CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
BY AND AMONG
ADOBE SYSTEMS INCORPORATED,
J ACQUISITION CORPORATION
AND
FRAME TECHNOLOGY CORPORATION
DATED AS OF JUNE 22, 1995
TABLE OF CONTENTS
ARTICLE I
THE MERGERS
SECTION 1.01. THE MERGERS.............................................................
SECTION 1.02. EFFECTIVE TIME..........................................................
SECTION 1.03. EFFECT OF THE MERGER....................................................
SECTION 1.04. ARTICLES OF INCORPORATION; BY-LAWS......................................
SECTION 1.05. DIRECTORS AND OFFICERS..................................................
SECTION 1.06. EFFECT ON CAPITAL STOCK.................................................
SECTION 1.07. EXCHANGE OF CERTIFICATES................................................
SECTION 1.08. DISSENTING SHARES.......................................................
SECTION 1.09. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.....................
SECTION 1.10. LOST, STOLEN OR DESTROYED CERTIFICATES..................................
SECTION 1.11. TAX AND ACCOUNTING CONSEQUENCES.........................................
SECTION 1.12. TAKING OF NECESSARY ACTION; FURTHER ACTION..............................
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 2.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES............................
SECTION 2.02. ARTICLES OF INCORPORATION AND BY-LAWS...................................
SECTION 2.03. CAPITALIZATION..........................................................
SECTION 2.04. AUTHORITY RELATIVE TO THIS AGREEMENT....................................
SECTION 2.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS..............................
SECTION 2.06. COMPLIANCE; PERMITS.....................................................
SECTION 2.07. SEC FILINGS; FINANCIAL STATEMENTS.......................................
SECTION 2.08. ABSENCE OF CERTAIN CHANGES OR EVENTS....................................
SECTION 2.09. NO UNDISCLOSED LIABILITIES..............................................
SECTION 2.10. ABSENCE OF LITIGATION...................................................
SECTION 2.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS...........................
SECTION 2.12. LABOR MATTERS...........................................................
SECTION 2.13. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS......................
SECTION 2.14. RESTRICTIONS ON BUSINESS ACTIVITIES.....................................
SECTION 2.15. TITLE TO PROPERTY.......................................................
SECTION 2.16. TAXES...................................................................
SECTION 2.17. ENVIRONMENTAL MATTERS...................................................
SECTION 2.18. BROKERS.................................................................
SECTION 2.19. FULL DISCLOSURE.........................................................
SECTION 2.20. INTELLECTUAL PROPERTY...................................................
SECTION 2.21. INTERESTED PARTY TRANSACTIONS...........................................
SECTION 2.22. OPTION PLANS............................................................
SECTION 2.23. POOLING MATTERS.........................................................
SECTION 2.24. OPINION OF FINANCIAL ADVISOR............................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES............................
SECTION 3.02. ARTICLES OF INCORPORATION AND BY-LAWS...................................
SECTION 3.03. CAPITALIZATION..........................................................
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT....................................
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS..............................
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SECTION 3.06. SEC FILINGS; FINANCIAL STATEMENTS.......................................
SECTION 3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS....................................
SECTION 3.08. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS......................
SECTION 3.09. OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES............................
SECTION 3.10. BROKERS.................................................................
SECTION 3.11. FULL DISCLOSURE.........................................................
SECTION 3.12. OPINION OF FINANCIAL ADVISOR............................................
SECTION 3.13. TAXES...................................................................
SECTION 3.14. NO UNDISCLOSED LIABILITIES..............................................
SECTION 3.15. ABSENCE OF LITIGATION...................................................
SECTION 3.16. TITLE TO PROPERTY.......................................................
SECTION 3.17. INTELLECTUAL PROPERTY...................................................
SECTION 3.18. POOLING MATTERS.........................................................
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER...................
SECTION 4.02. NO SOLICITATION.........................................................
SECTION 4.03. CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER........................
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT......................
SECTION 5.02. COMPANY SHAREHOLDERS' MEETING...........................................
SECTION 5.03. ACCESS TO INFORMATION; CONFIDENTIALITY..................................
SECTION 5.04. CONSENTS; APPROVALS.....................................................
SECTION 5.05. STOCK OPTIONS...........................................................
SECTION 5.06. COMPANY EMPLOYEE STOCK PURCHASE PLAN....................................
SECTION 5.07. AGREEMENTS OF AFFILIATES................................................
SECTION 5.08. INDEMNIFICATION.........................................................
SECTION 5.09. NOTIFICATION OF CERTAIN MATTERS.........................................
SECTION 5.10. FURTHER ACTION/TAX TREATMENT............................................
SECTION 5.11. PUBLIC ANNOUNCEMENTS....................................................
SECTION 5.12. POOLING ACCOUNTING TREATMENT............................................
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.............
SECTION 6.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB...........
SECTION 6.03. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY......................
ARTICLE VII
TERMINATION
SECTION 7.01. TERMINATION.............................................................
SECTION 7.02. EFFECT OF TERMINATION...................................................
SECTION 7.03. FEE AND EXPENSES........................................................
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.............
SECTION 8.02. NOTICES.................................................................
SECTION 8.03. CERTAIN DEFINITIONS.....................................................
SECTION 8.04. AMENDMENT...............................................................
SECTION 8.05. WAIVER..................................................................
SECTION 8.06. HEADINGS................................................................
SECTION 8.07. SEVERABILITY............................................................
SECTION 8.08. ENTIRE AGREEMENT........................................................
SECTION 8.09. ASSIGNMENT..............................................................
SECTION 8.10. PARTIES IN INTEREST.....................................................
SECTION 8.11. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE...................
SECTION 8.12. GOVERNING LAW...........................................................
SECTION 8.13. COUNTERPARTS............................................................
SECTION 8.14. WAIVER OF JURY TRIAL....................................................
