EXECUTION COPY
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GRC INTERNATIONAL, INC.,
AT&T CORP.
and
LMN CORPORATION
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AGREEMENT AND PLAN OF MERGER
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Dated as of February 14, 2000
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TABLE OF CONTENTS
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Page No.
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ARTICLE I. THE TENDER OFFER....................................................2
SECTION 1.1. The Offer...................................................2
SECTION 1.2. Company Action..............................................4
SECTION 1.3. Directors...................................................5
ARTICLE II. THE MERGER.........................................................7
SECTION 2.1. The Merger..................................................7
SECTION 2.2. Closing; Effective Time.....................................7
SECTION 2.3. Effect of the Merger........................................7
SECTION 2.4. Subsequent Actions..........................................8
SECTION 2.5. Certificate of Incorporation; By-Laws;
Directors and Officers....................................8
SECTION 2.6. Conversion of Securities....................................9
SECTION 2.7. Dissenting Shares...........................................9
SECTION 2.8. Surrender of Shares; Stock Transfer Books..................10
SECTION 2.9. Stock Plans................................................12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER...........14
SECTION 3.1. Corporate Organization.....................................14
SECTION 3.2. Authority Relative to this Agreement.......................14
SECTION 3.3. No Conflict; Required Filings and Consents.................15
SECTION 3.4. Financing Arrangements.....................................16
SECTION 3.5. Brokers....................................................16
SECTION 3.6. Offer Documents; Proxy Statement...........................16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................16
SECTION 4.1. Organization and Qualification; Subsidiaries...............16
SECTION 4.2. Capitalization.............................................17
SECTION 4.3. Authority Relative to this Agreement.......................19
SECTION 4.4. No Conflict; Required Filings and Consents.................20
SECTION 4.5. SEC Filings; Financial Statements..........................21
SECTION 4.6. Absence of Certain Changes or Events.......................22
SECTION 4.7. Litigation.................................................24
SECTION 4.8. Employee Benefit Plans.....................................24
SECTION 4.9. Labor and Employment.......................................27
SECTION 4.10. Properties.................................................28
SECTION 4.11. Intellectual Property......................................29
SECTION 4.12. Insurance..................................................30
SECTION 4.13. Environmental Matters......................................31
SECTION 4.14. Government Contracts.......................................32
SECTION 4.15. Licenses and Permits; Compliance with Laws.................32
SECTION 4.16. Material Contracts.........................................33
SECTION 4.17. Taxes......................................................35
SECTION 4.18. Offer Documents; Proxy Statement...........................37
SECTION 4.19. Brokers....................................................38
(i)
SECTION 4.20. Takeover Statutes..........................................38
SECTION 4.21. Rights Plan................................................38
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER.............................38
SECTION 5.1. Conduct of Business by the Company Pending the Closing.....38
SECTION 5.2. No Solicitation............................................42
ARTICLE VI. ADDITIONAL AGREEMENTS.............................................43
SECTION 6.1. Proxy Statement............................................43
SECTION 6.2. Meeting of Stockholders of the Company.....................44
SECTION 6.3. Compliance with Law........................................44
SECTION 6.4. Notification of Certain Matters............................44
SECTION 6.5. Access to Information......................................45
SECTION 6.6. Public Announcements.......................................45
SECTION 6.7. Reasonable Best Efforts; Cooperation.......................45
SECTION 6.8. Agreement to Defend and Indemnify..........................46
SECTION 6.9. Takeover Statutes..........................................47
SECTION 6.10. Employment Matters.........................................47
SECTION 6.11. Company Employee Benefit Plans.............................48
ARTICLE VII. CONDITIONS OF MERGER.............................................49
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER...............................50
SECTION 8.1. Termination................................................50
SECTION 8.2. Effect of Termination......................................53
ARTICLE IX. GENERAL PROVISIONS................................................53
SECTION 9.1. Non-Survival of Representations
Warranties and Agreements................................53
SECTION 9.2. Notices....................................................54
SECTION 9.3. Expenses...................................................55
SECTION 9.4. Certain Definitions........................................55
SECTION 9.5. Headings...................................................56
SECTION 9.6. Severability...............................................56
SECTION 9.7. Schedules..................................................56
SECTION 9.8. Entire Agreement; No Third-Party Beneficiaries.............56
SECTION 9.9. Assignment.................................................56
SECTION 9.10. Governing Law..............................................56
SECTION 9.11. Amendment..................................................56
SECTION 9.12. Waiver.....................................................57
SECTION 9.13. Counterparts...............................................57
(ii)
SCHEDULES
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2.9(b) Stock Plans
4.1 Subsidiaries
4.2(a) Options, Warrants, Etc.
4.2(b) Joint Ventures, Etc.
4.4(a) Conflicts
4.4(b) Company Consents
4.5(c) Undisclosed Liabilities
4.5(d) Amendments to Filed Documents
4.6 Changes, Events, Etc.
4.7 Litigation
4.8 ERISA
4.8(a)(ii) Options
4.9 Labor and Employment
4.10 Properties
4.11 Intellectual Property
4.12 Insurance
4.13 Environmental Matters
4.14 Government Contracts
4.15 Compliance with Laws
4.16 Material Contracts
4.17 Tax
5.1(i) Settlement of Proceedings
5.2(f) Indemnification Agreements
6.8 Indemnification Insurance
6.10 Executive Compensation
6.11 Employee Benefit Matters
Annex I - Conditions to the Offer
Index of Defined Terms
Exhibit A - Form of Stockholders Agreement
Exhibit B - Form of Stockholders Agreement
(iii)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 14, 2000 (the
"Agreement"), among GRC INTERNATIONAL, INC., a Delaware corporation (the
"Company"), AT&T CORP., a New York corporation ("Parent"), and LMN CORPORATION,
a Delaware corporation and an indirect wholly owned subsidiary of Parent
("Purchaser").
W I T N E S S E T H:
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WHEREAS, the respective Boards of Directors of the Company and Purchaser
have each determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Purchaser will make a
cash tender offer (as it may be amended from time to time as permitted under
this Agreement, the "Offer") to acquire all of the issued and outstanding shares
(the "Shares") of the common stock, $.10 par value, of the Company (the "Company
Common Stock") at a purchase price of fifteen dollars ($15) per Share (such
price or such higher price as may be paid in the Offer, the "Per Share Amount"),
net to the seller in cash; and
WHEREAS, the respective Boards of Directors of the Company, Purchaser and
Parent have each approved this Agreement and the merger (the "Merger") of
Purchaser with and into the Company following the consummation of the Offer and
upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of the Company (the "Board of Directors")
has determined that the consideration to be paid for each Share in the Offer and
the Merger is fair to the holders of such Shares and to recommend that the
holders of such Shares accept the Offer and approve this Agreement and the
transactions contemplated hereby; and
WHEREAS, the Board of Directors has approved the terms of the Stockholders
Agreements attached hereto as Exhibits A and B (the "Stockholders Agreements")
to be entered into among Parent, Purchaser and certain holders of Shares (the
"Stockholders") simultaneously herewith, pursuant to which such Stockholders
have, among other things, agreed to tender their Shares pursuant to the Offer.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company, Parent and Purchaser hereby agree as follows:
Article I.
THE TENDER OFFER
SECTION 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 hereof and none of the events set forth in Annex I
hereto shall have occurred and be existing, Purchaser shall commence (within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) the Offer as promptly as reasonably practicable, but in no
event later than seven business days following the public announcement by Parent
and the Company of the execution of this Agreement. The obligation of Purchaser
to accept for payment and pay for any Shares tendered pursuant to the Offer
shall be subject to the satisfaction of the conditions set forth in Annex I.
Purchaser expressly reserves the right from time to time, subject to Sections
1.1(b) and 1.1(d) hereof, without the consent of the Company to waive any such
condition, to increase the Per Share Amount, or to make any other changes in the
terms and conditions of the Offer. The Per Share Amount shall be net to the
seller in cash, without interest, subject to reduction only for any applicable
withholding taxes or stock transfer taxes payable by the seller. The Company
agrees that no Shares held by the Company or any Subsidiary (as hereinafter
defined) will be tendered pursuant to the Offer.
(b) Without the prior written consent of the Company, Purchaser shall not
(i) decrease the Per Share Amount or change the form of consideration payable in
the Offer, (ii) seek to purchase less than all outstanding Shares, (iii) amend
or waive satisfaction of the Minimum Condition (as defined in Annex I) or (iv)
impose conditions to the Offer in addition to those set forth in Annex I hereto,
or amend any other term or condition of the Offer in any manner materially
adverse to the holders of Shares. Upon the terms and subject to the conditions
of the Offer and this Agreement, Purchaser will accept for payment and purchase,
as soon as permitted under the terms of the Offer and applicable law (subject to
the first proviso to Section 8.1(c)(i)) (the "Share Purchase Date") all Shares
validly tendered and not withdrawn prior to the expiration of the Offer. On or
prior to the Share Purchase Date, Parent shall provide or cause to be provided
to Purchaser the funds necessary to pay for Shares that Purchaser becomes
obligated to accept for payment, and pay for, pursuant to the Offer. Purchaser
shall not provide for a subsequent offering period in accordance with Rule
14d-11 under the Exchange Act.
(c) The Offer shall be made by means of an offer to purchase (the "Offer to
Purchase") having only the conditions set forth in Annex I hereto. As soon as
reasonably practicable on the date the Offer is commenced, Purchaser shall file
with the Securities and Exchange Commission (the "SEC") a Tender Offer
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Statement on Schedule TO (together with all amendments and supplements thereto,
the "Schedule TO") with respect to the Offer that will comply in all material
respects with the provisions of all applicable Federal securities laws, and will
contain (including as an exhibit) or incorporate by reference the Offer to
Purchase and forms of the related letter of transmittal and summary
advertisement (which documents, together with any supplements or amendments
thereto, are referred to collectively herein as the "Offer Documents"). Parent
and Purchaser agree promptly to correct the Schedule TO or the Offer Documents
if and to the extent that it or they shall have become false or misleading in
any material respect (and the Company, with respect to written information
supplied by it specifically for use in the Schedule TO or the Offer Documents,
shall promptly notify Parent of any required corrections of such information and
shall cooperate with Parent and Purchaser with respect to correcting such
information) and to supplement the Schedule TO or the Offer Documents to include
any information that shall become necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (and the Company shall supplement the information provided by it
specifically for use in the Schedule TO or the Offer Documents to include any
information that shall become necessary in order to make the statements therein
that are based on such provided information, in light of the circumstances under
which they were made, not misleading), and Parent and Purchaser further agree to
take all steps necessary to cause the Schedule TO, as so corrected or
supplemented, to be filed with the SEC and the Offer Documents, as so corrected
or supplemented, to be disseminated to holders of Shares, in each case to the
extent required by applicable Federal securities laws. The Company and its
counsel shall be given a reasonable opportunity to review and comment on the
Schedule TO and any Offer Documents before they are filed with the SEC.
(d) The Offer to Purchase shall provide (i) for an initial expiration date
of 20 business days (as defined in Rule 14d-1 under the Exchange Act) from and
including the date of commencement of the Offer (the "Initial Expiration Date").
Purchaser shall extend the expiration date of the Offer until 5:00 p.m., Eastern
time, on the earlier of (i) the thirtieth (30th) business day following the
public announcement by Parent and the Company of the execution of this Agreement
(which thirty business days shall for this purpose include the date of such
public announcement) and (ii) if a tender offer (other than the Offer) shall
have been commenced for all or a portion of the Shares, the business day
immediately preceding the initial expiration date of such tender offer (such
earlier date, the "Extended Expiration Date"). Unless this Agreement shall have
been terminated pursuant to Section 8.1 hereof, Purchaser agrees that it shall
not, without the consent of the Company, terminate or withdraw the Offer or
(except as provided in this Section 1.1(d)) extend the expiration date of the
Offer; provided, however, that, subject to the immediately following sentence,
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without the consent of the Company, Purchaser shall have the right to terminate
or withdraw the Offer or extend the Offer from time to time if at the
then-scheduled expiration date of the Offer the conditions to the Offer
described in Annex I hereto shall not have been satisfied or earlier waived.
Unless this Agreement shall have been terminated pursuant to Section 8.1, if at
the then-scheduled expiration date of the Offer, the conditions to the Offer
described in Annex I hereto (other than the Minimum Condition) shall not have
been satisfied or earlier waived, upon the request of the Company, Purchaser
shall from time to time extend the expiration date of the Offer for up to a
maximum of 20 business days in the aggregate (it being understood and agreed
that the period from the Initial Expiration Date to and including the Extended
Expiration Date shall be counted in such 20-business-day period) for all such
extensions (the period of each such extension to be determined by Purchaser),
provided that at the time of such extension any such condition is reasonably
capable of being satisfied and provided further that the failure of any such
condition to be satisfied shall not result from a willful breach by the Company
of any of its covenants and agreements contained in this Agreement, until the
date Purchaser becomes obligated, pursuant to the terms of the Offer and this
Agreement, to accept for payment and pay for Shares tendered pursuant to the
Offer. Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, extend the expiration date of the Offer (as it may be extended) for any
period required by applicable rules, regulations, interpretations or positions
of the SEC or the staff thereof applicable to the Offer or for any period
required by applicable law.
SECTION 1.2. Company Action.
(a) The Company hereby approves of and consents to the Offer and represents
and warrants that the Board of Directors, at a meeting duly called and held on
February 14, 2000, acting by the unanimous vote of those present: (i) approved
and adopted this Agreement and the transactions contemplated hereby, including
the Offer and the Merger, and the Stockholders Agreements; (ii) recommended that
the stockholders of the Company accept the Offer, tender their Shares pursuant
to the Offer and approve this Agreement and the transactions contemplated
hereby, including the Merger; and (iii) determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, are
advisable, fair to and in the best interests of the stockholders of the Company.
(b) The Company hereby agrees to file with the SEC, as promptly as
practicable after the filing by Purchaser of the Schedule TO with respect to the
Offer but in any event on the date such Schedule TO is filed with the SEC, a
Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 (together
with any amendments or supplements thereto, the "Schedule 14D-9") that (i) will
comply in all material respects with the provisions
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of all applicable Federal securities laws and (ii) will include the opinion of
the Company Financial Advisor referred to in Section 4.3(c) hereof. The Company
agrees to mail such Schedule 14D-9 to the stockholders of the Company along with
the Offer Documents promptly after the commencement of the Offer. The Company
agrees that the Schedule 14D-9 and the Offer Documents shall contain the
recommendations of the Board of Directors described in Section 1.2(a) hereof.
The Company agrees promptly to correct the Schedule 14D-9 if and to the extent
that it shall become false or misleading in any material respect (and each of
Parent and Purchaser, with respect to written information supplied by it
specifically for use in the Schedule 14D-9, shall promptly notify the Company of
any required corrections of such information and cooperate with the Company with
respect to correcting such information) and to supplement the information
contained in the Schedule 14D-9 to include any information that shall become
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (and each of Parent and Purchaser
shall supplement the information provided by it specifically for use in the
Schedule 14D-9 to include any information that shall become necessary in order
to make the statements therein that are based on such provided information, in
light of the circumstances under which they were made, not misleading), and the
Company shall take all steps necessary to cause the Schedule 14D-9, as so
corrected or supplemented, to be filed with the SEC and disseminated to the
Company's stockholders, in each case to the extent required by applicable
Federal securities laws. Parent and its counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9 before it is filed with
the SEC.
(c) In connection with the Offer, the Company shall promptly upon execution
of this Agreement furnish Parent with mailing labels containing the names and
addresses of all record holders of Shares, non-objecting beneficial owners list
and security position listings of Shares held in stock depositories, each as of
a recent date, and shall promptly furnish Parent with such additional
information, including updated lists of stockholders, mailing labels and
security position listings, and such other information and assistance as Parent
or its agents may reasonably request for the purpose of communicating the Offer
to the record and beneficial holders of Shares.
SECTION 1.3. Directors. Promptly upon the purchase by Purchaser of any
Shares pursuant to the Offer, Parent shall be entitled to designate up to such
number of directors, rounded to the nearest whole number, on the Board of
Directors as will give Parent, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board of Directors equal to that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors appointed or elected pursuant to
this sentence and including current directors serving as officers of the
Company) multiplied by the percentage that the aggregate number of Shares
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beneficially owned by Parent or any affiliate of Parent (including for purposes
of this Section 1.3 such Shares as are accepted for payment pursuant to the
Offer, but excluding Shares held by the Company or any Subsidiary) bears to the
number of Shares outstanding. At such time, the Company will also cause, if
requested by Parent, (i) each committee of the Board of Directors, (ii) the
board of directors of each of the Subsidiaries and (iii) if requested by Parent,
each committee of such board to include persons designated by Parent
constituting up to the same percentage of each such committee or board as
Parent's designees constitute on the Board of Directors. The Company shall, upon
request by Parent, promptly take all actions necessary to cause Parent's
designees to be elected or appointed to the Board of Directors in accordance
with the terms of this Section 1.3, including, without limitation, increasing
the size of the Board of Directors and/or securing the resignations of such
number of directors as is necessary to enable Parent's designees to be elected
to the Board of Directors in accordance with the terms of this Section 1.3;
provided, however, that, in the event that Parent's designees are appointed or
elected to the Board of Directors, until the Effective Time (as defined in
Section 2.2(b) hereof) the Board of Directors shall have at least two directors
who are directors on the date hereof and who are neither officers of the Company
nor designees, affiliates or associates (within the meaning of the Federal
securities laws) of Parent (two or more of such directors, the "Independent
Directors"); provided further, that if no Independent Directors remain, the
other directors shall designate one person to fill one of the vacancies who
shall be neither an officer of the Company nor a designee, affiliate or
associate of Parent, and such person shall be deemed to be an Independent
Director for purposes of this Agreement. The Company represents and warrants to
Parent and Purchaser that nothing contained in the Stipulation and Settlement
Agreement dated December 15, 1999 settling Corcoran v. GRC International, Inc.
(C.A. No.: 17239) and Corcoran v. Denman, et al. (C.A. No.: 17490) in the
Delaware Court of Chancery, New Castle County (the "Settlement Agreement")
prohibits the Company from complying with its obligations under this Section 1.3
(it being understood that the Settlement Agreement restricts the manner in which
the Company may comply with this Section 1.3 by (i) limiting the size of the
Board of Directors to 13 directors and (ii) prescribing the classes into which
certain directors must be placed). Subject to applicable law, the Company shall
promptly take all action necessary pursuant to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under
this Section 1.3 and shall include in the Schedule 14D-9 mailed to stockholders
promptly after the commencement of the Offer (or an amendment thereof or an
information statement pursuant to Rule 14f-1 if Parent has not theretofore
designated directors or timely provided the requisite information) such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under this Section 1.3. Parent will supply the
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Company any information with respect to itself and its nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1.
Notwithstanding anything in this Agreement to the contrary, following the time
directors designated by Parent constitute a majority of the Board of Directors
and prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required to (i) amend or terminate this Agreement
on behalf of the Company, (ii) exercise or waive any of the Company's rights or
remedies hereunder, (iii) extend the time for performance of Parent's
obligations hereunder or (iv) take any other action by the Company in connection
with this Agreement required to be taken by the Board of Directors, and such
affirmative majority vote shall be sufficient to take any such action.
Article II.
THE MERGER
SECTION 2.1. The Merger. At the Effective Time (as defined in Section 2.2)
and upon the terms and subject to the conditions of this Agreement and the
Delaware General Corporation Law (the "DGCL"), Purchaser shall be merged with
and into the Company, the separate corporate existence of Purchaser shall cease,
and the Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger hereinafter sometimes is referred to as
the "Surviving Corporation."
SECTION 2.2. Closing; Effective Time. (a) The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on the second business day after
satisfaction or waiver of the conditions set forth in Article VII, at the
offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New
York, 10019, unless another date, time or place is agreed to in writing between
Parent and the Company. The date on which the Closing occurs is referred to in
this Agreement as the "Closing Date."
(b) On the Closing Date or as promptly as practicable thereafter, the
parties hereto shall cause the Merger to be consummated by filing a Certificate
of Merger, in accordance with Section 251, or a Certificate of Ownership and
Merger, in accordance with Section 253 of the DGCL, with the Secretary of State
of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL (the time of such filing
(or such later time as is specified in such Certificate of Merger or Certificate
of Merger and Ownership, as applicable, as agreed between Parent and the
Company) being the "Effective Time").
SECTION 2.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL. Without
limiting the
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generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and Purchaser
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company and Purchaser shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 2.4. Subsequent Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Purchaser acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either the Company or Purchaser, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of such corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
SECTION 2.5. Certificate of Incorporation; By-Laws; Directors and Officers.
(a) At the Effective Time, the Certificate of Incorporation of the
Surviving Corporation shall be amended in its entirety to read as the
Certificate of Incorporation of Purchaser, as in effect immediately before the
Effective Time, until thereafter amended as provided by law and such Certificate
of Incorporation; provided, however, that the Certificate of Incorporation of
the Surviving Corporation shall provide that the Surviving Corporation shall be
named "GRC International, Inc."
(b) Subject to Section 6.8, the By-Laws of Purchaser, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such By-Laws.
