Exhibit 10.12
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MEDIA 100 INC.,
DERRINGER ACQUISITION CORP.
and
DIGITAL ORIGIN, INC.
Dated as of December 28, 1999
TABLE OF CONTENTS
ARTICLE I THE MERGER............................................2
SECTION 1.1 THE MERGER...............................................................2
SECTION 1.2 CONSUMMATION OF THE MERGER...............................................2
SECTION 1.3 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION...................2
SECTION 1.4 BY-LAWS OF THE SURVIVING CORPORATION.....................................2
SECTION 1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION......................2
SECTION 1.6 CLOSING..................................................................3
ARTICLE II CONVERSION AND EXCHANGE OF SECURITIES.....................................3
SECTION 2.1 CONVERSION OF CAPITAL STOCK..............................................3
SECTION 2.2 EXCHANGE OF CERTIFICATES.................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY 8
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.............................8
SECTION 3.2 ARTICLES OF INCORPORATION AND BY-LAWS....................................9
SECTION 3.3 CAPITALIZATION...........................................................9
SECTION 3.4 AUTHORITY RELATIVE TO THIS AGREEMENT....................................10
SECTION 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS..............................11
SECTION 3.6 SEC FILINGS; FINANCIAL STATEMENTS.......................................12
SECTION 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS....................................12
SECTION 3.8 NO UNDISCLOSED LIABILITIES..............................................13
SECTION 3.9 ABSENCE OF LITIGATION...................................................13
SECTION 3.10 AGREEMENTS, CONTRACTS AND COMMITMENTS...................................13
SECTION 3.11 COMPLIANCE; PERMITS.....................................................14
SECTION 3.12 EMPLOYEE BENEFIT PLANS, OPTIONS
AND EMPLOYMENT AGREEMENTS...............................................14
SECTION 3.13 LABOR MATTERS...........................................................16
SECTION 3.14 PROPERTIES; ENCUMBRANCES................................................17
SECTION 3.15 TAXES...................................................................17
SECTION 3.16 ENVIRONMENTAL MATTERS...................................................19
SECTION 3.17 INTELLECTUAL PROPERTY...................................................20
SECTION 3.18 INSURANCE...............................................................21
SECTION 3.19 RESTRICTIONS ON BUSINESS ACTIVITIES.....................................21
SECTION 3.20 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS......................22
SECTION 3.21 INTERESTED PARTY TRANSACTIONS...........................................22
SECTION 3.22 CHANGE IN CONTROL PAYMENTS..............................................23
SECTION 3.23 YEAR 2000 COMPLIANCE....................................................23
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SECTION 3.24 POOLING; TAX MATTERS....................................................24
SECTION 3.25 NO EXISTING DISCUSSIONS.................................................24
SECTION 3.26 OPINION OF FINANCIAL ADVISOR............................................25
SECTION 3.27 BROKERS.................................................................25
SECTION 3.28 AFFILIATES..............................................................25
SECTION 3.29 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS.......................25
SECTION 3.30 ABSENCE OF CERTAIN PAYMENTS.............................................25
SECTION 3.31 FULL DISCLOSURE.........................................................25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB 26
SECTION 4.1 ORGANIZATION AND QUALIFICATION..........................................26
SECTION 4.2 CERTIFICATE OF INCORPORATION AND BY-LAWS................................27
SECTION 4.3 CAPITALIZATION..........................................................27
SECTION 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT....................................28
SECTION 4.5 NO CONFLICT, REQUIRED FILINGS AND CONSENTS..............................29
SECTION 4.6 SEC FILINGS; FINANCIAL STATEMENTS.......................................29
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS....................................30
SECTION 4.8 NO UNDISCLOSED LIABILITIES..............................................30
SECTION 4.9 COMPLIANCE..............................................................31
SECTION 4.10 ABSENCE OF LITIGATION...................................................31
SECTION 4.11 EMPLOYEE BENEFIT PLANS, OPTIONS
AND EMPLOYMENT AGREEMENTS...............................................31
SECTION 4.12 LABOR MATTERS...........................................................33
SECTION 4.13 PROPERTIES; ENCUMBRANCES................................................33
SECTION 4.14 TAXES...................................................................34
SECTION 4.15 ENVIRONMENTAL MATTERS...................................................35
SECTION 4.16 INTELLECTUAL PROPERTY...................................................35
SECTION 4.17 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS......................37
SECTION 4.18 YEAR 2000 COMPLIANCE....................................................37
SECTION 4.19 BROKERS.................................................................38
SECTION 4.20 OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES............................38
SECTION 4.21 POOLING; TAX MATTERS....................................................39
SECTION 4.22 AFFILIATES..............................................................39
ARTICLE V CONDUCT OF BUSINESS.........................................39
SECTION 5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER...................39
SECTION 5.2 CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER........................41
SECTION 5.3 ADVICE OF CHANGES.......................................................42
SECTION 5.4 COOPERATION.............................................................42
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ARTICLE VI ADDITIONAL AGREEMENTS.........................................42
SECTION 6.1 ACCESS TO INFORMATION; CONFIDENTIALITY..................................42
SECTION 6.2 NO SOLICITATION.........................................................43
SECTION 6.3 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT......................46
SECTION 6.4 SHAREHOLDERS' AND STOCKHOLDERS' MEETINGS................................46
SECTION 6.5 LEGAL CONDITIONS TO MERGER..............................................47
SECTION 6.6 AGREEMENTS WITH RESPECT TO AFFILIATES...................................48
SECTION 6.7 TAX-FREE REORGANIZATION.................................................48
SECTION 6.8 POOLING ACCOUNTING......................................................48
SECTION 6.9 LETTERS OF ACCOUNTANTS..................................................49
SECTION 6.10 PUBLIC ANNOUNCEMENTS....................................................49
SECTION 6.11 LISTING OF PARENT SHARES................................................49
SECTION 6.12 OPTIONS.................................................................49
SECTION 6.13 CONSENTS................................................................50
SECTION 6.14 INDEMNIFICATION AND INSURANCE...........................................50
SECTION 6.15 ADDITIONAL AGREEMENTS; BEST EFFORTS.....................................51
ARTICLE VII CONDITIONS TO THE MERGER......................................51
SECTION 7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.............51
SECTION 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT
AND MERGER SUB..........................................................53
SECTION 7.3 ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY......................54
ARTICLE VIII TERMINATION...........................................54
SECTION 8.1 TERMINATION.............................................................54
SECTION 8.2 EFFECT OF TERMINATION...................................................56
SECTION 8.3 FEES AND EXPENSES.......................................................56
ARTICLE IX GENERAL PROVISIONS..........................................57
SECTION 9.1 NONSURVIVAL OF REPRESENTATIONS; WARRANTIES
AND AGREEMENTS..........................................................57
SECTION 9.2 NOTICES.................................................................57
SECTION 9.3 CERTAIN DEFINITIONS.....................................................58
SECTION 9.4 AMENDMENT...............................................................59
SECTION 9.5 EXTENSION; WAIVER.......................................................59
SECTION 9.6 HEADINGS................................................................60
SECTION 9.7 SEVERABILITY............................................................60
SECTION 9.8 ENTIRE AGREEMENT, NO THIRD PARTY BENEFICIARIES..........................60
SECTION 9.9 ASSIGNMENT..............................................................60
SECTION 9.10 INTERPRETATION..........................................................60
SECTION 9.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE...................60
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SECTION 9.12 GOVERNING LAW...........................................................61
SECTION 9.13 COUNTERPARTS............................................................61
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LIST OF EXHIBITS
Exhibit A Merger Agreement
Exhibit B Form of Company Affiliate Agreement
Exhibit C Form of Parent Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 28, 1999 (this
"Agreement"), by and among Media 100 Inc., a Delaware corporation ("Parent"),
Derringer Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and Digital Origin, Inc., a California
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have each determined that it is advisable and in the best interests
of their respective stockholders or shareholders that Parent acquire the Company
pursuant to the terms and conditions of this Agreement, and, in furtherance of
such acquisition, such Boards of Directors have approved the merger of Merger
Sub with and into the Company (the "Merger") in accordance with the terms of
this Agreement and the applicable provisions of the California General
Corporation Law (the "CGCL") and the Delaware General Corporation Law (the
"DGCL");
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement shall be, and is hereby, adopted as a plan of reorganization for
purposes of Section 368(a) of the Code; and
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with sections 1100 et seq. of the
CGCL, Merger Sub shall be merged with and into the Company at the Effective Time
of the Merger. Following the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights,
properties, liabilities and obligations of Merger Sub in accordance with the
CGCL and DGCL.
SECTION 1.2 CONSUMMATION OF THE MERGER. Upon the terms and subject to
the conditions set forth in this Agreement and the Agreement of Merger between
Merger Sub and the Company together with the related officers' certificates
required by section 1103 of the CGCL, in the form attached to this Agreement as
EXHIBIT A (the "Merger Agreement"), the parties hereto shall file the Merger
Agreement with the Secretary of State of the State of California, whereupon
Merger Sub shall be merged with and into the Company pursuant to sections 1100
et seq. of the CGCL. The parties hereto shall make all other filings, recordings
or publications required by the CGCL and DGCL in connection with the Merger. The
Merger shall become effective at the time specified in the Merger Agreement (the
"Effective Time").
SECTION 1.3 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. At
and after the Effective Time, the Articles of Incorporation attached as ANNEX I
to the Merger Agreement, shall be the Articles of Incorporation of the Surviving
Corpora tion, until amended in accordance with the CGCL.
SECTION 1.4 BY-LAWS OF THE SURVIVING CORPORATION. At and after the
Effective Time, the By-laws of the Company, as in effect immediately prior to
the Effective Time, shall be the By-laws of the Surviving Corporation, until
amended in accordance with the CGCL.
SECTION 1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
(a) The directors of Merger Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Articles of
Incorporation or By-laws of the Surviving Corporation or as otherwise provided
by law. In furtherance thereof, the Company shall secure, at the Effective Time,
such resignations of its incumbent directors as are necessary to enable the
designees of Parent to be elected or appointed to the Board of Directors of the
Company.
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(b) The officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Articles of Incorporation
or By-laws of the Surviving Corporation or as otherwise provided by law.
SECTION 1.6 CLOSING. Subject to satisfaction of the conditions set
forth in this Agreement, the closing of the Merger (the "Closing") shall take
place at 10:00 a.m., E.S.T., at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, One Beacon Street, Boston, Massachusetts on a date to be specified by
Parent and the Company which shall be no later than the second business day
after satisfaction or waiver of each of the conditions set forth in Article VII
or on such other date and at such other time and place as Parent and the Company
shall agree. The date on which the Closing shall occur is referred to herein as
the "Closing Date."
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES
SECTION 2.1 CONVERSION OF CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of the common stock, no par value, of the Company (the "Company Common
Stock") or capital stock of Merger Sub:
(a) COMPANY COMMON STOCK. Subject to this Article II, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive 0.5347, (the "Exchange Ratio")
of a share of common stock, par value $.01 per share, of Parent (the "Parent
Common Stock"), payable upon the surrender of the certificates which immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock (the "Certificates") that are to be converted, pursuant to this Section
2.1(a), into the right to receive shares of Parent Common Stock. All such shares
of Company Common Stock, when so converted, shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist and each
holder of a Certificate representing any such shares shall cease to have any
rights with respect thereto, except (i) dissenters' rights, if any, as described
in Section 2.1.(c), or (ii) the right to receive the shares of Parent Common
Stock pursuant to this Section 2.1(a), any dividends or other distributions
payable pursuant to Section 2.2(c) and any cash in lieu of fractional shares
payable pursuant to Section 2.2(d), all to be issued or paid in consideration
therefor upon the surrender of such Certificates in accordance with Section
2.2(b), without interest (collectively, the "Merger Consideration").
Notwithstanding the foregoing, the Exchange Ratio shall be adjusted to reflect
fully the effect of any stock split, reverse split, reclassification, stock
dividend, reorganization, recapitalization or other like change with respect to
Parent Common Stock or Company Common Stock occurring after the date hereof and
prior to the Effective Time.
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(b) COMPANY WARRANTS. The (i) warrant to purchase up to 60,000 shares
of Company Common Stock at $10.00 per share dated September 13, 1996 issued by
the Company to IBM Credit Corporation, (ii) warrant to purchase up to 5,000
shares of Company Common Stock at $10.00 per share dated October 13, 1996 issued
by the Company to Mitsubishi Electronics America, Inc., and (iii) warrant to
purchase up to 50,000 shares of Company Common Stock at $1.50 per share dated
November 23, 1998 issued by the Company to Post Digital Software, Inc.
(collectively, the "Company Warrants"), in each case to the extent issued and
outstanding immediately prior to the Effective Time, shall be converted into the
right to purchase Parent Common Stock in accordance with their respective terms.
(c) APPRAISAL RIGHTS. Holders of all shares of the outstanding capital
stock of the Company for which dissenters' rights, if any, shall have been
perfected under section 1300 et seq. of the CGCL (the "Dissenting Shares") shall
have those rights, but only those rights, of holders of "dissenting shares"
under section 1300 et seq. of the CGCL. The Company shall give Parent prompt
notice of any demand, purported demand or other communication received by the
Company with respect to any Dissenting Shares or shares claimed to be Dissenting
Shares and Parent shall have the right to participate in all negotiations and
proceedings with respect to such shares.
(d) CAPITAL STOCK OF MERGER SUB. Each common share, par value $.01 per
share, of Merger Sub ("Merger Sub Common Shares") issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable common share, par value $.01 per share, of the
Surviving Corporation.
(e) STOCK OPTIONS. Options to purchase shares of Company Common Stock
(i) granted under (x) the Company's 1994 Directors' Stock Option Plan, the
Company's 1990 Directors' Stock Option Plan, the Company's 1995 Stock Option
Plan, the 1988 SuperMac Option Plan or the Company's 1986 Stock Option Plan
(collectively, the "Company Stock Option Plans"), or (y) the Company's 1999
Employee Stock Purchase Plan (the "Company ESPP") or (ii) granted to James
Given, Charles Berger, Mark Housley, Brady Bruce, Mary Bobel, Cary Capece, Tom
Fristoe, Henry Morgan and Michael Glass (the "Other Company Options") shall be
treated in the manner set forth in Section 6.12.
SECTION 2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Closing Date, Parent shall designate a
bank or trust company to act as Exchange Agent hereunder (the "Exchange Agent").
As soon as practicable after the Effective Time, Parent shall deposit with or
for the account of the Exchange Agent stock certificates representing the number
of shares of Parent Common Stock issuable pursuant to Section 2.1(a) in exchange
for outstanding shares of Company Common Stock, which shares of Parent Common
Stock shall be deemed to have been issued at the Effective Time.
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(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, Parent will instruct the Exchange Agent to mail to each holder of record
of a Certificate or 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 proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may specify that are not inconsistent with the terms of this Agreement)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor (i) certificates evidencing that number of whole shares of
Parent Common Stock which such holder has the right to receive in accordance
with Section 2.1(a) in respect of the shares of Company Common Stock formerly
evidenced by such Certificate, (ii) any dividends or other distributions to
which such holder is entitled pursuant to Section 2.2(c) and (iii) any cash in
lieu of any fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.2(d), after giving effect to any tax
withholdings, and the Certificate so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of shares of Company Common Stock which is
not registered in the transfer records of the Company as of the Effective Time,
a certificate representing the proper number of shares of Parent Common Stock
may be issued to a transferee if the Certificate evidencing such Company Common
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer pursuant to this Section 2.2(b) and by
evidence that any applicable stock transfer taxes have been paid. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, to represent only (i) the right to
exercise dissenters rights, if any, as described in Section 2.1(c), or (ii) the
right to receive upon surrender the Merger Consideration.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED PARENT SHARES. No
dividends or other distributions with respect to shares of Parent Common Stock
for which the record date is after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock they are entitled to receive until the holder of such Certificate
surrenders such Certificate. Following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of Parent Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock. 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 described in this Agreement, and any holders of Company
5
Common Stock who have not theretofore complied with this Article II shall look
thereafter only to Parent for the shares of Parent Common Stock, any dividends
or distributions thereon, and any cash in lieu of fractional shares thereof to
which they are entitled pursuant to this Article II.