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of June 22, 1995
(this "AGREEMENT"), among ADOBE SYSTEMS INCORPORATED, a California corporation
("PARENT"), J ACQUISITION CORPORATION, a California corporation and a wholly
owned subsidiary of Parent ("MERGER SUB"), and FRAME TECHNOLOGY CORPORATION, a
California corporation (the "COMPANY"),
W I T N E S S E T H:
WHEREAS, the 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 shareholders for Parent to acquire the Company upon the terms and
subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the merger (the "MERGER")
of Merger Sub with and into the Company in accordance with the California
Corporations Code ("CALIFORNIA LAW") and upon the terms and subject to the
conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, by executing this
Agreement, to adopt a plan of reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the "CODE"), and the
regulations thereunder, and to cause the Merger and the Upstream Merger (as
defined in Section 1.01(b)) to qualify as a reorganization under the provisions
of Section 368(a) of the Code;
WHEREAS, for accounting purposes, it is intended that the transaction
contemplated hereby shall be accounted for as a pooling of interests under
United States generally accepted accounting principles ("GAAP");
WHEREAS, pursuant to the Merger, each outstanding share (a "SHARE") of the
Company's common stock, no par value (the "COMPANY COMMON STOCK"), shall be
converted into the right to receive the Merger Consideration (as defined in
Section 1.07(b)), upon the terms and subject to the conditions set forth herein;
and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGERS
SECTION 1.01. THE MERGERS. (a) At the Effective Time (as defined in
Section 1.02 hereof), and subject to and upon the terms and conditions of this
Agreement and California Law, Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall cease, and the
Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "SURVIVING CORPORATION"; provided that, in the event of an Upstream Merger
(as such term is defined in Section 1.01(b) hereof) or in the event of a Forward
Merger (as defined in Section 8.04 hereof), Parent shall be deemed to be the
"Surviving Corporation".
(b) UPSTREAM MERGER. As soon as reasonably practicable after the Effective
Time (as defined in Section 1.02), Parent shall cause the Surviving Corporation
to be merged with and into Parent (the "Upstream Merger"), and Parent shall
continue as the surviving corporation after the Upstream Merger.
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing this Agreement, or a
merger agreement as contemplated by Section 1101 of the California Law
(the "MERGER AGREEMENT"), with the Secretary of State of the State of
California, in such form as required by, and executed in accordance with the
relevant provisions of, California Law (the time of such filing being the
"EFFECTIVE TIME").
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Merger Agreement and the
applicable provisions of California Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.04. ARTICLES OF INCORPORATION; BY-LAWS. (a) ARTICLES OF
INCORPORATION. Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time the Articles of Incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Incorporation; PROVIDED, HOWEVER, that Article I of
the Articles of Incorporation of the Surviving Corporation shall be amended to
read as follows: "The name of the corporation is Frame Technology Corporation".
(b) BY-LAWS. The By-Laws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by California Law, the Articles of Incorporation
of the Surviving Corporation and such By-Laws.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.06. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holders of any of the following securities:
(a) CONVERSION OF SECURITIES. Each Share issued and outstanding
immediately prior to the Effective Time (excluding any Shares held in the
treasury of the Company or owned by Parent, Merger Sub or any of their
subsidiaries and any Dissenting Shares (as defined in Section 1.08)) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive 0.52 shares (the "EXCHANGE RATIO") of
validly issued, fully paid and nonassessable common stock, no par value, of
Parent ("PARENT COMMON SHARES").
(b) CANCELLATION. All Shares to be converted into Parent Common Shares
pursuant to subsection (a) of this Section 1.06 shall, by virtue of the Merger
and without any action on the part of the holders thereof, cease to be
outstanding, be canceled and retired and cease to exist, and each holder of a
certificate (a "CERTIFICATE") representing any such Shares shall thereafter
cease to have any rights with respect to such Shares, except the right to
receive for each of the Shares, upon the surrender of such Certificate in
accordance with Section 1.07, the Merger Consideration and cash in lieu of
fractional Parent Common Shares as contemplated by Section 1.06(g).
(c) SHARES OWNED BY PARENT, ETC. Each Share issued and outstanding and
owned by Parent, Merger Sub or any of their subsidiaries immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, cease to be outstanding, be canceled and retired
without payment of any consideration therefor and cease to exist.
(d) ASSUMPTION OF STOCK OPTIONS. All options to purchase Company Common
Stock then outstanding under the Company's Dual Stock Option Plan, 1991
Directors' Stock Option Plan and 1994 Directors Stock Option Plan shall be
assumed by Parent in accordance with Sections 5.05.
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(e) CAPITAL STOCK OF MERGER SUB. Each share of common stock, no par value,
of Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, no par value, of the Surviving Corporation.
Each stock certificate of Merger Sub evidencing ownership of any such shares
shall continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.
(f) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted to
reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into Parent
Common Shares or Company Common Stock), reorganization, recapitalization or
other like change with respect to Parent Common Shares or Company Common Stock
occurring after the date hereof and prior to the Effective Time.
(g) FRACTIONAL SHARES. No fraction of a share of Parent Common Shares will
be issued, but in lieu thereof each holder of shares of Company Common Stock who
would otherwise be entitled to a fraction of a share of Parent Common Shares
(after aggregating all fractional shares of Parent Common Shares to be received
by such holder) shall receive from Parent an amount of cash (rounded to the
nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the average of the last reported sale price for trades of Parent Common
Shares on the Nasdaq National Market (the "NNM") as of each of the thirty (30)
consecutive trading days immediately preceding the Effective Time as quoted in
the Wall Street Journal or other reliable financial newspaper or publication.
For the purposes of the preceding sentence, a "TRADING DAY" means a day on which
trading generally takes place on the NNM and on which trading in Parent Common
Shares has occurred.
SECTION 1.07. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. Parent shall
supply, or shall cause to be supplied, to or for the account of a bank or trust
company designated by Parent (the "EXCHANGE AGENT"), in trust for the benefit of
the holders of Company Common Stock (other than Dissenting Shares), for exchange
in accordance with this Section 1.07, through the Exchange Agent, certificates
evidencing the Parent Common Shares issuable pursuant to Section 1.06 in
exchange for outstanding Shares.
(b) EXCHANGE PROCEDURES. As soon as reasonably 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 reasonably specify) and (ii) instructions to effect the surrender of
the Certificates in exchange for the certificates evidencing shares of Parent
Common Shares and, in lieu of any fractional shares thereof, cash. 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 (A) certificates evidencing
that number of whole Parent Common Shares which such holder has the right to
receive in accordance with the Exchange Ratio in respect of the Shares formerly
evidenced by such Certificate, (B) any dividends or other distributions to which
such holder is entitled pursuant to Section 1.07(c), and (C) cash in lieu of
fractional Parent Common Shares to which such holder is entitled pursuant to
Section 1.06(g) (the Parent Common Shares, dividends, distributions and cash
described in this clause (C) being, collectively, the "MERGER CONSIDERATION"),
and the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of Shares which is not registered in the transfer
records of the Company as of the Effective Time, Parent Common Shares and cash
may be issued and paid in accordance with this Article I to a transferee if the
Certificate evidencing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
pursuant to this Section 1.07(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 the Company
Common Stock will be deemed from and after the Effective Time, for all corporate
purposes, other than the payment of dividends, to evidence the ownership of the
number of
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full shares of Parent Common Shares into which such shares of the Company Common
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 1.06.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Shares with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate until the holder of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Shares
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 Shares.