(c) The directors of Purchaser immediately prior to the Effective Time will
be the initial directors of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time will be the initial officers of
the Surviving Corporation, in each case until their successors are elected or
appointed and qualified. If, at the Effective Time, a vacancy shall exist on the
Board of Directors or in any office of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by law.
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SECTION 2.6. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Purchaser, the Company or the
holder of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than any Shares to be canceled pursuant to Section 2.6(b) and any
Dissenting Shares (as defined in Section 2.7(a)) shall be canceled and be
converted into the right to receive the Per Share Amount in cash payable to the
holder thereof, without interest, upon surrender of the certificate representing
such Share. Each holder of a certificate representing any such Shares shall
cease to have any rights with respect thereto, except the right to receive the
Per Share Amount, without interest, upon the surrender of such certificate in
accordance with Section 2.8 hereof.
(b) Each Share held in the treasury of the Company or owned by any
Subsidiary and each Share owned by Parent or any direct or indirect wholly owned
subsidiary of Parent immediately prior to the Effective Time shall be canceled
and no payment or other consideration shall be made with respect thereto.
(c) Each share of common stock, $.0l par value, of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted into and
thereafter represent one validly issued, fully paid and nonassessable share of
common stock, $.0l par value, of the Surviving Corporation.
SECTION 2.7. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, Shares
that are outstanding immediately prior to the Effective Time and that are held
by any stockholder who has not voted in favor of or consented to the Merger and
who duly demands appraisal of his Shares pursuant to the DGCL and complies with
all the provisions of the DGCL concerning the right of holders of Shares to
demand appraisal of their Shares in connection with the Merger (collectively,
the "Dissenting Shares") shall not be converted into the right to receive cash
pursuant to Section 2.6, but shall become the right to receive such cash
consideration as may be determined to be due to such stockholder as provided in
the DGCL. If, however, such stockholder withdraws his demand for appraisal or
fails to perfect or otherwise loses his right of appraisal, in any case pursuant
to the DGCL, his Shares shall be deemed to be converted as of the Effective Time
into the right to receive cash pursuant to Section 2.6(a) hereof, without any
interest thereon, upon surrender of the certificate or certificates representing
such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal of Shares received by the Company and (ii) the opportunity to
participate in and direct all
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negotiations and proceedings with respect to any such demands. The Company shall
not, without the prior written consent of Parent, make any payment with respect
to, or settle, offer to settle or otherwise negotiate, any such demands.
(c) Each Dissenting Share, if any, shall be canceled after payment in
respect thereof has been made to the holder thereof pursuant to the DGCL.
SECTION 2.8. Surrender of Shares; Stock Transfer Books.
(a) Before the Effective Time, Parent shall designate a bank or trust
company who shall be reasonably satisfactory to the Company to act as paying
agent in the Merger (the "Exchange Agent") to receive the funds necessary to
make the payments contemplated by Section 2.6. Parent shall, from time to time,
make available or cause to be made available to the Exchange Agent funds in
amounts and at times necessary for the payments under Section 2.8(b) to which
holders of Shares shall be entitled at the Effective Time pursuant to Section
2.6. Such funds shall be invested by the Exchange Agent as directed by Parent.
Any net profits resulting from, or interest or income produced by, such
investments shall be payable as directed by Parent.
(b) As soon as reasonably practicable after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates that immediately prior to the Effective
Time represented Shares (the "Certificates"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger consideration as provided in Section
2.6(a). Upon surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Parent, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount of cash, without
interest, into which the Shares theretofore represented by such Certificate
shall have been converted pursuant to Section 2.6(a), and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each such
Certificate (other than Certificates representing Dissenting Shares and
Certificates representing Shares to be canceled pursuant to Section 2.6(b))
shall represent solely the right to receive the aggregate Per Share Amount,
without interest, relating thereto.
(c) If payment of cash in respect of canceled Shares is to be made to a
Person other than the Person in whose name a
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surrendered Certificate is registered, it shall be a condition to such payment
that the Certificate so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the Certificate
surrendered or shall have established to the satisfaction of Parent or the
Exchange Agent that such tax either has been paid or is not payable. If a
mutilated Certificate is surrendered to the Exchange Agent or if the holder of a
Certificate submits an affidavit to the Exchange Agent stating that the
Certificate has been lost, destroyed or wrongfully taken, such holder shall, if
required by the Surviving Corporation, furnish an indemnity bond sufficient in
the reasonable judgment of the Surviving Corporation to protect Parent, the
Surviving Corporation and the Exchange Agent from any loss that any of them may
suffer.
(d) All cash paid upon the surrender of Certificates in accordance with the
terms of this Article II shall be deemed to have been paid in full satisfaction
of all rights pertaining to the Shares theretofore represented by such
Certificates. At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall not be any further registration of
transfers of Shares that were outstanding immediately prior to the Effective
Time on the records of the Surviving Corporation. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for cash as provided in Section 2.6(a) and this Section 2.8. No
interest shall accrue or be paid on any cash payable upon the surrender of a
Certificate or Certificates.
(e) Promptly following the date which is six months after the Effective
Time, the Exchange Agent shall deliver to Parent all cash, certificates and
other documents in its possession relating to the transactions contemplated
hereby, and the Exchange Agent's duties shall terminate. Thereafter, each holder
of a Certificate (other than Certificates representing Dissenting Shares and
Certificates representing Shares to be canceled pursuant to Section 2.6(b))
shall look only to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) and only as general creditors thereof, with
respect to any Merger consideration that may be payable upon due surrender of
the Certificates held by such holder. Notwithstanding the foregoing, none of
Parent, Purchaser, the Company or the Exchange Agent shall be liable to any
Person in respect of any cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) Parent or the Exchange Agent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Shares such amounts as Parent or the Exchange Agent is required to
deduct and
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withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code") or under any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by the Parent or the Exchange Agent.
SECTION 2.9. Stock Plans. (a) Options Outstanding. The Company currently
maintains the GRC International, Inc. 1985 Employee Stock Option Plan, the GRC
International, Inc. 1994 Employee Stock Option Plan, the GRC International, Inc.
1998 Employee Stock Option Plan, the GRC International, Inc. Cash Compensation
Replacement Plan, and the GRC International, Inc. Directors Fee Replacement Plan
(collectively referred to as the "Stock Plans"), more specifically described in
Section 4.2, which provide for the granting of options to purchase and awards of
Company Common Stock, and the GRC International, Inc. 1985 Employee Stock
Purchase Plan ("ESPP"), which permits employees to purchase Company Common
Stock. As of the date of this Agreement, the Company has taken all actions
necessary to amend each Stock Plan and the ESPP to provide that no further
options, awards or rights to receive equity shall be granted, offered or elected
under any Stock Plan after the date hereof. As of the date of this Agreement,
the Company has taken all actions necessary to cause the GRC International, Inc.
Cash Compensation Replacement Plan, the GRC International, Inc. Directors Fee
Replacement Plan, and the ESPP to terminate, and all participant contributions
and deferral amounts credited on behalf of the participants under such plans at
the time of such termination shall be paid to them in cash by the Company as
soon as administratively practicable thereafter.
(b) Conversion of Options. The Board of Directors of the Company has
adopted an amendment to provide that the Stock Plans are amended so that upon
the consummation of the Offer each then outstanding and unexercised option to
purchase shares of Company Common Stock granted under any of the Stock Plans
(the "Options"), whether or not then exercisable or vested, shall be converted
into an obligation of the Company to pay, and a right of the holder thereof to
receive in full satisfaction of such Option, cash in an amount in respect
thereof equal to the product of (A) the excess, if any, of the Per Share Amount
over the exercise price thereof and (B) the number of shares of Company Common
Stock subject to such Option, less any income or employment tax withholding
required under the Code or any provision of foreign, state or local law.
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(c) Option Payments.
(i) With respect to each Option granted pursuant to the terms of the
GRC International, Inc. 1985 Employee Stock Option Plan, the GRC
International, Inc. 1994 Employee Stock Option Plan or the GRC
International, Inc. 1998 Stock Option Plan (the "Option Plans") that is
fully vested and exercisable as of the consummation of the Offer, the
Company shall make the payment of the amount determined pursuant to Section
2.9(b) above as soon as reasonably practicable following the consummation
of the Offer.
(ii) With respect to each Option granted pursuant to the terms of an
Option Plan that is not vested and exercisable as of the consummation of
the Offer, the Company or the Surviving Corporation, as applicable, shall
make the payment of the amount determined pursuant to Section 2.9(b) above
at the time each such unvested Option would otherwise have become vested
and exercisable subject to the satisfaction of the terms and conditions set
forth in the applicable option award agreement and the Option Plan pursuant
to which such Option was granted, or at such earlier date as may be
determined by Parent in its sole and absolute discretion; provided,
however, if such holder's employment or service with the Company or any
Subsidiary is involuntarily terminated by the Company or any Subsidiary for
reasons other than Cause (as defined in Section 9.4), all of such holder's
Options shall become vested upon such termination of employment or service,
and the Company or the Surviving Corporation, as applicable, shall make the
payment of the amount determined pursuant to Section 2.9(b) as soon as
reasonably practicable following such termination. For purposes of this
Section 2.9(c)(ii), a termination of employment by an Option holder, after
the consummation of the Offer, following (A) a material decrease in such
holder's base salary, (B) a relocation of such holder's principal place of
employment to a location that increases his or her commute by more than 30
miles from such holder's commute to his or her principal place of
employment prior to the consummation of the Offer or (C) a non-employee
director's cessation of service on the Board of Directors upon the request
of the Company or the Surviving Corporation, as applicable, shall be deemed
to be an involuntary termination.
(iii) With respect to each Option granted pursuant to the terms of the
GRC International, Inc. Cash Compensation Replacement Plan or the GRC
International, Inc. Directors Fee Replacement Plan, whether or not such
Option is vested and exercisable as of the consummation of the Offer, the
Company shall make the payment of the amount determined pursuant to Section
2.9(b) above as soon as reasonably practicable following the consummation
of the Offer.
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(iv) Parent shall from time to time provide the Company or the
Surviving Corporation, as applicable, with sufficient funds to satisfy the
obligations of the Company or the Surviving Corporation, as applicable,
under this Section 2.9.
(d) Directors Retirement Plan. The Company has recently terminated the GRC
International, Inc. Directors Retirement Plan (the "Director Retirement Plan").
In exchange for their benefits under such plan, certain directors of the Company
received the right to receive shares of Company Common Stock ("Deferred Stock
Units") subsequent to their resignation from the Board of Directors. Immediately
following the consummation of the Offer, each Deferred Stock Unit shall be
converted into the right to receive cash in an amount equal to the product of
(A) the Per Share Amount and (B) the number of Deferred Stock Units held by each
such director, which cash amount shall be payable as soon as practicable
following the director's cessation of service on the Board of Directors.
Article III.
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows:
SECTION 3.1. Corporate Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite corporate power
and authority to carry on its business as it is now being conducted.
SECTION 3.2. Authority Relative to this Agreement. Parent and Purchaser
have the necessary corporate power and authority to enter into this Agreement
and to carry out their obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Purchaser and no other corporate proceeding is
necessary for the execution and delivery of this Agreement by Parent or
Purchaser, the performance by Parent or Purchaser of their respective
obligations hereunder and the consummation by Parent or Purchaser of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and Purchaser and, assuming due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
each such corporation, enforceable against each of them in accordance with its
terms.
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SECTION 3.3. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Purchaser do
not, and the performance of this Agreement by Parent and Purchaser will not, (i)
assuming all notices, reports or other filings described in clauses (i) through
(vi) of Section 3.3(b) have been given or made, conflict with or violate any
law, regulation, court order, judgment or decree applicable to Parent or
Purchaser or by which any of their property is bound or affected, (ii) violate
or conflict with either the Certificate of Incorporation or By-Laws of either
Parent or Purchaser, or (iii) result in any violation or breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of Parent or Purchaser pursuant to, any note, bond,
mortgage, indenture, agreement, contract, instrument, permit, license, franchise
or other obligation to which Parent or Purchaser is a party or by which Parent
or Purchaser or any of them or their property is bound or affected, except for,
in the case of clauses (i) and (iii), conflicts, violations, breaches or
defaults which would not prevent or materially delay the consummation of the
Offer and the Merger.
(b) Except for (i) applicable requirements, if any, of the Exchange Act,
(ii) the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (iii) the filing and
recordation of appropriate merger documents as required by the DGCL, (iv)
filings as may be required by any applicable "blue sky" laws, (v) any filings
required under applicable foreign antitrust or competition laws, (vi) any
required notifications or filings with any national or international securities
exchange on which Parent's securities are listed and (vii) as would not prevent
or materially delay the consummation of the Offer and the Merger, neither Parent
nor Purchaser is required to submit any notice, report or other filing with any
federal, state or local government or any court, administrative or regulatory
agency or commission or other governmental authority or agency, domestic or
foreign (a "Governmental Entity"), in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. No waiver, consent, approval or authorization of any
Governmental Entity, is required to be obtained or made by either Parent or
Purchaser in connection with its execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby, except
(i) where the failure to obtain such waivers, consents, approvals or
authorizations would not prevent or materially delay the performance by Parent
or Purchaser of their respective obligations under this Agreement or (ii) in
connection with any submission required above.
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SECTION 3.4. Financing Arrangements. Parent has or will have funds
available to it sufficient to consummate the Offer and the Merger in accordance
with the terms of this Agreement.
SECTION 3.5. Brokers. No broker, finder or investment banker (other than
Lehman Brothers Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent or Purchaser. Any
amounts due to Lehman Brothers Inc. in connection with the transactions
contemplated by this Agreement shall be paid by Parent.
SECTION 3.6. Offer Documents; Proxy Statement. None of the information
supplied by or on behalf of Parent or Purchaser (the "Parent Information"), for
inclusion in the Proxy Statement (as defined in Section 4.18), will, on the date
the Proxy Statement is first mailed to stockholders or at the time of the
Company Stockholders' Meeting (as defined in Section 4.18), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Offer
Documents will not, at the respective times the Offer Documents are filed with
the SEC or first published, sent or given to the Company's stockholders, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, Parent and Purchaser do not make any
representation or warranty with respect to statements made or incorporated by
reference in any of the foregoing documents based upon information that has been
supplied by the Company or its accountants, counsel or other authorized
representatives for use in any of the foregoing documents. The Offer Documents
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
Article IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser as
follows:
SECTION 4.1. Organization and Qualification; Subsidiaries. (a) Each of the
Company and the Subsidiaries (defined below in Section 4.1(d)) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and any necessary governmental authority and approvals to own, operate
or lease the properties
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that it purports to own, operate or lease and to carry on its business as it is
now being conducted, and is duly qualified or licensed as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned, operated or leased or the nature of its
activities makes such qualification or licensing necessary, except for any such
failures which, when taken together with all other such failures, would not have
a Material Adverse Effect or prevent or materially delay the consummation of the
Offer or the Merger. For purposes of this Agreement, "Material Adverse Effect"
means any condition, change or effect that is or is reasonably likely to be
materially adverse to the business, results of operations, properties (including
intangible properties), condition (financial or otherwise), assets or
liabilities of the Company and the Subsidiaries taken as a whole.
(b) A true and complete list of all the Subsidiaries, together with the
jurisdiction of incorporation or organization of each Subsidiary and the
percentage of each Subsidiary's outstanding capital stock owned by the Company
or another Subsidiary, is set forth in Schedule 4.1 hereto.
(c) The Company has heretofore furnished to Parent a complete and correct
copy of the Certificate of Incorporation (the "Company Certificate of
Incorporation") and the By-laws (the "Company By-laws") of the Company as
currently in effect. No other similar organizational documents are applicable to
or binding upon the Company. The Company is not in violation of any of the
provisions of the Company Certificate of Incorporation or Company By-laws.
(d) For purposes of this Agreement, "Subsidiary" means any corporation or
other legal entity of which the Company (either alone or through or together
with any other Subsidiary) (i) owns, directly or indirectly, more than 50% of
the stock or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other governing body of
such corporation or other legal entity, or (ii) in the case of partnerships,
serves as a general partner, or (iii) in the case of a limited liability
company, serves as managing member or (iv) otherwise has the ability to elect a
majority of the directors, trustees or managing members thereof.
SECTION 4.2. Capitalization. (a) The authorized capital stock of the
Company consists of: (i) 30,000,000 shares of Company Common Stock and (ii)
300,000 shares of preferred stock, $1.00 par value per share, of the Company
(the "Company Preferred Stock"). As of December 31, 1999, (A) 12,442,607 shares
of Company Common Stock were issued and outstanding, all of which were duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive (or similar) rights, (B) no shares of Company Preferred Stock were
issued and outstanding, (C) 32,721 shares of Company Common Stock were reserved
for issuance upon the exercise of outstanding Options
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under the Company's 1985 Employee Stock Option Plan and Options with respect to
32,721 shares of Company Common Stock were outstanding thereunder, (D) 598,114
shares of Company Common Stock were reserved for issuance upon the exercise of
outstanding Options under the Company's 1994 Employee Stock Plan and Options
with respect to 546,573 shares of Company Common Stock were outstanding
thereunder, (E) 1,512,126 shares of Company Common Stock were reserved for
issuance under the Company's 1998 Employee Stock Option Plan and Options with
respect to 1,290,092 shares of Company Common Stock were outstanding thereunder,
(F) 160,853 shares of Company Common Stock were reserved for issuance under the
Company's Cash Compensation Replacement Plan and Options with respect to 43,897
shares of Company Common Stock were outstanding thereunder, (G) 218,938 shares
of Company Common Stock were reserved for issuance under the Company's Directors
Fee Replacement Plan and Options with respect to 98,440 shares of Company Common
Stock were outstanding thereunder, (H) 219,328 shares of Company Common Stock
were reserved for issuance under the Company's Employee Stock Purchase Plan, (I)
300,000 shares of Company Common Stock were held in the treasury of the Company
and (J) 445,000 shares of Company Common Stock were reserved for issuance upon
exercise of warrants to purchase shares of Company Common Stock described on
Schedule 4.2(a) hereto (the "Warrants"). Since December 31, 1999, (i) no Options
have been granted, (ii) no shares of Company Common Stock have been issued
except for shares issued pursuant to the exercise of Options outstanding as of
December 31, 1999, and (iii) no shares of Preferred Stock have been issued.
Except as set forth in Schedule 4.2(a) or in this Section 4.2(a): (x) there are
no shares of capital stock or other voting securities of the Company, options,
calls, warrants or rights, agreements, arrangements or commitments of any
character obligating the Company or any of its Subsidiaries to issue, deliver or
sell or cause to be issued, delivered or sold any shares of capital stock or
other voting securities or securities convertible into or exchangeable for
capital stock or voting securities of or other equity interests in the Company
or any of the Subsidiaries or equity equivalents, interests in the ownership or
earnings of the Company or other similar rights (collectively, "Company
Securities"); (y) there are no bonds, debentures, notes or other indebtedness of
the Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of the
Company may vote ("Company Voting Debt"); and (z) there are no stockholders
agreements, voting trusts or other agreements or understandings to which the
Company or any Subsidiary is a party or by which it is bound relating to the
issued or unissued capital stock of the Company (including any such agreements
or understandings that may limit in any way the solicitation of proxies by or on
behalf of the Company from, or the casting of votes by, the stockholders of the
Company with respect to the Merger) or granting to any person or group of
persons the right to elect, or to designate or nominate for election, a director
to the Board of Directors. Except as set forth in Schedule 4.2(a),
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there are no programs in place or outstanding obligations of the Company or any
of the Subsidiaries (1) to repurchase, redeem or otherwise acquire any Company
Securities or (2) to vote or to dispose of any shares of the capital stock of
any of the Subsidiaries. All shares of Company Common Stock subject to issuance
as aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive (or similar)
rights and registration rights. Upon consummation of the Merger, each holder of
Warrants shall be entitled to receive, pursuant to the terms thereof, upon
payment of the aggregate Purchase Price (as defined in the Warrants) then in
effect, the Per Share Amount for each share of Company Common Stock that would
otherwise have been issuable upon the exercise of such Warrants immediately
prior to consummation of the Merger. No event has occurred since the issuance of
the Warrants that has resulted in an adjustment to the Purchase Price in effect
on the date of their issuance.
(b) All the shares of outstanding capital stock of each of the Subsidiaries
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive (or similar) rights and, except as set forth in Schedule
4.1, are owned by the Company or a wholly owned Subsidiary and are owned free
and clear of any liens, security interests, pledges, agreements, claims, charges
or encumbrances of any nature whatsoever. There are no existing options, calls,
warrants or other rights, agreements arrangements or commitments of any
character relating to the issued or unissued capital stock or other equity
interests or securities of any Subsidiary. Except for the Subsidiaries and
except as set forth in Schedule 4.2(b), the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any equity or similar interest in any
other corporation, partnership, joint venture or other business association or
entity. Except as set forth in Schedule 4.2(b), neither the Company nor any
Subsidiary is under any current or prospective obligation to provide funds to,
make a capital contribution or investment in or loan to, or to assume any
liability or obligation of, any corporation, partnership, joint venture or the
business association or entity.
SECTION 4.3. Authority Relative to this Agreement.