(d) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Cer-
tificates pursuant to this Article II; no dividend, stock split or
other change in the capital structure of Parent shall relate to any
fractional security; and such fractional interests shall not entitle
the owner thereof to vote or to any rights of a security holder.
(ii) As promptly as practicable following the Effective Time, the Ex-
change Agent will determine the excess of (A) the number of whole
shares of Parent Common Stock delivered to the Exchange Agent by Parent
pursuant to Section 2.2(a) over (B) the aggregate number of whole
shares of Parent Common Stock to be distributed to holders of Company
Common Stock pursuant to Section 2.2(b) (such excess being herein
called the "Excess Shares"). Following the Effective Time, the Exchange
Agent will, on behalf of former shareholders of the Company, sell the
Excess Shares at then-prevailing prices on the Nasdaq National Market
(the "NASDAQ").
(iii) The Exchange Agent will use reasonable efforts to complete the
sale of the Excess Shares as promptly following the Effective Time as,
in the Exchange Agent's sole judgment, is practicable consistent with
obtaining the best execution of such sales in light of prevailing
market conditions. Until the net proceeds of such sale or sales have
been distributed to the holders of Company Common Stock, the Exchange
Agent will hold such proceeds in trust (the "Common Shares Trust").
Parent shall be entitled to any interest earned on such proceeds until
such proceeds have been distributed to the former holders of Company
Common Stock. The Surviving Corporation will pay all commissions,
transfer taxes and other out-of-pocket transaction costs, including the
expenses and compensation of the Exchange Agent incurred in connection
with such sale of the Excess Shares. The Exchange Agent will determine
the portion of the Common Shares Trust to which each former holder of
Company Common Stock is entitled, if any, by multiplying the amount of
the aggregate net proceeds comprising the Common Shares Trust by a
fraction, the numerator of which is the amount of the fractional share
interest to which such former holder of Company Common Stock is
entitled (after taking into account all shares of Company Common Stock
held at the Effective Time by such holder) and the denominator of which
is the aggregate amount of fractional share interests to which all
holders of Company Common Stock are entitled. For purposes of this
Section 2.2(d), shares of Company Common Stock of any former holder
represented by two or more
6
Certificates shall be aggregated and in no event shall any holder be
paid an amount of cash in respect of more than one share of Parent
Common Stock.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to the former holders of Company Common Stock
with respect to any fractional share interests, the Exchange Agent will
hold such cash amounts for the benefit of, and pay such cash amounts
to, such former holders of Company Common Stock subject to and in
accordance with the terms of Section 2.2(b).
(e) NO LIABILITY. Neither Parent, Merger Sub nor the Company shall be
liable to any holder of Company Common Stock or Parent Common Stock, as the case
may be, for such shares (or dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law following the passage of time specified therein.
(f) WITHHOLDING RIGHTS. Parent or the Exchange Agent shall be entitled
to deduct and withhold from the Merger Consideration otherwise payable pursuant
to this Agreement to any holder of Company Common Stock such amounts as Parent
or the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code, or 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 of Parent Common Stock
in respect of which such deduction and withholding was made by Parent or the
Exchange Agent.
(g) CLOSING OF SHARE TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and thereafter there shall be no
further registration of transfers on the stock transfer books of the Company or
the Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to such time. If, after such time, Certificates
are presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Article II.
(h) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof the Merger
Consideration as provided in this Article II; PROVIDED, HOWEVER, that Parent
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificates to deliver an
agreement of indemnification in form satisfactory to Parent, or a bond in such
sum as Parent may direct as indemnity against any claim that may be made
against Parent or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that the
statements contained in this Article III are true and correct, except as set
forth in the Company Disclosure Schedule, dated as of the date hereof, prepared
by the Company and delivered to Parent in connection herewith (the "Company
Disclosure Schedule"). The Company Disclosure Schedule is arranged in sections
corresponding to the numbered and lettered sections contained in this Article
III and shall qualify only the corresponding Section in this Article III.
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company
and each of its Subsidiaries 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 necessary to own, lease and
operate the properties it purports to own, lease or operate and to carry on its
business as it is now being conducted or presently proposed to be conducted. The
Company and each of its Subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could not
be expected to have a Company Material Adverse Effect. A true, complete and
correct list of all of the Company's Subsidiaries, together with the
jurisdiction of incorporation of each Subsidiary, the authorized capitalization
of each Subsidiary, and the percentage of each Subsidiary's outstanding capital
stock owned by the Company or another Subsidiary, is set forth in Section 3.1 of
the Company Disclosure Schedule. 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
corporation, partnership, joint venture or other business association or entity,
excluding securities in any publicly traded company held for investment by the
Company and comprising less than one percent of the outstanding stock of such
company. As used in this Agreement, the word "Subsidiary" means, with respect to
any party, any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such party is
a general partner (excluding partnerships, the general partnership interests of
which are held by such party or any Subsidiary of such party that do not have a
majority of the voting interest in such partnership), (ii) such party or any
Subsidiary of such party owns in excess of a majority of the outstanding equity
or voting securities or (iii) at least a majority of the board of directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly appointed or controlled by such party or
by any one or more of its Subsidiaries. The term "Company Material Adverse
Effect" means any change, effect or circumstance that, individually or when
taken together with all other changes, effects or circumstances that have
occurred or reasonably could be expected to occur prior to the date of
determination of the
8
occurrence of the Company Material Adverse Effect, (i) is materially adverse to
the business, prospects, assets (including intangible assets), condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole or (ii) could materially delay or prevent the
consummation of the transactions contemplated hereby. Changes in economic or
market conditions affecting the software industry generally, changes in the
Company's stock price, failure to meet the Company's revenue projections for the
second quarter of fiscal year 2000 (except as set forth below) or any loss of a
supplier, customer or employee resulting from the Merger or its announcement to
the extent so resulting will be deemed not to constitute a Company Material
Adverse Effect; revenue of 25% or more below the amount set forth in Section 3.1
of the Company Disclosure Schedule for the second quarter of fiscal year 2000
will be deemed to constitute a Company Material Adverse Effect.
SECTION 3.2 ARTICLES OF INCORPORATION AND BY-LAWS. The Company has
heretofore furnished to Parent a true, complete and correct copy of its Articles
of Incorporation, as amended to date (the "Company Charter"), and By-Laws, as
amended to date (the "Company By-Laws"), and the charter and by-laws (or equiva-
lent organizational documents), as amended to date, of each of its Subsidiaries
(the "Subsidiary Documents"). Such Company Charter, Company By-Laws and Subsid-
iary Documents are in full force and effect. Neither the Company nor any of its
Subsidiaries is in violation of any of the provisions of the Company Charter,
Company By-Laws or Subsidiary Documents, as the case may be.
SECTION 3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 100,000,000
shares of Company Common Stock, and 2,000,000 shares of preferred stock, no par
value per share (the "Company Preferred Stock"). As of December 13, 1999: (i)
5,611,048 shares of Company Common Stock are issued and outstanding, 836,250
shares of Company Common Stock are reserved for issuance upon exercise of
options granted pursuant to the Company Stock Option Plans, 122,568 (as of
commencement of the current purchase period ending on February 29, 2000) shares
of Company Common Stock are reserved for issuance upon exercise of options
granted under the Company ESPP, 415,785 shares of Company Common Stock are
reserved for issuance upon exercise of the Other Company Options, 115,000 shares
of Company Common Stock are reserved for issuance upon exercise of the Company
Warrants, and no shares of Company Common Stock are issued and held in the
treasury of the Company; and (ii) no shares of Company Preferred Stock are
issued and outstanding. All outstanding shares of Company Common Stock are, and
all shares of Company Common Stock subject to issuance as specified above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the CGCL, the Company Charter
or the Company By-Laws
9
or any agreement to which the Company is a party or is otherwise bound. No
material change in such capitalization has occurred since December 13, 1999. All
of the outstanding shares of capital stock of each of the Company's Subsidiaries
are duly authorized, validly issued, fully paid and nonassessable, and all such
shares are owned by the Company free and clear of all security interests, liens,
claims, pledges, agreements, limitations in voting rights, charges or other
encumbrances of any nature whatsoever (collectively, "Liens"). There are no
accrued and unpaid dividends with respect to any outstanding shares of capital
stock of the Company or any of its Subsidiaries.
(b) Except as described in Section 3.3(a) of this Agreement, there are
no equity securities of any class of the Company or any of its Subsidiaries or
any security exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except as described in Section
3.3(a) of this Agreement, there are no options, warrants, calls, rights,
commitments or agreements of any character to which the Company or any of its
Subsidiaries is a party, or by which the Company or any of its Subsidiaries is
bound, obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of the Company or any of its Subsidiaries or obligating the Company or any
of its Subsidiaries to grant, extend or accelerate the vesting of or enter into
any such option, warrant, call, right, commitment or agreement. There are no
voting trusts, proxies or other similar agreements or understandings with
respect to the shares of capital stock of the Company or any of its
Subsidiaries. There are no obligations, contingent or otherwise, of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or any of its Subsidiaries or to provide funds
to or make any investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity.
SECTION 3.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Subject only to the
approval of the Company's shareholders described below, the Company has all
necessary corporate power and authority to execute and deliver this Agreement
and each instrument required hereby to be executed and delivered by it (the
"Company Merger Documents") at the Closing and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of the Company Merger Documents and the
consummation of the transactions contemplated by the Company Merger Documents
have been duly and validly authorized by all necessary corporate action on the
part of the Company, subject only to the approval of this Agreement and the
Merger by the Company's shareholders (the "Company Voting Proposal") under the
CGCL and the Company Charter by the affirmative vote of the holders of a
majority of the voting power of the outstanding shares of Company Common Stock.
This Agreement has been duly and validly executed and delivered by the Company
and constitutes, and when executed and delivered by the Company each of the
other Company Merger Documents will constitute, assuming the due authorization,
execution and delivery by Parent and Merger Sub, as applicable, the legal, valid
and binding obligation of
10
the Company, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law). The
Board of Directors of the Company has determined that it is advisable and in the
best interests of the Company's shareholders for the Company to enter into a
business combination with Parent upon the terms and subject to the conditions of
this Agreement, and has recommended that the Company's shareholders approve the
Company Voting Proposal.
SECTION 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of the Company Merger Documents does
not, and the performance of the Company Merger Documents by the Company will
not, (i) conflict with or violate the Company Charter or Company By-Laws, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its Subsidiaries or by which its or any of
their respective properties is bound or affected, or (iii) 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), or impair the Company's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties or
assets of the Company or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or its or any of
their respective properties is bound or affected; other than such conflicts,
breaches, defaults, impairments or other effects under (iii) of this Section
3.5(a) that have not had and could not reasonably be expected to have a Company
Material Adverse Effect.
(b) The execution and delivery of this Agreement or any instrument
required hereby to be executed and delivered by the Company at the Closing does
not, and the performance of this Agreement by the Company or its Subsidiaries
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any court, administrative or regulatory agency or
commission or other governmental authority or instrumentality (whether domestic
or foreign, a "Governmental Entity"), except (i) the filing of the pre-merger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) the filing of a Registration Statement on
Form S-4 (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") in accordance with the Securities Act of 1933, as
amended (the "Securities Act"), and the filing of the Proxy Statement/Prospectus
with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (iii) such consents, approvals,
11
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the laws of any
foreign country and (iv) the filing and recordation of the Merger Agreement or
other documents as required by the CGCL.
SECTION 3.6 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has timely filed all forms, reports, schedules, state
ments and other documents, including any exhibits thereto, required to be filed
by the Company with the SEC, since September 30, 1998 (collectively, the
"Company SEC Reports"). The Company SEC Reports (i) at the time filed, complied
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act, as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Company SEC Reports or necessary in order to make the statements in such Company
SEC Reports, in light of the circumstances under which they were made, not
misleading. None of the Company's Subsidiaries are required to file any forms,
reports, schedules, statements or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes), contained in the Company SEC Reports, including any
Company SEC Reports filed after the date of this Agreement until the Closing,
complied, as of its respective date, in all material respects with all
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles ("GAAP") (except as may be indicated in the notes thereto)
applied on a consistent basis throughout the periods involved and fairly
presented the consolidated financial position of the Company and its
Subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount. The audited balance sheet of the Company as of September 30, 1999 is
referred to herein as the "Company Balance Sheet."
SECTION 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
Company Balance Sheet, the Company has conducted its business in the ordinary
course consistent with past practice and, since such date, there has not
occurred: (i) any change, development, event or other circumstance, situation or
state of affairs that has had or could reasonably be expected to have a Company
Material Adverse Effect; (ii) any amendments to or changes in the Company
Charter or Company By-Laws; (iii) any damage to, destruction or loss of any
asset of the Company or any of its Subsidiaries (whether or not covered by
insurance) that could reasonably be expected to have a Company Material Adverse
Effect; (iv) any change by the Company in its accounting methods, principles or
practices; (v) any revaluation by
12
the Company of any of its assets, including, without limitation, writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business consistent with past practice; (vi) any sale of
a material amount of assets (tangible or intangible) of the Company; or (vii)
any other action or event that would have required the consent of Parent
pursuant to Section 5.1 had such action or event occurred after the date of this
Agreement.
SECTION 3.8 NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Company SEC Reports, neither the Company nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise), except liabilities (a)
adequately reflected in the Company Balance Sheet, (b) incurred in the ordinary
course of business consistent with past practice and not required under GAAP to
be reflected in the Company Balance Sheet, (c) incurred since the date of the
Company Balance Sheet in the ordinary course of business consistent with past
practice or (d) incurred in connection with this Agreement.
SECTION 3.9 ABSENCE OF LITIGATION. There are no claims, actions, suits,
proceedings or investigations (i) pending against the Company or any of its
Subsidiaries or any properties or assets of the Company or of any of its
Subsidiaries or (ii) to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or assets of the Company
or of any of its Subsidiaries, in each case, which claims, actions, suits,
proceedings or investigations could reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.10 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Section 3.10(a) of the Company Disclosure Schedule sets forth a
list of (i) all agreements, contracts or other instruments containing
non-competition or similar restrictive provisions with respect to the Company or
any of its Subsidiaries and (ii) all agreements, contracts or other instruments
which, as of the date hereof, the Company is required to file as "material
contracts" with the SEC pursuant to the requirements of the Exchange Act.
(b) (i) Neither the Company nor any of its Subsidiaries has breached
(without cure), is in default under, or has received written notice of any
breach of or default under, any agreements, contracts or other instruments
required to be disclosed in Section 3.10(a) of the Company Disclosure Schedule
(each, a "Material Contract"), (ii) to the Company's knowledge, no other party
to any Material Contract has breached or is in default of any of its obligations
thereunder, (iii) each Material Contract is in full force and effect and (iv)
each Material Contract is a legal, valid and binding obligation of the Company
or its Subsidiary and, to the knowledge of the Company or any of its
Subsidiaries, each of the other parties thereto, enforceable in accordance with
its terms, except that the enforcement thereof may be limited by (A) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
13
hereafter in effect relating to creditors' rights generally and (B) general
principles of equity.
SECTION 3.11 COMPLIANCE; PERMITS.
(a) Neither the Company nor any of its Subsidiaries is in conflict
with, or in default or violation of (and has not received any notices of
violation with respect to), any (i) law, rule or regulation, or (ii) order,
judgment or decree applicable to the Company or any of its Subsidiaries or by
which its or any of their respective properties is bound or affected, and the
Company is not aware of any such conflict, default or violation thereunder
(other than any conflicts, defaults or violations under (i) of this Section
3.11(a) that have not had and could not reasonably be expected to have a Company
Material Adverse Effect).
(b) The Company and its Subsidiaries hold all permits, licenses, ease
ments, variances, exemptions, consents, certificates, authorizations,
registrations, orders and other approvals from any arbitrator, court, nation,
government, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial regulatory or administrative
functions of, or pertaining to, government that are material to the operation of
the business of the Company and its Subsidiaries taken as a whole as it is now
being conducted (collectively, the "Company Permits"). The Company Permits are
in full force and effect, have not been violated and no suspension, revocation
or cancellation thereof has been threatened and there is no action, proceeding
or investigation pending or threatened regarding suspension, revocation or
cancellation of any Company Permit.
SECTION 3.12 EMPLOYEE BENEFIT PLANS, OPTIONS AND EMPLOYMENT
AGREEMENTS.