(d) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent Common
Shares is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any person designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Shares in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(e) NO LIABILITY. Neither Parent, Merger Sub nor the Company shall be
liable to any holder of Company Common Stock for any Merger Consideration (or
dividends or distributions with respect thereto) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) WITHHOLDING RIGHTS. Parent, the Surviving Corporation and 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, the Surviving Corporation 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, provincial or foreign tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the Shares
in respect of which such deduction and withholding was made.
SECTION 1.08. DISSENTING SHARES. (a) Notwithstanding any provision of this
Agreement to the contrary, any shares of capital stock of the Company held by a
holder who has exercised dissenters' rights for such shares in accordance with
California Law and who, as of the Effective Time, has not effectively withdrawn
or lost such dissenters' rights ("DISSENTING SHARES"), shall not be converted
into or represent a right to receive Parent Common Shares pursuant to Section
1.06, but the holder thereof shall only be entitled to such rights as are
granted by California Law.
(b) Notwithstanding the provisions of subsection (a), if any holder of
Dissenting Shares shall effectively withdraw or lose (through failure to perfect
or otherwise) his dissenters' rights, then, as of the later of Effective Time or
the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive the Merger Consideration,
without interest thereon, upon surrender of the certificate or certificates
representing such Dissenting Shares.
(c) The Company shall give Parent (i) prompt notice of any written demands
received by the Company to require the Company to purchase shares of capital
stock of the Company, withdrawals of such demands, and any other instruments
served pursuant to California Law and received by the Company and (b) the
opportunity to participate in all negotiations and proceedings with respect to
such demands. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any such demands or offer
to settle or settle any such demands.
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(d) Prior to the consummation of the Upstream Merger, the Company shall
establish an escrow account with a financial institution selected by the Parent
and the Company shall fund such escrow account with cash or cash equivalents in
an amount sufficient to make all payments to holders of Dissenting Shares. Such
escrow account shall survive the Merger and Upstream Merger. All payments to
holders of Dissenting Shares shall be made out of such escrow account, and no
such payments shall be made or otherwise funded by Parent.
SECTION 1.09. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof (including any cash in lieu of fractional
shares paid in respect thereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article I.
SECTION 1.10. 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, such shares of Parent
Common Shares and cash for fractional shares, if any, as may be required
pursuant to Section 1.06; 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 a bond in such sum as it may
reasonably 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.
SECTION 1.11. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the
parties hereto that the Merger and the Upstream Merger shall (a) constitute a
reorganization within the meaning of Section 368 of the Code and (b) qualify for
accounting treatment as a pooling of interests under GAAP. The parties hereto
hereby adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
SECTION 1.12. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that,
except as set forth in the written disclosure schedule previously delivered by
the Company to Parent (the "COMPANY DISCLOSURE SCHEDULE"):
SECTION 2.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) Each of
the Company and 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 and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("APPROVALS") necessary
to own, lease and operate the properties it purports to own, operate or lease
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power,
authority and Approvals would not, individually or in the aggregate, have a
Material Adverse Effect (as defined
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below). Each of the Company and 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 its 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 would not, either individually or in the aggregate, have a
Material Adverse Effect. When used in connection with the Company or any of its
subsidiaries, the term "MATERIAL ADVERSE EFFECT" means any change or effect
that, individually or when taken together with all other such changes or effects
that have occurred prior to the date of determination of the occurrence of the
Material Adverse Effect, is or is reasonably likely to be materially adverse to
the business, assets (including intangible assets), financial condition or
results of operations of the Company and its subsidiaries, taken as a whole. A
true and complete list of all of the Company's subsidiaries, together with the
jurisdiction of incorporation 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 2.01 of the Company Disclosure Schedule.
Except as set forth in Section 2.01 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.
SECTION 2.02. ARTICLES OF INCORPORATION AND BY-LAWS. The Company has
heretofore furnished to Parent a complete and correct copy of its Articles of
Incorporation and By-Laws, as amended to date, and equivalent organizational
documents of each of its subsidiaries. Such Articles of Incorporation, By-Laws
and equivalent organizational documents of each of its subsidiaries are in full
force and effect. Neither the Company nor any of its subsidiaries is in
violation of any of the provisions of its Articles of Incorporation or By-Laws
or equivalent organizational documents.
SECTION 2.03. CAPITALIZATION. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock and 2,000,000 shares of
undesignated preferred stock, no par value, of the Company (the "COMPANY
PREFERRED STOCK"). As of June 21, 1995, (i) 15,031,549 shares of Company Common
Stock were issued and outstanding, all of which are validly issued, fully paid
and nonassessable, (ii) no shares of Company Common Stock were held by
subsidiaries of the Company, (iii) 564,258 shares of Company Common Stock were
reserved for future issuance pursuant to outstanding employee stock options or
stock purchase rights granted pursuant to the Company's Dual Stock Option
Program, (iv) 84,168 Shares of Company Common Stock were reserved for future
issuance pursuant to the Company's 1991 Directors' Stock Option Plan, (v)
338,174 shares of Company Common Stock were reserved for future issuance
pursuant to the Company's 1991 Employee Stock Purchase Plan, (vi) 41,049 shares
of Company Common Stock were reserved for issuance pursuant to the Company's
1994 Directors Stock Option Plan and (vii) no shares of Company Preferred Stock
were issued or outstanding. No material change in such capitalization has
occurred between May 10, 1995 and the date hereof. As of the date hereof, none
of the shares of Company Preferred Stock is issued and outstanding. Except as
set forth in this Section 2.03 or Section 2.11 or in Section 2.03 or Section
2.11 of the Company Disclosure Schedule, or pursuant to the terms of that
certain Agreement and Plan Reorganization, dated as of May 24, 1995, by and
among the Company, VI Acq. Corp., a California corporation, and Mastersoft,
Inc., an Arizona corporation ("MASTERSOFT") (the "MASTERSOFT AGREEMENT"), there
are no options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
the Company or any of its subsidiaries or obligating the Company or any of its
subsidiaries to issue, register or sell any shares of capital stock of, or other
equity interests in, the Company or any of its subsidiaries. All shares of
Company Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. There are no obligations, contingent or otherwise, of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of Company Common Stock or the capital stock of any subsidiary 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 other than guarantees of
bank obligations of subsidiaries entered into in the ordinary course of
business. All
6
of the outstanding shares of capital stock (other than directors' qualifying
shares) of each of the Company's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and all such shares (other than directors'
qualifying shares) are owned by the Company or another subsidiary free and clear
of all security interests, liens, claims, pledges, agreements, limitations in
the Company's voting rights, charges or other encumbrances of any nature
whatsoever.