(a) The Company has the necessary corporate power and authority to enter
into this Agreement and, subject to obtaining any necessary stockholder approval
of the Merger, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to the approval of the Merger by the
Company's stockholders in accordance with the DGCL. This Agreement has
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been duly executed and delivered by the Company and constitutes a legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms. The affirmative vote of the holders of a majority of the shares of
Company Common Stock entitled to vote approving this Agreement is the only vote
of the holders of any class or series of the Company's capital stock necessary
to approve this Agreement and the transactions contemplated hereby; provided,
however, that no such vote shall be required if the Merger is subject to Section
253 of the DGCL.
(b) At a Board of Directors' meeting duly called and held on February 14,
2000, the Board of Directors (i) determined that this Agreement and the
transactions contemplated hereby are advisable, fair to and in the best
interests of the stockholders and that the Per Share Amount to be paid for each
Share in the Offer and the Merger is fair to the holders of such Shares, (ii)
declared advisable and in all respects approved and adopted this Agreement, the
Offer, the Merger and the other transactions contemplated hereby, and (iii)
resolved to recommend the approval and adoption of this Agreement and the Merger
by the stockholders of the Company.
(c) Banc of America Securities LLC (the "Company Financial Advisor") has
delivered to the Board of Directors its written opinion, dated prior to or as of
the date of this Agreement, that based on the assumptions, qualifications and
limitations contained therein, the Per Share Amount to be received by the
Company's stockholders in the Offer and the Merger is fair from a financial
point of view to such stockholders. The Company has provided a copy of such
opinion to Parent.
SECTION 4.4. No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 4.4(a) hereto, the execution and
delivery of this Agreement by the Company does not, and the performance hereof
by the Company will not, (i) conflict with or violate any law, regulation, court
order, judgment or decree applicable to the Company or any of the Subsidiaries
or by which its or any of their property is bound or affected, (ii) violate or
conflict with the Certificate of Incorporation or By-Laws or equivalent
organizational documents of the Company or any Subsidiary, or (iii) result in
any violation or breach of or constitute a default (or an event which with
notice or lapse of time of both would become a default) under, or result in any,
or give rise to any rights of termination, amendment, cancellation or
acceleration of any obligations or any loss of any material benefit under or,
result in the creation of a lien or encumbrance on any of the properties or
assets of the Company or any of the Subsidiaries pursuant to, any note, bond,
mortgage, indenture, agreement, contract, instrument, permit, license, franchise
or other obligation to which the Company or any of the Subsidiaries is a party
or by which the Company or any of the Subsidiaries or
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its or any of them or their property is bound or affected, except for, in the
case of clauses (i) and (iii), conflicts, violations, breaches or defaults
which, individually or in the aggregate, would not (x) have a Material Adverse
Effect, (y) impair, in any material respect, the ability of the Company to
perform its obligations under this Agreement or (z) be reasonably likely to
prevent or materially delay the consummation of the Offer and the Merger.
(b) Except for (i) applicable requirements, if any, of the Exchange Act,
(ii) the pre-merger notification requirements of the HSR Act, (iii) the filing
and recordation of appropriate merger or other documents as required by the
DGCL, (iv) filings as may be required by any "blue sky" laws of various states
and/or the rules of the National Association of Securities Dealers, Inc., (v)
any required notifications or filings with the New York Stock Exchange, Inc. and
(vi) as set forth in Schedule 4.4(b) hereto, the Company and each of the
Subsidiaries are not required to submit any notice, report or other filing with
any Governmental Entity, in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby, except where the failure to make such submission would not
prevent or materially delay the performance by the Company of its obligations
under this Agreement. No waivers, consents, approvals or authorizations of any
Governmental Entity are required to be obtained or made by the Company in
connection with its execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby, except (i) where the
failure to obtain such waivers, consents, approvals or authorizations would not
prevent or materially delay the performance by the Company of its obligations
under this Agreement, (ii) in connection with any submission required above or
(iii) as set forth in Schedule 4.4(b) hereto.
SECTION 4.5. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents (including all
exhibits thereto) required to be filed with the SEC since July 1, 1998,
including its (i) Annual Reports on Form 10-K for the fiscal years ended June
30, 1999 and June 30, 1998, respectively, (ii) the Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1999, (iii) all proxy statements
relating to the Company's meetings of stockholders (whether annual or special)
held since July 1, 1998 and (iv) all other reports or registration statements
filed by the Company with the SEC since July 1, 1998 (collectively, including
the exhibits thereto, the "SEC Reports"). The SEC Reports (including but not
limited to any financial statements or schedules included or incorporated by
reference therein) (i) at the time they became effective, in the case of
registration statements, or when filed, in the case of any other SEC Report,
complied as to form in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as
-21-
the case may be, and the rules and regulations promulgated thereunder and (ii)
do not (except to the extent revised or superseded by a subsequent filing with
the SEC), and did not at the time they were filed, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. None of the
Subsidiaries is required to file any statements or reports with the SEC pursuant
to Sections 13(a) or 15(d) of the Exchange Act.
(b) The consolidated financial statements contained in the SEC Reports were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated financial position of
the Company and its Subsidiaries as at the respective dates thereof and the
consolidated results of operations and changes in financial position of the
Company and its Subsidiaries for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments (which in the aggregate are not material in
amount).
(c) Except (i) as set forth in Schedule 4.5(c) or (ii) as and to the extent
disclosed or reflected in the audited consolidated financial statements of the
Company and the Subsidiaries at June 30, 1999, including the notes thereto,
contained in the Annual Report on Form 10-K of the Company for the fiscal year
ended June 30, 1999 (the "Company 1999 10-K") and except for (x) liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since June 30, 1999 and (y) liabilities and obligations that have not
had and would not have, individually or in the aggregate, a Material Adverse
Effect (without taking into account the effects of the Offer and the Merger),
the Company and the Subsidiaries have no liabilities of any nature (whether
accrued, absolute, contingent or otherwise).
(d) The Company has heretofore furnished to Parent a complete and correct
copy of any material amendments or modifications which have not yet been filed
with the SEC to agreements, documents or other instruments which previously had
been filed by the Company with the SEC pursuant to the Securities Act and the
rules and regulations promulgated thereunder or the Exchange Act and the rules
and regulations promulgated thereunder other than with respect to any such
agreement, document or other instrument that has been heretofore terminated.
SECTION 4.6. Absence of Certain Changes or Events. Except as expressly
contemplated by this Agreement or as set forth in Schedule 4.6 hereto or in any
SEC Report filed and publicly available prior to the date of this Agreement,
since June 30, 1999, the business of the Company and the Subsidiaries
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has been conducted in the ordinary course consistent with past practice and
there has not been:
(a) any Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by insurance)
with respect to any of the assets of the Company or any of its Subsidiaries,
except as would not, individually or in the aggregate, have a Material Adverse
Effect;
(c) any redemption or other acquisition of Shares by the Company or any of
the Subsidiaries or any declaration, setting aside or payment of any dividend or
other distribution in cash, stock or property with respect to the Company Common
Stock, except for purchases heretofore made pursuant to the terms of the Company
Employee Benefit Plans (as defined in Section 4.8(a));
(d) any material change by the Company in accounting methods, principles or
practices;
(e) any material revaluation by the Company of any material asset
(including, without limitation, any writing down of the value of inventory or
writing off of notes or accounts receivable), other than in the ordinary course
of business consistent with past practice;
(f) any entry by the Company or any Subsidiary into any commitment or
transaction material to the Company and the Subsidiaries taken as a whole, other
than commitments or transactions entered into in the ordinary course of business
consistent with past practice;
(g) any increase in or amendment to (in the case of directors and executive
officers of the Company) or any material increase in or material amendment to
(in the case of other officers and Key Management Personnel) or establishment of
any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards or restricted stock
awards, or the acceleration of vesting of any such options, rights or awards)
stock purchase or other employee benefit plan or agreement or arrangement, or
any other increase in the compensation payable or to become payable to any
present or former directors, officers or Key Management Personnel of the Company
or any Subsidiary, except for increases in base compensation and bonuses in the
ordinary course of business consistent with past practice;
(h) any entry by the Company or any Subsidiary into any employment,
consulting, severance, termination or indemnification agreement or arrangement
with any director, officer or key employee of the Company or any Subsidiary or
any entry into any such material agreement with any other person; or
-23-
(i) any agreement, in writing or otherwise, by the Company or any
Subsidiary to take any of the actions described in this Section 4.6, except as
expressly contemplated by this Agreement.
SECTION 4.7. Litigation. Except as disclosed in the Company 1999 10-K or in
Schedule 4.7 hereto, there are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its Subsidiaries, or any properties or rights
of the Company or any of its Subsidiaries, before any Governmental Entity or
arbitrator, except as would not, individually or in the aggregate, have a
Material Adverse Effect. Except as disclosed in the Company 1999 10-K or in
Schedule 4.7 hereto, neither the Company nor any of its Subsidiaries nor any of
their property is subject to any material order, judgment, injunction or decree.
SECTION 4.8. Employee Benefit Plans.
(a) (i) Schedule 4.8 sets forth a list of all "employee benefit plans", as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and all other employee benefit or executive compensation
arrangements, perquisite programs or payroll practices, including, without
limitation, any such arrangements or payroll practices providing severance pay,
sick leave, vacation pay, salary continuation for disability, retirement
benefits, deferred compensation, bonus pay, incentive pay, stock options
(including those held by directors, employees, and consultants), hospitalization
insurance, medical insurance, life insurance, scholarships or tuition
reimbursements, that are maintained by the Company, any Subsidiary or any entity
within the same "controlled group" as the Company or Subsidiary, within the
meaning of Section 4001(a)(14) of ERISA (a "Company ERISA Affiliate") or to
which the Company, any Subsidiary or Company ERISA Affiliate is obligated to
contribute thereunder for current or former employees or directors of the
Company, any Subsidiary or Company ERISA Affiliate (the "Company Employee
Benefit Plans").
(ii) Schedule 4.8(a)(ii) sets forth, with respect to each Option that
is outstanding under the Option Plans as of January 31, 2000, the name of
the holder of such Option, the number of shares of Company Common Stock
subject to such Option, the exercise price per share of such Option and the
date on which such Options vest or become exercisable (it being understood
that Schedule 4.8(a)(ii) does not include information concerning the
Warrants).
(b) None of the Company Employee Benefit Plans is a "multiemployer plan",
as defined in Section 4001(a)(3) of ERISA (the "Company Multiemployer Plan") or
a plan that has two or more contributing sponsors at least two of whom are not
under common
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control, within the meaning of Section 4063 of ERISA. Neither the Company, any
Subsidiary nor any Company ERISA Affiliate has withdrawn in a complete or
partial withdrawal from any Company Multiemployer Plan, nor has any of them
incurred any liability due to the termination or reorganization of a Company
Multiemployer Plan. The aggregate withdrawal liability from each of such Company
Multiemployer Plan would not exceed $0.
(c) None of the Company Employee Benefit Plans is a "single employer plan",
as defined in Section 4001(a)(15) of ERISA, that is subject to Title IV of
ERISA. Neither the Company, any Subsidiary nor any Company ERISA Affiliate has
incurred any outstanding liability under Section 4062 of ERISA to the Pension
Benefit Guaranty Corporation or to a trustee appointed under Section 4042 of
ERISA. Neither the Company, any Subsidiary nor any Company ERISA Affiliate has
engaged in any transaction described in Section 4069 of ERISA. Except as set
forth on Schedule 4.8 hereto, neither the Company nor any Subsidiary maintains,
or is required, either currently or in the future, to provide life, health,
medical or other welfare benefits to employees, directors, former employees,
former directors, or retirees after their termination of employment or service,
other than pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985. The Company and each Subsidiary have reserved the right to amend,
terminate or modify at any time all plans or arrangements providing for retiree
health or life insurance coverage.
(d) Except as set forth in Schedule 4.8, each Company Employee Benefit Plan
that is intended to qualify under Section 401 of Internal Revenue Code of 1986,
as amended (the "Code"), and each trust maintained pursuant thereto, has been
determined to be exempt from federal income taxation under Section 501 of the
Code by the IRS, and, to the Company's knowledge, nothing material has occurred
with respect to the operation of any such Company Employee Benefit Plan that is
reasonably likely to cause the loss of such qualification or exemption or the
imposition of any material liability, penalty or tax under ERISA or the Code, or
the assertion of material claims by participants (as that term is defined in
section 3(7) of ERISA) other than routine benefit claims.
(e) All contributions (including all employer contributions and employee
salary reduction contributions) required to have been made under any of the
Company Employee Benefit Plans to any funds or trusts established thereunder or
in connection therewith have been made by the due date thereof.
(f) There has been no material violation of ERISA or the Code with respect
to the filing of applicable reports, documents and notices regarding the Company
Employee Benefit Plans with the Secretary of Labor or the Secretary of the
Treasury or the furnishing of required reports, documents or
-25-
notices to the participants or beneficiaries of the Company Employee Benefit
Plans.
(g) None of the Company, the Subsidiaries, the officers or directors of the
Company or any of the Subsidiaries or the Company Employee Benefits Plans which
are subject to ERISA, any trusts created thereunder or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) or any other
breach of fiduciary responsibility that could subject the Company, any of the
Subsidiaries or any officer or director of the Company or any of the
Subsidiaries to any material tax or penalty on prohibited transactions imposed
by such Section 4975 or to any material liability under Section 502(i) or (1) of
ERISA.
(h) The Company has no Company-owned life insurance policies currently in
force.
(i) True, correct and complete copies of the following documents, with
respect to each of the Company Employee Benefit Plans, have been delivered or
made available to Parent by the Company: (i) all Company Employee Benefit Plans
and related trust documents, and amendments thereto; (ii) the most recent Forms
5500 (iii) summary plan descriptions; and (iv) any other documents, records or
materials as may be reasonably requested by the Parent.
(j) There are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the Company's knowledge, threatened, against the
Company Employee Benefit Plans, the assets of any of the trusts in their
capacity as such under such plans or the plan sponsor or the plan administrator,
or against any fiduciary of the Company Employee Benefit Plans with respect to
the operation of such plans (other than routine benefit claims).
(k) All Company Employee Benefit Plans subject to ERISA or the Code have
been maintained and administered, in all material respects, in accordance with
their terms and with all provisions of ERISA and the Code, respectively,
(including rules and regulations thereunder) and other applicable federal and
state laws and regulations.
(l) Except as set forth and excepted in Schedule 4.8(l) and Sections 2.9,
6.10 and 6.11, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby (either alone or in
conjunction with any other event) will (i) result in any payment (including,
without limitation, severance, unemployment compensation, "excess parachute
payment" (within the meaning of Section 280G of the Code), forgiveness of
indebtedness or otherwise) becoming due to any director or any employee of the
Company or any Subsidiary under any Company Employee Benefit Plan or otherwise;
(ii)
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materially increase any benefits otherwise payable under any Company Employee
Benefit Plan; (iii) result in any acceleration of the time of payment or vesting
of any such benefits; (iv) limit or prohibit the ability to amend or terminate
any Company Employee Benefit Plan; (v) require the funding of any trust or other
funding vehicle; or (vi) renew or extend the term of any agreement in respect of
compensation for an employee of the Company which would create any liability to
the Company or Purchaser or their respective affiliates after consummation of
the Offer.
SECTION 4.9. Labor and Employment. (a) Except as disclosed in Schedule
4.9(a) of this Agreement, (i) there is no unfair labor practice charge pending
or, to the Company's knowledge, threatened against the Company or any
Subsidiary; (ii) there is no labor strike, slowdown, stoppage or other similar
labor activity actually pending or, to the Company's knowledge, threatened
against or involving the Company or any Subsidiary; (iii) no material labor
grievance is pending or, to the Company's knowledge, threatened; (iv) to the
Company's knowledge, for the 12 month period ending on the date of this
Agreement, neither the Company nor any Subsidiary has been the subject of any
union organizational campaign; (v) neither the Company nor any Subsidiary has
any material labor negotiations in process with any labor union or other labor
organization; (vi) neither the Company nor any Subsidiary is presently, nor has
any of them in the past been a party to or bound by any collective bargaining
agreement or union contract; and (vii) to the Company's knowledge, there are no
efforts in process by labor unions to organize any employees who are not now
represented by recognized collective bargaining agents; and (viii) neither the
Company nor any Subsidiary has closed any plant or facility or implemented any
early retirement, or window program within the past six (6) months, nor has the
Company or any Subsidiary planned or announced any such action or program for
the future.
(b) Except as set forth in Schedule 4.9(b) of this Agreement, neither the
Company nor any of its Subsidiaries is a party to any written, oral or implied
contract or agreement with any current or former officer or director of the
Company or any Subsidiary, or any independent contractor relating to the
employment or service of any such person which to the Company's knowledge is
reasonably likely to result in any material liability to or obligation of the
Company after the Closing Date. The Company has delivered to Parent true and
complete copies of all such contracts or agreements or detailed descriptions of
individual agreements (or, in the case of any contract or agreement that is not
in writing, a description of the terms and conditions of such contract or
agreement), and the Company and its Subsidiaries have been in compliance in all
material respects with the terms and conditions of all such written, oral and
implied contracts and agreements.
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(c) Except as disclosed in Schedule 4.9(c), or except to the extent any
undisclosed non-compliance would not result in any material liability to the
Company after the Closing Date, the Company and its Subsidiaries have policies
in place to address compliance in all material respects with all federal, state
and local laws and regulations relating to employment and employment practices
such as wages and hours and the payment and withholding of taxes, the Fair Labor
Standards Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination
in Employment Act, state and local human rights laws, the National Labor
Relations Act, state labor laws, the Rehabilitation Act of 1974, the
Occupational Safety and Health Act, the Worker Adjustment and Retraining
Notification Act of 1988 state worker's compensation laws, state disability
laws, state unemployment laws, the Immigration Reform and Control Act of 1986,
the Polygraph Protection Act of 1988, the Equal Pay Act, and the Americans with
Disabilities Act, with respect to each current employee or director of the
Company or any Subsidiary.
(d) Except as disclosed in Schedule 4.9(d), or except to the extent any
undisclosed non-compliance would not result in any material liability to the
Company or any of its Subsidiaries after the Closing Date, there are no such
claims, causes of action, charges, suits, complaints, administrative
proceedings, government investigations or proceedings, arbitrations or other
proceedings pending or to the Company's knowledge threatened against the Company
or any of its affiliates relating to employment or employment practices with
respect to any employee or former employee or director of the Company, and the
Company has no notice of, nor has knowledge of any matter that could reasonably
be the basis for any claim or assertion of liability against the Company or any
of its affiliates relating to any federal, state or local law relating to
employment or employment practices with respect to any such person.
Section 4.10. Properties. Schedule 4.10(a) hereto lists all real property
owned or leased by the Company or any of its Subsidiaries. Except as set forth
on Schedule 4.10(b) hereto, each of the Company and its Subsidiaries has good,
valid and, in the case of real property, marketable fee simple, title to all the
material assets and properties that it owns and that are reflected on the
Company's consolidated balance sheet as of June 30, 1999, or that were
thereafter acquired (except for assets and properties sold, consumed or
otherwise disposed of in the ordinary course of business by them since such
date), and such assets and properties are owned free and clear of all liens,
claims and encumbrances, except for (a) liens for taxes and assessments not yet
due and payable or for taxes the validity of which is being contested in good
faith, (b) liens, claims and encumbrances to secure indebtedness reflected on
the Company's consolidated balance sheet as of June 30, 1999, or indebtedness
(including purchase money indebtedness) incurred in the ordinary course of
business and consistent with past practice after the date thereof, (c)
mechanic's, materialmen's, and other liens,
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claims and encumbrances that have arisen in the ordinary course of business and
(d) imperfections of title and liens, claims and encumbrances the existence of
which do not, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth on Schedule 4.10(c), neither the Company nor any of the
Subsidiaries is, nor to the knowledge of the Company is any other party, in
material breach of any lease agreement to which the Company or any Subsidiary is
a party (the "Company Leases"). The execution and delivery of this Agreement and
the performance of the Company's obligations under this Agreement and the
consummation of the transactions contemplated hereby will not (i) constitute a
breach by the Company or any Subsidiary under any Company Leases (ii) give rise
to any right of any third party to terminate any Company Lease, or (iii) cause a
loss or impairment of rights under any Company Lease, except for any such
breaches, terminations, losses or impairments as would not, individually or in
the aggregate, have a Material Adverse Effect. All the material buildings,
structures, equipment and other tangible assets of the Company and its
Subsidiaries (whether owned or leased) are in normal operating condition (normal
wear and tear excepted) and are fit for use in the ordinary course of business
of the Company. Notwithstanding anything to the contrary, no representations or
warranties set forth in this Section 4.10 shall apply to any personal property
of the Company or any Subsidiary that is surplus to the operating needs of the
business of the Company or any Subsidiary as presently conducted.
SECTION 4.11. Intellectual Property.