(a) Section 3.12(a) of the Company Disclosure Schedule contains a true
and complete list of (i) each deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; (ii) each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")); (iii)
each profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA); (iv) each employment, termination
or severance agreement; and (v) each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by the Company or by any trade
or business, whether or not incorporated (an "ERISA Affiliate"), that together
with the Company would be deemed a "single employer" within the meaning of
Section 4001(b) of ERISA, or to which the Company or an ERISA Affiliate is
party, whether written or oral, for the benefit of any employee or former
employee of the Company or any of its Subsidiaries (collectively, the "Company
Plans"). No Company Plan is subject to Section 302 or Title IV of ERISA or
Section
14
412 of the Code. Neither the Company, any of its Subsidiaries nor any ERISA
Affiliate has any commitment or formal plan, whether legally binding or not, to
create any additional employee benefit plan or modify or change any existing
Company Plan that would affect any employee or former employee of the Company or
any of its Subsidiaries.
(b) With respect to each Company Plan, the Company has heretofore
delivered or made available to Parent true and complete copies of each of the
following documents: (i) a copy of the Company Plan and any amendments thereto
(or if the Company Plan is not a written Company Plan, a description thereof);
(ii) a copy of the two most recent annual reports and actuarial reports, if
required under ERISA, and the most recent report prepared with respect thereto
in accordance with Statement of Financial Accounting Standards No. 87; (iii) a
copy of the most recent Summary Company Plan Description required under ERISA
with respect thereto; (iv) if the Company Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding agreement and
the latest financial statements thereof; and (v) the most recent determination
letter received from the IRS with respect to each Company Plan intended to
qualify under Section 401 of the Code.
(c) No liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability, other than liability for
premiums due to the Pension Benefit Guaranty Corporation (which premiums have
been paid when due).
(d) All contributions required to be made with respect to any Company
Plan on or prior to the Effective Time have been timely made or are reflected on
the Company Balance Sheet.
(e) Neither the Company nor any of its Subsidiaries, any Company Plan,
any trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which the Company or any of its
Subsidiaries, any Company Plan, any such trust, or any trustee or administrator
thereof, or any party dealing with any Company Plan or any such trust could be
subject to either a civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code.
(f) Each Company Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including but
not limited to ERISA and the Code. There are no pending, threatened or
anticipated claims by or on behalf of any Company Plan, by any employee or
beneficiary covered under any such Company Plan, or otherwise involving any such
Company Plan (other than routine claims for benefits).
15
(g) Each Company Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified and the trusts maintained thereunder
are exempt from taxation under Section 501(a) of the Code. Each Company Plan
intended to satisfy the requirements of Section 501(c)(9) has satisfied such
requirements.
(h) No Company Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for employees or former employees
of the Company or any of its Subsidiaries for periods extending beyond their
retirement or other termination of service, other than (i) coverage mandated by
applicable law, (ii) death benefits under any "pension plan," or (iii) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary). No condition exists that would prevent the Company or any of its
Subsidiaries from amending or terminating any Company Plan providing health or
medical benefits in respect of any active or former employee of the Company or
any of its Subsidiaries.
(i) No amounts payable under the Company Plans have failed, or as a
result of the transactions contemplated hereby will fail, to be deductible for
federal income tax purposes by virtue of Sections 162(m) or 280G of the Code.
(j) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event, (i)
entitle any current or former employee or officer of the Company or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement, or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due any such
employee or officer.
SECTION 3.13 LABOR MATTERS. (a) There are no controversies pending or,
to the knowledge of the Company or any of its Subsidiaries, threatened, between
the Company or any of its Subsidiaries and any of their respective employees,
consultants or independent contractors; (b) neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or its
Subsidiaries, nor does the Company or any of its Subsidiaries know of any
activities or proceedings of any labor union to organize any such employees; and
(c) neither the Company nor any of its Subsidiaries has any knowledge of any
labor disputes, strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of, or consultants or independent
contractors to, the Company or any of its Subsidiaries.
SECTION 3.14 PROPERTIES; ENCUMBRANCES. The Company and each of its
Subsidiaries have good, valid and marketable title to, or a valid leasehold
interest in, all the tangible properties and assets which it purports to own or
lease (real, personal and mixed), including, without limitation, all the
properties and assets reflected in the Company Balance Sheet (except for
personal property sold since the date of the Company Balance Sheet in the
ordinary course of business consistent with past practice). All properties and
assets reflected in the Company Balance Sheet are free
16
and clear of all Liens, except for Liens reflected on the Company Balance Sheet
and Liens for current taxes not yet due and other Liens that do not materially
detract from the value or impair the use of the property or assets subject
thereto.
SECTION 3.15 TAXES.
(a) The Company and each of its Subsidiaries have timely filed with the
appropriate taxing authorities all Tax Returns required to be filed by them
(giving effect to valid extensions) and all such Tax Returns are true, correct
and complete in all material respects. Each group of corporations with which the
Company or any of its Subsidiaries has filed (or was required to file)
consolidated, combined, unitary or similar Tax Returns (an "Affiliated Group")
has timely filed all income and other material Tax Returns that it was required
to file (giving effect to valid extensions) with respect to any period in which
the Company or any of its Subsidiaries was a member of such Affiliated Group
(each such Tax Return, an "Affiliated Return") and all such Affiliated Returns
are true, correct and complete in all material respects. All material Taxes due
and owing by the Company and its Subsidiaries have been timely paid or
adequately reserved for. There are no Tax Liens on any assets of the Company or
any Subsidiary thereof other than liens relating to current Taxes not yet due
and payable. Neither the Company, any of its Subsidiaries nor any member of any
Affiliated Group has granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax. No
power of attorney has been granted with respect to any matter relating to Taxes
of the Company or any of its Subsidiaries which is currently in force.
(b) Neither the Company nor any of its Subsidiaries is, or has been, a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(c) The Company and each of its Subsidiaries have complied in all
material respects with all applicable laws, rules and regulations relating to
Taxes required to be withheld or collected, including, without limitation, Taxes
required to be withheld pursuant to Sections 1441 and 1442 of the Code and Taxes
required to be withheld from employee wages. The Company has delivered to Parent
true, correct and complete copies of all (i) income and other material Tax
Returns filed by the Company and each of its Subsidiaries and (ii) Affiliated
Returns, in each case since the date of September 28, 1996. None of the Company,
any of its Subsidiaries or any member of any Affiliated Group has received any
notice of any audit examination, deficiency, refund litigation, proposed
adjustment or matter in controversy with respect to any Taxes or Tax Return of
the Company, any of its Subsidiaries or any Affiliated Group, and no audits or
other administrative proceedings or court proceedings with respect to any Taxes
or Tax Return of the Company, any of its Subsidiaries or any Affiliated Group
are in progress. No taxing authority has asserted that the Company, any of its
Subsidiaries or any Affiliated Group was
17
required to file any Tax Return that was not filed. Neither the Company nor any
of its Subsidiaries is a "consenting corporation" within the meaning of Section
341(f) of the Code or has agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries is a party to or bound by any Tax
indemnity, sharing, allocation, or similar contract or arrangement. Neither the
Company nor any of its Subsidiaries is or has ever been a member of a group of
corporations with which it has filed (or been required to file) consolidated,
combined, unitary or similar Tax Returns, other than a group of which only the
Company and its Subsidiaries are or were members. Neither the Company nor any of
its Subsidiaries has agreed to, or is required to, make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
(d) The statute of limitations for the assessment of Taxes has expired
for all Tax Returns of the Company and its Subsidiaries and any Affiliated
Group, or those Tax Returns have been audited and closed by the appropriate
taxing authorities. The Company has delivered to Parent true, correct and
complete copies of each of (i) all audit reports, letter rulings, technical
advice memoranda and similar documents issued by a taxing authority relating to
Taxes of, or with respect to, the Company or any of its Subsidiaries and (ii)
any closing agreements entered into by the Company or any of its Subsidiaries
with any taxing authority.
(e) For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes,
fees, levies, duties, tariffs, imposts and governmental impositions or charges
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority, including without limitation (i)
income, franchise, profits, gross receipts, AD VALOREM, net worth, value added,
sales, use, service, real or personal property, special assessments, capital
stock, license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premium, windfall profits, transfer and gains taxes and (ii)
interest, penalties, additional taxes and additions to tax imposed with respect
thereto; and "Tax Returns" shall mean returns, reports, declarations, schedules,
certificates, information statements and other similar documents with respect to
Taxes (including any supporting information) required to be filed with the IRS
or any other taxing authority, domestic or foreign, including, without
limitation, consolidated, combined or unitary tax returns, claims for refund,
amended returns, or declarations of estimated Tax.
SECTION 3.16 ENVIRONMENTAL MATTERS.
(a) The Company and its Subsidiaries are in full compliance with all
applicable Environmental Laws; neither the Company nor any of its Subsidiaries
has received any communication whether from a Governmental Entity, citizens
group, employee or otherwise, that alleges that the Company or any of its
Subsidiaries are
18
not in such full compliance; and, to the Company's best knowledge, there are no
circumstances that may prevent, interfere with, such full compliance in the
future.
(b) There is no Environmental Claim pending or threatened against the
Company or any of its Subsidiaries or, to the Company's knowledge, against any
person or entity whose liability for any Environmental Claim the Company or any
of its Subsidiaries have or may have retained or assumed either contractually or
by operation of law.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including the Release, emission, discharge or
disposal of any Hazardous Materials, that could form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or, to the
Company's knowledge, against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries have or may have
retained or assumed either contractually or by operation of law.
(d) The Company and its Subsidiaries have delivered or otherwise made
available for inspection to Parent true, complete and correct copies and results
of any audits, reports, studies, analyses, tests or monitoring possessed or
initiated by the Company or its Subsidiaries pertaining to Hazardous Materials
in, on, beneath or adjacent to any property currently or formerly owned,
operated or leased by the Company or its Subsidiaries or regarding the Company's
or its Subsidiaries' compliance with applicable Environmental Laws.
(e) "Environmental Claim" means any claim, action, cause of action,
investigation or notice by any person or entity alleging potential liability
arising out of, based on or resulting from (i) the presence, or release into the
environment, of any Hazardous Material at any location, whether or not owned by
the Company or any of its Subsidiaries or (ii) circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law.
(f) "Environmental Laws" means all federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment, including without limitation laws and regulations relating to
emissions, discharges, releases or threatened releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials.
(g) "Hazardous Materials" means chemicals, pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, all substances
defined as Hazardous Substances, Hazardous Wastes, Oils, Pollutants or
Contaminants in the National Oil and Hazardous Substances Pollution Contingency
Plan, 40 C.F.R.
19
ss. 300.5, or defined as such by, or otherwise regulated under, any
Environmental Law.
(h) "Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater and surface or subsurface strata) or into or out of
any property, including the movement of Hazardous Materials through or in the
air, soil, surface water, groundwater or property.
SECTION 3.17 INTELLECTUAL PROPERTY.
(a) The Company or its Subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use (free and clear of all liens and
encumbrances), all trademarks, service marks, trade names, copyrights, Internet
domain names, mask works, including any registrations or applications for
registration thereof, patents and patent applications, and trade secrets,
including technology, know-how, processes, schematics, computer software
programs or applications, and all other tangible or intangible proprietary
information or material, that is used in the business of the Company and its
Subsidiaries as currently conducted (the "Company Intellectual Property
Rights"). Set forth in Section 3.17(a) of the Company Disclosure Schedule is a
list of all Company-owned patents and patent applications, registered and
unregistered trademarks and service marks, and copyright and mask work
registrations.
(b) Either the Company or one of its Subsidiaries is the sole and
exclusive owner of all right, title and interest in and to (free and clear of
any Liens), or is the exclusive or non-exclusive licensee of, the Company
Intellectual Property Rights, and, in the case of Company Intellectual Property
Rights owned by the Company or any of its Subsidiaries, has sole and exclusive
rights (and is not contractually obligated to pay any compensation to any third
party in respect thereof) to the use thereof and the material covered thereby.
No claims have been asserted or, to the Company's knowledge, are threatened by
any person (i) to the effect that the manufacture, sale, licensing or use of
any of the products or services of the Company or any of its Subsidiaries as now
manufactured, sold or licensed or used or proposed for manufacture, use, sale or
licensing by the Company or any of its Subsidiaries infringes any intellectual
property rights of any third party, (ii) against the use by the Company or any
of its Subsidiaries of any trademarks, service marks, trade names, trade
secrets, copyrights, patents, technology or know-how used in the business of the
Company and its Subsidiaries as currently conducted or as presently proposed to
be conducted, or (iii) challenging the ownership or use by the Company or any of
its Subsidiaries or the validity of any of the Company Intellectual Property
Rights. All patents and trademark, service mark, copyright and mask work
registrations held by the Company and its Subsidiaries and used in the business
of the Company or its Subsidiaries as currently conducted or as presently
proposed to be conducted are valid, subsisting, in full force and effect, and
have not lapsed, expired or been
20
cancelled or abandoned. To the knowledge of the Company, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any of its Subsidiaries. No Company
Intellectual Property Right or product or service of the Company or any of its
Subsidiaries is subject to any outstanding decree, order, judgment or
stipulation restricting in any manner the use, sale or licensing thereof by the
Company or any of its Subsidiaries. No current or former partner, director,
officer or employee of the Company or any of its Subsidiaries will, after
giving effect to the transactions contemplated hereby, own or retain any rights
in or to any of the Company Intellectual Property. Neither the Company nor any
of its Subsidiaries has entered into any agreement under which the Company or
its Subsidiaries is restricted from using or licensing any Company Intellectual
Property Right in any manner anywhere in the world, or selling or otherwise
distributing any of its products or services.
(c) Neither the Company nor any Subsidiary is, or as a result of the
execution or delivery of this Agreement or the performance of its obligations
hereunder will be in violation of any license, sublicense, agreement or
instrument to which the Company or such Subsidiary is a party or otherwise
bound, nor will the consummation of the transactions contemplated hereby result
in any material loss or impairment of the Company or any Subsidiary's ownership
of or right to use any of the Company Intellectual Property, nor require the
consent of any Governmental Entity or third party with respect to any of the
Company Intellectual Property.
SECTION 3.18 INSURANCE. To the Company's best knowledge, after
reasonable inquiry, all fire and casualty, general liability, business
interruption, product liability, sprinkler and water damage insurance policies
and other forms of insurance maintained by the Company or any of its
Subsidiaries are with reputable insurance carriers, provide adequate coverage
for all normal risks incident to the business of the Company and its
Subsidiaries and their respective properties and assets and are in character and
amount and with such deductibles and retained amounts as generally carried by
persons engaged in similar businesses and subject to the same or similar perils
or hazards.
SECTION 3.19 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, there is no agreement, judgement, injunction, order or decree binding
upon the Company or any of its Subsidiaries which has or could be expected to
have the effect of prohibiting or impairing any business practice of the Company
or any of its Subsidiaries, acquisition of property by the Company or any of its
Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted or as proposed to be conducted by the
Company.
SECTION 3.20 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by the Company for inclusion in the Registration Statement
shall not at the time the Registration Statement is declared effective by the
SEC
21
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The information supplied by the Company for inclusion or
incorporation by reference in the proxy statement/prospectus (as amended or
supplemented, the "Proxy Statement/Prospectus") to be sent to the shareholders
of the Company in connection with the meeting of the shareholders of the Company
to consider the Company Voting Proposal (the "Company Shareholders Meeting"),
and stockholders of Parent in connection with the meeting of the stockholders of
Parent to consider the issuance of the Parent Common Stock in the Merger (the
"Parent Stockholders Meeting"), shall not, on the date the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
mailed to shareholders of the Company and stockholders of Parent or at the time
of the Company Shareholders Meeting and the time of the Parent Stockholders
Meeting contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or shall omit to state any material fact necessary in
order to make the statements made therein not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Shareholders Meeting and the Parent Stockholders Meeting which has become false
or misleading. If at any time prior to the later of the Company Shareholders
Meeting and the Parent Stockholders Meeting any event relating to the Company or
any of its respective affiliates, officers or directors should be discovered by
the Company which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy State ment/Prospectus, the Company shall
promptly inform Parent. The Proxy State ment/Prospectus shall comply in all
material respects as to form and substance with the requirements of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Merger Sub which is
contained in the Registration Statement or the Proxy Statement/Prospectus.
