e), then:
(i) the Company shall pay to Parent, in cash (at the time
specified in Section 8.3(c)), a nonrefundable fee in the amount of
$5,000,000; and
(ii) in the event an Acquisition Transaction is consummated at
any time on or prior to the first anniversary of the date on which this
Agreement is terminated, the Company shall pay to Parent, in cash,
contemporaneously with the consummation of such Acquisition Transaction, an
additional nonrefundable fee in an amount equal to the Designated Amount
(as defined in Section 8.3(d)).
(c) In the case of termination of this Agreement by the Company
pursuant to Section 8.1(d), the fee referred to in clause "(i)" of Section
8.3(b) shall be paid by the Company prior to such termination, and in the case
of termination of this Agreement by Parent pursuant to Section 8.1(d) or Section
8.1(e), the fee referred to in clause "(i)" of Section 8.3(b) shall be paid by
the Company within three business days after such termination.
(d) The "Designated Amount" shall be $10,000,000; PROVIDED, HOWEVER,
that if (i) the Acquisition Transaction referred to in clause "(ii)" of Section
8.3(b) is required to be accounted for as a "pooling of interests," (ii) prior
to the consummation of such Acquisition Transaction, the Company delivers to
Parent reasonable written evidence of a determination by the SEC that relates
specifically to such Acquisition Transaction and that states that the SEC will
not permit such Acquisition Transaction to be accounted for as a "pooling of
interests" in the event, and solely because, a fee in the amount of $10,000,000
is paid by the Company to Parent in accordance with clause "(ii)" of Section
8.3(b), (iii) Parent shall have been given a reasonable opportunity, both prior
to and after such determination by the SEC, to persuade the appropriate official
at the SEC to appropriately modify the SEC's position on the accounting
treatment of such Acquisition Transaction (so that such Acquisition Transaction
can be accounted for as a "pooling of interests" notwithstanding the payment by
the Company of a fee in the amount of $10,000,000 in accordance with clause
"(ii)" of Section 8.3(b)), (iv) the Company shall have promptly advised Parent
of all material communications between the Company or any of its Representatives
and the SEC regarding the accounting treatment of such Acquisition Transaction,
(v) the Company shall have cooperated with Parent, both prior to and after such
determination by the SEC, in Parent's efforts to persuade the appropriate
official at the SEC to appropriately modify the SEC's position on the accounting
treatment of such Acquisition Transaction, (vi) the Company shall not have
57
taken any action or position, either prior to or after such determination by the
SEC, in opposition to or inconsistent with Parent's efforts to persuade the
appropriate official at the SEC to appropriately modify the SEC's position on
the accounting treatment of such Acquisition Transaction, and (vii) the position
reflected in such determination by the SEC shall not have been reversed,
withdrawn or otherwise appropriately altered, then the "Designated Amount" shall
be the lesser of $10,000,000 or the maximum dollar amount that would not
preclude such Acquisition Transaction from being accounted for as a "pooling of
interests."
(e) If this Agreement is validly terminated pursuant to Section
8.1(h), then Parent shall pay to the Company, in cash, a nonrefundable fee in
the amount of $10,000,000. If this Agreement is validly terminated by Parent
pursuant to Section 8.1(h), then such fee shall be paid to the Company on the
date Parent terminates this Agreement. If this Agreement is validly terminated
by the Company pursuant to Section 8.1(h), then such fee shall be paid to the
Company within three business days after the date on which the Company
terminates this Agreement.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 AMENDMENT. This Agreement may be amended with the approval of the
respective Boards of Directors of the Company and Parent at any time before or
after adoption and approval of this Agreement and the Merger by the stockholders
of the Company; PROVIDED, HOWEVER, that after any such adoption and approval of
this Agreement and the Merger by the Company's stockholders, no amendment shall
be made which by law requires further approval of the stockholders of the
Company without the further approval of such stockholders. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
9.2 WAIVER.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No party shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Merger.
58
9.4 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and
the other agreements referred to herein and the letter agreements dated as of
September 26, 1996 between Parent and the Company constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among or between any of the parties with respect to the subject matter
hereof and thereof. This Agreement may be executed in several counterparts, each
of which shall be deemed an original and all of which shall constitute one and
the same instrument, and shall be governed in all respects by the laws of the
State of Delaware as applied to contracts entered into and to be performed
entirely within the State of Delaware. The parties hereto waive trial by jury
in any action at law or suit in equity based upon, or arising out of, this
Agreement or the subject matter hereof.
9.5 DISCLOSURE SCHEDULE. The Company Disclosure Schedule shall be
arranged in separate parts corresponding to the numbered and lettered sections
contained in Section 2, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
section in Section 2, and shall not be deemed to relate to or to qualify any
other representation or warranty (unless it is reasonably apparent to Parent
that such information qualifies another representation or warranty).
9.6 ATTORNEYS' FEES. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive a reasonable sum for
its attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
9.7 ASSIGNABILITY. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that neither this
Agreement nor any of the Company's rights hereunder may be assigned by the
Company without the prior written consent of Parent, and any attempted
assignment of this Agreement or any of such rights by the Company without such
consent shall be void and of no effect. Except as set forth in Section 5.5 with
respect to the current directors and officers of the Company, nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
9.8 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
60
IF TO PARENT:
Cadence Design Systems, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO MERGER SUB:
Wyoming Acquisition Sub, Inc.
Cadence Design Systems, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO THE COMPANY:
▇▇▇▇▇▇ & Chyan Technology, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.9 COOPERATION. The Company agrees to cooperate fully with Parent and
to execute and deliver such further documents, certificates, agreements and
instruments and to take such other actions as may be reasonably requested by
Parent to evidence or reflect the transactions contemplated by this Agreement
and to carry out the intent and purposes of this Agreement.