(a) Except as set forth on Schedule 4.11, the Company and its Subsidiaries
have good title to or, with respect to items not owned by the Company or its
Subsidiaries, sufficient rights to use all patents, trademarks and service marks
(registered or unregistered), trade names, domain names, computer software and
copyrights, and applications and registrations therefor (collectively,
"Intellectual Property"), owned or licensed by the Company or any Subsidiary or
utilized by the Company or any Subsidiary in the conduct of its and their
businesses and good title to or, with respect to items not owned by the Company
or its Subsidiaries, sufficient rights to use all material inventions,
processes, designs, formulae, trade secrets and know-how utilized in the conduct
of the businesses of the Company and its Subsidiaries, as presently conducted
(all of the foregoing items, including the items of Intellectual Property,
collectively referred to as the "Company Intellectual Property"). The Company
has no knowledge of any infringement by others of Intellectual Property owned by
the Company or any Subsidiary nor the misappropriation of any trade secrets
owned by the Company or any Subsidiary, except where such infringement or
misappropriation would not, individually or in the aggregate, have a Material
Adverse Effect. To the Company's knowledge, the conduct of the businesses of the
Company and the Subsidiaries does not infringe on any Intellectual Property
rights of others nor does it involve the misappropriation of any trade secrets
of others, except where
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such infringement or misappropriation would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) Except as set forth on Schedule 4.11 and except as would not,
individually or in the aggregate, have a Material Adverse Effect, with respect
to each item of Company Intellectual Property: (i) if the Company or any
Subsidiary has held itself out as the owner thereof or otherwise developed or
caused the development of the item, the Company or its Subsidiaries exclusively
possess all rights, title and interest in and to the item; and (ii) no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand or
assertion is pending or, to the knowledge of the Company, is threatened that
challenges the legality, validity, enforceability, use or ownership of the item
or that concerns the infringement of the item.
(c) The Company and each Subsidiary have taken reasonable steps to protect
the Company's and each Subsidiary's rights in all inventions, processes,
designs, formulae, know-how, trade secrets and other confidential information of
the Company and each Subsidiary, and have taken reasonable steps to enforce
rights in Intellectual Property owned by the Company or any Subsidiary against
known infringement by third parties. The Company and each Subsidiary have taken
reasonable steps, including all steps that the Company or any Subsidiary may be
contractually obligated to undertake, to protect confidential information or
trade secrets provided by another Person to the Company or any Subsidiary.
(d) Except as set forth on Schedule 4.11, neither this Agreement nor the
assignment to Parent or the Surviving Corporation, by operation of law or
otherwise, of title to or the rights to use any or all of the Company
Intellectual Property will to the Company's knowledge after the Effective Time
(a) cause or result in an infringement or misappropriation of any Intellectual
Property right of any Person; (b) prevent the Surviving Corporation or its
assignee (provided that such assignee has the necessary national security
clearance and is allowed access to and use of such Company Intellectual Property
by the U.S. Government) from using the Company Intellectual Property in
substantially the same manner as it is used by the Company and each Subsidiary
prior to the Effective Time (other than by virtue of agreements, relationships
or the status of Parent and its affiliates); or (c) subject Parent or the
Surviving Corporation to any obligation to pay royalties or other amounts to any
third party in excess of those payable by the Company or any Subsidiary,
respectively, prior to the Effective Time.
SECTION 4.12. Insurance. Schedule 4.12 sets forth a true and complete list
of all insurance policies carried by, or covering the Company and the
Subsidiaries with respect to their businesses, assets and properties, together
with, in respect of
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each such policy, the name of the insurer, the policy number, the type of
policy, the amount of coverage and the deductible. True and complete copies of
each such policy have previously been provided to Parent. All such policies are
in full force and effect, and no notice of cancellation has been received by the
Company with respect to any such policy. All premiums due on such policies have
been paid in a timely manner, and the Company and the Subsidiaries have complied
in all material respects with the terms and provisions of such policies. The
insurance coverage provided by such policies is adequate and customary for the
industry in which the Company and the Subsidiaries operate.
SECTION 4.13. Environmental Matters.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means any pollutant or
contaminant or any hazardous or toxic substance, waste, chemical, or material,
including as those terms are defined in any Environmental Law, and including
without limitation (A) petroleum and petroleum products including crude oil and
any fractions thereof; (B) natural gas, synthetic gas, and mixtures thereof; (C)
radon; (D) asbestos and asbestos-containing materials; (ii) "Environmental Law"
means any Law relating to regulation of pollution or the protection of human
health or the environment, including without limitation the following federal
statutes and their state counterparts, as each may be amended from time to time,
and any regulations promulgated thereunder: the Atomic Energy Act, the Clean Air
Act, the Clean Water Act, the Comprehensive Environmental Response,
Compensation, and Liability Act, the Federal Insecticide, Fungicide, and
Rodenticide Act, the Hazardous Materials Transportation Act, the Occupational
Safety and Health Act, the Resource Conservation and Recovery Act, and the Safe
Drinking Water Act.
(b) Except as set forth on Schedule 4.13 hereto: (i) neither the Company
nor any Subsidiary is in material violation or has in the last three (3) years
been in material violation of any Environmental Law; (ii) none of the properties
currently owned or leased by the Company or any Subsidiary is contaminated with
any Hazardous Substance to an extent that may require cleanup or other
remediation or give rise to any material liability under any Environmental Law;
(iii) none of the properties formerly owned or leased by the Company or by any
current or former Subsidiary is contaminated with any Hazardous Substance to an
extent that may require cleanup or other remediation or give rise to any
material liability under any Environmental Law; (iv) no operations of the
Company or of any present or former Subsidiary have given rise to any off-site
contamination that may require cleanup or other remediation or give rise to any
material liability under any Environmental Law; (v) the material Company and
each Subsidiary has all material permits, licenses and other authorizations
required under any Environmental Law ("Environmental Permits"); (vi) the Company
and
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each Subsidiary is in material compliance with its Environmental Permits; and
(vii) there are no pending or, to the Company's knowledge, threatened claims
against the Company or any Subsidiary relating to any Environmental Law or
Hazardous Substance.
SECTION 4.14. Government Contracts.
(a) Except as disclosed in Schedule 4.14, with respect to Government
Contracts, or teaming agreements or arrangements in respect of Government
Contracts, held by the Company or any Subsidiary or any joint venture in which
the Company participates as a venturer, there is no (i) material civil, criminal
or other investigation of which the Company has knowledge by any Governmental
Entity, (ii) suspension or debarment proceeding (or equivalent proceeding)
against the Company or any Subsidiary or, to the Company's knowledge, any basis
therefor, (iii) as of the date hereof, request for a contract price adjustment
based on a claimed disallowance by Defense Contract Audit Agency or any other
Governmental Entity or claim of defective pricing or mischarging of any kind,
(iv) as of the date hereof, claim or request for equitable adjustment or other
demand by the Company or any Subsidiary against the U.S. Government or any third
party or, to the Company's knowledge, any basis therefor, (v) written notice
challenging, questioning or disallowing any cost(s) or, to the Company's
knowledge, any basis therefor, (vi) as of the date hereof, notice of contract
termination or absence or reduction in funding; or (vii) material cure notice or
show cause notice or any material claim or demand by any Person relating to or
arising under a Government Contract or, to the Company's knowledge, any basis
therefor.
(b) For the purposes of this Agreement, with respect to any party,
"Government Contract" means any prime contract, subcontract, option, basic
ordering agreement, forward pricing rate agreement, letter contract, purchase
order, delivery order, change order, task order, Bid or other arrangement of any
kind between such party or any of its subsidiaries and (i) the U.S. Government
(acting on its own behalf or on behalf of another country or international
organization), (ii) any prime contractor of the U.S. Government or (iii) any
subcontractor with respect to any contract of a type described in clauses (i) or
(ii) above. For the purposes of this Agreement, with respect to any party, "Bid"
means any quotation, bid or proposal made by such party or any of its
subsidiaries that if accepted or awarded would lead to a Contract with the U.S.
Government or any other person for the design, manufacture and sale of products
or the provision of services.
SECTION 4.15. Licenses and Permits; Compliance with Laws. Except as set
forth on Schedule 4.15, the Company and the Subsidiaries hold, and at all
applicable times hereunder held, all material permits, licenses, variances,
exemptions, franchises, authorizations and approvals from all Governmental
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Entities that are required for the operation of the businesses of the Company
and the Subsidiaries as presently conducted and the ownership, operation, lease
and holding by the Company and the Subsidiaries of their respective properties
and assets (the "Company Permits"). No suspension or cancellation of any of the
Company Permits is pending or, to the knowledge of the Company, threatened,
except where the failure to have, or suspension or cancellation of, any of the
Company Permits would not, individually or in the aggregate, have a Material
Adverse Effect. Except where individually or in the aggregate the existence of a
conflict with, a violation of, or a default under would not have a Material
Adverse Effect, none of the Company or any Subsidiary is in conflict with, or in
default under or violation of and the Company and the Subsidiaries have not
received any notices of violations with respect to, (i) any federal, state,
local or foreign statutes, laws, ordinances, rules, regulations, judgments,
decrees, orders, concessions, grants, franchises, permits, licenses and other
governmental authorizations and approvals ("Laws") applicable to the Company or
any Subsidiary or by which any asset of the Company or any Subsidiary is bound
or affected, (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or its or any of their respective properties are bound or affected or (iii) any
Company Permits.
SECTION 4.16. Material Contracts.
(a) Except for any contract filed as an exhibit to any SEC Report or as set
forth on Schedule 4.16(a) hereto (collectively, the "Company Material
Contracts") and except for classified contracts, neither the Company nor any of
the Subsidiaries is a party to or bound by:
(i) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC);
(ii) any contract or agreement for the purchase of materials or
personal property from any supplier or for the furnishing of services to
the Company or any Subsidiary that requires future aggregate payments by
the Company or any of the Subsidiaries of $150,000 or more;
(iii) any U.S. Government prime contract (including teaming agreements
in respect thereof), U.S. Government subcontract (other than any
subcontract requiring future aggregate payments of less than $100,000) or
any commercial contract for the sale of the Company's services or licensed
software;
(iv) (A) any contract, agreement or instrument relating to or
evidencing purchase money indebtedness in excess of $100,000 or
indebtedness for borrowed money of the
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Company or any Subsidiary, (B) any guarantee or assumption of an obligation
for purchase money indebtedness in excess of $100,000 or borrowed money or
other obligations of reimbursement of any maker of a letter of credit or
any guaranty of minimum equity or capital or make-whole or similar
agreement or (C) extension of credit by the Company or any Subsidiary in
excess of $100,000 or loan by the Company or any Subsidiary;
(v) except for teaming and other agreements entered into in the
ordinary course of business, any non-competition agreement or any other
agreement or obligation which purports to limit in any respect the manner
in which, or the localities in which, the business of the Company or the
Subsidiaries may be conducted;
(vi) any partnership, joint venture, strategic alliance or cooperation
agreement (or any agreement similar to any of the foregoing);
(vii) any voting or other agreement governing how any Shares shall be
voted;
(viii) any contract or other agreement which would prohibit or
materially delay the consummation of the Merger or any of the transactions
contemplated by this Agreement;
(ix) any licenses, whether as licensor or licensee, of Intellectual
Property other than commercial-off-the-shelf software licenses; or
(x) any brokerage or finders fee agreements other than agreements for
normal brokerage commissions or finders fees payable in the ordinary course
of business.
(b) Except as set forth on Schedule 4.16(b) hereto, each Company Material
Contract is valid and binding on the Company (or, to the extent a Subsidiary is
a party, such Subsidiary) and, to the Company's knowledge, each other party
thereto, and each is in full force and effect, and the Company and each
Subsidiary and, to the Company's knowledge, each other party thereto have
performed all obligations required to be performed by them to date under each
Company Material Contract, except where such noncompliance, individually or in
the aggregate, would not have a Material Adverse Effect. Neither the Company nor
any Subsidiary knows of, or has given or received notice of, any violation or
default under (nor, to the knowledge of the Company, has there occurred any
event or does there exist any condition which with the passage of time or the
giving of notice or both would result in such a violation or default under) any
Company Material Contract, except where any such violations or defaults,
individually or in the aggregate, would not have a Material Adverse Effect.
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(c) Except as disclosed in the Company's proxy statement for the 1999
annual meeting of stockholders or in Schedule 4.16 or as expressly provided for
in this Agreement, neither the Company nor any of the Subsidiaries is a party to
any oral or written (i) employment or consulting or similar agreement that (A)
cannot be terminated on eight weeks' or less notice without any material
additional expense other than the payment of accrued compensation and/or
expenses or (B) requires payments of compensation to any one Person in excess of
$125,000 (exclusive of bonuses, to the extent such bonuses do not exceed 50% of
such Person's other compensation) per year or aggregate payments of compensation
to any one Person in excess of $200,000 or (ii) agreement or arrangement, with
any director, officer or other key employee of the Company or any Subsidiary the
benefits of which are contingent or vest or accelerate, or the terms of which
are altered, upon the occurrence of a transaction of the nature contemplated by
this Agreement.
SECTION 4.17. Taxes.
(a) Except as set forth in Schedule 4.17, all material Tax Returns (as
defined below) by or on behalf of the Company or any Subsidiary or any
affiliated, combined or unitary group of which the Company or any Subsidiary is
or was a member have been duly and timely filed with the appropriate taxing
authorities. All such Tax Returns were correct and complete in all material
respects. All Taxes shown as due thereon have been paid, and the most recent
financial statements contained in the SEC Reports provide an adequate accrual
for the payment of Taxes for the periods covered by such reports.
(b) Except as set forth in Schedule 4.17, neither the Company nor any
Subsidiary has requested any extension of time within which to file any Tax
Return in respect of any taxable year, which Tax Return has not since been
filed.
(c) Except as set forth in Schedule 4.17, there are no outstanding waivers
or comparable consents that have been given by the Company or any Subsidiary or
with respect to any Tax Return of the Company or any Subsidiary regarding the
application of any statute of limitations with respect to any Taxes or Tax
Returns of the Company or any such Subsidiary.
(d) Except as set forth in Schedule 4.17, no United States federal, state,
local or foreign audits, investigations, other administrative proceedings or
court proceedings are presently pending against the Company or any Subsidiary
that could materially affect the liability for Taxes of the Company or any
Subsidiary or against the Company or any Subsidiary with regard to any Taxes or
Tax Returns of the Company or any Subsidiary and no notification has been
received by the Company or any Subsidiary that such an audit, investigation or
other proceeding is pending or threatened. No issue has been raised by a Tax
authority in any audit of the Company or any Subsidiary
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that if raised with respect to any other period not so audited could be expected
to result in a proposed deficiency for any period not so audited. No claim has
ever been made by an authority in a jurisdiction where any of the Company and
its Subsidiaries does not file Tax Returns that it is or may be subject to
taxation in that jurisdiction.
(e) No deficiency or adjustment for any Taxes has been threatened,
proposed, assessed or asserted against the Company or any Subsidiary. Except as
set forth in Schedule 4.17, there are no encumbrances for Taxes upon the assets
or properties of the Company or any Subsidiary except for statutory encumbrances
for Taxes not yet due for which adequate reserves have been established in
accordance with generally accepted accounting principles.
(f) Neither the Company nor any Subsidiary is a party to, or is bound by,
any Tax sharing, Tax indemnity, cost sharing, or similar agreement, policy or
practice relating to Taxes. Except as set forth in Schedule 4.17, no closing
agreement pursuant to section 7121 of the Code (or any predecessor provision) or
any similar provision of any state, local or foreign law has been entered into
by or on behalf of the Company or any Subsidiary.
(g) The Company has made available to Parent true and complete copies of
all federal, state, local and foreign income Tax Returns, and state and local
property and sales Tax Returns and any other Tax Returns filed by the Company or
any Subsidiary for any of the taxable periods that remains open, as of the date
hereof, for examination or assessment of Tax.
(h) Except as disclosed on Schedule 4.17, neither the Company nor any
Subsidiary: (i) has been a member of an affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which is the
Company) or (ii) has any liability for the Taxes of any person (other than the
Company and its Subsidiaries) under Section 1.1502-6 of the Treasury Regulations
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
(i) Neither the Company nor any of its Subsidiaries has filed a consent
under Section 341(f) of the Code.
(j) The net operating loss carryforwards ("NOLs") of the Company and its
Subsidiaries as of June 30, 1999 equal the amount of the NOLs set forth in Notes
to Consolidated Financial Statements contained in the Company 1999 10-K and,
except for limitations that may apply by reason of the Merger or related
transactions contemplated by this Agreement, such NOLs are not subject to
limitation under Section 382 of the Code, Section 1.1502-15 or -21 of the
Treasury Regulations or otherwise.
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(k) For purposes of this Agreement, "Taxes" shall mean all taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, goods and
services, capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, severance, stamp, occupation, real and
personal property, social security, estimated, recording, gift, value assessed,
windfall profits or other taxes, customs duties, fees, assessments or charges of
any kind whatsoever, whether computed on a separate, consolidated, unitary,
combined or other basis, together with any interest, fines, penalties, additions
to tax or other additional amounts imposed by any taxing authority (domestic or
foreign). For purposes of this Agreement, "Tax Return" shall mean any return,
declaration, report, estimate, information or other document (including any
documents, statements or schedules attached thereto) required to be filed with
any federal, state, local or foreign tax authority with respect to Taxes.
SECTION 4.18. Offer Documents; Proxy Statement. The Schedule 14D-9, when
filed with the SEC and first published, sent or given to stockholders of the
Company, will comply in all material respects with the Exchange Act and the
rules and regulations thereunder. Neither the Schedule 14D-9 nor any of the
information provided by or on behalf of the Company specifically for inclusion
in the Schedule TO or the Offer Documents will, at the respective times the
Schedule 14D-9, the Schedule TO and the Offer Documents or any amendments or
supplements thereto are filed with the SEC or first published, sent or given to
stockholders of the Company, 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 made therein, in light of the circumstances under
which they were made, not misleading. No representation is made by the Company
with respect to written information supplied by Parent or Purchaser specifically
for inclusion in the Schedule 14D-9. Any proxy statement to be sent to the
stockholders of the Company in connection with a meeting of the Company's
stockholders to consider the Merger (the "Company Stockholders' Meeting") or the
information statement to be sent to such stockholders, as appropriate (such
proxy statement or information statement, as amended or supplemented, is herein
referred to as the "Proxy Statement"), will comply in all material respects with
the applicable requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is being made by the
Company with respect to Parent Information. The Proxy Statement will not, at the
time the Proxy Statement (or any amendment or supplement thereto) is filed with
the SEC or first sent to stockholders, at the time of the Company Stockholders
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
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SECTION 4.19. Brokers. No broker, finder or investment banker (other than
the Company Financial Advisor) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of the Company. The
Company has heretofore furnished to Parent true and complete copies of all
agreements and other arrangements between the Company and the Company Financial
Advisor.
SECTION 4.20. Takeover Statutes. The Board of Directors has approved the
Offer, the Merger and this Agreement, and such approval is sufficient to render
inapplicable to the Offer, the Merger, this Agreement the limitations on
business combinations contained in any restrictive provision of any "fair
price," "moratorium," "control share acquisition," "interested stockholder" or
other similar anti-takeover statute or regulation (including, without
limitation, Section 203 of the DGCL) or restrictive provision of any applicable
anti-takeover provision in the Company's Certificate of Incorporation (including
Article 9 thereof) or By-Laws. No other state takeover statute or similar
statute or regulation or other comparable takeover provision of the Company's
Certificate of Incorporation or By-Laws applies to the Offer, the Merger, this
Agreement or any of the transactions contemplated by this Agreement.
SECTION 4.21. Rights Plan. All rights ("Rights") to acquire Company Common
Stock, other securities or other consideration in lieu thereof issued under the
Amended and Restated Rights Agreement dated December 13, 1999 between the
Company and The American Stock Transfer & Trust Company (the "Rights Agreement")
expired immediately prior to the execution and delivery of this Agreement and
the Stockholders Agreements, and no holder of Rights has any right thereunder to
acquire shares of Company Common Stock or any other securities or any other
consideration in lieu thereof.