SECTION 3.21 INTERESTED PARTY TRANSACTIONS. Since the date of the
Company's proxy statement dated January 19, 1999, no event has occurred that
would be required to be reported as a Certain Relationship or Related
Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 3.22 CHANGE IN CONTROL PAYMENTS. Neither the Company nor any of
its Subsidiaries have any agreements, other than as previously disclosed in
Section 3.12 of the Company Disclosure Schedule, to which they are parties, or
to which they are subject, pursuant to which payments may be required upon, or
may become payable directly or indirectly as a result of, a change of control of
the Company.
SECTION 3.23 YEAR 2000 COMPLIANCE.
22
(a) All of (i) the internal systems used in the business or operations
of the Company and its Subsidiaries, including without limitation computer
hardware systems, software, applications, firmware, equipment containing
embedded microchips and other embedded systems and (ii) the software, hardware,
firmware and other technology that constitute part of the products and services
manufactured, marketed, licensed or sold by the Company or any of its
Subsidiaries to third parties are Year 2000 Compliant.
(b) To the Company's knowledge, all third-party systems used in connec-
tion with the business, products, services or operations of the Company or any
of its Subsidiaries, including without limitation any system belonging to any of
the Company's or its Subsidiaries' vendors, co-venturers, service providers or
customers are Year 2000 Compliant. The Company and its Subsidiaries have
received satisfactory written assurances and warranties from all of their
respective vendors, co-venturers, service providers and customers that are
material to the ongoing operation of the business of the Company and its
Subsidiaries that past and future products, software, equipment, components or
systems provided by such parties are (or in the case of future products, will
be) Year 2000 Compliant.
(c) The Company has conducted "year 2000" audits with respect to (i)
each of the internal systems used in the business, products, services and
operations of the Company and its Subsidiaries, including without limitation
computer hardware systems, software, applications, firmware, equipment
containing embedded microchips and other embedded systems and (ii) all of the
software, applications, hardware, firmware and other technology which
constitute part of the products and services manufactured, marketed, performed
or sold by the Company or any of its Subsidiaries or licensed by the Company or
any of its Subsidiaries to third parties. The Company has obtained "year 2000"
certifications with respect to all material third-party systems used in
connection with the business or operations of the Company and its Subsidiaries,
including without limitation systems belonging to the vendors, co-venturers,
service providers and customers of the Company of any or its Subsidiaries. The
Company has made available to Parent true, complete and correct copies of all
"year 2000" audits, certifications, reports and other similar documents that
have been prepared or performed by or on behalf of the Company or any third
party with respect to the systems, business, operations, products or services of
the Company or any of its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has provided any
representation, warranty or guarantee for any product sold or licensed, or
service provided, by the Company or its Subsidiaries to the effect that such
product or service (i) complies with or accounts for the fact of the year change
from December 31, 1999 to January 1, 2000, (ii) will not be adversely affected
with respect to functionality, interoperability, connectivity, performance,
reliability or volume capacity (including without limitation the processing
storage, recall and reporting of data) by the passage of any date, including
without limitation the year change from December 31, 1999 to January 1, 2000 or
(iii) is otherwise Year 2000 Compliant.
23
(e) For purposes of this Agreement, "Year 2000 Compliant" means that
the applicable system, product, service or item:
(i) will accurately receive, record, store, provide,
recognize, recall and process all date and time data from, during, into and
between the years 1999, 2000 and 2001, and all years pertinent thereafter;
(ii) will accurately perform all date-dependent calculations
and operations (including without limitation, mathematical operations, sorting,
comparing and reporting) from, during, into and between the years 1999, 2000
and 2001, and all pertinent years thereafter; and
(iii) will not malfunction, cease to function or provide
invalid or incorrect results as a result of (A) the change of years from 1999 to
2000 or from 2000 to 2001, (B) date data, including date data which represents
or references different centuries, different dates during 1999, 2000 and 2001,
or more than one century or (C) the occurrence of any particular date;
in each case without human intervention, provided, in each case, that all
software, applications, hardware and other systems used in conjunction with such
system or item that are not owned or licensed by the Company or its Subsidiaries
correctly exchange date data with or provide data to such system or item.
SECTION 3.24 POOLING; TAX MATTERS. Neither the Company nor any of its
affiliates has taken or agreed to take any action or failed to take any action,
or has any reason to believe that any conditions exist, that would prevent (a)
Parent from accounting for the business combination to be effected by the Merger
as a pooling of interests or (b) the Merger from constituting a reorganization
within the meaning of Section 368(a) of the Code.
SECTION 3.25 NO EXISTING DISCUSSIONS. As of the date hereof, the
Company is not engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to an Acquisition Proposal (as
defined in Section 6.2(b)) or any other substantially similar proposal.
SECTION 3.26 OPINION OF FINANCIAL ADVISOR. The financial advisor of the
Company, First Security Van Kasper, has delivered to the Company an opinion
dated the date of this Agreement to the effect that as of the date of this
Agreement, the Merger Consideration is fair, from a financial point of view, to
the shareholders of the Company. The Company has provided a complete and correct
copy of such opinion to Parent.
SECTION 3.27 BROKERS. No broker, finder or investment banker (other
than First Security Van Kasper, whose brokerage, finder's or other fee will be
paid by the Company) is entitled to any brokerage, finder's or other fee or
commission in
24
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any of its Subsidiaries. The
Company has heretofore furnished to Parent a complete and correct copy of all
agreements between the Company and First Security Van Kasper pursuant to which
such firm would be entitled to any payment relating to the transactions
contemplated hereunder.
SECTION 3.28 AFFILIATES. Section 3.28 of the Company Disclosure
Schedule contains a true, complete and correct list of all persons who, as of
the date hereof, to the best knowledge of the Company, may be deemed to be
affiliates of the Company excluding all its Subsidiaries but including all
directors and executive officers of the Company.
SECTION 3.29 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each
current and former employee and officer of the Company has executed an
Agreement Regarding Confidential Information and Inventions, or an Employee
Proprietary Information Agreement or similar such agreement, in substantially
the form previously provided or made available to Parent. The Company is not
aware that any of the current or former employees of the Company is in
violation thereof.
SECTION 3.30 ABSENCE OF CERTAIN PAYMENTS. Neither the Company, nor, to
the Company's knowledge, any of its affiliates or any of their respective
officers, directors, employees or agents or other people acting on behalf of any
of them have: (i) engaged in any activity prohibited by the United States
Foreign Corrupt Practices Act of 1977 or any other similar law, regulation,
decree, directive or order of any Governmental Entity and (ii) without limiting
the generality of the preceding clause (i), used any corporate or other funds
for unlawful contributions, payments, gifts or entertainment, or made any
unlawful expenditures relating to political activity to government officials or
others. Neither the Company, nor, to the Company's knowledge, any of its
affiliates or any of their respective directors, officers, employees or agents
of other persons acting on behalf of any of them, has accepted or received any
unlawful contributions, payments, gifts or expenditures.
SECTION 3.31 FULL DISCLOSURE. To the Company's best knowledge, after
reasonable inquiry, no representation or warranty by the Company in this
Agreement and no statement contained in any schedule or certificate furnished or
to be furnished by the Company to Parent, or any of its representatives pursuant
to the provisions hereof taken as a whole, contains as of the date hereof any
untrue statement of material fact or omits to state any material fact necessary
in order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
25
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that the
statements contained in this Article IV are true and correct, except as set
forth in the Parent Disclosure Schedule, dated as of the date hereof, prepared
by Parent and delivered to the Company in connection herewith (the "Parent
Disclosure Schedule"). The Parent Disclosure Schedule is arranged in sections
corresponding to the numbered and lettered sections contained in this Article
IV and shall qualify only the corresponding Section in this Article IV.
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Parent and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its respective incorporation and
has the requisite corporate power and authority necessary to own, lease and
operate the properties it purports to own, lease or operate and to carry on its
business as it is now being conducted or presently proposed to be conducted.
Parent and each of its Subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could not
reasonably be expected to have a Parent Material Adverse Effect. A true,
complete and correct list of all of Parent's Subsidiaries, together with the
jurisdiction of incorporation of each Subsidiary, the authorized capitalization
of each Subsidiary, and the percentage of each Subsidiary's outstanding capital
stock owned by Parent or another Subsidiary, is set forth in Section 4.1 of the
Parent Disclosure Schedule. Parent 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 corporation,
partnership, joint venture or other business association or entity, excluding
securities in any publicly traded company held for investment by Parent and
comprising less than one percent of the outstanding stock of such company. The
term "Parent Material Adverse Effect" means any change, effect or circumstance
that, individually or when taken together with all other such similar or related
changes, effects or circumstances that have occurred or could reasonably be
expected to occur prior to the date of determination of the occurrence of the
Parent Material Adverse Effect, (i) is materially adverse to the business,
prospects, assets (including intangible assets), condition (financial or
otherwise) or results of operations of Parent and its Subsidiaries taken as a
whole or (ii) could materially delay or prevent the consummation of the
transactions contemplated hereby. Changes in economic or market conditions
affecting the computer peripherals or computer software industries generally,
changes in Parent's stock price, failure to meet Parent's revenue projections
for the first quarter of fiscal year 2000 (except as set forth below) or any
loss of a supplier, customer or employee resulting from the Merger or its
announcement to the extent so resulting will be deemed not to constitute a
Parent Material Adverse Effect; revenue for the first quarter of fiscal year
2000 of 25% or more below the amount set forth in Section 4.1
26
of the Parent Disclosure Schedule will be deemed to constitute a Parent Material
Adverse Effect.
SECTION 4.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. Parent has
heretofore furnished to the Company a true, complete and correct copy of its
Certifi cate of Incorporation, as amended to date (the "Parent Charter"), and
By-Laws, as amended to date (the "Parent By-Laws"). Such Parent Charter and
Parent By-Laws are in full force and effect. Parent is not in violation of any
of the provisions of the Parent Charter or Parent By-Laws.
SECTION 4.3 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 25,000,000
shares of Parent Common Stock, and 1,000,000 shares of preferred stock, par
value $.01 per share (the "Parent Preferred Stock"). As of November 30, 1999:
(i) 8,485,714 shares of Parent Common Stock are issued and outstanding,
1,826,309 shares of Parent Common Stock are reserved for issuance upon exercise
of options granted pursuant to Parent's 1982 Key Employee Incentive Plan, 1986
Employee Stock Purchase Plan and 1992 Key Employee Incentive Plan; and no shares
of Parent Common Stock are issued and held in the treasury of Parent; and (ii)
no shares of Parent Preferred Stock are issued and outstanding. All outstanding
shares of Parent Common Stock are, and all shares of Parent Common Stock subject
to issuance as specified above, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be, duly
authorized, validly issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the DGCL, Parent Charter or Parent By-Laws or any agreement to which Parent is
a party or is otherwise bound. No material change in such capitalization has
occurred since November 30, 1999. All of the outstanding shares of capital stock
of each of Parent's Subsidiaries are duly authorized, validly issued, fully paid
and nonassessable, and all such shares are owned by Parent free and clear of all
Liens. There are no accrued and unpaid dividends with respect to any outstand-
ing shares of capital stock of Parent or any of its Subsidiaries.
(b) Except as described in Section 4.3(a) of this Agreement, there are
no equity securities of any class of Parent or any of its Subsidiaries or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except as described in Section 4.3(a) of
this Agreement, there are no options, warrants, calls, rights, commitments or
agreements of any character to which Parent or any of its Subsidiaries is a
party, or by which Parent or any of its Subsidiaries is bound, obligating Parent
or any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of Parent or any of its
Subsidiaries or obligating Parent or any of its Subsidiaries to grant, extend
or accelerate the vesting of or enter into any such option, warrant, call,
right, commitment or agreement. To Parent's knowledge, there are no voting
27
trusts, proxies or other similar agreements or understandings with respect to
the shares of capital stock of Parent or any of its Subsidiaries There are no
obligations, contingent or otherwise, of Parent or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of Parent or
any of its Subsidiaries or to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any such Subsidiary or any
other entity.
(c) All of the shares of Parent Common Stock to be issued in the Merger
will be, when issued in accordance with this Agreement, duly authorized, validly
issued, fully paid and nonassessable.
(d) The authorized capital stock of Merger Sub consists of 100 Merger
Sub Common Shares, all of which are issued and outstanding and fully paid and
nonassessable.
SECTION 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Subject only to the
approval of Parent's stockholders described below, each of Parent and Merger Sub
has all necessary corporate power and authority to execute and deliver this
Agreement and each instrument required hereby to be executed and delivered by
it (the "Parent Merger Documents") at the Closing and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of the Parent Merger Documents and the
consummation of the transactions contemplated by the Parent Merger Documents
have been duly and validly authorized by all necessary corporate action on the
part of Parent and Merger Sub, subject only to the approval of the holders of
Parent Common Stock of the issuance of the Parent Common Stock in the Merger at
a meeting where a quorum is present by a majority of the votes properly cast
(the "Parent Voting Proposal"). This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and constitutes, and when
executed and delivered by Parent and Merger Sub, as applicable, each of the
other Parent Merger Documents will constitute, assuming the due authorization,
execution and delivery by the Company, the legal and binding obligation of each
of Parent and Merger Sub, as applicable, except as such enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law). The Board of
Directors of Parent has determined that it is advisable and in the best
interests of Parent's stockholders for Parent to issue the shares to the
Company's shareholders on the terms and subject to the conditions of this
Agreement, and has recommended that Parent's stockholders approve the Parent
Voting Proposal.
SECTION 4.5 NO CONFLICT, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of the Parent Merger Documents by Parent
and Merger Sub do not, and the performance of this Agreement by Parent and
Merger Sub will not, (i) conflict with or violate the Parent Charter, the Parent
ByLaws, the Certificate of Incorporation of Merger Sub or the By-
28
Laws of Merger Sub, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Parent or Merger Sub by which its or
their respective properties are bound or affected, or (iii) 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), or impair Parent's or any of its Subsidiaries'
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien on any of the properties or assets of Parent or
any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its Subsidiaries is a party or by which
Parent or any of its Subsidiaries or its or any of their respective properties
is bound or affected; other than such conflicts, breaches, defaults, impairments
or other effects under (iii) of this Section 4.5(a) that have not had and could
not reasonably be expected to have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement or any instrument
required hereby to be executed and delivered by Parent and Merger Sub does not,
and the performance of this Agreement by Parent and Merger Sub will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) the filing of the
pre-merger notification report under the HSR Act, (ii) the filing of the
Registration Statement with the SEC in accordance with the Securities Act, and
the filing of the Proxy Statement/Prospectus with the SEC under the Exchange
Act, (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country and (iv) the filing and
recordation of the Merger Agreement or other documents as required by the CGCL
and the DGCL.
SECTION 4.6 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has timely filed all forms, reports, schedules, statements
and other documents required to be filed by Parent with the SEC since November
30, 1998 (collectively, the "Parent SEC Reports"). The Parent SEC Reports (i) at
the time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such Parent SEC Reports or necessary in order to make
the statements in such Parent SEC Reports, in light of the circumstances under
which they were made, not misleading. None of Parent's Subsidiaries are required
to file any forms, reports, schedules, statements or other documents with the
SEC.
29
(b) Each of the consolidated financial statements (including, in each
case, any related notes), contained in the Parent SEC Reports, including any
Parent SEC Reports filed after the date of this Agreement until the Closing,
complied, as of its respective date, in all material respects with all
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved and fairly presented the
consolidated financial position of Parent and its Subsidiaries as at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount.
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
unaudited balance sheet of Parent as of November 30, 1999 (the "Parent Balance
Sheet"), a copy of which has been previously supplied to the Company by Parent,
and except as disclosed in the Parent SEC Reports, Parent has conducted its
business in the ordinary course consistent with past practice and, since such
date, there has not occurred: (i) any change, development, event or other
circumstance, situation or state of affairs that has had or could reasonably be
expected to have a Parent Material Adverse Effect; (ii) any amendments to or
changes in the Parent Charter or Parent By-Laws; (iii) any damage to,
destruction or loss of any asset of Parent or any of its Subsidiaries (whether
or not covered by insurance) that could reasonably be expected to have a Parent
Material Adverse Effect; (iv) any change by Parent in its accounting methods,
principles or practices; (v) any revaluation by Parent of any of its assets,
including, without limitation, writing down the value of inventory or writing
off notes or accounts receivable other than in the ordinary course of business
consistent with past practice; or (vi) any sale of a material amount of assets
(tangible or intangible) of Parent other than in the ordinary course of business
and consistent with past practice.