SECTION 2.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
approval and adoption of the Merger by the holders of a majority of the
outstanding shares of Company Common Stock entitled to vote in accordance with
California Law and the Company's Articles of Incorporation and By-Laws). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Company.
SECTION 2.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Section
2.05(a) of the Company Disclosure Schedule includes a list of all agreements
heretofore filed with the SEC as a "material contract" and all agreements which,
as of the date hereof, will be required to be filed with the SEC as a "material
contract" (the "MATERIAL CONTRACTS") of the Company and its subsidiaries.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company shall not, (i) conflict with or
violate the Articles of Incorporation or By-Laws or equivalent organizational
documents of the Company or any of its subsidiaries, (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 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, any Material Contract, or result in the
creation of a lien or encumbrance 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, except for any such breaches,
defaults or other occurrences that would not, individually or in the aggregate,
have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company shall not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), state securities laws ("BLUE SKY LAWS"), the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), and the filing and recordation of appropriate
merger or other documents as required by California Law and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay consummation of
the Merger, or otherwise prevent the Company from performing its obligations
under this Agreement, and would not have a Material Adverse Effect.
SECTION 2.06. COMPLIANCE; PERMITS. (a) Neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) 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 (ii) any note, bond, mortgage, indenture, contract, agreement,
lease,
7
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, except for any such conflicts, defaults or violations which would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) The Company and its subsidiaries hold all permits, licenses, easements,
variances, exemptions, consents, certificates, orders and approvals from
governmental authorities which 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 and its subsidiaries are in
compliance with the terms of the Company Permits, except where the failure to so
comply would not have a Material Adverse Effect.
SECTION 2.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company has filed
all forms, reports and documents required to be filed with the Securities and
Exchange Commission ("SEC") since February 12, 1992, and has made available to
Parent (i) its Annual Reports on Form 10-K for the fiscal years ended December
31, 1992, 1993 and 1994, (ii) its Quarterly Report on Form 10-Q for the period
ended March 31, 1995, (iii) all proxy statements relating to the Company's
meetings of shareholders (whether annual or special) held since February 12,
1992, (iv) all other reports or registration statements (other than Reports on
Form 10-Q not referred to in clause (ii) above) filed by the Company with the
SEC since February 12, 1992 and (vi) all amendments and supplements to all such
reports and registration statements filed by the Company with the SEC
(collectively, the "COMPANY SEC REPORTS"). The Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act or 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 therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of the Company's subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presented the consolidated financial position of the Company and its
subsidiaries as at the respective dates thereof 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 and did or do not contain all footnotes that would be required by
GAAP.
(c) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC pursuant
to the Securities Act or the Exchange Act.
SECTION 2.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 2.08 of the Company Disclosure Schedule, since December 31, 1994 the
Company has conducted its business in the ordinary course and there has not
occurred: (i) any Material Adverse Effect; (ii) any amendments or changes in the
Articles of Incorporation or Bylaws of the Company; (iii) any damage to,
destruction or loss of any assets (tangible or intangible) of the Company,
(whether or not covered by insurance) that could have a Material Adverse Effect;
or (iv) any sale of a material amount of property (including, without
limitation, intellectual property) of the Company, except in the ordinary course
of business.
SECTION 2.09. NO UNDISCLOSED LIABILITIES. Except as is disclosed in
Section 2.09 of the Company Disclosure Schedule and the Company SEC Reports,
neither the Company nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise) which are, in the aggregate, material to the
business, operations or financial condition of the Company and its subsidiaries
8
taken as a whole, except liabilities (a) adequately provided for in the
Company's audited balance sheet (including any related notes thereto) for the
fiscal year ended December 31, 1994 included in the Company SEC Reports (the
"1994 BALANCE SHEET"), (b) incurred in the ordinary course of business and not
required under GAAP to be reflected on the balance sheet, or (c) incurred since
December 31, 1994 in the ordinary course of business and consistent with past
practice, and liabilities incurred in connection with this Agreement.
SECTION 2.10. ABSENCE OF LITIGATION. Except as set forth in Section 2.10
of the Company Disclosure Schedule, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, before any court, arbitrator
or administrative, governmental or regulatory authority or body, domestic or
foreign, that, individually or in the aggregate, could have a Material Adverse
Effect.
SECTION 2.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) Section
2.11 of the Company Disclosure Schedule lists all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, and any current or
former employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee, officer or director
of the Company, any trade or business (whether or not incorporated) which is a
member or which is under common control with the Company (an "ERISA AFFILIATE")
within the meaning of Section 414 of the Code, or any subsidiary of the Company
(together, the "EMPLOYEE PLANS"), and a copy of each such written Employee Plan
has been made available to Parent.
(b) (i) None of the Employee Plans promises or provides retiree medical or
other retiree welfare benefits to any person; (ii) there has been no "prohibited
transaction", as such term is defined in Section 406 of ERISA and Section 4975
of the Code, with respect to any Employee Plan, which could result in any
material liability of the Company or any of its subsidiaries; (iii) all Employee
Plans are in compliance in all material respects with the requirements
prescribed by any and all statutes (including ERISA and the Code), orders, or
governmental rules and regulations currently in effect with respect thereto
(including all applicable requirements for notification to participants or the
Department of Labor, Internal Revenue Service or Secretary of the Treasury), and
the Company and each of its subsidiaries have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any default or violation
by any other party to, any of the Employee Plans; (iv) each Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code does so qualify and a favorable
determination letter with respect to each such Employee Plan and trust has been
received from the Internal Revenue Service (the "IRS"), and nothing has occurred
which may reasonably be expected to cause the loss of such qualification or
exemption; (v) all contributions required to be made to any Employee Plan
pursuant to Section 412 of the Code, the terms of the Employee Plan or any
collective bargaining agreement, have been made on or before their due dates and
a reasonable amount has been accrued for contributions to each Employee Plan for
the current plan years; (vi) with respect to each Employee Plan, no "reportable
event" within the meaning of Section 4043 of ERISA (excluding any such event for
which the thirty (30) day notice requirement has been waived under the
regulations to Section 4043 of ERISA) nor any event described in Section 4062,
4063 or 4041 of ERISA has occurred; and (vii) no Employee Plan is covered by,
and neither the Company nor any subsidiary has incurred or expects to incur any
liability under, Title IV of ERISA or Section 412 of the Code.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true and
complete list of each current or former employee, officer or director of the
Company or any of its subsidiaries who holds any option to purchase Company
Common Stock or Company Preferred Stock as of the date hereof, together with the
number of shares of Company Common Stock or Company Preferred Stock subject
9
to such option, the date of grant of such option, the extent to which such
option is vested, the option price of such option, whether such option is
intended to qualify as an incentive stock option within the meaning of Section
422(b) of the Code (an "ISO"), and the expiration date of such option. Section
2.11(c) of the Company Disclosure Schedule also sets forth the total number of
ISOs and of nonqualified options to purchase Company Common Stock or Company
Preferred Stock.