Article V.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1. Conduct of Business by the Company Pending the Closing. From
the date of this Agreement to the Effective Time, except as expressly
contemplated by this Agreement (including as specified on the Schedules hereto),
the Company shall, and shall cause each of the Subsidiaries, to (i) (other than
inactive Subsidiaries) carry on its respective businesses in the ordinary course
consistent with past practice, (ii) use reasonable efforts to preserve intact
its current business organizations and keep available the services of its
current officers and employees, (iii) use all reasonable efforts to preserve its
relationships with principal customers, suppliers and other Persons with which
it has business dealings, (iv) comply in all material respects with all laws and
regulations
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applicable to it or any of its properties, assets or business and (v) maintain
in full force and effect all the Company Permits necessary for such business. By
way of amplification and not limitation of the foregoing, the Company shall not,
and it shall cause the Subsidiaries not to, between the date of this Agreement
and the Effective Time, except as permitted by this Agreement (including as
specified on the Schedules hereto), directly or indirectly, do, or commit to do,
any of the following without the prior written consent of Parent:
(a) Amend or otherwise change its certificate of incorporation or bylaws or
the equivalent organizational documents;
(b) Issue, grant, deliver, sell, pledge, dispose of or encumber any shares
of capital stock of any class, any Company Voting Debt or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
capital stock, or any Company Voting Debt or any other ownership interest
(including but not limited to stock appreciation rights, phantom stock or
stock-based performance units) of the Company or any Subsidiary (except for the
issuance of shares of Company Common Stock required to be issued pursuant to the
terms of the Warrants or Options outstanding as of the date hereof;
(c) Declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock (other than dividends or distributions by any wholly owned
Subsidiary of the Company to its parent);
(d) Reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any shares of capital stock of the Company or
any Subsidiary or any securities convertible into or exercisable for any such
shares of its capital stock or securities, other than pursuant to Options and
Stock Plans in accordance with their terms as in effect on the date hereof;
(e) (i) Acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof, or any assets that are material, individually or in the aggregate, to
the Company and the Subsidiaries, taken as a whole; (ii) incur any indebtedness
for borrowed money (including by issuance of debt securities) other than
borrowings in the ordinary course of business under the Company's existing
credit facility or issue any debt securities or warrants or other rights to
acquire any debt securities of the Company or any Subsidiary, or assume,
guarantee or endorse (other than for collection or deposit in the ordinary
course of business), or otherwise as an accommodation become responsible for,
the obligations of any person, or make any loans or advances or make any capital
contributions to, or investments in, any other Person; (iii) enter into any
material
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contract or agreement other than in the ordinary course of business; or (iv) (A)
authorize or make capital expenditures in excess of $1,600,000 in the aggregate
for the license of or in connection with Lawson Associates, Inc. enterprise
management software, (B) for the period commencing on the date hereof and ending
on March 31, 2000, authorize or make capital expenditures (other than as set
forth in clause (A) above) in excess of $75,000 individually or $500,000 in the
aggregate and (C) for the period commencing on April 1, 2000 and ending on June
30, 2000, authorize or make capital expenditures (other than as set forth in
clause (A) above) in excess of $75,000 individually or, when taken together with
all capital expenditures authorized or made pursuant to subclause (B) above,
$1,200,000 in the aggregate.
(f) (i) Increase the compensation or fringe benefits of any of its
directors, officers or employees, except as required by contractual obligations
existing as of the date hereof and except for increases in salary or wages in
connection with a promotion or change in position granted in the ordinary course
to employees of the Company or a Subsidiary who are not one of the Key
Management Personnel, in the ordinary course of business in accordance with past
practice, (ii) grant any increase in severance or termination pay not currently
required to be paid under existing severance plans or contracts to any director,
officer or other employee of the Company or any Subsidiary, including without
limitation any increase as a result of promotion, (iii) enter into any
employment, consulting or severance agreement or arrangement, including any
arrangement to provide post-retirement medical or life insurance benefits, with
any present or former director, officer or other employee of the Company or any
Subsidiary or (iv) except as set forth on Schedule 5.2(f) hereto and except as
is required by law, establish, adopt, enter into or amend or terminate, or take
any action to accelerate any rights or benefits under, or make any material
determination not in the ordinary course of business consistent with past
practice under, any collective bargaining agreement, Company Employee Benefit
Plan or employee benefit arrangement that would have been Company Employee
Benefit Plans if they were in effect as of the date hereof, including, but not
limited to, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(g) Except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting methods,
practices or principles used by it;
(h) Except as may be required to comply with a change in law, make any
material tax election, make or change any method of accounting with respect to
Taxes, file any amended Tax Returns that may have a material adverse effect on
the tax position of the Company or any Subsidiary or settle or compromise any
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material federal, state, local or foreign Tax liability or refund;
(i) Except for the settlement of any suit, action or claim disclosed on
Schedule 5.1(i) hereto, settle or compromise any pending suit, action, audit or
claim (A) against the Company or any Subsidiary by any Governmental Entity,
including, but not limited to, DCAA, or (B) which is material to the Company and
the Subsidiaries, taken as a whole, or which relates to the transactions
contemplated hereby;
(j) Adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any Subsidiary (other than the Merger);
(k) (i) Pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction (A) in the ordinary course of business
and consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in the most recent consolidated
financial statements of the Company included in the SEC Reports filed prior to
the date of this Agreement or (B) of liabilities incurred in the ordinary course
of business and consistent with past practice, (ii) cancel any material
indebtedness (individually or in the aggregate) or waive any claims (except in
connection with the settlement of any suit, action or claim disclosed on
Schedule 5.1(i) hereto) or rights of substantial value or (iii) waive the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company or any Subsidiary is a party;
(l) Sell, lease (as lessor), license or otherwise dispose of or subject to
any lien or encumbrance any properties or assets, except sales of excess or
obsolete assets or real property in the ordinary course consistent with past
practice;
(m) (i) Except for teaming agreements entered into in the ordinary course
of business, enter into any "non-compete" or similar agreement or (ii) knowingly
execute any new Information Technology (IT) design or study contract, excluding
acceptance of individual Task Orders or Delivery Orders under existing
contracts, that creates an actual organizational conflict of interest (under
Federal Acquisition Regulation Subpart 9.5) with an existing unclassified
contract of Parent; provided, however, that in order to protect the U.S.
Government interest against the creation of an actual conflict of interest in
the execution of new contracts, designated representatives of the Company and
Parent will meet or communicate weekly or as otherwise required, and to the
extent permitted by applicable laws and regulation, to take reasonable actions
to avoid such conflicts; or
(n) Take, or propose to take, or agree to take in
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writing or otherwise, any of the actions described in Sections 5.1(a) through
5.1(m) or any action which would result in any of the conditions set forth in
Annex I not being satisfied.
SECTION 5.2. No Solicitation.
(a) Except as set forth in this Section 5.2, neither the Company nor any of
its affiliates controlled by it shall (and each shall use its best efforts to
cause its respective officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants
(collectively, "Agents"), not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any Person (other than Parent, any of its affiliates or Agents)
concerning any proposal or offer (in each case, whether or not in writing and
whether or not delivered to the stockholders of the Company generally) to
acquire in any manner, directly or indirectly, all or a substantial part of the
assets or business and properties of the Company or any of its Subsidiaries or
any capital stock of or other equity interest in the Company or any of its
Subsidiaries, whether by merger, tender offer, exchange offer, sale of assets or
similar transactions involving the Company or any Subsidiary, division or
operating or principal business unit of the Company, other than pursuant to the
transactions contemplated by this Agreement (collectively, an "Acquisition
Proposal"). Except as provided in this Section 5.2, the Company shall not have
any activities, discussions or negotiations with any Person with respect to any
of the foregoing. A "Superior Proposal" is an Acquisition Proposal that involves
payment of consideration to the Company's stockholders that is financially
superior to that payable in the Offer and the Merger. The Company, its
affiliates and their respective Agents shall immediately cease any existing
discussions or negotiations, if any, with any Persons conducted heretofore with
respect to any Acquisition Proposal.
(b) Prior to the Share Purchase Date, the Company may furnish information
concerning its business, properties or assets to any Person in response to a
request for such information made after the date of this Agreement which was not
encouraged, solicited or initiated, directly or indirectly, by the Company or
any of its affiliates or their respective Agents after the date of this
Agreement, and may participate in discussions and negotiations with such Person
concerning an Acquisition Proposal, in each case if and only to the extent that
(x) such Person has submitted a written Acquisition Proposal to the Board of
Directors relating to such transaction, (y) the Board of Directors determines in
good faith (i) after consulting with its independent financial advisors, (A)
that such Person is reasonably capable of consummating such Acquisition
Proposal, taking into account the legal, financial, regulatory and other aspects
of such Acquisition Proposal and the Person making such Acquisition Proposal and
(B) such Acquisition Proposal is reasonably likely to be a Superior Proposal and
(ii) after
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receipt of advice from outside legal counsel to the Company, that failure to
take such action would be inconsistent with its fiduciary duties under
applicable law, and (z) such Person has signed a confidentiality agreement
substantially identical to the Confidentiality Agreement. The Company will
promptly provide to Parent any written material information regarding the
Company provided to such Person which was not previously provided or otherwise
made available to Parent.
(c) The Company will promptly following receipt of an Acquisition Proposal
(and in any event not later than 24 hours after receipt thereof) notify Parent
of the receipt of the Acquisition Proposal and shall in such notice indicate in
reasonable detail the identity of the offeror and the material terms and
conditions of any proposal and shall keep Parent promptly advised of the status
and material terms of any such inquiry, offer or proposal.
(d) The Board of Directors may withdraw or modify its approval or
recommendation of the Offer and/or the Merger, provided (i) the Board of
Directors determines in good faith, after receipt of advice from outside legal
counsel to the Company, that the failure to do so would be inconsistent with its
fiduciary duties to the Company's stockholders under applicable law, and (ii)
the Company notifies Parent of any such withdrawal or modification prior to its
release to the public.
(e) Nothing contained in this Section 5.2 or any other provision hereof
shall prohibit the Company or the Board of Directors from (i) taking and
disclosing to the Company's stockholders a position with respect to a tender or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act, or (ii) making such disclosure to the Company's
stockholders as, in the good faith judgment of the Board of Directors, after
receiving advice from outside counsel, is required under applicable law,
provided that the Board of Directors may not, except as permitted by Section
5.2(d), withdraw or modify its approval or recommendation of the Offer or the
Merger.
(f) Nothing contained in this Section 5.2 shall prohibit Purchaser from
purchasing Shares pursuant to the Offer or consummating the Merger.
Article VI.
ADDITIONAL AGREEMENTS
SECTION 6.1. Proxy Statement. As promptly as practicable after the
consummation of the Offer and if required by the Exchange Act, the Company shall
prepare and file with the SEC, and shall use all reasonable efforts to have
cleared by the SEC, and promptly thereafter shall mail to stockholders, the
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Proxy Statement. The Proxy Statement shall contain the recommendation of the
Board of Directors that the Company's stockholders approve this Agreement and
the Merger.
SECTION 6.2. Meeting of Stockholders of the Company. Following the
consummation of the Offer, the Company shall promptly take all action necessary
in accordance with the DGCL and its Certificate of Incorporation and By-Laws to
convene the Company Stockholders' Meeting, if such meeting is required. The
stockholder vote required for approval of the Merger will be no greater than
that set forth in the DGCL. The Company shall use its reasonable efforts to
solicit from stockholders of the Company proxies in favor of the Merger and
shall take all other action necessary or, in the reasonable opinion of Parent,
advisable to secure any vote of stockholders required by the DGCL to effect the
Merger. Notwithstanding the foregoing, if Purchaser or any other subsidiary of
Parent shall acquire at least 90 percent of the outstanding Shares, and provided
that the conditions set forth in Article VII shall have been satisfied or
waived, the Company shall, at the request of Parent, take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without the approval of the stockholders of
the Company, in accordance with Section 253 of the DGCL.
SECTION 6.3. Compliance with Law. Each of the Company, Parent and Purchaser
will comply in all material respects with all applicable laws and with all
applicable rules and regulations of any Governmental Entity in connection with
its execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
SECTION 6.4. Notification of Certain Matters. The Company shall give prompt
notice to Parent (A) of the occurrence, or non-occurrence of any event whose
occurrence, or non-occurrence would be likely to cause (i) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any respect
at any time from the date hereof to the Effective Time, (ii) any condition set
forth in Annex I to be unsatisfied in any material respect at any time from the
date hereof to the date Parent purchases Shares pursuant to the Offer or (iii)
any covenant, condition or agreement contained in this Agreement not to be
complied with or satisfied in all material respects; and (B) any failure by the
Company to comply with in all material respects any of its covenants or
agreements hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.4 shall not limit or otherwise affect the remedies
available to Parent hereunder. The Company shall give prompt notice to Parent of
any notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Agreement.
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SECTION 6.5. Access to Information. Except as may be prohibited by
applicable law, from the date hereof to the Effective Time, the Company shall,
and shall cause its Subsidiaries, officers, directors, employees, auditors and
agents to, afford the Agents of Parent and Purchaser reasonable access at all
reasonable times to their respective Agents, properties, offices and other
facilities and to all books, records and contracts, and shall promptly furnish
Parent and Purchaser with (a) all financial, operating and other data and
information as Parent or Purchaser, through its Agents, may reasonably request
and (b) a copy of each report, schedule and other document filed or received by
the Company or any of the Subsidiaries during such period pursuant to the
requirements of applicable securities or federal Tax laws.
SECTION 6.6. Public Announcements. So long as this Agreement is in effect,
Parent and the Company shall consult with each other before issuing, and provide
each other a reasonable opportunity to review and comment upon, any press
release or other public statements with respect to the Offer or the Merger and
shall not issue, or permit their affiliates to issue, any such press release or
make any such public statement prior to such consultation, except as may be
required by law or in accordance with any listing agreement with any securities
exchange on which such party's securities are listed.
SECTION 6.7. Reasonable Best Efforts; Cooperation. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to obtain in a timely manner all necessary waivers,
consents and approvals and to effect all necessary registrations and filings,
and to use all reasonable best efforts to take, or cause to be taken, all other
actions and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including, without limitation, (i)
cooperating in responding to inquiries from, and making presentations to,
regulatory authorities and customers, (ii) defending against and responding to
any action, suit, proceeding, or investigation, whether judicial or
administrative, challenging or relating to this Agreement or the transactions
contemplated hereby, including seeking to have any stay or temporary restraining
order entered, by any court or other Governmental Entity vacated or reversed
(iii) cooperating in the preparation and filing of the Offer Documents, the
Schedule 14D-9 and the Proxy Statement and (iv) promptly making all regulatory
filings and applications, including without limitation any required filings
under the HSR Act, and any amendments thereto as are necessary for the
consummation of the transactions contemplated by this Agreement. Notwithstanding
anything herein to the contrary, in connection with any filing or submission or
other action required to be made or taken by any party to effect the Merger and
all other transactions contemplated hereby, the Company shall not, without the
prior written consent of Parent, commit to any divestiture
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transaction, and Parent shall not be required to divest or hold separate or
otherwise take or commence to take any action that, in the reasonable discretion
of Parent, limits its freedom of action with respect to, or its ability to
retain, the Company or any of the Company's affiliates or any material portion
of the Company's assets or businesses.
SECTION 6.8. Agreement to Defend and Indemnify.
(a) It is understood and agreed that, subject to the limitations on
indemnification contained in the DGCL, the Company shall, to the fullest extent
permitted under applicable law and regardless of whether the Merger becomes
effective, indemnify and hold harmless, and after the Effective Time, the
Surviving Corporation shall for a period of six years following the Effective
Time, to the fullest extent permitted under applicable law, and Parent shall,
for such six-year period, but only to the extent the Company or the Surviving
Corporation would be required or permitted under applicable law, indemnify and
hold harmless, each director and officer of the Company (collectively, the
"Indemnified Parties") from and against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation arising out of or pertaining to matters
relating to their duties or actions in their capacity as officers and directors
in connection with any of the transactions contemplated hereby and existing at
the Effective Time, including without limitation liabilities arising under the
Securities Act or the Exchange Act in connection with the Offer or the Merger,
and in the event of any such claim, action, suit, proceeding or investigation
(whether arising prior to or after the Effective Time), (i) the Company or the
Surviving Corporation shall advance the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company or the Surviving Corporation, promptly as statements
therefor are received (provided the person to whom such expenses are advanced
provides a customary undertaking complying with applicable law to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification), and (ii) the Company, Parent (but only after the consummation
of the Offer) and the Surviving Corporation will cooperate in the defense of any
such matter; provided, however, that none of the Company, Parent nor the
Surviving Corporation shall be liable for any settlement effected without its
prior written consent; and provided further that none of the Company, Parent nor
the Surviving Corporation shall be obliged pursuant to this Section 6.8 to pay
the fees and disbursements of more than one counsel for all Indemnified Parties
in any single action except to the extent that, in the opinion of counsel for
the Indemnified Parties, two or more of such Indemnified Parties have
conflicting interests in the outcome of such action. For six years after the
Effective Time, Parent shall cause to be maintained or obtained officers' and
directors' liability
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insurance covering the Indemnified Parties who are currently covered by the
Company's officers and directors liability insurance policy with respect to
matters or events occurring prior to the Effective Time on terms not less
favorable than those in effect on the date hereof in terms of coverage and
amounts to the extent available; provided, however, that if the aggregate annual
premiums for such insurance at any time during such period exceed 150% of the
per annum rate of premium paid by the Company for such insurance as of the date
of this Agreement (which amounts under current policies are set forth on
Schedule 6.8), then Parent shall be required to provide the maximum coverage
that will then be available at an annual premium equal to 150% of such per annum
rate as of the date of this Agreement. The Surviving Corporation shall continue
in effect, without amendment, repeal or modification in any manner that would
adversely affect the rights of the persons entitled to the protections and
privileges thereof, the indemnification provisions provided on the date hereof
by the Company By-Laws for a period of not less than six years following the
Effective Time. This Section 6.8 shall survive the consummation of the Merger or
any termination of this Agreement pursuant to Section 8.1 hereof.
Notwithstanding anything in this Section 6.8 to the contrary, neither the
Company nor the Surviving Corporation shall have any obligation under this
Section 6.8 to indemnify any Indemnified Party against any cost, expense,
judgment, fine, loss, claim, damage, liability or settlement amount found to
have resulted solely from such Indemnified Person's own gross negligence or
willful misconduct. Notwithstanding Section 9.8 hereof, this Section 6.8 is
intended to be for the benefit of and to grant third-party rights to Indemnified
Parties whether or not parties to this Agreement, and each of the Indemnified
Parties shall be entitled to enforce the covenants contained in this Section
6.8.
(b) If the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
Person, then and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation assume the obligations set
forth in this Section 6.8.
SECTION 6.9. Takeover Statutes. If any state takeover statute or other
similar statute or regulation becomes or is deemed to become applicable to the
Offer, the Merger, this Agreement or any of the transactions contemplated
hereby, the Company shall promptly take all action necessary to render such
statute or regulation inapplicable to all of the foregoing.
SECTION 6.10. Employment Matters. The Company will, and will cause its
Subsidiaries to, and from and after the Effective Time the Surviving Corporation
will, honor, in accordance with their terms all existing employment and
severance agreements between the Company or any of its Subsidiaries and any
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officer, director or employee of the Company or any of its Subsidiaries
specified in Schedule 6.10 hereto, including the obligation of the Company to
make any payment to any officer, director or employee on a date that is prior to
the Effective Time pursuant to the terms of any such employment agreement or
severance agreement. Notwithstanding anything contained herein to the contrary,
no such payments shall be made pursuant to the terms of the agreements with the
employees listed on Schedule 4.8(l) hereto without the prior consent of Parent,
which consent shall not be unreasonably withheld.
SECTION 6.11. Company Employee Benefit Plans. (a) For the period commencing
at the consummation of the Offer until the first anniversary thereof, the
Company or the Surviving Corporation, as applicable, shall provide medical,
dental, vision care, life and disability insurance, severance, vacation and
"section 125" benefits for the employees of the Company and any Subsidiary as of
the consummation of the Offer (the "Employees") and their eligible dependents
that are substantially similar in the aggregate to those provided as of the date
of this Agreement under the Company Employee Benefit Plans listed on Schedule
6.11 hereto. Subject to the eligibility requirements thereof, as soon as
reasonably practicable following the Effective Time the Employees will become
eligible to participate in the Parent Employee Stock Purchase Plan and an
Employee's service with the Company and any Subsidiary prior to the Effective
Time will be recognized for purposes of determining eligibility to participate
in such plan.
(b) For the period commencing at the consummation of the Offer until the
first anniversary thereof, the Company or the Surviving Corporation, as
applicable, shall provide benefits to the Employees under a defined contribution
plan with a cash-or-deferred arrangement providing benefits to the Employees,
including Company contributions, which are comparable to the benefits provided
to the Employees under the GRC International, Inc. Employees' Deferred Income
Plan as of the date of this Agreement (the "401(k) Plan"); provided that nothing
herein shall require the Company or the Surviving Corporation to provide or
permit investment in the securities of Parent or to continue to make available
the specific investment options currently available under the 401(k) Plan,
including without limitation any investment in Company Common Stock.
(c) In the event the Company or any Subsidiary becomes a participating
company in the employee benefit plans of Parent, or an Employee otherwise
becomes employed by a company that participates in the employee benefit plans of
Parent (a "Participating Company"), Parent shall recognize, or shall cause the
Participating Company to recognize, each Employee's service with or recognized
by the Company and any Subsidiary as follows:
(i) service prior to the Effective Time shall be recognized for
purposes of determining eligibility to
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participate in the defined contribution plan and health and welfare plans
then made available to the Employees generally, and for eligibility to
receive matching contributions and vesting in matching contributions under
any such defined contribution plan, but not for purposes of determining
levels or amounts of benefits under any of Parent's disability or severance
plans, or for vesting or benefit accruals under any of Parent's defined
benefit plans, or for eligibility for post-employment medical, dental, life
insurance or toll discount plans or programs;
(ii) service after the Effective Time but prior to the date on which
an Employee becomes employed by a Participating Company shall be recognized
for purposes of determining levels or amounts of benefits under Parent's
disability or severance plans in which such employee is then eligible to
participate, and for vesting under Parent's defined benefit pension plan in
which such employee is then eligible to participate, but not for purposes
of benefit accruals under any defined benefit pension plan and not for
eligibility for post-employment medical, dental, life insurance or toll
discount plans or programs; and
(iii) service after the date on which an Employee becomes employed by
a Participating Company shall be recognized for all purposes under the
employee benefit plans of Parent in which such employee is then eligible to
participate.