9.10 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
61
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
62
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
CADENCE DESIGN SYSTEMS, INC.
By: /s/ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
Vice President and General Counsel
WYOMING ACQUISITION SUB, INC.
By: /s/ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
Vice President and Secretary
▇▇▇▇▇▇ & CHYAN TECHNOLOGY, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Vice President and
Chief Financial Officer
63
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUIRED CORPORATION CONTRACT. "Acquired Corporation Contract" shall mean
any Contract: (a) to which any of the Acquired Corporations is a party; (b) by
which any of the Acquired Corporations or any asset of any of the Acquired
Corporations is or may become bound or under which any of the Acquired
Corporations has, or may become subject to, any obligation; or (c) under which
any of the Acquired Corporations has or may acquire any right or interest.
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer or
proposal (other than an offer or proposal by Parent) contemplating or otherwise
relating to any Acquisition Transaction.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction or series of related transactions involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange
offer or other similar transaction (i) in which the Company is a
constituent corporation, (ii) in which a Person or "group" (as defined in
the Exchange Act and the rules promulgated thereunder) of Persons directly
or indirectly acquires the Company or more than 50% of the Company's
business or directly or indirectly acquires beneficial or record ownership
of securities representing more than 40% of the outstanding securities of
any class of voting securities of the Company, or (iii) in which the
Company issues securities representing more than 40% of the outstanding
securities of any class of voting securities of the Company; or
(b) any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 50% of the assets of the
Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
COMPANY COMMON STOCK. "Company Common Stock" shall mean the Common Stock,
$0.01 par value per share, of the Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license,
A-1
sublicense, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
HSR ACT. "HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, audit or active
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
A-2
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on the Acquired
Corporations if such event, violation, inaccuracy, circumstance or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in Section 2 of the Agreement but
for the presence of "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, in such representations and
warranties) would have a material adverse effect on the business, condition,
assets, liabilities, operations or financial performance of the Acquired
Corporations taken as a whole; PROVIDED, HOWEVER, that in the event the
Company's representations and warranties are inaccurate as of the Closing Date
as if made on and as of the Closing Date, the circumstances giving rise to the
inaccuracies in such representations and warranties will not be deemed to
constitute a Material Adverse Effect on the Acquired Corporations for purposes
of Section 6.1(b) if such circumstances (i) are demonstrated to have resulted
directly from changes that occurred after the date of this Agreement in general
business conditions in the electronic design automation industry, or (ii) are
demonstrated to have resulted directly from the public announcement or the
pendency of the Merger and would reasonably be expected to have only a temporary
effect on the Acquired Corporations and the Acquired Corporations' business and
financial condition. An event, violation, inaccuracy, circumstance or other
matter will be deemed to have a "Material Adverse Effect" on Parent if such
event, violation, inaccuracy, circumstance or other matter (considered together
with all other matters that would constitute exceptions to the representations
and warranties set forth in Section 3 of the Agreement but for the presence of
"Material Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on the business, condition, assets, liabilities, operations or
financial performance of Parent and its subsidiaries taken as a whole; PROVIDED,
HOWEVER, that in the event Parent's representations and warranties are
inaccurate as of the Closing Date as if made on and as of the Closing Date, the
circumstances giving rise to the inaccuracies in such representations and
warranties will not be deemed to constitute a Material Adverse Effect on Parent
for purposes of Section 7.1(b) if such circumstances (i) are demonstrated to
have resulted directly from changes that occurred after the date of this
Agreement in general business conditions in the electronic design automation
industry, or (ii) are demonstrated to have resulted directly from the public
announcement or the pendency of the Merger and would reasonably be expected to
have only a temporary effect on Parent and Parent's business and financial
condition.
NYSE. "NYSE" shall mean the New York Stock Exchange.
PARENT COMMON STOCK. "Parent Common Stock" shall mean the Common Stock,
$.01 par value per share, of Parent. Unless the context otherwise requires, all
references in the Agreement to Parent Common Stock shall be deemed to refer also
to the associated rights under Parent's Rights Agreement dated as of February 9,
1996 between Parent and ▇▇▇▇▇▇ Trust and Savings Bank.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious
A-3
business name, service ▇▇▇▇ (whether registered or unregistered), service ▇▇▇▇
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know-how, customer
list, franchise, system, computer software, computer program, source code,
algorithm, invention, design, blueprint, engineering drawing, proprietary
product, technology, proprietary right or other intellectual property right or
intangible asset.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
TRIGGERING EVENT. A "Triggering Event" shall be deemed to have occurred
if: (i) the Board of Directors of the Company shall have failed to recommend,
or shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its unanimous recommendation in favor of, the Merger or
approval or adoption of this Agreement; (ii) the Company shall have failed to
include in the Prospectus/Proxy Statement the unanimous recommendation of the
Board of Directors of the Company in favor of approval and adoption of this
Agreement and the Merger; (iii) the Board of Directors of the Company shall have
approved, endorsed or recommended any Acquisition Proposal; (iv) the Company
shall have entered into any letter of intent or similar document or any Contract
relating to any Acquisition Proposal; (v) the Company shall have failed to hold
the Company Stockholders' Meeting as promptly as practicable and in any event
within 60 days after the S-4 Registration Statement is declared effective; (vi)
a tender or exchange offer relating to securities of the Company shall have been
commenced and the Company shall not have sent to its securityholders, within ten
business days after the commencement of such tender or exchange offer, a
statement disclosing that the Company recommends rejection of such tender or
exchange offer; or (vii) an Acquisition Proposal is publicly announced, and the
Company (A) fails to issue a press release announcing its opposition
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to such Acquisition Proposal within five business days after such Acquisition
Proposal is announced or (B) otherwise fails to actively oppose such Acquisition
Proposal.
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