(d) The Company has made available to Parent (i) copies of all employment
agreements with officers of the Company; (ii) copies of all agreements with
consultants who are individuals obligating the Company to make annual cash
payments in an amount exceeding $100,000; (iii) a schedule listing all officers
of the Company who have executed a non-competition agreement with the Company;
(iv) copies of all severance agreements, programs and policies of the Company
with or relating to its employees; and (v) copies of all plans, programs,
agreements and other arrangements of the Company with or relating to its
employees which contain change in control provisions.
SECTION 2.12. LABOR MATTERS. Except as set forth in Section 2.12 of the
Company Disclosure Schedule, (i) 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, which
controversies have or may have a Material Adverse Effect; (ii) 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 (iii) neither the Company nor any of its subsidiaries has any
knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of the Company or any of its
subsidiaries.
SECTION 2.13. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by the Company for inclusion in the Registration Statement
(as defined in Section 3.08) 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 the Company
for inclusion in the proxy statement/prospectus to be sent to the shareholders
of the Company in connection with the meeting of the Company's shareholders to
consider the Merger (the "COMPANY SHAREHOLDERS' MEETING") (such proxy statement/
prospectus as amended or supplemented is referred to herein as the "PROXY
STATEMENT/PROSPECTUS"), shall not, on the date the Proxy Statement/Prospectus
(or any amendment thereof or supplement thereto) is first mailed to
shareholders, at the time of the Company Shareholders' Meeting, or at the
Effective Time, 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 which has become false or misleading. If at any time prior
to the Effective Time 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 Statement/Prospectus, the Company shall promptly inform
Parent and Merger Sub. The Proxy Statement/Prospectus shall comply in all
material respects as to form and substance with the requirement of 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 any of the foregoing
documents.
SECTION 2.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, there is no material agreement, judgment, injunction, order or decree
binding upon the Company or any of its subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or materially
10
impairing any business practice of the Company or any of its subsidiaries, any
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 2.15. TITLE TO PROPERTY. The Company owns no real property.
Section 2.15 of the Company Disclosure Statement sets forth a true and complete
list of all real property leased by the Company or any of its subsidiaries
requiring annual lease payments of more than $100,000, and the aggregate monthly
rental or other fee payable under such lease. The Company and each of its
subsidiaries have good and defensible title to all of their properties and
assets, free and clear of all liens, charges and encumbrances except liens for
taxes not yet due and payable and such liens or other imperfections of title, if
any, as do not materially detract from the value of or interfere with the
present use of the property affected thereby or which, individually or in the
aggregate, would not have a Material Adverse Effect; and, to the knowledge of
the Company, all leases pursuant to which the Company or any of its subsidiaries
lease from others material amounts of real or personal property, are in good
standing, valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing material default or event
of default (or event which with notice or lapse of time, or both, would
constitute a material default and in respect of which the Company or such
subsidiary has not taken adequate steps to prevent such a default from
occurring) except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default would not
have a Material Adverse Effect. All the facilities of the Company and its
subsidiaries, except such as may be under construction, are in good operating
condition and repair, except where the failure of such plants, structures and
equipment to be in such good operating condition and repair would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 2.16. TAXES. (a) 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, capital
stock, license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premiums, windfall profits, transfer and gains taxes and (ii)
interest, penalties and additions to tax imposed with respect thereto; and "TAX
RETURNS" shall mean returns, reports, and information statements with respect to
Taxes required to be filed with the IRS or any other taxing authority, domestic
or foreign, including, without limitation, consolidated, combined and unitary
tax returns.
(b) The Company on behalf of itself and all its affiliates hereby represents
that, other than as disclosed on Section 2.16(b) of the Company Disclosure
Schedule: the Company and its "affiliates" (excluding for the purposes of this
Section 2.16 only officers, directors and 10% or greater shareholders of the
Company) have filed all United States federal income tax and all other material
tax returns required to be filed by them, and the Company and its affiliates
have paid and discharged all Taxes due in connection with or with respect to the
filing of all Tax Returns and have paid all other Taxes as are due, except such
as are being contested in good faith by appropriate proceedings (to the extent
any such proceedings are required) and with respect to which the Company is
maintaining reserves to the extent currently required in all material respects
adequate for their payment except to the extent the failure to do so would not
have a Material Adverse Effect. The Company and each of its affiliates have
disclosed to the relevant taxing authority any position it has taken where such
disclosure would enable such person to avoid penalties or additions to tax.
Neither the IRS nor any other taxing authority or agency is now asserting or, to
the best of the Company's knowledge, threatening to assert against the Company
or any of its affiliates any deficiency or claim for additional Taxes other than
additional Taxes with respect to which the Company is maintaining reserves in
all material respects adequate for their payment, and there are no requests for
information currently outstanding that could affect the Taxes of the Company or
any affiliates. Neither the Company nor any of its affiliates is currently being
audited by any taxing authority. There are no tax liens on any assets of the
Company
11
or any affiliate. Neither the Company nor any of its affiliates has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax. The accruals and reserves for taxes
reflected in the 1994 Balance Sheet are in all material respects adequate to
cover all Taxes accruable through the date thereof (including interest and
penalties, if any, thereon and Taxes being contested) in accordance with
generally accepted accounting principles. Neither the Company nor any of its
affiliates is required to include in income (i) any amount in respect of any
adjustment under Section 481 of the Code, (ii) any deferred intercompany
transaction or (iii) any installment sale gain, where the inclusion in income
would result in a tax liability materially in excess of the reserves therefor.
Neither the Company nor any of its affiliates has given a consent under Section
341(f) of the Code. Neither the Company nor any of its affiliates is a party to
a tax sharing or allocation agreement nor does the Company or any of its
affiliates owe any amount under any such agreement. Neither the Company nor any
of its affiliates is, or has been at any time, a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code.