SECTION 4.8 NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Parent SEC Reports or in the Parent Balance Sheet, to Parent's knowledge,
neither Parent nor any of its Subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise), except liabilities (a) adequately reflected
in the Parent Balance Sheet, (b) incurred in the ordinary course of business
consistent with past practice and not required under GAAP to be reflected in the
Parent Balance Sheet, (c) incurred since the date of the Parent Balance Sheet in
the ordinary course of business consistent with past practice or (d) incurred in
connection with this Agreement.
SECTION 4.9 COMPLIANCE. To Parent's knowledge, neither Parent nor any
of its Subsidiaries is in conflict with, or in default or violation of (and has
not received any notices of violation with respect to), any (i) law, rule or
regulation, or (ii) order, judgment or decree applicable to Parent or any of its
Subsidiaries or by which its or any of their respective properties is bound or
affected, and Parent is not aware of any such conflict, default or violation
thereunder (other than any conflicts,
30
defaults or violations under (i) of this Section 4.9 that have not had and could
not reasonably be expected to have a Parent Material Adverse Effect).
SECTION 4.10 ABSENCE OF LITIGATION. Except as disclosed in the Parent
SEC Reports, there are no claims, actions, suits, proceedings or investigations
(i) pending against Parent or any of its Subsidiaries or any properties or
assets of Parent or of any of its Subsidiaries or (ii) to the knowledge of
Parent, threatened against Parent or any of its Subsidiaries, or any properties
or assets of Parent or of any of its Subsidiaries, in each case, which claims,
actions, suits, proceedings or investigations could reasonably be expected to
have a Parent Material Adverse Effect.
SECTION 4.11 EMPLOYEE BENEFIT PLANS, OPTIONS AND EMPLOYMENT
AGREEMENTS.
(a) Section 4.11(a) of the Parent Disclosure Schedule contains a true
and complete list of (i) each deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option and other equity
compensation plan, pro gram, agreement or arrangement; (ii) each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of Section 3(1) of ERISA);
(iii) each profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA); (iv) each employment, termination
or severance agreement; and (v) each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by Parent or by any trade or
business, whether or not incorporated (a "Parent ERISA Affiliate"), that
together with Parent would be deemed a "single employer" within the meaning of
Section 4001(b) of ERISA, or to which Parent or a Parent ERISA Affiliate is
party, whether written or oral, for the benefit of any employee or former
employee of Parent or any of its Subsidiaries (collectively, the "Parent
Plans"). No Parent Plan is subject to Section 302 or Title IV of ERISA or
Section 412 of the Code. Neither Parent, any of its Subsidiaries nor any Parent
ERISA Affiliate has any commitment or formal plan, whether legally binding or
not, to create any additional employee benefit plan or modify or change any
existing Parent Plan that would affect any employee or former employee of Parent
or any of its Subsidiaries.
(b) With respect to each Parent Plan, Parent has heretofore delivered
or made available to the Company true and complete copies of each of the
following documents: (i) a copy of the Parent Plan and any amendments thereto
(or if the Parent Plan is not a written Parent Plan, a description thereof);
(ii) a copy of the two most recent annual reports and actuarial reports, if
required under ERISA, and the most recent report prepared with respect thereto
in accordance with Statement of Financial Accounting Standards No. 87; (iii) a
copy of the most recent Summary Parent Plan Description required under ERISA
with respect thereto; (iv) if the Parent Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding agreement and
the latest financial statements thereof; and (v) the
31
most recent determination letter received from the IRS with respect to each
Parent Plan intended to qualify under Section 401 of the Code.
(c) No liability under Title IV or Section 302 of ERISA has been
incurred by Parent or any Parent ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to Parent or any
Parent ERISA Affiliate of Parent incurring any such liability, other than
liability for premiums due to the Pension Benefit Guaranty Corporation (which
premiums have been paid when due).
(d) All contributions required to be made with respect to any Parent
Plan on or prior to the Effective Time have been timely made or are reflected on
the Parent Balance Sheet.
(e) Neither Parent nor any of its Subsidiaries, any Parent Plan, any
trust created thereunder, nor any trustee or administrator thereof has engaged
in a transaction in connection with which Parent or any of its Subsidiaries,
any Parent Plan, any such trust, or any trustee or administrator thereof, or any
party dealing with any Parent Plan or any such trust could be subject to either
a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code.
(f) Each Parent Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including but not
limited to ERISA and the Code. There are no pending, threatened or anticipated
claims by or on behalf of any Parent Plan, by any employee or beneficiary
covered under any such Parent Plan, or otherwise involving any such Parent Plan
(other than routine claims for benefits).
(g) Each Parent Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified and the trusts maintained thereunder
are exempt from taxation under Section 501(a) of the Code. Each Parent Plan
intended to satisfy the requirements of Section 501(c)(9) has satisfied such
requirements.
(h) No Parent Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for employees or former employees
of Parent or any of its Subsidiaries for periods extending beyond their
retirement or other termination of service, other than (i) coverage mandated by
applicable law, (ii) death benefits under any "pension plan," or (iii) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary). No condition exists that would prevent Parent or any of its
Subsidiaries from amending or terminating any Parent Plan providing health or
medical benefits in respect of any active or former employee of Parent or any of
its Subsidiaries.
(i) No amounts payable under the Parent Plans have failed, or as a
result of the transactions contemplated hereby will fail, to be deductible for
federal income tax purposes by virtue of Sections 162(m) or 280G of the Code.
32
(j) The consummation of the transactions contemplated by this Agree-
ment will not, either alone or in combination with another event, (i) entitle
any current or former employee or officer of Parent or any Parent ERISA
Affiliate to severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement, or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such employee
or officer.
SECTION 4.12 LABOR MATTERS. (a) There are no controversies pending or,
to the knowledge of Parent or any of its Subsidiaries, threatened, between
Parent or any of its Subsidiaries and any of their respective employees,
consultants or inde pendent contractors; (b) neither Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by Parent or its Subsidiaries, nor
does Parent or any of its Subsidiaries know of any activities or proceedings of
any labor union to organize any such employees; and (c) neither Parent nor any
of its Subsidiaries has any knowledge of any labor disputes, strikes, slowdowns,
work stoppages, lockouts, or threats thereof, by or with respect to any
employees of, or consultants or independent contractors to, Parent or any of its
Subsidiaries.
SECTION 4.13 PROPERTIES; ENCUMBRANCES. Parent and each of its Subsid
iaries have good, valid and marketable title to, or a valid leasehold interest
in, all the tangible properties and assets which it purports to own or lease
(real, personal and mixed), including, without limitation, all the properties
and assets reflected in the Parent Balance Sheet (except for personal property
sold since the date of the Parent Balance Sheet in the ordinary course of
business consistent with past practice). All properties and assets reflected in
the Parent Balance Sheet are free and clear of all Liens, except for Liens
reflected on the Parent Balance Sheet and Liens for current taxes not yet due
and other Liens that do not materially detract from the value or impair the use
of the property or assets subject thereto.
SECTION 4.14 TAXES.
(a) Parent and each of its Subsidiaries have timely filed with the
appro priate taxing authorities all Tax Returns required to be filed by them
(giving effect to valid extensions) and all such Tax Returns are true, correct
and complete in all material respects. Each group of corporations with which
Parent or any of its Subsidiaries has filed (or was required to file)
consolidated, combined, unitary or similar Tax Returns (an "Parent Affiliated
Group") has timely filed all income and other material Tax Returns that it was
required to file (giving effect to valid exten sions) with respect to any period
in which Parent or any of its Subsidiaries was a member of such Parent
Affiliated Group (each such Tax Return, a "Parent Affiliated Return") and all
such Parent Affiliated Returns are true, correct and complete in all material
respects. All material Taxes due and owing by Parent and its Subsidiaries have
been timely paid or adequately reserved for. There are no Tax Liens on any
33
assets of Parent or any Subsidiary thereof other than liens relating to current
Taxes not yet due and payable. Neither Parent, any of its Subsidiaries nor any
member of any Affiliated Group has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. No power of attorney has been granted with respect to any matter
relating to Taxes of Parent or any of its Subsidiaries which is currently in
force.
(b) Neither Parent nor any of its Subsidiaries is, or has been, a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(c) Parent and each of its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to Taxes
required to be withheld or collected, including, without limitation, Taxes
required to be withheld pursuant to Sections 1441 and 1442 of the Code and Taxes
required to be withheld from employee wages. None of Parent, any of its
Subsidiaries or any member of any Parent Affiliated Group has received any
notice of any audit examination, deficiency, refund litigation, proposed
adjustment or matter in controversy with respect to any Taxes or Tax Return of
Parent, any of its Subsidiaries or any Parent Affiliated Group, and no audits or
other administrative proceedings or court proceedings with respect to any Taxes
or Tax Return of Parent, any of its Subsidiaries or any Parent Affiliated Group
are in progress. No taxing authority has asserted that Parent, any of its
Subsidiaries or any Parent Affiliated Group was required to file any Tax Return
that was not filed. Neither Parent nor any of its Subsidiaries is a "consenting
corporation" within the meaning of Section 341(f) of the Code or has agreed to
have Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned by Parent
or any of its Subsidiaries. Neither Parent nor any of its Subsidiaries is a
party to or bound by any Tax indemnity, sharing, allocation, or similar contract
or arrangement. Neither Parent nor any of its Subsidiaries is or has ever been a
member of a group of corporations with which it has filed (or been required to
file) consolidated, combined, unitary or similar Tax Returns, other than a group
of which only Parent and its Subsidiaries are or were members. Neither Parent
nor any of its Subsidiaries has agreed to, or is required to, make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(d) The statute of limitations for the assessment of Taxes has expired
for all Tax Returns of Parent and its Subsidiaries and any Parent Affiliated
Group, or those Tax Returns have been audited and closed by the appropriate
taxing authorities.
SECTION 4.15 ENVIRONMENTAL MATTERS.
(a) Parent and its Subsidiaries are in full compliance with all
applicable Environmental Laws; neither Parent nor any of its Subsidiaries has
received any communication whether from a Governmental Entity, citizens group,
employee or otherwise, that alleges that Parent or any of its Subsidiaries are
not in such full
34
compliance; and, to Parent's best knowledge, there are no circumstances that may
prevent, interfere with, such full compliance in the future.
(b) There is no Environmental Claim pending or threatened against
Parent or any of its Subsidiaries or, to Parent's knowledge, against any person
or entity whose liability for any Environmental Claim Parent or any of its
Subsidiaries have or may have retained or assumed either contractually or by
operation of law.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including the Release, emission, discharge or
disposal of any Hazardous Materials, that could form the basis of any
Environmental Claim against Parent or any of its Subsidiaries or, to Parent's
knowledge, against any person or entity whose liability for any Environmental
Claim Parent or any of its Subsidiaries have or may have retained or assumed
either contractually or by operation of law.
(d) Parent and its Subsidiaries have delivered or otherwise made
available for inspection to Parent true, complete and correct copies and results
of any audits, reports, studies, analyses, tests or monitoring possessed or
initiated by Parent or its Subsidiaries pertaining to Hazardous Materials in,
on, beneath or adjacent to any property currently or formerly owned, operated or
leased by Parent or its Subsidiaries or regarding Parent's or its Subsidiaries'
compliance with applicable Environmental Laws.
SECTION 4.16 INTELLECTUAL PROPERTY.
(a) To Parent's knowledge, Parent or its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use (free and
clear of all liens and encumbrances), all trademarks, service marks, trade
names, copyrights, Internet domain names, mask works, including any
registrations or applications for registration thereof, patents and patent
applications, and trade secrets, including technology, know-how, processes,
schematics, computer software programs or applications, and all other tangible
or intangible proprietary information or material, that is used in the business
of Parent and its Subsidiaries as currently conducted (the "Parent Intellectual
Property Rights").
(b) To Parent's knowledge, either Parent or one of its Subsidiaries is
the sole and exclusive owner of all right, title and interest in and to (free
and clear of any Liens), or is the exclusive or non-exclusive licensee of, the
Parent Intellectual Property Rights, and, in the case of Parent Intellectual
Property Rights owned by Parent or any of its Subsidiaries, has sole and
exclusive rights (and is not contractually obligated to pay any compensation to
any third party in respect thereof) to the use thereof and the material covered
thereby. No claims have been asserted or, to Parent's knowledge, are threatened
by any person (i) to the effect that the manufacture, sale, licensing or use of
any of the products or services of Parent or any of its
35
Subsidiaries as now manufactured, sold or licensed or used or proposed for
manufacture, use, sale or licensing by Parent or any of its Subsidiaries
infringes any intellectual property rights of any third party, (ii) against the
use by Parent or any of its Subsidiaries of any trademarks, service marks, trade
names, trade secrets, copyrights, patents, technology or know-how used in the
business of Parent and its Subsidiaries as currently conducted or as presently
proposed to be conducted, or (iii) challenging the ownership or use by Parent or
any of its Subsidiaries or the validity of any of the Parent Intellectual
Property Rights. To Parent's knowledge, all patents and trademark, service
mark, copyright and mask work registrations held by Parent and its Subsidiaries
and used in the business of Parent or its Subsidiaries as currently conducted or
as presently proposed to be conducted are valid, subsisting, in full force and
effect, and have not lapsed, expired or been canceled or abandoned. To Parent's
knowledge, there is no unauthorized use, infringement or misappropriation of any
of the Parent Intellectual Property Rights by any third party, including any
employee or former employee of Parent or any of its Subsidiaries. To Parent's
knowledge, no Parent Intellectual Property Right or product or service of Parent
or any of its Subsidiaries is subject to any outstanding decree, order, judgment
or stipulation restricting in any manner the use, sale or licensing thereof by
Parent or any of its Subsidiaries. To Parent's knowledge, no current or former
partner, director, officer or employee of Parent or any of its Subsidiaries
will, after giving effect to the transactions contemplated hereby, own or retain
any rights in or to any of the Parent Intellectual Property. To Parent's
knowledge, neither Parent nor any of its Subsidiaries has entered into any
agreement under which Parent or its Subsidiaries is restricted from using or
licensing any Parent Intellectual Property Right in any manner anywhere in the
world, or selling or otherwise distributing any of its products or services.
(c) To Parent's knowledge, neither Parent nor any Subsidiary is, or as
a result of the execution or delivery of this Agreement or the performance of
its obligations hereunder will be in violation of any license, sublicense,
agreement or instrument to which Parent or such Subsidiary is a party or
otherwise bound, nor will the consummation of the transactions contemplated
hereby result in any material loss or impairment of Parent or any Subsidiary's
ownership of or right to use any of the Parent Intellectual Property, nor
require the consent of any Governmental Entity or third party with respect to
any of the Parent Intellectual Property.
SECTION 4.17 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by Parent for inclusion in the Registration Statement shall
not at the time the Registration Statement is declared effective by the SEC
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The information supplied by Parent for inclusion or incorporation by
reference in the Proxy Statement/Prospectus to be sent to the stockholders of
Parent and the shareholders of the Company in connection with the Parent
Stockholders Meeting and the Company Shareholders Meeting, shall not, on the
date the Proxy Statement/Prospectus (or any
36
amendment thereof or supplement thereto) is first mailed to stockholders of
Parent or shareholders of the Company or at the time of the Parent Stockholders
Meeting or the Company Shareholders Meeting, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or shall omit to state
any material fact necessary in order to make the statements made therein not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Parent Stockholders Meeting or the Company Shareholders Meeting
which has become false or misleading. If at any time prior to the Parent
Stockholders Meeting or the Company Shareholders Meeting any event relating to
Parent or any of its respective affiliates, officers or directors should be
discovered by Parent which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement/Prospectus, Parent
shall promptly inform the Company. The Registration Statement shall comply in
all material respects as to form and substance with the requirements of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing, Parent makes no representation or warranty with
respect to any information supplied by the Company which is contained in any of
the foregoing documents.
SECTION 4.18 YEAR 2000 COMPLIANCE.
(a) All of (i) the internal systems used in the business or operations
of Parent and its Subsidiaries, including without limitation computer hardware
systems, software, applications, firmware, equipment containing embedded
microchips and other embedded systems and (ii) the software, hardware, firmware
and other technology that constitute part of the products and services
manufactured, marketed, licensed or sold by Parent or any of its Subsidiaries to
third parties are Year 2000 Compliant.