(d) Nothing contained in this Agreement shall be interpreted as (i)
preventing the Company, Parent or the Surviving Corporation from amending,
modifying or terminating any Company Employee Benefit Plan or other related
contract, arrangement, commitment or understanding in accordance with their
terms and applicable law or (ii) interfering with the Company's or the Surviving
Corporation's right or obligation to make such changes as are necessary to
comply with applicable law.
(e) From and after the date hereof, all communications relating to the
Company Employee Benefit Plans, including, without limitation, the Stock Plans,
shall be subject to Parent's comment and approval prior to distribution, which
shall not be unreasonably withheld or delayed, and the Company shall cooperate
with and assist Parent in providing necessary or desirable communications to the
employees and directors of the Company regarding the transactions contemplated
hereby.
ARTICLE VII.
CONDITIONS OF MERGER
The respective obligations of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Effective Time of the following
conditions:
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(a) Purchaser shall have made, or caused to be made, the Offer and shall
have purchased, or caused to be purchased, Shares pursuant to the Offer;
(b) The Merger and this Agreement shall have been approved and adopted by
the requisite vote of the stockholders of the Company, if required by the DGCL;
and
(c) No statute, rule, regulation, judgment, writ, decree, order or
injunction shall have been promulgated, enacted, entered or enforced, and no
other action shall have been taken, by any Governmental Entity that in any of
the foregoing cases has the effect of making illegal or directly or indirectly
restraining, prohibiting or restricting the consummation of the Merger.
Article VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether prior to or
after approval of matters presented in connection with the Merger by the
stockholders of the Company:
(a) Subject to Section 1.3, by the mutual written consent of Parent and the
Company; or
(b) By either of Parent or the Company if any Governmental Entity of
competent jurisdiction shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling or other action each party hereto
shall use its reasonable best efforts to have vacated or reversed in accordance
with Section 6.7), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and non-appealable.
(c) By the Company:
(i) if any Person shall have made a bona fide written offer to acquire
the Company which was not encouraged, solicited or initiated, directly or
indirectly, by the Company or any of its affiliates or their respective
Agents after the date hereof (A) that the Board of Directors determines in
its good faith judgment is a Superior Proposal and (B) as a result of which
the Board of Directors determines in good faith, after receiving advice
from outside counsel to the Company, that failure to take such action would
be inconsistent with its fiduciary duties under applicable law; provided,
however, that not less than five business days prior to such termination,
the Company shall notify Parent of its intention to terminate this
Agreement
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pursuant to this Section 8.1(c)(i) and shall cause its respective financial
and legal advisers to negotiate during such five-business-day period with
Parent in an effort to make such adjustments in the terms and conditions of
this Agreement as would enable the Company to proceed with the transactions
contemplated herein on such adjusted terms (during which period Purchaser
shall not accept for payment or purchase Shares pursuant to the Offer), and
notwithstanding such negotiations and adjustments, the Board of Directors
reasonably concludes, in its good faith judgment, that the transactions
contemplated herein on such terms as adjusted, are not at least as
favorable to the stockholders of the Company as such offer and provided
that the Company shall have complied with the notice provisions of Section
5.2(b); and provided, further, that such termination under this clause (i)
shall not be effective until the Company has made payment of the full
Termination Fee required by Section 8.2(b); or
(ii) if as the result of the failure to be satisfied of any of the
conditions set forth in Annex I, Parent or Purchaser shall have terminated
the Offer or the Offer shall have expired without Purchaser having
purchased any Shares pursuant thereto; provided, however, that the Company
may not terminate this Agreement pursuant to this Section 8.1(c)(ii) if the
failure of any such condition to be satisfied at the time of such
termination results from (A) the Company's failure to perform any of its
obligations under this Agreement or (B) facts or circumstances that
constitute a breach of any representation or warranty of the Company under
this Agreement; or
(iii) if Parent, Purchaser or any of their affiliates shall have
failed to commence the Offer in accordance with the first sentence of
Section 1.1(a); provided, however, that the Company may not terminate this
Agreement pursuant to this Section 8.1(c)(iii) if such failure to have
commenced the Offer shall have been caused by (A) the Company's failure to
perform any of its obligations under this Agreement or (B) facts or
circumstances that constitute a breach of any representation or warranty of
the Company under this Agreement; or
(iv) if Parent or Purchaser shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement which breach or failure to perform
is incapable of being cured or has not been cured by the date that is 15
business days following written notice thereof to Parent from the Company.
(d) By Parent or Purchaser:
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(i) if prior to the purchase of any Shares pursuant to the Offer, the
Board of Directors or any committee thereof shall have withdrawn, or
modified or changed, or publicly proposed to withdraw, modify or change, in
a manner adverse to Parent or Purchaser (including by amendment of the
Schedule 14D-9) its approval or recommendation of the Offer, this Agreement
or the Merger or shall have approved or recommended or publicly proposed to
approve or recommend an Acquisition Proposal, or if the Board of Directors
or any committee thereof fails to reaffirm publicly and unconditionally its
recommendation to the Company's stockholders that they tender their Shares
in the Offer, which public reaffirmation must be made within ten days after
Parent's written request to do so (which request may be made at any time
that an Acquisition Proposal is pending and not withdrawn) and must also
include the unconditional rejection of such Acquisition Proposal (to the
extent not previously withdrawn); or
(ii) if Parent or Purchaser shall have withdrawn or terminated the
Offer or the Offer shall have expired in accordance with its terms and the
terms of this Agreement without Parent or Purchaser having purchased any
Shares thereunder; provided that Parent or Purchaser may not terminate this
Agreement pursuant to this Section 8.1(d)(ii) if Parent or Purchaser is in
material breach of its obligations under this Agreement; or
(iii) any Person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser, or their affiliates or any
group of which any of them is a member, shall have acquired beneficial
ownership (as determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of the Shares; provided that for purposes of
this Section 8.1(d)(iii), none of Cilluffo Associates, L.P., Gerald
McNichols or their respective affiliates or any group of which any of them
is a member shall be deemed to have acquired 25% or more of the Shares
solely by virtue of the execution, delivery or performance of the
Stockholders Agreements; or
(iv) if the Company shall have breached any of its representations or warranties
which breach would give rise to the failure of the condition set forth in
clause (d) of Annex I hereto to be satisfied or if, prior to consummation
of the Offer, the Company shall have failed to perform its covenants or
other agreements contained in this Agreement which failure to perform would
give rise to the failure of the condition set forth in clause (e) of Annex
I hereto to be satisfied, which breach or failure to perform is incapable
of being cured or has not been cured by the date that is 15 business days
following written notice thereof to the Company from Parent.
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SECTION 8.2. Effect of Termination.
(a) In the event of termination of this Agreement by either the Company or
Parent or Purchaser as provided in Section 8.1, (A) this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Parent, Purchaser or the Company, other than as provided in Section
9.1 and except that nothing herein shall relieve any party for breach of any of
its representations, warranties, covenants or agreements set forth in this
Agreement and (B) unless this Agreement has been terminated pursuant to Section
8.1(c)(ii) or Section 8.1(d)(ii), Purchaser shall terminate the Offer without
the purchase of Shares thereunder.
(b) If (A) Parent or Purchaser terminates this Agreement under Section
8.1(d)(i), or the Company terminates this Agreement pursuant to Section
8.1(c)(i) or (B) the Company terminates this Agreement pursuant to Section
8.1(c)(ii) or Parent or Purchaser terminates this Agreement pursuant to Section
8.1(d)(ii) or 8.1(d)(iii) and in the case of a termination under Section
8.1(c)(ii), 8.1(d)(ii) or 8.1(d)(iii) (x) at any time after the date of this
Agreement and prior to such termination an Acquisition Proposal shall have been
publicly announced or otherwise publicly communicated to the stockholders of the
Company generally and (y) prior to the first anniversary of such termination,
the Company shall enter into a definitive agreement with respect to an
Acquisition Proposal or an Acquisition Proposal is consummated, then the Company
shall pay to Parent, or cause to be paid, (1) in the case of a termination of
this Agreement by Parent or Purchaser pursuant to Section 8.1(d)(i), not later
than one business day following such termination, (2) in the case of a
termination of this Agreement by the Company pursuant to Section 8.1(c)(i),
prior to such termination, or (3) in the case of a termination of this Agreement
by the Company pursuant to Section 8.1(c)(ii) or by Parent or Purchaser pursuant
to Section 8.1(d)(ii) or 8.1(d)(iii), not later than one business day following
the entering into of a definitive agreement with respect to, or the consummation
of, an Acquisition Proposal prior to the first anniversary of such termination,
as applicable, a termination fee, in cash, by wire transfer of immediately
available funds to an account designated by Parent, in an amount equal to the
sum of (x) $6 million plus (y) out-of-pocket expenses incurred by Parent or
Purchaser exclusively in connection with the transactions contemplated by this
Agreement not to exceed $500,000 in the aggregate (such sum is referred to
herein as the "Termination Fee").
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1. Non-Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall terminate
at the Effective
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Time or upon the termination of this Agreement pursuant to Section 8.1, as the
case may be, except that the agreements set forth in Article II, Section 6.8,
Section 6.10 and Article IX shall survive the Effective Time indefinitely and
those set forth in Section 8.2 and Article IX shall survive termination
indefinitely.
SECTION 9.2. Notices. All notices and other communications given or made
pursuant hereto shall be in writing (and shall be deemed to have been duly given
or made when received) by delivery in person, by facsimile, cable, telecopy,
telegram or telex or by registered or certified mail (postage prepaid, return
receipt requested)), in each case to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Purchaser:
AT&T Government Markets
2020 K Street N.W.
Eighth Floor
Washington, DC 20006-1817
Attention: Mary Jane McKeever, President
Facsimile: (202) 776-6004
With a copy to:
Vice President
AT&T Corp.
295 North Maple Avenue Room 1212P2
Basking Ridge, NJ 07920-1002
Attention: Marilyn J. Wasser
Facsimile: (908) 221-6618
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Steven A. Rosenblum, Esq.
Facsimile: (212) 403-2000
(b) if to the Company:
GRC International, Inc.
900 Gallows Road
Vienna, VA 22182
Attention: Gary L. Denman, Chief
Executive Officer
Facsimile: (703) 449-6890
With a copy to:
Willkie Farr & Gallagher
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787 Seventh Avenue
New York, New York 10019
Attention: Michael A. Schwartz, Esq.
Facsimile: (212) 728-8111
SECTION 9.3. Expenses. Except as expressly set forth in Section 8.2(b), all
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs and expenses.
SECTION 9.4. Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person;
(b) "Cause" means (i) conviction (including a plea of guilty or nolo
contendere) of a crime involving theft, fraud, dishonesty or moral turpitude;
(ii) intentional or grossly negligent disclosure of confidential or trade secret
information of the Company or Surviving Corporation, as applicable, or any of
their affiliates, to anyone who is not entitled to receive such information;
(iii)gross omission or gross dereliction of any statutory or common law duty of
loyalty to the Company or Surviving Corporation, as applicable, or any of their
affiliates; (iv) willful and knowing violation of the Company's or Surviving
Corporation's, as applicable, Code of Conduct or other written policies or
procedures; or (v) repeated failure to carry out the duties of the employee's
position despite specific instruction to do so.
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise;
(d) "Key Management Personnel" means those employees of the Company or any
Subsidiary who are identified on Schedule 9.4(d).
(e) "knowledge" of the Company means the actual knowledge, after reasonable
inquiry, of the Company's executive officers, including reasonable inquiry of
the Company's counsel; and
(f) "Person" means an individual, corporation, partnership, association,
trust, any unincorporated organization or group (within the meaning of Section
13(d)(3) of the Exchange Act).
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SECTION 9.5. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.6. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the maximum extent possible.
SECTION 9.7. Schedules. The Schedules to this Agreement shall be construed
with and as an integral part of this Agreement and any matter disclosed on any
particular Schedule shall be deemed to be disclosed on any other Schedule (or in
another part of the same Schedule) if the facts and circumstances relating to
such matter, as disclosed on the particular Schedule, would fairly apprise the
party to which the representation and warranty is being made of facts and
circumstances that such party should fairly anticipate would be applicable to
such other Schedule (or part of such other Schedule).
SECTION 9.8. Entire Agreement; No Third-Party Beneficiaries. This Agreement
and the Non-Disclosure Agreement dated December 21, 1999 between the Company and
Parent (the "Confidentiality Agreement"), constitute the entire agreement and
supersede any and all other prior agreements, undertakings, statements,
information and materials, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as otherwise
expressly provided in Section 6.8 hereof, this Agreement is not intended to
confer upon any other Person any rights or remedies hereunder.
SECTION 9.9. Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that Parent and Purchaser may assign all or any of
their rights hereunder to any affiliate of Parent, provided that no such
assignment shall relieve the assigning party of its obligations hereunder.
SECTION 9.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed entirely within that State.
SECTION 9.11. Amendment. This Agreement may be amended by the parties
hereto by action taken by Parent and Purchaser, and by action taken by the Board
of Directors at any
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time prior to the Effective Time; provided, however, that, after approval of the
Merger by the stockholders of the Company, no amendment may be made which would
not otherwise be permitted pursuant to Section 251(d) of the DGCL. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 9.12. Waiver. Subject to Section 1.3, at any time prior to the
Effective Time, any party hereto may (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto and (c) waive
compliance by the other parties hereto with any of their agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only as against such party and only if
set forth in an instrument in writing signed by such party. The failure of any
party hereto to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
SECTION 9.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
GRC INTERNATIONAL, INC.
By: /s/ Gary Denman
------------------------------
Gary Denman
AT&T CORP.
By: /s/ Mary Jane McKeever
------------------------------
Mary Jane McKeever
Vice President
LMN CORPORATION
By: /s/ Mary Jane McKeever
------------------------------
Mary Jane McKeever
President
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ANNEX I
Conditions to the Offer. Notwithstanding any other provision of the Offer,
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated
under the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for,
and (subject to any such rules or regulations) may delay the acceptance for
payment of any tendered Shares and (except as provided in this Agreement) amend
or terminate the Offer as to any Shares not then paid for if (i) there shall not
have been validly tendered and not withdrawn prior to the expiration of the
Offer such number of shares of Company Common Stock which represents at least a
majority of the number of shares of Company Common Stock (assuming the exercise
of all Options and Warrants and the conversion or exchange of all securities
convertible or exchangeable into shares of Company Common Stock) (the "Minimum
Condition") or (ii) any applicable waiting period under the HSR Act shall not
have expired or been terminated prior to the expiration of the Offer or (iii) at
any time after the date of this Agreement and prior to the time of payment for
any such Shares (whether or not any Shares have theretofore been accepted for
payment or paid for pursuant to the Offer), any of the following events shall
occur and be continuing or conditions exists:
(a) (x) there shall have been any action taken by a Governmental
Entity, or any statute, rule, regulation, legislation, interpretation,
judgment, order or injunction, proposed, sought, promulgated, enacted,
entered, enforced, issued, amended or deemed applicable by a Governmental
Entity to Parent, Purchaser, the Company, any other affiliate of Parent or
the Company, the Offer or the Merger, that would or is reasonably likely,
directly or indirectly, to (i) make the acceptance for payment of, or
payment for or purchase of all or a substantial number of the Shares
pursuant to the Offer illegal, or otherwise restrict or prohibit the making
of the Offer or the consummation of the Offer or the Merger, (ii) result in
a significant delay in or restrict the ability of Purchaser to accept for
payment, pay for or purchase all or a substantial number of the Shares
pursuant to the Offer or to effect the Merger, (iii) render Purchaser
unable to accept for payment or pay for or purchase all or a substantial
number of the Shares pursuant to the Offer, (iv) impose material
limitations on the ability of Parent, Purchaser or any of their respective
Subsidiaries or affiliates to acquire or hold, transfer or dispose of, or
effectively to exercise all rights of ownership of, all or a substantial
number of the Shares including without limitation the right to vote the
Shares purchased by it pursuant to the Offer on an equal basis with all
other Shares on all matters properly presented to the stockholders of the
Company, (v) require the divestiture by Parent, Purchaser or any of their
respective Subsidiaries or
affiliates of any Shares, or require Purchaser, Parent, the Company, or any
of their respective Subsidiaries or affiliates to dispose of or hold
separate all or any material portion of their respective businesses, assets
or properties or impose any material limitations on the ability of any of
such entities to conduct their respective businesses or own such assets,
properties or Shares or on the ability of Parent or Purchaser to conduct
the business of the Company and its Subsidiaries and own the assets and
properties of the Company and its Subsidiaries, (vi) impose any material
limitations on the ability of Parent, Purchaser or any of their respective
Subsidiaries or affiliates effectively to control the business or
operations of the Company, Parent, Purchaser or any of their respective
Subsidiaries or affiliates, or (vii) otherwise materially adversely affect
Parent, Purchaser, the Company or any of their respective Subsidiaries or
affiliates, or their business, assets, liabilities, condition (financial or
otherwise) or results of operations, or the value of the Shares; or
(y) there shall have been instituted or pending any action, proceeding
or counterclaim by any Governmental Entity, challenging the making of the
Offer or the acquisition by Purchaser of the Shares pursuant to the Offer
or the consummation of the Merger, or seeking to, directly or indirectly,
result in any of the consequences referred to in clauses (i) through (vii)
in subclause (x) above; or
(z) or there shall have been threatened any action, proceeding or
counterclaim by any Governmental Entity, challenging the making of the
Offer or the acquisition by Purchaser of the Shares pursuant to the Offer
or the consummation of the Merger, or seeking to, directly or indirectly,
result in any of the consequences referred to in clauses (i) through (vii)
in subclause (x) above that, in the good faith judgment of Parent, has a
reasonable probability of success.
(b) this Agreement shall have been terminated in accordance with its terms
or any event shall have occurred which gives Parent or Purchaser the right to
terminate this Agreement or not consummate the Merger; or
(c) since the date of this Agreement there shall have occurred any event,
change, effect or development that, individually or when considered together
with any other event, change, effect or development, has had or would have a
Material Adverse Effect; or
(d) (i) the representations and warranties of the Company set forth in
Sections 4.2, 4.3, 4.4(a)(ii), 4.20 or 4.21 shall not be true and correct in all
material respects both when made and as of the date of determination, as if made
at and as of
I-2
such time (except to the extent expressly made as of an earlier date, in which
case any of such representations or warranties shall not be true and correct in
all material respects as of such earlier date) or (ii) any of the other
representations and warranties of the Company set forth in this Agreement
(without giving effect to any explicit limitation as to "materiality" or
"Material Adverse Effect" set forth therein) shall not be true and correct both
when made and as of the date of determination, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such earlier date), except where the failure of any such representation or
warranty to be so true and correct does not have, and would not have,
individually or when taken together with all such failures to be so true and
correct, a Material Adverse Effect; or
(e) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or covenant
of the Company to be performed or complied with by it under this Agreement; or
(f) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or in
the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation (whether or not mandatory) by any
Governmental Entity on, or other event that materially and adversely affects,
the extension of credit by banks or other lending institutions or (iv) in the
case of any of the foregoing existing at the time of the execution of this
Agreement, a material acceleration or worsening thereof; or
(g) the Board of Directors or any committee thereof (i) shall have
withdrawn, or modified or changed in a manner adverse to Parent or Purchaser
(including by amendment of the Schedule 14D-9) its approval or recommendation of
this Agreement or the transactions contemplated hereby, including the Offer or
the Merger, (ii) recommended or approved an Acquisition Proposal, (iii) shall
have adopted any resolution to effect any of the foregoing, or (iv) upon request
of Purchaser, shall fail to reaffirm publicly and unconditionally its approval
or recommendation of the Offer, this Agreement or the Merger within ten days
after Parent's written request to do so under the circumstances described in
Section 8.1(d)(i) of this Agreement; or
(h) any Person or "group" (as defined in Section 13(d)(3) of the Exchange
Act), other than Parent, Purchaser, or their affiliates or any group of which
any of them is a member, shall have acquired beneficial ownership (as determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the
Shares; provided that for purposes of this condition, none of Cilluffo
Associates, L.P., Gerald McNichols, or their respective affiliates or any group
of which any of them is a
I-3
member, shall be deemed to have acquired 25% or more of the Shares solely by
virtue of the execution, delivery or performance of the Stockholders Agreements;
which, in the judgment of Parent or Purchaser with respect to each and every
matter referred to above and regardless of the circumstances giving rise to any
such condition, makes it inadvisable to proceed with the Offer or with such
acceptance for payment of or payment for Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances (including any action or
inaction by Parent or Purchaser) giving rise to any such conditions and may be
waived by Purchaser in whole or in part at any time and from time to time, in
their sole discretion subject to the terms of this Agreement. The failure by
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a waiver with respect to
any other facts and circumstances and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Terms used but
not defined herein shall have the meanings assigned to such terms in the
Agreement to which this Annex I is a part.