(c) The Company on behalf of itself and all its affiliates hereby represents
that, other than as disclosed on Section 2.16(c) of the Company Disclosure
Schedule, and other than with respect to items the inaccuracy of which would not
have a Material Adverse Effect: Neither the Company nor any of its affiliates is
a party to any agreement, contract or arrangement that may result, separately or
in the aggregate, in the payment of any "excess parachute payment" within the
meaning of Section 280G of the Code, determined without regard to Section
280G(b)(4) of the Code. Except as disclosed on Section 2.16(c) of the Company
Disclosure Schedule, no acceleration of the vesting schedule for any property
that is substantially unvested within the meaning of the regulations under
Section 83 of the Code will occur in connection with the transactions
contemplated by this Agreement. Neither the Company nor any of its affiliates is
or has been subject to any accumulated earnings tax or personal holding company
tax. Neither the Company nor any of its affiliates owns stock in a passive
foreign investment company within the meaning of Section 1296 of the Code.
Neither the Company nor any of its affiliates is obligated under any agreement
with respect to industrial development bonds or other obligations with respect
to which the excludibility from gross income of the holder for federal income
tax purposes could be affected by the transactions contemplated hereunder.
Neither the Company nor any of its affiliates has an unrecaptured overall
foreign loss within the meaning of Section 904(f) of the Code or has
participated in or cooperated with an international boycott within the meaning
of Section 999 of the Code. Neither the Company nor any of its affiliates owns
any property of a character, the transfer of which would give rise to (x) a
revaluation of such property for purposes of any AD VALOREM or similar tax, or
(y) any documentary, stamp or other transfer tax. Neither the Company nor any of
its affiliates has an "excess loss account" for purposes of the treasury
regulations promulgated under Section 1502 of the Code.
(d) Within ten days after the date hereof, the Company will make available
to Parent or its legal counsel for inspection copies of all income and sales and
use tax returns for all periods since the date of the Company's incorporation.
SECTION 2.17. ENVIRONMENTAL MATTERS. Except as set forth in Section 2.17
of the Company Disclosure Schedule, and except in all cases as, in the
aggregate, have not had and could not reasonably be expected to have a Material
Adverse Effect, the Company and each of its subsidiaries to their respective
knowledge (i) have obtained all applicable permits, licenses and other
authorization which are required under Federal, state or local laws relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
by the Company or its subsidiaries (or their respective agents); (ii) are in
compliance with all terms and conditions of such required permits, licenses and
authorization, and also are in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in such laws or contained in any regulation,
code, plan, order,
12
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder; (iii) as of the date hereof, are not aware of nor have
received notice of any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued compliance or which would give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit or proceeding,
based on or resulting from the Company's or any of its subsidiary's (or any of
their respective agent's) manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, or
release into the environment, of any pollutant, contaminant, or hazardous or
toxic material or waste; and (iv) have taken all actions necessary under
applicable requirements of Federal, state or local laws, rules or regulations to
register any products or materials required to be registered by the Company or
its subsidiaries (or any of their respective agents) thereunder.
SECTION 2.18. BROKERS. No broker, finder or investment banker (other than
Hambrecht & Quist LLC) 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 the Company. The Company has
heretofore furnished to Parent a complete and correct copy of all agreements
between the Company and Hambrecht & Quist LLC pursuant to which such firm would
be entitled to any payment relating to the transactions contemplated hereunder.
SECTION 2.19. FULL DISCLOSURE. No statement contained in any certificate
or schedule furnished or to be furnished by the Company or its subsidiaries to
Parent or Merger Sub in, or pursuant to the provisions of, this Agreement
contains or shall contain any untrue statement of a material fact or omits or
shall omit to state any material fact necessary, in the light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
SECTION 2.20. INTELLECTUAL PROPERTY. (a) The Company owns, or is licensed
or otherwise possesses legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, maskworks, net lists, schematics, technology, know-how, computer
software programs or applications (in both source code and object code form),
and tangible or intangible proprietary information or material that are used or
proposed to be used in the business of the Company as currently conducted or as
proposed to be conducted by the Company (the "COMPANY INTELLECTUAL PROPERTY
RIGHTS") free and clear of all liens, charges, security interests or similar
encumbrances. Section 2.20(a) of the Company Disclosure Schedule lists all
patents, registered and material unregistered trademarks and service marks,
registered and material unregistered copyrights, trade names and any
applications therefor of the Company included in the Company Intellectual
Property Rights, and specifies the jurisdictions in which each such Company
Intellectual Property Right has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers and the names of all registered
owners, together with a list of all of the Company's currently marketed software
products and an indication as to which, if any, of such software products have
been registered for copyright protection with the United States Copyright Office
and any foreign offices and by whom such items have been registered. Section
2.20(b) of the Company Disclosure Schedule includes and specifically identifies
all patents, registered and material unregistered trademarks and service marks,
registered and material unregistered copyrights, trade names and any
applications therefor included in the third party patents, trademarks, trade
names, service marks, copyrights, mask works, net lists, schematics, technology,
know-how, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material (the "THIRD PARTY INTELLECTUAL PROPERTY RIGHTS"), of which the Company
is aware, and which are incorporated in, are, or form a part of, any Company
product. Section 2.20(b) of the Company Disclosure Schedule lists (i) any
requests the Company has received to make any such registration, including the
identity of the requestor and the item requested to be so registered, and the
jurisdiction for which such request has been made; (ii) except for object code
license agreements for the Company's products executed in the ordinary course of
business and in accordance with the Company's past practices, all material
licenses, sublicenses and other agreements as to which the Company is a party
and pursuant to which any person is
13
authorized to use any Company Intellectual Property Right, or any trade secret
material to the Company; and (iii) all material licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to which the Company
is authorized to use any Third Party Intellectual Property Rights, or other
trade secret of a third party in or as any product, and includes the identity of
all parties thereto, a description of the nature and subject matter thereof, the
applicable royalty rates and the term thereof if not perpetual or automatically
renewable by the Company.