(b) To Parent's knowledge, all third-party systems used in connection
with the business, products, services or operations of Parent or any of its
Subsidiaries, including without limitation any system belonging to any of
Parent's or its Subsidiaries' vendors, co-venturers, service providers or
customers are Year 2000 Compliant. Parent and its Subsidiaries have received
satisfactory written assurances and warranties from all of their respective
vendors, co-venturers, service providers and customers that are material to the
ongoing operation of the business of Parent and its Subsidiaries that past and
future products, software, equipment, components or systems provided by such
parties are (or in the case of future products, will be) Year 2000 Compliant.
(c) Parent has conducted "year 2000" audits with respect to (i) each of
the internal systems used in the business, products, services and operations of
Parent and its Subsidiaries, including without limitation computer hardware
systems, software, applications, firmware, equipment containing embedded
microchips and other embedded systems and (ii) all of the software,
applications, hardware, firmware and
37
other technology which constitute part of the products and services
manufactured, marketed, performed or sold by Parent or any of its Subsidiaries
or licensed by Parent or any of its Subsidiaries to third parties. Parent has
obtained "year 2000" certifications with respect to all material third-party
systems used in connection with the business or operations of Parent and its
Subsidiaries, including without limitation systems belonging to the vendors,
co-venturers, service providers and customers of Parent of any or its
Subsidiaries. Parent has made available to the Company true, complete and
correct copies of all "year 2000" audits, certifications, reports and other
similar documents that have been prepared or performed by or on behalf of Parent
or any third party with respect to the systems, business, operations, products
or services of Parent or any of its Subsidiaries.
(d) Neither Parent nor any of its Subsidiaries has provided any
representation, warranty or guarantee for any product sold or licensed, or
service provided, by Parent or its Subsidiaries to the effect that such product
or service (i) complies with or accounts for the fact of the year change from
December 31, 1999 to January 1, 2000, (ii) will not be adversely affected with
respect to functionality, interoperability, connectivity, performance,
reliability or volume capacity (including without limitation the processing
storage, recall and reporting of data) by the passage of any date, including
without limitation the year change from December 31, 1999 to January 1, 2000 or
(iii) is otherwise Year 2000 Compliant.
SECTION 4.19 BROKERS. No broker, finder or investment banker (other
than U.S. Bancorp Piper Jaffray Inc. whose brokerage, finder's or other fee will
be paid by Parent) 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 or on behalf of Parent.
SECTION 4.20 OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES. As of the
date hereof and as of the Effective Time, except for obligations or liabilities
incurred in connection with its incorporation or organization and the
transactions contemplated by this Agreement and except for this Agreement and
any other agreements or arrangements contemplated by this Agreement, Merger Sub
has not and will not have incurred, directly or indirectly, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person.
SECTION 4.21 POOLING; TAX MATTERS. Neither Parent nor any of its
affiliates has taken or agreed to take any action or failed to take any action,
or has any reason to believe that any conditions exist, that would prevent (a)
Parent from accounting for the business combination to be effected by the Merger
as a pooling of interests or (b) the Merger from constituting a reorganization
within the meaning of Section 368(a) of the Code.
SECTION 4.22 AFFILIATES. Section 4.22 of the Parent Disclosure Schedule
contains a true, complete and correct list of all persons who, as of the date
hereof, to
38
the best knowledge of Parent, may be deemed to be affiliates of Parent excluding
all its Subsidiaries but including all directors and executive officers of
Parent.
ARTICLE V
CONDUCT OF BUSINESS
SECTION 5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, unless Parent shall otherwise agree in writing or in
accordance with Section 6.2(b), the Company shall conduct its business and shall
cause the businesses of its Subsidiaries to be conducted only in, and the
Company and its Subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with past practice and in
compliance in all material respects with all applicable laws and regulations;
and the Company shall use commercially reasonable best efforts to preserve
substantially intact the business organization of the Company and its
Subsidiaries, to keep available the services of the current officers, employees
and consultants of the Company and its Subsidiaries and to preserve the present
relationships of the Company and its Subsidiaries with customers, suppliers and
other persons with which the Company or any of its Subsidiaries has significant
business relations. By way of amplification and not limitation, except (x) as
set forth in Section 5.1 of the Company Disclosure Schedule, (y) as contem-
plated by this Agreement or (z) in accordance with Section 6.2(b), the Company
shall not and shall not permit its Subsidiaries to, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, directly or indirectly do, or propose to
do, any of the following without the prior written consent of Parent:
(a) amend or otherwise change the Company Charter, Company By-Laws
or any Subsidiary Document;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in the
Company or any of its Subsidiaries, other than Company Common Stock pursuant to
the exercise of (x) options currently outstanding, under the Company Stock
Option Plans or the Company ESPP, in each case, in accordance with their current
terms, (y) the Other Company Options in accordance with their current terms or
(z) the warrants in accordance with their current terms;
39
(c) sell, pledge, dispose of or encumber any assets of the Company or
any of its Subsidiaries (except for sales of assets in the ordinary course of
business and in a manner consistent with past practice);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except that a wholly owned Subsidiary of
the Company may declare and pay a dividend to its parent, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (iii) amend the terms or change the period
of exercisability of, purchase, repurchase, redeem or otherwise acquire, or
permit any Subsidiary to purchase, repurchase, redeem or otherwise acquire, any
of its securities or any securities of its Subsidiaries, or any option, warrant
or right, directly or indirectly, to acquire any such securities, or propose to
do any of the foregoing, other than Company Common Stock pursuant to the
exercise of options currently outstanding, under the Company Stock Option Plans
or the Company ESPP, in each case, in accordance with their current terms, (y)
the Other Company Options in accordance with their current terms or (z) the
warrants in accordance with their current terms;
(e) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances or capital contributions to or investments in any other person, except
in the ordinary course of business and consistent with past practice; (iii)
enter into or amend any material contract or agreement, or enter into, renew,
amend or terminate any lease relating to real property; or (iv) authorize any
capital expenditures or purchase of fixed assets which are, in the aggregate, in
excess of $100,000 for the Company and its Subsidiaries taken as a whole;
(f) except as disclosed in Section 5.1(f) of the Company Disclosure
Schedule, increase the compensation payable or to become payable to its
directors, officers or employees (except such increases payable to non-officer
employees made in the ordinary course of business consistent with past
practice), grant any severance or termination pay to, or enter into or amend any
employment or severance agreement with, any director, officer or other employee
of the Company or any of its Subsidiaries, establish, adopt, enter into or amend
any collective bargaining, 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 current or former directors, officers or
employees, pay any bonuses to any officer of the Company, materially change any
actuarial assumption or other assumption used to calculate funding obligations
with respect to any pension or retirement plan, or change the
40
manner in which contributions to any such plan are made or the basis on which
such contributions are determined;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable and collection of accounts receivable), except as
required by GAAP;
(h) make any Tax election or settle or compromise any Tax liability or
agree to an extension of a statute of limitations or file any amended Tax
Returns or claims for refund;
(i) except for the settlement of existing lawsuits disclosed in Section
5.1(i) of the Company Disclosure Schedule solely in exchange for the payment of
not more than $50,000 per lawsuit (and $100,000 in the aggregate for all such
lawsuits) in cash, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities reflected or
reserved against in the financial statements contained in the Company SEC
Reports filed prior to the date of this Agreement or incurred in the ordinary
course of business and consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1(a) through (i) above, or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect or prevent the Company from performing or cause
the Company not to perform its covenants hereunder, in each case, such that the
conditions set forth in Sections 7.2(a) or 7.2(b), as the case may be, would not
be satisfied.
SECTION 5.2 CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER.
Parent covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, unless the Company shall otherwise agree in writing,
Parent shall conduct its business and shall cause the businesses of its
Subsidiaries to be conducted only in the ordinary course of business and in
compliance in all material respects with all applicable laws and regulations;
and Parent shall use commercially reasonable best efforts to preserve
substantially intact the business organization of Parent and its Subsidiaries,
to keep available the services of the current officers, employees and
consultants of Parent and its Subsidiaries and to preserve the present
relationships of Parent and its Subsidiaries with customers, suppliers and other
persons with which Parent or any of its Subsidiaries has significant business
relations.
SECTION 5.3 ADVICE OF CHANGES. Parent and the Company shall promptly
advise the other party orally and in writing to the extent it has knowledge of
(i) any representation or warranty made by it (and, in the case of Parent, made
by
41
Merger Sub) contained in this Agreement becoming untrue or inaccurate in any
material respect, (ii) the failure by it (and, in the case of Parent, by Merger
Sub) to comply in any material respect with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement and (iii) any change or event having, or which could
reasonably be expected to have, a Company Material Adverse Effect or a Parent
Material Adverse Effect, as the case may be, on such party or the ability for
the conditions set forth in Article VII to be satisfied; PROVIDED, HOWEVER, that
no such notification shall affect in any manner the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or any
matter set forth in the Company Disclosure Schedule, the Parent Disclosure
Schedule or the conditions to the obligations of the parties under this
Agreement.
SECTION 5.4 COOPERATION. Subject to compliance with applicable law,
from the date hereof until the Effective Time, (a) representatives of the
Company shall confer on a regular and frequent basis with one or more
representatives of Parent to discuss operational matters that are material and
the general status of ongoing operations and (b) each of Parent and the Company
shall promptly provide the other party or its counsel with copies of all filings
made by such party with any Governmental Entity in connection with this
Agreement, the Merger and the transactions contemplated hereby and thereby.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) The Company shall (and shall cause its Subsidiaries and its and
their respective officers, directors, employees, auditors and agents to) afford
to Parent and to Parent's officers, employees, financial advisors, legal
counsel, accountants, consultants and other representatives access during normal
business hours throughout the period prior to the Effective Time to all of its
books and records and its properties, plants and personnel and, during such
period, the Company shall furnish promptly to Parent a copy of each report,
schedule and other document filed or received by it pursuant to the requirements
of federal securities laws, provided that no investigation pursuant to this
Section 6.1(a) shall affect any representations or warranties made herein or the
conditions to the obligations of the respective parties to consummate the
Merger.
(b) Parent shall (and shall cause its Subsidiaries and its and their
respective officers, directors, employees, auditors and agents to) afford to
the Company and to the Company's officers, employees, financial advisors, legal
counsel, accountants, consultants and other representatives access during
normal business hours throughout the period prior to the Effective Time to all
of its books and records and its properties, plants and personnel and, during
such period, Parent shall furnish
42
promptly to the Company a copy of each report, schedule and other document filed
or received by it pursuant to the requirements of federal securities laws,
provided that no investigation pursuant to this Section 6.1(b) shall affect any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger.
(c) Unless otherwise required by law, each party agrees that it (and
its Subsidiaries and its and their respective representatives) shall hold in
confidence all non-public information acquired in accordance with the terms of
the Mutual Agreement of Confidentiality dated November 11, 1999 between Parent
and the Company (the "Confidentiality Agreement"); provided, however, that the
termination date of the Confidentiality Agreement is hereby extended to June 30,
2000.
SECTION 6.2 NO SOLICITATION.
(a) From and after the date of this Agreement until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, the Company and its Subsidiaries and affiliates shall not, directly or
indirectly, through any officer, director, employee, advisor, financial advisor,
representative or agent (and it shall cause such officers, directors, employees,
advisors, financial advisors, representatives and agents not to, directly or
indirectly), (i) solicit, initiate, facilitate or encourage any inquiries or
proposals that constitute, or could be expected to lead to, an Acquisition
Proposal or (ii) engage in negotiations or discussions concerning, or provide
any non-public information with respect to the Company and its Subsidiaries to
any person making or proposing to make, any Acquisition Proposal; PROVIDED,
HOWEVER, that if, at any time prior to the date of the Company Shareholders
Meeting, the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's shareholders under applicable
law, the Company may, in response to an unsolicited Acquisition Proposal, and
subject to the Company's compliance with Section 6.2(c), (x) furnish information
with respect to the Company and its Subsidiaries to any person making such
Acquisition Proposal pursuant to a confidentiality agreement containing terms no
less favorable to the Company than the Confidentiality Agreement and (y)
participate in discussions or negotiations regarding such Acquisition Proposal.
(b) From and after the date of this Agreement until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by such Board of
Directors or such committee of the Company Voting Proposal, (ii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition
Proposal, or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or similar agreement related to
any Acquisition Proposal; PROVIDED,
43
HOWEVER, that if, at any time prior to the date of the Company Shareholders
Meeting, the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's shareholders under applicable
law, the Board of Directors of the Company may, in response to an unsolicited
Superior Proposal, and subject to the Company's compliance with Section 6.2(c),
(x) take any action prohibited by clause (i) of this sentence or (y) if prior to
taking any action prohibited by clauses (ii) or (iii) of this sentence the
Company terminates this Agreement pursuant to Section 8.1(g) and pays to Parent
all amounts due Parent in connection with such termination pursuant to Sections
8.3(b) and (c) in accordance therewith, take any action prohibited by clauses
(ii) or (iii) of this sentence. For purposes of this Agreement, "Acquisition
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of a business that constitutes 15% or
more of the net revenues, net income or the assets of the Company and its
Subsidiaries, taken as a whole, or 15% or more of any class of equity securities
of the Company or any of its Subsidiaries, any tender offer or exchange offer
that if consummated would result in any person beneficially owning 15% or more
of any class of equity securities of the Company or any of its Subsidiaries, or
any merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement. For
purposes of this Agreement, a "Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash or securities, more than 50% of the combined
voting power of the shares of Company Common Stock then outstanding or all or
substantially all the assets of the Company and otherwise on terms which the
Board of Directors of the Company determines in its good faith judgment (based
on the advice of a financial advisor of nationally recognized reputation,
including First Security Van Kasper) to be more favorable to the Company's
shareholders than the Merger and for which financing, to the extent required, is
then committed.
(c) The Company, its Subsidiaries and affiliates (and their respective
officers, directors, employees, advisors, financial advisors, representatives
and agents) shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any person (other than Parent or
its representatives) conducted heretofore with respect to any Acquisition
Proposal. The Company shall notify Parent immediately after receipt by the
Company (or its counsel, advisors or agents) of any Acquisition Proposal or any
request for nonpublic information in connection with an Acquisition Proposal or
for access to the properties, books or records of the Company or any of its
Subsidiaries by any person or entity that informs the Company that it is
considering making, or has made, an Acquisition Proposal. Such notice to Parent
shall be made orally and in writing and shall indicate in detail the identity of
the offeror and the terms and conditions of such proposal, inquiry or contact.
The Company shall keep Parent informed of all developments
44
and the status of any Acquisition Proposal, any negotiations or discussions with
respect to any Acquisition Proposal or any request for nonpublic information in
connection with any Acquisition Proposal or for access to the properties, books
or records of the Company or any of its Subsidiaries by any person or entity
that is considering making, or has made, an Acquisition Proposal. The Company
shall give Parent five business days advance notice of its intention to exercise
its rights under the proviso to (i) Section 6.2(a) specifying the material terms
and conditions of the Acquisition Proposal with respect to which it intends to
exercise such rights and identifying the person making such Acquisition
Proposal, or (ii) Section 6.2(b) specifying the material terms and conditions of
the Superior Proposal with respect to which it intends to exercise such rights
and identifying the person making such Superior Proposal. The Company shall
provide Parent with (i) copies of all documents received from any person or
entity that is considering making or has made an Acquisition Proposal and (ii)
copies of all documents to be delivered or sent to any person or entity that is
considering making or has made an Acquisition Proposal.
(d) Nothing contained in this Section 6.2 shall prohibit the Company
from taking and disclosing to its shareholders a position with respect to a
tender or exchange offer by a third party contemplated by Rule 14d-9 or 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders if, in the good faith judgment of the Board of Directors
of the Company, after consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under applicable law; PROVIDED,
HOWEVER, that, except as expressly provided in Sections 6.2(b) and 6.4, neither
the Company nor its Board of Directors nor any committee thereof shall withdraw
or modify, in a manner adverse to Parent, or propose publicly to withdraw or
modify, in a manner adverse to Parent, its position with respect to the Company
Voting Proposal or approve or recommend, or propose publicly to approve or
recommend, an Acquisition Proposal.