I-4
INDEX OF DEFINED TERMS
Section
Term Containing Definition
- ---- ---------------------
Acquisition Proposal......................................................5.2(a)
Affiliate.................................................................9.4(a)
Agents....................................................................5.2(a)
Agreement..........................................................1st Paragraph
Bid......................................................................4.14(b)
Board of Directors.................................................5th Paragraph
Cause.....................................................................9.4(b)
Certificates..............................................................2.8(b)
Closing...................................................................2.2(a)
Closing Date..............................................................2.2(a)
Code..............................................................4.8(d). 2.8(f)
Company............................................................1st Paragraph
Company 1999 10-K.........................................................4.5(c)
Company By-laws...........................................................4.1(c)
Company Certificate of Incorporation......................................4.1(c)
Company Common Stock...............................................3rd Paragraph
Company Employee Benefit Plans............................................4.8(a)
Company ERISA Affiliate...................................................4.8(a)
Company Financial Advisor.................................................4.3(c)
Company Intellectual Property............................................4.11(a)
Company Leases..............................................................4.10
Company Material Contracts...............................................4.16(a)
Company Multiemployer Plan................................................4.8(b)
Company Permits.............................................................4.15
Company Preferred Stock...................................................4.2(a)
Company Securities........................................................4.2(a)
Company Stockholders' Meeting...............................................4.18
Company Voting Debt.......................................................4.2(a)
Confidentiality Agreement....................................................9.8
Control...................................................................9.4(b)
Deferred Stock Units......................................................2.9(d)
DGCL.........................................................................2.1
Director Retirement Plan..................................................2.9(d)
Dissenting Shares.........................................................2.7(a)
Effective Time............................................................2.2(b)
Environmental Law........................................................4.13(a)
Environmental Permits....................................................4.13(b)
ERISA.....................................................................4.8(a)
ESPP......................................................................2.9(a)
Exchange Act..............................................................1.1(a)
Exchange Agent............................................................2.8(a)
Extended Expiration Date..................................................1.1(d)
Government Contract......................................................4.14(b)
Governmental Entity.......................................................3.3(b)
Hazardous Substances.....................................................4.13(a)
HSR Act...................................................................3.3(b)
Indemnified Parties.......................................................6.8(a)
Independent Directors........................................................1.3
Initial Expiration Date...................................................1.1(d)
Intellectual Property....................................................4.11(a)
Key Management Personnel..................................................9.4(e)
Knowledge.................................................................9.4(d)
Laws........................................................................4.15
Material Adverse Effect......................................................4.1
Merger.............................................................4th Paragraph
Minimum Condition........................................................Annex I
NOLs.....................................................................4.17(j)
Offer..............................................................3rd Paragraph
Offer Documents...........................................................1.1(c)
Offer to Purchase.........................................................1.1(c)
Option Plans..............................................................2.9(c)
Options...................................................................2.9(b)
Parent.............................................................1st Paragraph
Parent Information...........................................................3.6
Per Share Amount...................................................3rd Paragraph
Person....................................................................9.4(c)
Proxy Statement.............................................................4.18
Purchaser..........................................................1st Paragraph
Rights......................................................................4.21
Rights Agreement............................................................4.21
Schedule 14D-9............................................................1.2(b)
Schedule TO...............................................................1.1(c)
SEC.......................................................................1.1(c)
SEC Reports...............................................................4.5(a)
Securities Act............................................................4.5(a)
Settlement Agreement.........................................................1.3
Share Purchase Date.......................................................1.1(b)
Shares.............................................................3rd Paragraph
Stock Plans...............................................................2.9(a)
Stockholders.......................................................6th Paragraph
Stockholders Agreements............................................6th Paragraph
Subsidiary................................................................4.1(d)
Superior Proposal.........................................................5.2(a)
Surviving Corporation........................................................2.1
Tax Return...............................................................4.17(k)
Taxes....................................................................4.17(k)
Termination Fee...........................................................8.2(b)
Warrants..................................................................4.2(a)
EXHIBIT A
STOCKHOLDERS AGREEMENT
----------------------
STOCKHOLDERS AGREEMENT, dated as of February 14, 2000 (this "Agreement"),
among AT&T Corp., a New York corporation ("Parent"), LMN Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and Cilluffo
Associates, L.P., a Delaware limited partnership ("Stockholder') and a
stockholder of GRC International, Inc., a Delaware corporation (the "Company").
WHEREAS, Parent, Sub and the Company are, concurrently with the execution
hereof, entering into an Agreement and Plan of Merger, dated as of February 14,
2000 (the "Merger Agreement"), pursuant to which, upon the terms and subject to
the conditions set forth in the Merger Agreement, Sub will make an offer (the
"Offer") to acquire all of the issued and outstanding shares of common stock,
par value $0.10 per share, of the Company (the "Company Common Stock"), at a
purchase price of $15.00 per share, net to the seller in cash, the consummation
of which will be followed by the merger of Sub with and into the Company, with
the Company being the surviving corporation (the "Merger");
WHEREAS, Stockholder is the record and/or beneficial owner of 1,708,000
shares of Company Common Stock (collectively, the "Existing Shares") (all such
Existing Shares, together with all other shares of capital stock or other voting
securities of the Company or any of its Subsidiaries with respect to which
Stockholder has beneficial ownership (for purposes of this Agreement,
"beneficial ownership" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act) as of the date of this Agreement, and any shares of capital stock
or other voting securities of the Company or any of its Subsidiaries, beneficial
ownership of which is directly or indirectly acquired after the date hereof,
including, without limitation, shares received pursuant to any stock splits,
stock dividends or distributions, shares acquired by purchase or upon the
exercise, conversion or exchange of any option, warrant or convertible security
or otherwise, and shares or any voting securities of the Company or any of its
Subsidiaries received pursuant to any change in the capital stock of the Company
or such Subsidiary by reason of any recapitalization, merger, reorganization,
consolidation, combination, exchange of shares or the like, are referred to
herein as the "Shares");
WHEREAS, each of the parties hereto desires to enter into this Agreement to
provide for, among other things, (1) the obligation of Stockholder to tender, or
cause the record holder of the Shares to tender, the Shares beneficially owned
by Stockholder (other than Shares subject to unexercised options) (the "Tender
Shares") in the Offer, (2) the obligation of Stockholder to vote, or cause the
record holder of the Shares to vote, the Shares beneficially owned by
Stockholder (other than Shares subject to unexercised options) (the "Voting
Shares") in the manner specified herein and (3) certain restrictions on the sale
or the transfer of the record and beneficial ownership of Shares by Stockholder
(this Agreement and all other agreements, instruments and other documents
executed and delivered by Stockholder in connection with this Agreement are
collectively referred to as the "Support Documents"); and
WHEREAS, Stockholder acknowledges that Parent and Sub are entering into the
Merger Agreement in reliance on the representations, warranties, covenants and
other agreements
of Stockholder set forth in this Agreement and would not enter into the
Merger Agreement if Stockholder did not enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Parent, Sub and
Stockholder agree as follows:
1. Defined Terms. Terms used herein without definition shall have the
meanings assigned to such terms in the Merger Agreement.
2. Agreement to Tender. Stockholder hereby agrees to validly tender, or
cause the record owner to validly tender, all of the Tender Shares pursuant to
and in accordance with the terms of the Offer within 18 business days of the
commencement thereof, and not to withdraw or permit to be withdrawn any Shares
therefrom.
3. Agreement to Vote. Stockholder hereby agrees that, from and after the
date hereof and until the Termination Date (as defined in Section 19), at any
meeting of the stockholders of the Company, however called, or in connection
with any written consent of the stockholders of the Company, Stockholder shall
appear at each such meeting, in person or by proxy, or otherwise cause the
Voting Shares to be counted as present thereat for purposes of establishing a
quorum, and Stockholder shall vote (or cause to be voted) or act by written
consent with respect to all of the Voting Shares that are beneficially owned by
Stockholder or as to which Stockholder has, directly or indirectly, the right to
vote or direct the voting, (a) in favor of adoption and approval of the Merger
Agreement and the Merger and the approval of the terms thereof and each of the
other actions contemplated by the Merger Agreement and this Agreement, and any
other action reasonably requested by Parent in furtherance thereof; (b) against
any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
contained in the Merger Agreement or of Stockholder contained in this Agreement;
and (c) against any Acquisition Proposal made by any person other than Parent or
any of its affiliates. Stockholder hereby agrees that it will not enter into any
voting or other agreement or understanding with any person or entity or grant a
proxy or power of attorney with respect to the Shares prior to the Termination
Date (other than a proxy or power of attorney to an officer of the Company that
may be exercised solely in accordance with this Section 3 and except as provided
in Section 4 below) or vote or give instructions in any manner inconsistent with
clause (a), (b) or (c) of the preceding sentence. Stockholder hereby agrees,
during the period commencing on the date hereof and ending on the Termination
Date, not to, and, if applicable, not to permit any of Stockholder's affiliates
to, vote or execute any written consent in lieu of a stockholders meeting or
vote, if such consent or vote by the stockholders of the Company would be
inconsistent with or frustrate the purposes of the other covenants of
Stockholder pursuant to this paragraph. As used in this Agreement, "person"
shall have the meaning specified in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act.
4. PROXY. SUBJECT TO SECTION 19 HEREOF, STOCKHOLDER HEREBY GRANTS TO, AND
APPOINTS, MARY JANE MCKEEVER, MARILYN WASSER AND GARY SWENSON, IN THEIR
RESPECTIVE CAPACITIES AS OFFICERS OF PARENT, AND ANY INDIVIDUAL WHO SHALL
HEREAFTER SUCCEED ANY SUCH
-2-
OFFICER OF PARENT, AND ANY OTHER PERSON DESIGNATED IN WRITING BY PARENT, EACH OF
THEM INDIVIDUALLY, STOCKHOLDER'S PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION) TO VOTE OR ACT BY WRITTEN CONSENT, TO THE FULLEST EXTENT PERMITTED
BY AND SUBJECT TO APPLICABLE LAW, WITH RESPECT TO THE SHARES IN ACCORDANCE WITH
SECTION 3 HEREOF IN RESPECT OF ANY MATTER SPECIFIED IN CLAUSE (a), (b) or (c) OF
SUCH SECTION 3. THIS PROXY IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE.
STOCKHOLDER WILL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS
MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY
PROXY PREVIOUSLY GRANTED BY STOCKHOLDER WITH RESPECT TO THE SHARES.
NOTWITHSTANDING THE FOREGOING, NEITHER PARENT NOR ANY OF THE AFORENAMED PROXIES
SHALL EXERCISE THE POWERS SET FORTH IN THIS SECTION 4 UNLESS AND UNTIL PARENT
SHALL HAVE RECEIVED ALL APPLICABLE REGULATORY APPROVALS REQUIRED UNDER
APPLICABLE LAW FOR SUCH EXERCISE.
5. Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to Stockholder as follows:
(a) Each of Parent and Sub is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
(b) Each of Parent and Sub has the requisite corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by Parent and Sub and the consummation
by Parent and Sub of the transactions contemplated hereby have been duly
authorized by the respective Boards of Directors of Parent and Sub and no other
corporate proceedings on the part of Parent or Sub are necessary to authorize
the execution and delivery of this Agreement by Parent and Sub and the
consummation by them of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Parent and Sub and (assuming the valid
authorization, execution and delivery of this Agreement by Stockholder) is a
valid and binding obligation of each of Parent and Sub, enforceable against each
of Parent and Sub in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law).
(c) The execution and delivery of this Agreement by Parent and Sub do not,
and the performance of this Agreement by Parent and Sub will not, (i) conflict
with or violate the certificate of incorporation or by-laws of Parent or Sub,
(ii) conflict with or violate any law, rule, regulation or order applicable to
Parent or Sub or by which any of their respective properties is bound, or (iii)
conflict with, result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
require payment under, or result in the creation of any lien on the properties
or assets of Parent or Sub pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
-3-
obligation to which Parent or Sub is a party or by which Parent or Sub or any of
their respective properties is bound, except for any thereof that would
materially impair the ability of Parent or Sub to perform its obligations
hereunder or to consummate the transactions contemplated hereby on a timely
basis.
(d) The execution and delivery of this Agreement by Parent and Sub do not,
and the performance by Parent and Sub of their obligations hereunder will not,
require Parent or Sub to obtain any consent, approval, authorization or permit
of, or to make any filing with or notification to, any Governmental Entity,
other than as set forth in Section 3.3 of the Merger Agreement.
(e) There is no suit, action, investigation or proceeding pending or, to
the knowledge of Parent or Sub, threatened against Parent or Sub at law or in
equity before or by any Governmental Entity that could reasonably be expected to
materially impair the ability of Parent or Sub to perform their obligations
hereunder on a timely basis, and there is no agreement, commitment or law to
which Parent or Sub is subject that could reasonably be expected to materially
impair the ability of Parent or Sub to perform their obligations hereunder on a
timely basis.
6. Representations and Warranties of Stockholder. Stockholder represents
and warrants to Parent and Sub as follows:
(a) Stockholder has been duly organized and is validly existing and in good
standing under the laws of the State of Delaware.
(b) Stockholder has all necessary corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby, and the execution, delivery and performance of
this Agreement by Stockholder and the consummation by Stockholder of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Stockholder.
(c) This Agreement has been duly executed and delivered by Stockholder and
(assuming the valid authorization, execution and delivery of this Agreement by
Parent and Sub) is a valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law).
(d) The execution and delivery of this Agreement by Stockholder do not, and
the performance of this Agreement by Stockholder will not, (i) conflict with or
violate the limited partnership agreement or other organizational documents of
Stockholder, (ii) conflict with or violate any law, rule, regulation or order
applicable to Stockholder or by which any of Stockholder's properties is bound,
or (iii) conflict with, result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of any lien
on the properties or assets of Stockholder pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
-4-
franchise or other instrument or obligation to which Stockholder is a party or
by which Stockholder or any of its properties is bound, except for any thereof
that would not result in the imposition of a lien on the Shares or materially
impair the ability of Stockholder to perform its obligations hereunder or to
consummate the transactions contemplated hereby on a timely basis.
(e) The execution and delivery of this Agreement by Stockholder do not, and
the performance by Stockholder of Stockholder's obligations hereunder will not,
require Stockholder to obtain any consent, approval, authorization or permit of,
or to make any filing with or notification to, any Governmental Entity, except
for an amendment to the Statement on Schedule 13D filed by, among others,
Stockholder with respect to the Company.
(f) There is no suit, action, investigation or proceeding pending or, to
the knowledge of Stockholder, threatened against Stockholder at law or in equity
before or by any Governmental Entity that could reasonably be expected to
materially impair the ability of Stockholder to perform its obligations
hereunder on a timely basis, and there is no agreement, commitment or law to
which Stockholder is subject that could reasonably be expected to materially
impair the ability of Stockholder to perform its obligations hereunder on a
timely basis.
(g) Except as set forth on Schedule I hereto or as otherwise provided
herein, (i) the Existing Shares are owned beneficially and of record by
Stockholder; (ii) Stockholder has not appointed or granted any proxy which is
still effective with respect to any Shares other than as provided in this
Agreement; and (iii) Stockholder has sole voting power and sole power of
disposition with respect to all of the Existing Shares, with no restrictions on
Stockholder's rights of disposition pertaining thereto. The Existing Shares
constitute all of the shares of Company Common Stock owned of record or
beneficially by Stockholder. All of the Existing Shares are issued and
outstanding and, except for the Rights associated with such Existing Shares,
Stockholder does not own, of record or beneficially, any warrants, options,
convertible securities or other rights to acquire any shares of Company Common
Stock.
7. Agreements of Stockholder. (a) Stockholder hereby agrees, while this
Agreement is in effect, and except as expressly contemplated hereby, not to (i)
sell, transfer, pledge, encumber, grant, assign or otherwise dispose of, enforce
any redemption agreement with the Company or enter into any contract, option or
other arrangement or understanding with respect to or consent to the offer for
sale, sale, transfer, pledge, encumbrance, grant, assignment or other
disposition of, record or beneficial ownership of any of the Shares (whether
acquired heretofore or hereafter) or any interest in any of the foregoing,
except to Parent or Sub, (ii) grant any proxies or powers of attorney, deposit
any Shares into a voting trust or enter into a voting agreement with respect to
any Shares, or any interest in any of the Shares, except to Parent or Sub or
(iii) take any action that would make any representation or warranty of
Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling Stockholder from performing its obligations under this
Agreement.
(b) Stockholder hereby agrees, while this Agreement is in effect, except
with respect to Parent and its affiliates, that Stockholder shall not, and shall
not permit any affiliates or, if applicable, any director, officer, employee
consultant, agent, advisor or representative of Stockholder or any of
Stockholder's affiliates (collectively, the "Representatives") to (i) initiate,
solicit or encourage, directly or indirectly, any inquiries or the making of any
proposal with
-5-
respect to any matter described in Section 7(a) hereof or any Acquisition
Proposal or (ii) participate in any negotiations concerning, or provide to any
other person any information or data relating to the Company or any of its
Subsidiaries for the purpose of, or have any discussions with any person
relating to, or cooperate with or assist or participate in, or facilitate, any
inquiries or the making of any proposal which constitutes, or would reasonably
be expected to lead to, any effort or attempt by any other person to seek to
effect any matter described in Section 7(a) hereof or any Acquisition Proposal,
or agree to or endorse any Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement such an Acquisition Proposal. Stockholder
agrees immediately to cease and cause to be terminated any existing activities,
discussions or negotiations with any persons conducted heretofore by Stockholder
with respect to any possible Acquisition Proposal, or any matter described in
Section 7(a) hereof, and will take the necessary steps to inform Stockholder's
Representatives of the obligations undertaken by Stockholder with respect to
Stockholder's Representatives in this Section 7; provided, that nothing in this
Agreement shall restrict Frank J. A. Cilluffo in the exercise of his fiduciary
duties to stockholders of the Company, in his capacity as a director of the
Company, under applicable law or otherwise prohibit him from taking such
actions, in his capacity as a director of the Company, as may be permitted
(under the circumstances therein specified) pursuant to Section 5.2 of the
Merger Agreement.
(c) Stockholder hereby agrees, while this Agreement is in effect, to notify
Parent promptly of the number of any additional shares of Company Common Stock
and the number and type of any other Shares acquired by Stockholder, if any,
after the date hereof.
8. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further action as may be necessary or
desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement. Without limiting
the generality of the foregoing, none of the parties hereto shall enter into an
agreement or arrangement (or alter, amend or terminate any existing agreement or
arrangement) if such action would materially impair the ability of such party to
effectuate, carry out or comply with all the terms of this Agreement.
9. Survival. None of the representations, warranties, covenants and
agreements of the parties herein shall survive beyond the Termination Date.
10. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given if given in the manner set forth in
Section 9.2 of the Merger Agreement. All notices hereunder shall be given to a
party at his or its address stated on the signature pages of this Agreement or
at its address set forth in Section 9.2 of the Merger Agreement or at any other
address as the party may specify for this purpose by notice to the other parties
pursuant to this Section 10.
11. No Waivers. No failure or delay by Parent or Sub in exercising any
right, power or privilege under any Support Document shall operate as a waiver
of that right, power or privilege. A single or partial exercise of any right,
power or privilege shall not preclude any other or further exercise of that
right, power or privilege or the exercise of any other right, power or
-6-
privilege. The rights and remedies provided in the Support Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.
12. Amendments, Etc. No amendment, modification, termination or waiver of
any provision of any Support Document, and no consent to any departure by
Stockholder or Parent or Sub from any provision of any Support Document, shall
be effective unless it shall be in writing and signed and delivered by each
party hereto, and then it shall be effective only in the specific instance and
for the specific purpose for which it is given.
13. Successors and Assigns; Third Party Beneficiaries.
(a) No party shall assign any of such party's rights or remedies or
delegate any of such party's obligations or liabilities, in whole or in part,
under any Support Document, except that Parent or Sub may assign all or any of
its rights hereunder to any affiliate of Parent or Sub. Any assignment or
delegation in contravention of this Section 13 shall be void ab initio and shall
not relieve the assigning or delegating party of any obligation under any
Support Document.
(b) The provisions of each Support Document shall be binding upon and inure
solely to the benefit of the parties hereto and their respective permitted
heirs, executors, legal representatives, successors and assigns, and no other
person.
14. Governing Law; Submission to Jurisdiction. This Agreement and each
other Support Document and all rights, remedies, liabilities, powers and duties
of the parties hereto and thereto, shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts
executed in and to be performed entirely within that State. Parent, Sub and each
Stockholder hereby (w) submit to the non-exclusive jurisdiction of any State and
Federal courts sitting in Delaware with respect to matters arising out of or
relating hereto, (x) agree that all claims with respect to such matters may be
heard and determined in an action or proceeding in such Delaware State or
Federal court, and (y) agree that a final judgment in any such action or
proceeding will be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.
15. Severability of Provisions. If any term or other provision of any
Support Document is invalid, illegal or incapable of being enforced by any law
or public policy, all other terms and provisions of such Support Document shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify such Support Document so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
16. Headings and References. Article and Section headings in any Support
Document are included for convenience of reference only and do not constitute a
part of the Support Document for any other purpose. References to Articles and
Sections in any Support Document are references to the Articles and Sections of
the Support Document unless the context shall require otherwise. Any of the
terms defined in this Agreement may, unless the context
-7-
otherwise requires, be used in the singular or the plural, depending on the
reference. The use in this Agreement of the word "include" or "including," when
following any general statement, term or matter, shall not be construed to limit
such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as "without limitation" or "but not limited to" or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that fall within the broadest
possible scope of such general statement, term or matter.
17. Entire Agreement. The Support Documents and the Merger Agreement embody
the entire agreement and understanding of each of the parties hereto, and
supersede all other written or oral prior agreements or understandings, with
respect to the subject matter of the Support Documents.
18. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of any Support Document were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the Support Documents and to enforce
specifically the terms and provisions of any Support Document in any Federal
court sitting in the State of Delaware or State of Delaware court, this being in
addition to any other remedy to which they are entitled at law or in equity.
19. Termination. This Agreement and the proxy set forth in Section 4 shall
terminate upon the earliest of the following dates (such date is referred to
herein as the "Termination Date"): (i) the date on which the Merger Agreement is
terminated in accordance with Article VIII thereof; (ii) the date on which
Parent terminates this Agreement upon written notice to Stockholder (Parent may
so terminate this Agreement and the proxy set forth herein at any time); (iii)
the Effective Time; and (iv) June 30, 2000.
20. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if all
signatures were on the same instrument.
21. Limitation on Representations Warranties and Covenants. Reference is
made to those certain option agreements, each dated as of August 5, 1999,
attached as Exhibits C, D, and E to Amendment No. 14 to the Statement on
Schedule 13D filed by, among others, Stockholder with respect to the Company on
August 5, 1999 (the "Option Agreements"). All of the representations, warranties
and covenants of Stockholder contained in this Agreement are subject to the
obligations of Stockholder under the Option Agreements; provided, however, that
Stockholder shall comply with its covenants hereunder to the fullest extent not
prohibited by Stockholder's obligations under the Option Agreements. Stockholder
represents and warrants to Parent and Sub that none of the Option Agreements has
been amended prior to the date hereof. Stockholder covenants and agrees not to
amend any Option Agreement while this Agreement is in effect.
22. WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT, AS A CONDITION OF
SUCH PARTY'S RIGHT TO ENFORCE OR DEFEND ANY RIGHT UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER SUPPORT
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DOCUMENT, WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND
ANY RIGHT UNDER THIS AGREEMENT OR ANY OTHER SUPPORT DOCUMENT AND AGREES THAT ANY
ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, Parent, Sub and the undersigned Stockholder have caused
this Agreement to be duly executed as of the day and year first above written.
AT&T CORP.
By:
------------------------------
Name:
Title:
LMN CORPORATION
By:
------------------------------
Name:
Title:
CILLUFFO ASSOCIATES, L.P.
160 Broadway, East Building
New York, New York 10038
Attn: Frank J. A. Cilluffo
Facsimile: (603)
By:
------------------------------
Name:
Title:
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SCHEDULE I
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All of the Existing Shares are (i) held of record by Stockholder or (ii) held of
record by Morgan Stanley Dean Witter for the benefit of Stockholder.
EXHIBIT B
STOCKHOLDERS AGREEMENT
----------------------
STOCKHOLDERS AGREEMENT, dated as of February 14, 2000 (this "Agreement"),
among AT&T Corp., a New York corporation ("Parent"), LMN Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and Gerald R.
McNichols, an individual ("Stockholder') and a stockholder of GRC International,
Inc., a Delaware corporation (the "Company").
WHEREAS, Parent, Sub and the Company are, concurrently with the execution
hereof, entering into an Agreement and Plan of Merger, dated as of February 14,
2000 (the "Merger Agreement"), pursuant to which, upon the terms and subject to
the conditions set forth in the Merger Agreement, Sub will make an offer (the
"Offer") to acquire all of the issued and outstanding shares of common stock,
par value $0.10 per share, of the Company (the "Company Common Stock"), at a
purchase price of $15.00 per share, net to the seller in cash, the consummation
of which will be followed by the merger of Sub with and into the Company, with
the Company being the surviving corporation (the "Merger");
WHEREAS, Stockholder is the record and/or beneficial owner of 2,001,700
shares of Company Common Stock (collectively, the "Existing Shares") (all such
Existing Shares, together with all other shares of capital stock or other voting
securities of the Company or any of its Subsidiaries with respect to which
Stockholder has beneficial ownership (for purposes of this Agreement,
"beneficial ownership" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act) as of the date of this Agreement, and any shares of capital stock
or other voting securities of the Company or any of its Subsidiaries, beneficial
ownership of which is directly or indirectly acquired after the date hereof,
including, without limitation, shares received pursuant to any stock splits,
stock dividends or distributions, shares acquired by purchase or upon the
exercise, conversion or exchange of any option, warrant or convertible security
or otherwise, and shares or any voting securities of the Company or any of its
Subsidiaries received pursuant to any change in the capital stock of the Company
or such Subsidiary by reason of any recapitalization, merger, reorganization,
consolidation, combination, exchange of shares or the like, are referred to
herein as the "Shares");
WHEREAS, each of the parties hereto desires to enter into this Agreement to
provide for, among other things, (1) the obligation of Stockholder to tender, or
cause the record holder of the Shares to tender, the Shares beneficially owned
by Stockholder (other than Shares subject to unexercised options) (the "Tender
Shares") in the Offer, (2) the obligation of Stockholder to vote, or cause the
record holder of the Shares to vote, the Shares beneficially owned by
Stockholder (other than Shares subject to unexercised options) (the "Voting
Shares") in the manner specified herein and (3) certain restrictions on the sale
or the transfer of the record and beneficial ownership of Shares by Stockholder
(this Agreement and all other agreements, instruments and other documents
executed and delivered by Stockholder in connection with this Agreement are
collectively referred to as the "Support Documents"); and
WHEREAS, Stockholder acknowledges that Parent and Sub are entering into the
Merger Agreement in reliance on the representations, warranties, covenants and
other agreements
of Stockholder set forth in this Agreement and would not enter into the Merger
Agreement if Stockholder did not enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Parent, Sub and
Stockholder agree as follows:
1. Defined Terms. Terms used herein without definition shall have the
meanings assigned to such terms in the Merger Agreement.
2. Agreement to Tender. Stockholder hereby agrees to validly tender, or
cause the record owner to validly tender, all of the Tender Shares pursuant to
and in accordance with the terms of the Offer within 18 business days of the
commencement thereof, and not to withdraw or permit to be withdrawn any Shares
therefrom.
3. Agreement to Vote. Stockholder hereby agrees that, from and after the
date hereof and until the Termination Date (as defined in Section 19), at any
meeting of the stockholders of the Company, however called, or in connection
with any written consent of the stockholders of the Company, Stockholder shall
appear at each such meeting, in person or by proxy, or otherwise cause the
Voting Shares to be counted as present thereat for purposes of establishing a
quorum, and Stockholder shall vote (or cause to be voted) or act by written
consent with respect to all of the Voting Shares that are beneficially owned by
him or as to which he has, directly or indirectly, the right to vote or direct
the voting, (a) in favor of adoption and approval of the Merger Agreement and
the Merger and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and this Agreement, and any other action
reasonably requested by Parent in furtherance thereof; (b) against any action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company contained in the
Merger Agreement or of Stockholder contained in this Agreement; and (c) against
any Acquisition Proposal made by any person other than Parent or any of its
affiliates. Stockholder hereby agrees that he will not enter into any voting or
other agreement or understanding with any person or entity or grant a proxy or
power of attorney with respect to the Shares prior to the Termination Date
(other than a proxy or power of attorney to an officer of the Company that may
be exercised solely in accordance with this Section 3 and except as provided in
Section 4 below) or vote or give instructions in any manner inconsistent with
clause (a), (b) or (c) of the preceding sentence. Stockholder hereby agrees,
during the period commencing on the date hereof and ending on the Termination
Date, not to, and, if applicable, not to permit any of his affiliates to, vote
or execute any written consent in lieu of a stockholders meeting or vote, if
such consent or vote by the stockholders of the Company would be inconsistent
with or frustrate the purposes of the other covenants of Stockholder pursuant to
this paragraph. As used in this Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
4. PROXY. SUBJECT TO SECTION 19 HEREOF, STOCKHOLDER HEREBY GRANTS TO, AND
APPOINTS, MARY JANE MCKEEVER, MARILYN WASSER AND GARY SWENSON, IN THEIR
RESPECTIVE CAPACITIES AS OFFICERS OF PARENT, AND ANY INDIVIDUAL WHO SHALL
HEREAFTER SUCCEED ANY SUCH
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OFFICER OF PARENT, AND ANY OTHER PERSON DESIGNATED IN WRITING BY PARENT, EACH OF
THEM INDIVIDUALLY, STOCKHOLDER'S PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION) TO VOTE OR ACT BY WRITTEN CONSENT, TO THE FULLEST EXTENT PERMITTED
BY AND SUBJECT TO APPLICABLE LAW, WITH RESPECT TO THE SHARES IN ACCORDANCE WITH
SECTION 3 HEREOF IN RESPECT OF ANY MATTER SPECIFIED IN CLAUSE (a), (b) or (c) OF
SUCH SECTION 3. THIS PROXY IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE.
STOCKHOLDER WILL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS
MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY
PROXY PREVIOUSLY GRANTED BY STOCKHOLDER WITH RESPECT TO THE SHARES.
NOTWITHSTANDING THE FOREGOING, NEITHER PARENT NOR ANY OF THE AFORENAMED PROXIES
SHALL EXERCISE THE POWERS SET FORTH IN THIS SECTION 4 UNLESS AND UNTIL PARENT
SHALL HAVE RECEIVED ALL APPLICABLE REGULATORY APPROVALS REQUIRED UNDER
APPLICABLE LAW FOR SUCH EXERCISE.
5. Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to Stockholder as follows:
(a) Each of Parent and Sub is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
(b) Each of Parent and Sub has the requisite corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by Parent and Sub and the consummation
by Parent and Sub of the transactions contemplated hereby have been duly
authorized by the respective Boards of Directors of Parent and Sub and no other
corporate proceedings on the part of Parent or Sub are necessary to authorize
the execution and delivery of this Agreement by Parent and Sub and the
consummation by them of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Parent and Sub and (assuming the valid
authorization, execution and delivery of this Agreement by Stockholder) is a
valid and binding obligation of each of Parent and Sub, enforceable against each
of Parent and Sub in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law).
(c) The execution and delivery of this Agreement by Parent and Sub do not,
and the performance of this Agreement by Parent and Sub will not, (i) conflict
with or violate the certificate of incorporation or by-laws of Parent or Sub,
(ii) conflict with or violate any law, rule, regulation or order applicable to
Parent or Sub or by which any of their respective properties is bound, or (iii)
conflict with, result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
require payment under, or result in the creation of any lien on the properties
or assets of Parent or Sub pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
-3-
obligation to which Parent or Sub is a party or by which Parent or Sub or any of
their respective properties is bound, except for any thereof that would
materially impair the ability of Parent or Sub to perform its obligations
hereunder or to consummate the transactions contemplated hereby on a timely
basis.
(d) The execution and delivery of this Agreement by Parent and Sub do not,
and the performance by Parent and Sub of their obligations hereunder will not,
require Parent or Sub to obtain any consent, approval, authorization or permit
of, or to make any filing with or notification to, any Governmental Entity,
other than as set forth in Section 3.3 of the Merger Agreement.
(e) There is no suit, action, investigation or proceeding pending or, to
the knowledge of Parent or Sub, threatened against Parent or Sub at law or in
equity before or by any Governmental Entity that could reasonably be expected to
materially impair the ability of Parent or Sub to perform their obligations
hereunder on a timely basis, and there is no agreement, commitment or law to
which Parent or Sub is subject that could reasonably be expected to materially
impair the ability of Parent or Sub to perform their obligations hereunder on a
timely basis.
6. Representations and Warranties of Stockholder. Stockholder represents
and warrants to Parent and Sub as follows:
(a) This Agreement has been duly executed and delivered by Stockholder and
(assuming the valid authorization, execution and delivery of this Agreement by
Parent and Sub) is a valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law).
(b) The execution and delivery of this Agreement by Stockholder do not, and
the performance of this Agreement by Stockholder will not, (i) conflict with or
violate any law, rule, regulation or order applicable to Stockholder or by which
any of Stockholder's properties is bound or (ii) conflict with, result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of any lien on the properties or assets of
Stockholder pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Stockholder is a party or by which Stockholder or any of his properties
is bound, except for any thereof that would not result in the imposition of a
lien on the Shares or materially impair the ability of Stockholder to perform
his obligations hereunder or to consummate the transactions contemplated hereby
on a timely basis.
(c) The execution and delivery of this Agreement by Stockholder do not, and
the performance by Stockholder of his obligations hereunder will not, require
Stockholder to obtain any consent, approval, authorization or permit of, or to
make any filing with or notification to, any Governmental Entity, except for an
amendment to the Statement on Schedule 13D filed by Stockholder with respect to
the Company.
-4-
(d) There is no suit, action, investigation or proceeding pending or, to
the knowledge of Stockholder, threatened against Stockholder at law or in equity
before or by any Governmental Entity that could reasonably be expected to
materially impair the ability of Stockholder to perform his obligations
hereunder on a timely basis, and there is no agreement, commitment or law to
which Stockholder is subject that could reasonably be expected to materially
impair the ability of Stockholder to perform his obligations hereunder on a
timely basis.
(e) Except as set forth on Schedule I hereto, (i) the Existing Shares are
owned beneficially and of record by Stockholder; (ii) Stockholder has not
appointed or granted any proxy which is still effective with respect to any
Shares other than as provided in this Agreement; and (iii) Stockholder has sole
voting power and sole power of disposition with respect to all of the Existing
Shares, with no restrictions on Stockholder's rights of disposition pertaining
thereto. The Existing Shares constitute all of the shares of Company Common
Stock owned of record or beneficially by Stockholder. All of the Existing Shares
are issued and outstanding and, except for the Rights associated with such
Existing Shares, Stockholder does not own, of record or beneficially, any
warrants, options, convertible securities or other rights to acquire any shares
of Company Common Stock.
7. Agreements of Stockholder. (a) Stockholder hereby agrees, while this
Agreement is in effect, and except as expressly contemplated hereby, not to (i)
sell, transfer, pledge, encumber, grant, assign or otherwise dispose of, enforce
any redemption agreement with the Company or enter into any contract, option or
other arrangement or understanding with respect to or consent to the offer for
sale, sale, transfer, pledge, encumbrance, grant, assignment or other
disposition of, record or beneficial ownership of any of the Shares (whether
acquired heretofore or hereafter) or any interest in any of the foregoing,
except to Parent or Sub, (ii) grant any proxies or powers of attorney, deposit
any Shares into a voting trust or enter into a voting agreement with respect to
any Shares, or any interest in any of the Shares, except to Parent or Sub or
(iii) take any action that would make any representation or warranty of
Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling Stockholder from performing his obligations under this
Agreement.
(b) Stockholder hereby agrees, while this Agreement is in effect, except
with respect to Parent and its affiliates, that he shall not, and shall not
permit any affiliates or, if applicable, any director, officer, employee
consultant, agent, advisor or representative of Stockholder or any of his
affiliates (collectively, the "Representatives") to (i) initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
with respect to any matter described in Section 7(a) hereof or any Acquisition
Proposal or (ii) participate in any negotiations concerning, or provide to any
other person any information or data relating to the Company or any of its
Subsidiaries for the purpose of, or have any discussions with any person
relating to, or cooperate with or assist or participate in, or facilitate, any
inquiries or the making of any proposal which constitutes, or would reasonably
be expected to lead to, any effort or attempt by any other person to seek to
effect any matter described in Section 7(a) hereof or any Acquisition Proposal,
or agree to or endorse any Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement such an Acquisition Proposal. Stockholder
agrees immediately to cease and cause to be terminated any existing activities,
discussions or negotiations with any persons conducted heretofore by Stockholder
with respect to any possible
-5-
Acquisition Proposal, or any matter described in Section 7(a) hereof, and will
take the necessary steps to inform Stockholder's Representatives of the
obligations undertaken by Stockholder with respect to Stockholder's
Representatives in this Section 7; provided, that nothing in this Agreement
shall restrict Stockholder in the exercise of his fiduciary duties to the
stockholders of the Company, in his capacity as a director of the Company, under
applicable law or otherwise prohibit him from taking such actions, in his
capacity as a director of the Company, as may be permitted (under the
circumstances therein specified) pursuant to Section 5.2 of the Merger
Agreement.
(c) Stockholder hereby agrees, while this Agreement is in effect, to notify
Parent promptly of the number of any additional shares of Company Common Stock
and the number and type of any other Shares acquired by Stockholder, if any,
after the date hereof.
8. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further action as may be necessary or
desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement. Without limiting
the generality of the foregoing, none of the parties hereto shall enter into an
agreement or arrangement (or alter, amend or terminate any existing agreement or
arrangement) if such action would materially impair the ability of such party to
effectuate, carry out or comply with all the terms of this Agreement.
9. Survival. None of the representations, warranties, covenants and
agreements of the parties herein shall survive beyond the Termination Date.
10. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given if given in the manner set forth in
Section 9.2 of the Merger Agreement. All notices hereunder shall be given to
Stockholder at his address stated on the signature pages of this Agreement or to
Parent or Sub at Parent's address set forth in Section 9.2 of the Merger
Agreement or at any other address as the party may specify for this purpose by
notice to the other parties pursuant to this Section 10.
11. No Waivers. No failure or delay by Parent or Sub in exercising any
right, power or privilege under any Support Document shall operate as a waiver
of that right, power or privilege. A single or partial exercise of any right,
power or privilege shall not preclude any other or further exercise of that
right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in the Support Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.
12. Amendments, Etc. No amendment, modification, termination or waiver of
any provision of any Support Document, and no consent to any departure by
Stockholder or Parent or Sub from any provision of any Support Document, shall
be effective unless it shall be in writing and signed and delivered by each
party hereto, and then it shall be effective only in the specific instance and
for the specific purpose for which it is given.
-6-
13. Successors and Assigns; Third Party Beneficiaries.
(a) No party shall assign any of such party's rights or remedies or
delegate any of such party's obligations or liabilities, in whole or in part,
under any Support Document, except that Parent or Sub may assign all or any of
its rights hereunder to any affiliate of Parent or Sub. Any assignment or
delegation in contravention of this Section 13 shall be void ab initio and shall
not relieve the assigning or delegating party of any obligation under any
Support Document.
(b) The provisions of each Support Document shall be binding upon and inure
solely to the benefit of the parties hereto and their respective permitted
heirs, executors, legal representatives, successors and assigns, and no other
person.
14. Governing Law; Submission to Jurisdiction. This Agreement and each
other Support Document and all rights, remedies, liabilities, powers and duties
of the parties hereto and thereto, shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts
executed in and to be performed entirely within that State. Parent, Sub and each
Stockholder hereby (w) submit to the jurisdiction of any State and Federal
courts sitting in Delaware with respect to matters arising out of or relating
hereto, (x) agree that all claims with respect to such matters may be heard and
determined in an action or proceeding in such Delaware State or Federal court,
and (y) agree that a final judgment in any such action or proceeding will be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
15. Severability of Provisions. If any term or other provision of any
Support Document is invalid, illegal or incapable of being enforced by any law
or public policy, all other terms and provisions of such Support Document shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify such Support Document so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
16. Headings and References. Article and Section headings in any Support
Document are included for convenience of reference only and do not constitute a
part of the Support Document for any other purpose. References to Articles and
Sections in any Support Document are references to the Articles and Sections of
the Support Document unless the context shall require otherwise. Any of the
terms defined in this Agreement may, unless the context otherwise requires, be
used in the singular or the plural, depending on the reference. The use in this
Agreement of the word "include" or "including," when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific items or matters set forth immediately following such
word or to similar items or matters, whether or not nonlimiting language (such
as "without limitation" or "but not limited to" or words of similar import) is
used with reference thereto, but rather shall be deemed to refer to all other
items or matters that fall within the broadest possible scope of such general
statement, term or matter.
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17. Entire Agreement. The Support Documents and the Merger Agreement embody
the entire agreement and understanding of each of the parties hereto, and
supersede all other written or oral prior agreements or understandings, with
respect to the subject matter of the Support Documents.
18. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of any Support Document were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the Support Documents and to enforce
specifically the terms and provisions of any Support Document in any Federal
court sitting in the State of Delaware or State of Delaware court, this being in
addition to any other remedy to which they are entitled at law or in equity.
19. Termination. This Agreement and the proxy set forth in Section 4 shall
terminate upon the earliest of the following dates (such date is referred to
herein as the "Termination Date"): (i) the date on which the Merger Agreement is
terminated in accordance with Article VIII thereof; (ii) the date on which
Parent terminates this Agreement upon written notice to Stockholder (Parent may
so terminate this Agreement and the proxy set forth herein at any time); (iii)
the Effective Time; and (iv) June 30, 2000.
20. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if all
signatures were on the same instrument.
21. WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT, AS A CONDITION OF
SUCH PARTY'S RIGHT TO ENFORCE OR DEFEND ANY RIGHT UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER SUPPORT DOCUMENT, WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS AGREEMENT OR ANY
OTHER SUPPORT DOCUMENT AND AGREES THAT ANY ACTION SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY.
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IN WITNESS WHEREOF, Parent, Sub and the undersigned Stockholder have caused
this Agreement to be duly executed as of the day and year first above written.
AT&T CORP.
By:
------------------------------
Name:
Title:
LMN CORPORATION
By:
------------------------------
Name:
Title:
GERALD R. MCNICHOLS
By:
------------------------------
Name:
Address:
-9-
SCHEDULE I
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No exceptions.