(b) The Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations hereunder, in
violation of any license, sublicense or agreement described in Section 2.20(b)
of the Company Disclosure Schedule. No claims with respect to the Company
Intellectual Property Rights, any trade secret material to the Company, or Third
Party Intellectual Property Rights to the extent arising out of any use,
reproduction or distribution of such Third Party Intellectual Property Rights by
or through the Company, have been asserted or, to the knowledge of the Company,
are threatened by any person, nor does the Company know of any valid grounds for
any bona fide claims (i) to the effect that the manufacture, sale, licensing or
use of any product as now used, sold or licensed or proposed for use, sale or
license by Company infringes on any copyright, patent, trademark, service mark
or trade secret; (ii) against the use by the Company of any trademarks, trade
names, trade secrets, copyrights, patents, maskworks, net lists, schematics,
technology, know-how or computer software programs and applications used in the
Company's business as currently conducted or as proposed to be conducted by the
Company; (iii) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property Rights or other trade secret material to the
Company; or (iv) challenging the Company's license or legally enforceable right
to use of the Third Party Intellectual Rights. To the Company's knowledge, all
material patents, registered trademarks, maskworks and copyrights held by the
Company are valid and enforceable and no registration relating thereto has
lapsed, expired or been abandoned or cancelled or is the subject of a
cancellation proceeding. The consummation of the transactions contemplated
hereby will not alter or impair any of the Company Intellectual Property Rights.
Neither the Company nor any of its subsidiaries has entered into any consent
decree or any material indemnification, forbearance to sue or settlement
agreement with respect to the Company Intellectual Property Rights other than
indemnities given in the ordinary course of business. Except as set forth in
Section 2.20(c) of the Company Disclosure Schedule, the Company is not aware of
any material unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property by any third party, including any employee or
former employee of the Company or any of its subsidiaries. Except as set forth
in Section 2.20(c) of the Company Disclosure Schedule, neither the Company nor
any of its subsidiaries (i) has been sued or charged in writing as a defendant
in any claim, suit, action or proceeding which involves a claim or infringement
of trade secrets, any patents, trademarks, service marks, maskworks or
copyrights and which has not been finally terminated prior to the date hereof or
(ii) has knowledge of any infringement liability with respect to, or
infringement by, the Company or any of its subsidiaries of any trade secret,
patent, trademark, service mark, maskwork or copyright of another.
(c) Each employee of the Company has executed a confidentiality and
invention agreement substantially in the form previously delivered to Parent.
SECTION 2.21. INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 2.21 of the Company Disclosure Schedule or in the Company SEC Reports,
no officer, director or shareholder of the Company who owns at least 10% of the
outstanding capital stock of the Company (nor any ancestor, sibling, descendant
or spouse of any of such persons, or any trust, partnership or corporation in
which any of such persons has or has had an interest), is indebted to the
Company for borrowed money or has or has had, directly or indirectly, (i) an
interest in any entity which furnished or sold, or furnishes or sells, services
or products that the Company furnishes or sells, or proposes to furnish or sell,
(ii) any interest in any entity that purchases from or sells or furnishes to,
the Company, any goods or services or (iii) a beneficial interest in any
material contract or agreement of the Company or any of its subsidiaries;
PROVIDED, THAT ownership of no more than five percent (5%) of the outstanding
voting stock of a publicly traded corporation shall not be deemed an "interest
in any entity" for purposes of this Section 2.21.
14
SECTION 2.22. OPTION PLANS. Except as described in Section 2.22 of the
Company Disclosure Schedule, the Board of Directors of the Company has taken all
necessary action (or refrained from taking action, where appropriate) under the
Company Stock Option Plans (as defined in Section 5.05) so that none of the
Company Options (as defined in Section 5.05) (or any portion thereof) will be
accelerated or be entitled to receive cash or other property as a result of the
consummation of the transactions contemplated hereby, but instead shall be
assumed as provided in Section 1.06(d) hereof.
SECTION 2.23. POOLING MATTERS. Neither the Company nor any of its
affiliates has, to the Company's knowledge and based upon consultation with its
independent accountants, taken or agreed to take any action, or is aware of any
condition, that (without giving effect to any action taken or agreed to be taken
by Parent or any of its affiliates) would affect the ability of Parent to
account for the business combination to be effected by (a) the Merger, (b) the
Merger and the Upstream Merger, or (c) the Forward Merger, as a pooling of
interests.
SECTION 2.24. OPINION OF FINANCIAL ADVISOR. The Company has been advised
by its financial advisor, Hambrecht & Quist LLC, that in its opinion, as of the
date hereof, the Exchange Ratio is fair from a financial point of view to the
Company and the shareholders of the Company and has delivered a written copy of
such opinion to Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company that, except as set forth in the written disclosure schedule
previously delivered by Parent to the Company (the "PARENT DISCLOSURE
SCHEDULE"):
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) Each of
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
incorporation and has the requisite corporate power and authority and is in
possession of all Approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority and Approvals would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
below). Each of 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 its 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 would not, either individually or in the
aggregate, have a Material Adverse Effect. When used in connection with Parent
or any of its subsidiaries, the term "MATERIAL ADVERSE EFFECT" means any change
or effect that, individually or when taken together with all such other changes
or effects that have occurred prior to the date of determination of the
occurrence of the Material Adverse Effect, is or is reasonably likely to be
materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of Parent and its subsidiaries,
taken as a whole. A true and complete list of all of Parent's subsidiaries,
together with the jurisdiction of incorporation of each subsidiary and the
percentage of each subsidiary's outstanding capital stock owned by Parent or
another subsidiary, is set forth in Section 3.01 of the Parent Disclosure
Schedule.
SECTION 3.02. ARTICLES OF INCORPORATION AND BY-LAWS. Parent has heretofore
furnished to the Company a complete and correct copy of its Articles of
Incorporation and the By-Laws, as amended to date. Such Articles of
Incorporation, By-Laws and equivalent organizational documents of each of its
subsidiaries are in full force and effect. Neither Parent nor any of its
subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or By-Laws or equivalent organizational documents.
SECTION 3.03. CAPITALIZATION. (a) As of June 2, 1995, the authorized
capital stock of Parent consisted of (i) 200,000,000 shares of Parent Common
Stock of which: 62,981,379 shares were issued
15
and outstanding, no shares were held in treasury, 7,507,825 shares were reserved
for issuance pursuant to outstanding options under Parent stock option plans,
6,000,000 shares were reserved for issuance under Parent's Employee Purchase
Plan, its 1994 Performance and Restricted Stock Plan and its Restricted Stock
Option Plan and (ii) 2,000,000 shares of Preferred Stock, no par value, none of
which were issued and outstanding. No material change in such capitalization has
occurred between June 2, 1995 and the date hereof. The authorized capital stock
of Merger Sub consists of 1,000 shares of common stock, no par value, 100 shares
of which, as of the date hereof, are issued and outstanding. All of the
outstanding shares of Parent's and Merger Sub's respective capital stock have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth in this Section 3.03 of the Parent Disclosure Schedule,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
Parent or any of its subsidiaries or obligating Parent or any of its
subsidiaries to issue or sell any shares of capital stock of, or other equity
interests in, Parent or any of its subsidiaries.