SECTION 6.3 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practicable after execution of this Agreement,
Parent and the Company shall in consultation with each other prepare, and shall
file with the SEC, preliminary joint proxy materials which shall constitute the
Proxy Statement/Prospectus. As promptly as practicable after comments are
received from the SEC thereon and after the furnishing by the Company and Parent
of all information required to be contained therein, (i) Parent and the Company
shall file with the SEC the Proxy Statement/Prospectus and (ii) Parent shall
file with the SEC the Registration Statement. The Company and Parent shall use
all reasonable efforts to cause the Registration Statement to become effective
as soon thereafter as practicable.
(b) The Company shall use all reasonable efforts to mail the Proxy
Statement/Prospectus to the shareholders of the Company and Parent shall use all
reasonable efforts to mail the Proxy Statement/Prospectus to the stockholders of
45
Parent as soon as practicable after the Registration Statement is declared
effective by the SEC.
(c) The Company shall furnish Parent with all information concerning
the Company and the holders of its capital stock and shall take such other
action as Parent may request pursuant to this Agreement in connection with the
Registration Statement and the issuance of the shares of Parent Common Stock.
(d) The Company and Parent shall make any necessary filing with respect
to the Merger under the Securities Act and the Exchange Act and the rules and
regulations thereunder.
SECTION 6.4 SHAREHOLDERS' AND STOCKHOLDERS' MEETINGS.
(a) The Company shall, subject to and in accordance with applicable law
and the Company Charter and Company By-Laws, promptly and duly call, give notice
of, convene and hold the Company Shareholders Meeting to be held as promptly as
practicable following the date upon which the Registration Statement becomes
effective for the purpose of voting on the Company Voting Proposal. The Company
will, through its Board of Directors, recommend to its shareholders the approval
of the Company Voting Proposal and the other transactions contemplated, which
recommendation shall be included in the Proxy Statement/Prospectus, and will use
its best efforts to solicit from its shareholders proxies in favor of the
Company Voting Proposal; PROVIDED, HOWEVER, that the Board of Directors of the
Company may withdraw or modify, in a manner adverse to Parent, such
recommendation (i) if a Superior Proposal has been made and remains in effect,
then if the Board of Directors of the Company is permitted to do so under
Section 6.2(b) or (ii) if no Acquisition Proposal or Superior Proposal has been
made, then if, at any time prior to the date of the Company Shareholders
Meeting, the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's stockholders under applicable
law.
(b) At or prior to the Closing, the Company shall deliver to Parent a
certificate of its Corporate Secretary setting forth the voting results from the
Company Shareholders Meeting.
(c) Parent shall, subject to and in accordance with applicable law and
the Parent Charter and Parent By-Laws, promptly and duly call, give notice of,
convene and hold the Parent Stockholders Meeting to be held as promptly as
practicable following the date upon which the Registration Statement becomes
effective for the purpose of voting on the Parent Voting Proposal. Parent will,
through its Board of Directors, recommend to its stockholders the approval of
the Parent Voting Proposal and will use its best efforts to solicit from its
stockholders proxies in favor of the Parent Voting Proposal. In addition to a
proposal that four of its five existing directors be reelected to it's Board of
Directors, Parent will include in the Proxy
46
Statement/Prospectus, a proposal that Mark Housley and Carl Rosendahl be
elected to it's Board of Directors, effective as of the Effective Time.
Management of Parent shall recommend to the Board of Directors of Parent that
Parent include in the Proxy Statement/Prospectus a proposal to increase the
number of shares reserved for issuance under the Parent's Stock Option Plan
by an amount to be determined by the management of Parent to be prudent under
the circumstances.
(d) At or prior to the Closing, Parent shall deliver to the Company a
certificate of its Corporate Secretary setting forth the voting results from the
Parent Stockholders Meeting.
SECTION 6.5 LEGAL CONDITIONS TO MERGER. Each of Parent and, subject to
Section 6.2, the Company will use its commercially reasonable best efforts to
comply promptly with all legal requirements which may be imposed with respect to
the Merger (which actions shall include, without limitation, furnishing all
information required under the HSR Act and in connection with approvals of or
filings with any other Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with the
Merger. Each of Parent and the Company will, and will cause its Subsidiaries to,
take all actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity required to be obtained or made by Parent, the
Company or any of their Subsidiaries in connection with the Merger or taking of
any action contemplated thereby or by this Agreement.
SECTION 6.6 AGREEMENTS WITH RESPECT TO AFFILIATES.
(a) The Company will use its commercially reasonable best efforts to
cause each person who is identified in Section 3.28 of the Company Disclosure
Schedule and any other person who may be or become an "affiliate" of the Company
as of the time of the Company Shareholders Meeting for purposes of (i) Rule 145
under the Securities Act ("Rule 145") or (ii) qualifying the merger for pooling
of interests accounting treatment under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations to deliver to Parent, as soon as
practicable but not later than thirty days preceding the Effective Time, a
written agreement (a "Company Affiliate Agreement") in connection with
restrictions on affiliates under Rule 145 and pooling of interests accounting
treatment, substantially in the form of EXHIBIT B hereto. The Company shall
provide prompt notice to Parent of any such other person who may be or become an
"affiliate" of the Company as of the time of the Company Shareholders Meeting
who is not identified in Section 3.28 of the Company Disclosure Schedule.
47
(b) Parent will use its commercially reasonable best efforts to cause
each person who is identified in Section 4.22 of the Parent Disclosure Schedule
and any other person who may be or become an "affiliate" of Parent as of the
time of the Parent Stockholders Meeting for purposes of qualifying the merger
for pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations to deliver to the
Company, as soon as practicable but not later than thirty days preceding the
Effective Time, a written agreement (a "Parent Affiliate Agreement") in
connection with restrictions on affiliates under pooling of interests accounting
treatment, substantially in the form of EXHIBIT C hereto. Parent shall provide
prompt notice to the Company of any such other person who may be or become an
"affiliate" of Parent as of the time of the Parent Stockholders Meeting who is
not identified in Section 4.22 of the Parent Disclosure Schedule.
SECTION 6.7 TAX-FREE REORGANIZATION. Parent and the Company intend that
the Merger will qualify as a reorganization within the meaning of Section 368(a)
of the Code. Parent and the Company shall each use its commercially reasonable
best efforts to cause the Merger to so qualify. Neither Parent nor the Company
shall knowingly take any action, or knowingly fail to take any action, that
could jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 6.8 POOLING ACCOUNTING. Parent and the Company shall each use
its commercially reasonable best efforts to cause the business combination to be
effected by the Merger to be accounted for as a pooling of interests for
accounting purposes. Neither Parent nor the Company shall knowingly take any
action, or knowingly fail to take any action, that could jeopardize the
treatment of the Merger as a pooling of interests for accounting purposes. Each
of Parent and the Company agrees to take such commercially reasonable action as
may be required to negate the impact of any past actions which to its knowledge
could jeopardize the treatment of the Merger as a pooling of interests for
accounting purposes.
SECTION 6.9 LETTERS OF ACCOUNTANTS.
(a) Parent shall use its commercially reasonable best efforts to cause
to be delivered to the Company (i) a copy of a letter of Arthur Andersen LLP,
Parent's independent auditors, dated a date within two business days before the
date on which the Registration Statement shall become effective, in form and
substance satisfactory to Parent and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement, which letter
shall be brought down to the Effective Time and (ii) the letter of Arthur
Andersen LLP referred to in Section 7.1(h).
(b) The Company shall use its commercially reasonable best efforts to
cause to be delivered to Parent (i) a copy of a letter of Ernst & Young LLP, the
Company's independent auditors, dated a date within two business days before the
48
date on which the Registration Statement shall become effective, in form and
substance satisfactory to Parent and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement, which letter
shall be brought down to the Effective Time and (ii) the letter of Ernst & Young
LLP referred to in Section 7.1(h).
SECTION 6.10 PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing any press release or making any public statement
with respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement without the prior written consent of
the other party, which shall not be unreasonably withheld or delayed; PROVIDED,
HOWEVER, that a party may, without the prior consent of the other party, issue
such press release or make such public statement as may upon the advice of
counsel be required by law or the rules and regulations of the NASDAQ if it has
used all reasonable efforts to consult with the other party prior thereto.
SECTION 6.11 LISTING OF PARENT SHARES. Parent shall use its
commercially reasonable best efforts to have authorized for listing on the
NASDAQ, upon official notice of issuance, the shares of Parent Common Stock to
be issued in the Merger.
SECTION 6.12 OPTIONS. As of the Effective Time, each option to acquire
shares of Company Common Stock (each, a "Company Option") other than options
issued pursuant to the Radius, Inc. Directors' Stock Option Plan (all of which
accelerate and will be exercised or will expire pursuant to their existing terms
as of the Effective Time) shall become and represent an option to purchase (i)
the number of shares of Parent Common Stock (a "Parent Option") determined by
multiplying (x) the number of shares of Company Common Stock which would have
been purchasable pursuant to such Company Option by (y) the Exchange Ratio (with
the result rounded up to the nearest whole share) (ii) at an exercise price per
share of Parent Common Stock equal to the exercise price per share of Company
Common Stock subject to the Company Option divided by the Exchange Ratio (with
the result rounded to the nearest whole cent); provided, however, that in the
case of any Company Option to which Section 421 of the Code applies by reason of
its qualification as an incentive stock option under Section 422 of the Code,
the conversion formula shall be adjusted if necessary to comply with Section
424(a) of the Code. After the Effective Time, (i) each Parent Option shall be
exercisable upon the same terms and conditions as were applicable to the related
Company Option immediately prior to the Effective Time and (ii) Parent shall
promptly file a Registration Statement on Form S-8 with respect to the shares
of Parent Common Stock issuable with respect thereto and shall use its
commercially reasonable best efforts to list such shares with the NASDAQ. Prior
to the Effective Time, the Company shall take all necessary and appropriate
action to effectuate the provisions of this Section 6.12.
49
SECTION 6.13 CONSENTS. The Company shall use its commercially
reasonable best efforts to obtain all necessary consents, waivers and approvals
under any of the Company's material agreements, contracts, licenses or leases in
connection with the Merger, including without limitation each of the consents
listed in Section 3.5 of the Company Disclosure Schedule.
SECTION 6.14 INDEMNIFICATION AND INSURANCE.
(a) All rights to indemnification, advancement of litigation expenses
and limitation of personal liability existing in favor of the directors,
officers and employees of the Company and its Subsidiaries under the provisions
existing on the date hereof in the Company Charter or Company By-Laws or in the
indemnification agreements previously provided by the Company to Parent
(collectively "Existing Indemnification Obligations") shall, with respect to any
matter existing or occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), survive the Effective Time. Parent
shall cause the Existing Indemnification Obligations to be assumed (by
operation of law or otherwise) by any successor to the Surviving Corporation by
merger or sale of all or substantially all assets and shall guarantee the
performance of the Existing Indemnification Obligation by the Surviving
Corporation (or any such successor) with respect to claims thereunder related to
the transactions contemplated by this Agreement.
(b) For a period of five years after the Effective Time, Parent shall
cause the Surviving Corporation (or any successor of the Surviving Corporation
by merger or sale of all or substantially all assets) to maintain in effect the
current policies of directors' and officers' and fiduciary liability insurance
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous to former
officers and directors of the Company) only with respect to claims arising from
facts or events which occurred at or before the Effective Time; PROVIDED,
HOWEVER, that in no event shall the Surviving Corporation (or any such
successor) be required to expend pursuant to this Section 6.14(b) more than an
aggregate amount equal to 125% the current aggregate annual premiums paid by the
Company for such insurance (the "Maximum Amount") (which premiums the Company
represents and warrants to be $117,000 in the aggregate). If the amount of the
aggregate annual premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, the Surviving Corporation (or any such
successor) during such five-year period shall maintain or procure as much
coverage as possible for aggregate annual premiums not to exceed the Maximum
Amount and shall promptly send a letter to the persons listed in Section 6.14(b)
of the Company Disclosure Schedule notifying them of such occurrence.
SECTION 6.15 ADDITIONAL AGREEMENTS; BEST EFFORTS. Subject to the terms
and conditions of this Agreement, each of the parties agrees to use its
commercially reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regula-
50
tions to consummate and make effective the transactions contemplated by this
Agreement.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose and no
similar proceeding in respect of the Proxy Statement/Prospectus shall have been
initiated or threatened by the SEC;
(b) SHAREHOLDER APPROVAL. The Company Voting Proposal shall have
been approved and adopted by the requisite vote of the shareholders of the
Company;
(c) HSR ACT AND OTHER APPROVALS. The waiting period applicable to
the consummation of the Merger under the HSR Act and under any other legal
requirement (including without limitation any authorization, consent, order
or approval, or dedication, filing or expiration of any waiting period) of
any Governmental Entity shall have expired or been terminated, as the case
may be, and any requirements of other jurisdictions applicable to the
consummation of the Merger shall have been satisfied;
(d) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding brought
by any administrative agency or commission or other Governmental Entity seeking
any of the foregoing be pending; and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal;
(e) TAX OPINIONS. (i) Parent shall have received an opinion of its
counsel, Skadden, Arps, Slate, Meagher & Flom LLP, in form and substance
reasonably satisfactory to Parent, dated as of the Effective Time, substantially
to the effect that for U.S. federal income tax purposes the Merger will qualify
as a reorganization within the meaning of Section 368(a) of the Code, (ii) the
Company shall have received an opinion of its counsel, Fenwick & West LLP, in
form and substance
51
reasonably satisfactory to the Company, dated as of the Effective Time,
substantially to the effect that for U.S. federal income tax purposes the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code, and (iii) the issuance of the opinions described in clauses (i) and (ii)
of this paragraph shall be conditioned upon the receipt by counsel for Parent
and the Company of representation letters from each of Parent, Merger Sub and
Company, in each case, in form and substance reasonably satisfactory to both of
such counsel;
(f) GOVERNMENTAL ACTIONS. There shall not be pending or threatened any
action or proceeding (or any investigation or other inquiry that might result in
such an action or proceeding) by any Governmental Entity or administrative
agency before any Governmental Entity, administrative agency or court of
competent jurisdiction, nor shall there be in effect any judgment, decree or
order of any Governmental Entity, administrative agency or court of competent
jurisdiction, in either case, seeking to prohibit or limit Parent from
exercising all material rights and privileges pertaining to its ownership of the
Surviving Corporation or the ownership or operation by Parent of all or a
material portion of the business or assets of Parent, or seeking to compel
Parent to dispose of or hold separate all or any portion of the business or
assets of Parent (including the Surviving Corporation and its subsidiaries), as
a result of the Merger or the transactions contemplated by this Agreement;
(g) NASDAQ LISTING. The shares of Parent Common Stock issuable in the
Merger shall have been authorized for listing on the NASDAQ upon official notice
of issuance;
(h) OPINION OF ACCOUNTANTS. Parent shall have received (and delivered
to the Company copies of) a letter from Arthur Andersen LLP, dated a date within
two business days of the Proxy Statement/Prospectus and within two business days
of the Closing Date, stating that the business combination to be effected by the
Merger will qualify as a pooling of interests transaction under generally
accepted accounting principles. The Company shall have received (and delivered
to Parent copies of) a letter from Ernst & Young LLP, dated a date within two
business days of the Proxy Statement/Prospectus and within two business days of
the Closing Date, stating that neither the Company nor any of its Subsidiaries
has taken or agreed to take any action that (without giving effect to this
Agreement, the transactions contemplated hereby, or any action taken or agreed
to be taken by Parent or any of its Subsidiaries) would prevent Parent from
accounting for the business combination to be effected by the Merger as a
pooling of interests transaction under generally accepted accounting principles;
and
(i) STOCKHOLDER APPROVAL. The Parent Voting Proposal shall have been
approved and adopted by the requisite vote of the stockholders of Parent.
SECTION 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
52
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct,
in each case as of the date of this Agreement and (except to the extent such
representations speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, except (x) for changes contemplated by this
Agreement and (y) where the failures to be true and correct (without regard to
any materiality, Company Material Adverse Effect or knowledge qualifications
contained therein), individually or in the aggregate, have not had, and could
not reasonably be expected to have, a Company Material Adverse Effect; and
Parent and Merger Sub shall have received a certificate signed on behalf of the
Company by the chief executive officer and chief financial officer of the
Company to such effect;
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date; and Parent and Merger Sub shall have received a certificate signed by the
chief executive officer and the chief financial officer of the Company to such
effect;
(c) CONSENTS OBTAINED. All consents, waivers, approvals, authorizations
and orders required to be obtained, and all filings required to be made, by the
Company for the authorization, execution and delivery of this Agreement and the
consummation by it of the transactions contemplated hereby shall have been
obtained and made by the Company; and
(d) AFFILIATE AGREEMENTS. Parent shall have received from each person
within the time frame specified in Section 6.6(a) who is identified in Section
3.28 of the Company Disclosure Schedule or in any notice delivered by the
Company to Parent pursuant to Section 6.6(a) as an "affiliate" of the Company,
an Affiliate Agreement, and each such Affiliate Agreement shall be in full force
and effect.
SECTION 7.3 ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct, in each case as of the date of this Agreement and (except to the
extent such representations speak as of an earlier date) as of the Closing Date
as though made on and as of the Closing Date, except (x) for changes
contemplated by this Agreement, and, (y) where the failures to be true and
correct (without regard to any materiality, Parent Material Adverse Effect or
knowledge qualifications contained therein), individually or in the aggregate,
have not had, and could not reasonably be expected to have, a Parent Material
Adverse Effect; and the Company shall have received a certificate signed on
behalf of the Company by the chief executive officer and chief financial officer
of Parent to such effect;
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(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them at or prior
to the Closing Date; and the Company shall have received a certificate signed by
the chief executive officer and the chief financial officer of Parent to such
effect; and
(c) AFFILIATE AGREEMENTS. The Company shall have received from each
person within the time frame specified in Section 6.6(b) who is identified in
Section 4.22 of the Parent Disclosure Schedule or in any notice delivered by
Parent to the Company pursuant to Section 6.6(b) as an "affiliate" of the
Company, an Affiliate Agreement, and each such Affiliate Agreement shall be in
full force and effect.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by June 30, 2000 (the "Outside Date") (provided that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date);
(c) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a nonappealable final order, decree or ruling or taken any
other action having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger (provided that the party seeking to terminate
pursuant to this Section 8.1(c) shall have complied with its obligations under
Section 6.5 and used its reasonable best efforts to have any such order, decree,
ruling or other action vacated or lifted);
(d) by either Parent or the Company, if at the Company Shareholders
Meeting (including any adjournment or postponement), the requisite vote of the
shareholders of the Company in favor of the Company Voting Proposal shall not
have been obtained;
(e) by Parent, if the Company shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements contained
in this Agreement, which breach or failure to perform would cause the conditions
set forth
54
in Sections 7.2(a) or 7.2(b) to not be satisfied and which breach shall not have
been cured within 10 business days following receipt by the Company of written
notice of such breach from Parent;
(f) by the Company, if Parent shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements contained
in this Agreement, which breach or failure to perform would cause the conditions
set forth in Sections 7.3(a) or 7.3(b), to not be satisfied and which breach
shall not have been cured within 10 business days following receipt by Parent of
written notice of such breach from the Company;
(g) by the Company at any time prior to the date of the Company
Shareholders Meeting if, in response to an unsolicited Superior Proposal,
and, subject to the Company's compliance with Section 6.2(c), the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is necessary to terminate this Agreement in order to
comply with its fiduciary duties to the Company's shareholders under
applicable law; provided that any termination by the Company pursuant to this
Section 8.1(g) shall not be effective unless and until the Company shall have
paid to Parent all amounts due Parent in connection with such termination
pursuant to Sections 8.3(b) and (c) in accordance therewith;
(h) by Parent in the event of a breach of Section 6.2 or Section
6.4(a) or (b);
(i) by Parent or the Company if, at the Parent Stockholders Meeting
(including any adjournment or postponement thereof), the Parent Voting Proposal
shall not have been approved ;
(j) by Parent, if for any reason other than Parent's failure to perform
its obligations under this Agreement the Company fails to call and hold the
Company Shareholders Meeting by the date which is one business day prior to the
Outside Date; or
(k) by the Company, if for any reason other than the Company's failure
to perform its obligations under this Agreement Parent fails to call and hold
the Parent Stockholders Meeting by the date which is one business day prior to
the Outside Date.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers, stockholders or shareholders except (i)
that the provisions of Sections 3.27, 4.19, 8.3, this Section 8.2 and Article IX
shall survive termination and (ii) nothing herein shall relieve any party from
liability for any breach hereof prior to such termination.
55
SECTION 8.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated; PROVIDED, HOWEVER, that Parent shall bear all fees and
expenses, other than the Company's financial advisor's, accountant's and
attorneys' fees and expenses, incurred in connection with preparing the printing
and filing of the Proxy Statement/Prospectus (including any preliminary
materials related thereto), the Registration Statement (including financial
statements and exhibits) and any amendments or supplements thereto and filings
under the HSR Act.
(b) The Company shall reimburse Parent for all fees and expenses of
Parent (or in the case of clause (i) of this Section 8.3(b), up to $750,000 of
fees and expenses of Parent) actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including without
limitation fees and expenses of Parent's counsel, accountants and financial
advisors), upon the termination of this Agreement (i) by Parent or the Company
pursuant to Section 8.1(d) (if prior to such termination an Acquisition Proposal
shall have been publicly announced or otherwise become publicly known or any
person shall have publicly announced an intention (whether or not conditional)
to make an Acquisition Proposal), or (ii) by Parent pursuant to Sections 8.1(e),
8.1(h) or 8.1(j) or (iii) by the Company pursuant to Section 8.1(g).
(c) The Company shall pay Parent a termination fee of $1,620,000 (and
in the case of termination of this Agreement pursuant to Section 8.1(d), the
Company shall also reimburse Parent for all fees and expenses of Parent actually
incurred relating to the transactions contemplated by this Agreement prior to
termination in excess of the amount previously reimbursed pursuant to 8.3(b)) on
the date of the first to occur of the following events:
(i) the entry by the Company into an agreement with respect
to, or the consummation of, any Acquisition Proposal within six months of the
termination of this Agreement pursuant to Sections 8.1(d), 8.1(e), 8.1(h) or
8.1(j) if prior to such termination an Acquisition Proposal shall have been
publicly announced or otherwise become publicly known or any person shall have
publicly announced an intention (whether or not conditional) to make an
Acquisition Proposal; or
(ii) the termination of this Agreement by the Company pursuant
to Section 8.1(g).
(d) Parent shall reimburse the Company for all fees and expenses of the
Company actually incurred relating to the transactions contemplated by this
Agreement prior to termination (including without limitation fees and expenses
of the Company's counsel, accountants and financial advisors), upon the
termination of this
56
Agreement (i) by Parent or the Company pursuant to Section 8.1(i), or (ii) by
the Company pursuant to Sections 8.1(f) or 8.1(k).
(e) Parent and the Company each acknowledge that the agreements
contained in this Section 8.3 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the other
party would not enter into this Agreement; accordingly, if Parent or the Company
fails promptly to pay the amount due pursuant to this Section 8.3, and, in order
to obtain such payment, the other party commences a suit which results in a
judgment against Parent or the Company, as the case may be, for the fee set
forth in this Section 8.3, Parent or the Company, as the case may be, shall pay
to the other party its costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on the amount of
the fee at the prime rate of Citibank, N.A. in effect on the date such payment
was required to be made.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 NONSURVIVAL OF REPRESENTATIONS; WARRANTIES AND AGREEMENTS.
None of the representations, warranties or agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Articles I and II, Sections 6.12,
6.14 and 6.15, this Article IX and the Affiliate Agreements.
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 if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
290 Donald Lynch Boulevard
Marlborough, Massachusetts 01752-4748
Attention: Steven Shea
Telecopier No.: (508) 303-4620
Telephone No.: (508) 303-4800
57
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, MA 02108
Attn: David Brewster, Esq.
Telecopier No.: (617) 573-4822
Telephone No.: (617) 573-4825
(b) If to the Company:
460 E. Middlefield Road
Mountain View, California 94043
Attention: Mark Housley
Telecopier No.: (650) 404-6205
Telephone No.: (650) 404-6301
With a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Gordon Davidson, Esq.
Telecopier No.: (650) 494-1417
Telephone No.: (650) 858-7237
SECTION 9.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "affiliate" 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; including, without limitation, any partnership
or joint venture in which the first mentioned person (either alone, or through
or together with any other subsidiary) has, directly or indirectly, an interest
of 5% or more;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise,
58
or (B) the right to vote pursuant to any agreement, arrangement or
understanding, or (iii) which are beneficially owned, directly or indirectly, by
any other persons with whom such person or any of its affiliates or associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares;
(c) "business day" means any day other than a Saturday or Sunday or any
day on which banks in The Commonwealth of Massachusetts are required or
authorized to be closed;
(d) "control" including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise; and
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act).
SECTION 9.4 AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after approval
of the Company Voting Proposal by the shareholders of the Company, no amendment
may be made which by law requires further approval by such shareholders without
such further approval. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
SECTION 9.5 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(b) waive any inaccuracies in the representations and warranties of any other
party hereto contained herein or in any document delivered pursuant hereto or
(c) waive compliance with any of the agreements or conditions of any other party
hereto contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
SECTION 9.6 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 9.7 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.
59
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 the transactions
contemplated hereby are fulfilled to the fullest extent possible.
SECTION 9.8 ENTIRE AGREEMENT, NO THIRD PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to herein, including
the Confidentiality Agreement) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof and (b)
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder, other than the persons intended to benefit from
the provisions of Section 6.14, who shall have the right to enforce such
provisions directly.
SECTION 9.9 ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent and Merger Sub may assign all
or any of their rights hereunder to any wholly owned subsidiary thereof;
PROVIDED, HOWEVER, that no such assignment pursuant to this Section 9.9 shall
relieve Parent of its obligations hereunder.
SECTION 9.10 INTERPRETATION. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation."
SECTION 9.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 9.12 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of California,
without regard to the conflict of law provisions thereof, including that the
Merger shall be effected in accordance with the applicable provisions of the
CGCL. Each of the parties hereto agrees that any action or proceeding brought to
enforce the rights or obligations of any party hereto under this Agreement will
be commenced and maintained in any court of competent jurisdiction located in
the State of California. Each of the parties hereto further agrees that process
may be served upon it by certified mail, return receipt requested, addressed as
more generally provided in
60
Section 9.2, and consents to the exercise of jurisdiction of a court of the
State of California over it and its properties with respect to any action, suit
or proceeding arising out of or in connection with this Agreement or the
transactions contemplated hereby or the enforcement of any rights under this
Agreement.
SECTION 9.13 COUNTERPARTS. This Agreement may be executed in two 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
taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
MEDIA 100 INC.
By: ________________________________
Name: Steven D. Shea
Title: Vice President of Finance
DERRINGER ACQUISITION CORP.
By: ________________________________
Name: Steven D. Shea
Title: President and Secretary
DIGITAL ORIGIN, INC.
By: ________________________________
Name: Mark Housley
Title: Chairman and Chief Executive
Officer
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TABLE OF DEFINED TERMS
CROSS REFERENCE
TERMS IN AGREEMENT
Acquisition Proposal............................................................ Section 6.2(b)
Affiliate....................................................................... Section 9.3(a)
Affiliated Group................................................................ Section 3.15(a)
Affiliated Return............................................................... Section 3.15(a)
Agreement....................................................................... Preamble
Beneficial Owner................................................................ Section 9.3(b)
Business Day.................................................................... Section 9.3(c)
Certificates.................................................................... Section 2.1(a)
CGCL............................................................................ Preamble
Closing......................................................................... Section 1.6
Closing Date.................................................................... Section 1.6
Code............................................................................ Preamble
Common Shares Trust............................................................. Section 2.2(d)(ii)
Company......................................................................... Preamble
Company Affiliate Agreement..................................................... Section 6.6(a)
Company Balance Sheet........................................................... Section 3.6(b)
Company By-Laws................................................................. Section 3.2
Company Charter................................................................. Section 3.2
Company Common Stock............................................................ Section 2.1
Company Disclosure Schedule..................................................... Article III
Company ESPP.................................................................... Section 2.1(e)
Company Intellectual Property Rights............................................ Section 3.17(a)
Company Material Adverse Effect ................................................ Section 3.1
Company Merger Documents........................................................ Section 3.4
Company Option.................................................................. Section 6.12
63
CROSS REFERENCE
TERMS IN AGREEMENT
Company Permits................................................................. Section 3.11(b)
Company Plans................................................................... Section 3.12(a)
Company Preferred Stock......................................................... Section 3.3(a)
Company SEC Reports............................................................. Section 3.6(a)
Company Shareholders Meeting.................................................... Section 3.20
Company Stock Option Plans ..................................................... Section 2.1(e)
Company Voting Proposal......................................................... Section 3.4
Company Warrants ............................................................... Section 2.1(b)
Confidentiality Agreement....................................................... Section 6.1(c)
Control......................................................................... Section 9.3(d)
DGCL............................................................................ Preamble
Dissenting Shares .............................................................. Section 2.1(c)
Effective Time.................................................................. Section 1.2
Environmental Claim............................................................. Section 3.16(e)
Environmental Laws.............................................................. Section 3.16(f)
ERISA........................................................................... Section 3.12(a)
ERISA Affiliate................................................................. Section 3.12(a)
Excess Shares .................................................................. Section 2.2(a)(ii)
Exchange Act.................................................................... Section 3.5(b)
Exchange Agent ................................................................. Section 2.2(a)
Exchange Ratio.................................................................. Section 2.1(a)
Existing Indemnification Obligations............................................ Section 6.14(a)
GAAP............................................................................ Section 3.6(b)
Governmental Entity............................................................. Section 3.5(b)
Hazardous Materials............................................................. Section 3.16(g)
HSR Act......................................................................... Section 3.5(b)
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CROSS REFERENCE
TERMS IN AGREEMENT
Liens........................................................................... Section 3.3(a)
Material Contract............................................................... Section 3.10(b)
Maximum Amount.................................................................. Section 6.14(b)
Merger.......................................................................... Preamble
Merger Agreement................................................................ Section 1.2
Merger Consideration ........................................................... Section 2.1(a)
Merger Sub...................................................................... Preamble
Merger Sub Common Shares ....................................................... Section 2.1(d)
NASDAQ.......................................................................... Section 2.2.(d)(ii)
Other Company Options........................................................... Section 2.1(e)
Outside Date.................................................................... Section 8.1(b)
Parent.......................................................................... Preamble
Parent Affiliate Agreement...................................................... Section 6.6(b)
Parent Affiliated Group......................................................... Section 4.14(a)
Parent Affiliated Return........................................................ Section 4.14(a)
Parent Balance Sheet............................................................ Section 4.7
Parent By-Laws.................................................................. Section 4.2
Parent Charter.................................................................. Section 4.2
Parent Common Stock............................................................. Section 2.1(a)
Parent Disclosure Schedule...................................................... Article IV
Parent ERISA Affiliate.......................................................... Section 4.11(a)
Parent Intellectual Property Rights............................................. Section 4.16(a)
Parent Material Adverse Effect.................................................. Section 4.1
Parent Merger Documents......................................................... Section 4.4
Parent Option................................................................... Section 6.12
Parent Plans.................................................................... Section 4.11(a)
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CROSS REFERENCE
TERMS IN AGREEMENT
Parent Preferred Stock.......................................................... Section 4.3(a)
Parent SEC Reports.............................................................. Section 4.6(a)
Parent Stockholders' Meeting.................................................... Section 3.20
Parent Voting Proposal.......................................................... Section 4.4
Person.......................................................................... Section 9.3(e)
Proxy Statement/Prospectus...................................................... Section 3.20
Registration Statement.......................................................... Section 3.5(b)
Release......................................................................... Section 3.16(h)
Rule 145........................................................................ Section 6.6(a)
SEC............................................................................. Section 3.5(b)
Securities Act.................................................................. Section 3.5(b)
Subsidiary...................................................................... Section 3.1
Subsidiary Documents............................................................ Section 3.2
Superior Proposal............................................................... Section 6.2(b)
Surviving Corporation........................................................... Section 1.1
Tax Returns..................................................................... Section 3.15(e)
Tax/Taxes....................................................................... Section 3.15(e)
Year 2000 Compliant............................................................. Section 3.23(e)
66