(b) The shares of Parent Common Stock to be issued pursuant to the Merger
will be duly authorized, validly issued, fully paid and nonassessable and shall
be available for trading on the NNM.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
Parent and Merger Sub.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Parent is
not, as of the date hereof, a party to any agreement that is required to be
filed with the SEC as a "material contract" which has not been so filed or
provided to the Company.
(b) The execution and delivery of this Agreement by Parent and Merger Sub do
not, and the performance of this Agreement by Parent and Merger Sub shall not,
(i) conflict with or violate the Articles of Incorporation, By-Laws or
equivalent organizational documents of Parent or any of its subsidiaries, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent or any of it subsidiaries or 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 which with notice or lapse of time or both
would become a default) under, or impair Parent's 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 or encumbrance on any of the properties or assets of Parent
or any of it subsidiaries pursuant to, any material 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 are bound or affected, except for any such breaches, defaults or
other occurrences that would not, individually or in the aggregate, have a
Material Adverse Effect.
(c) The execution and delivery of this Agreement by Parent and Merger Sub do
not, and the performance of this Agreement by Parent and Merger Sub shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Securities Act, the
Exchange Act, Blue Sky Laws, the pre-merger notification requirements of the HSR
Act and the rules and regulations thereunder, and the filing and recordation of
appropriate merger or other documents as
16
required by California Law and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay consummation of the Merger, or otherwise prevent
Parent or Merger Sub from performing their respective obligations under this
Agreement, and would not have a Material Adverse Effect.
SECTION 3.06. SEC FILINGS; FINANCIAL STATEMENTS. (a) Parent has filed all
forms, reports and documents required to be filed with the SEC since June 1,
1994, and has heretofore delivered to the Company, in the form filed with the
SEC, (i) its Annual Reports on Form 10-K for the fiscal years ended November 27,
1992, November 26, 1993, and November 25, 1994, (ii) its Quarterly Report on
Form 10-Q for the period ended March 3, 1995, (iii) all proxy statements
relating to Parent's meetings of shareholders (whether annual or special) held
since January 1, 1992, (iv) all other reports or registration statements (other
than Reports on Form 10-Q not referred to in clause (ii) above and Reports on
Form 3, 4 or 5 filed on behalf of affiliates of the Parent) filed by Parent with
the SEC since June 1, 1994 and (v) all amendments and supplements to all such
reports and registration statements filed by Parent with the SEC (collectively,
the "PARENT SEC REPORTS"). The Parent SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act or 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 therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of Parent's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports has been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presents the consolidated financial position of Parent and its subsidiaries as
at the respective dates thereof 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.
(c) Parent has heretofore furnished to the Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
SECTION 3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since November 25,
1994, Parent has conducted its business in the ordinary course and there has not
occurred: (i) any Material Adverse Effect; (ii) any amendments or changes in the
Articles of Incorporation or Bylaws of Parent; (iii) any damage to, destruction
or loss of any assets of the Parent, (whether or not covered by insurance) that
could have a Material Adverse Effect; or (iv) any sale of a material amount of
assets of Parent, except in the ordinary course of business.
SECTION 3.08. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. Subject
to the accuracy of the representations of the Company in Section 2.13, the
registration statement (the "REGISTRATION STATEMENT") pursuant to which the
Parent Common Shares to be issued in the Merger will be registered with the SEC
shall not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements included therein, in light of the circumstances
under which they were made, not misleading. The information supplied by Parent
for inclusion in the Proxy Statement/Prospectus shall not, on the date the Proxy
Statement/ Prospectus is first mailed to shareholders, at the time of the
Company Shareholders' Meeting and at the Effective Time, 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 therein not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect
17
to the solicitation of proxies for the Company Shareholders' Meeting which has
become false or misleading. If at any time prior to the Effective Time any event
relating to Parent, Merger Sub or any of their respective affiliates, officers
or directors should be discovered by Parent or Merger Sub which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, Parent or Merger Sub will promptly inform the Company.
Notwithstanding the foregoing, Parent and Merger Sub make no representation or
warranty with respect to any information supplied by the Company which is
contained in any of the foregoing documents. The Registration Statement and
Proxy Statement/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.
SECTION 3.09. OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES. (a) Merger
Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement.
(b) As of the date hereof and 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, through any
subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities or any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 3.10. BROKERS. No broker, finder or investment banker (other than
Morgan Stanley & Co. Incorporated) 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 or Merger Sub.
SECTION 3.11. FULL DISCLOSURE. No statement contained in any certificate
or schedule furnished or to be furnished by Parent or Merger Sub to the Company
in, or pursuant to the provisions of, this Agreement contains or shall contain
any untrue statement of a material fact or omits or shall omit to state any
material fact necessary, in the light of the circumstances under which it was
made, in order to make the statements herein or therein not misleading.
SECTION 3.12. OPINION OF FINANCIAL ADVISOR. Parent has been advised by its
financial advisor, Morgan Stanley & Co. Incorporated, that in its opinion, as of
the date hereof, the Exchange Ratio is fair from a financial point of view to
Parent and has delivered a written copy of such opinion to the Company.
SECTION 3.13. TAXES. Parent, on behalf of itself and all its affiliates,
hereby represents that each of them have filed all United States federal income
tax and all other material tax returns required to be filed by them, and have
paid and discharged all Taxes due in connection with or with respect to the
filing of all Tax Returns and have paid all other Taxes as are due, except such
as are being contested in good faith by appropriate proceedings (to the extent
any such proceedings are required) and with respect to which Parent is
maintaining reserves to the extent currently required in all material respects
adequate for their payment except to the extent the failure to do so would not
have a Material Adverse Effect.
SECTION 3.14. NO UNDISCLOSED LIABILITIES. Except as is disclosed in the
Parent Disclosure Schedule and the Parent SEC Reports, neither Parent nor any of
its subsidiaries has any liabilities (absolute, accrued, contingent or otherwise
including, without limitation, liabilities arising under or with respect to
ERISA, environmental or labor laws) which are, in the aggregate, material to the
business, operations or financial condition of Parent and its subsidiaries taken
as a whole, except liabilities (a) adequately provided for in the Parent's
audited balance sheet (including any related notes thereto) as of November 25,
1994 included in the Parent SEC Reports (the "NOVEMBER BALANCE SHEET"), (b)
incurred in the ordinary course of business and not required under GAAP to be
reflected on the November Balance Sheet, or (c) incurred since November 25, 1994
in the ordinary course of business and consistent with past practice, and
liabilities incurred in connection with this Agreement.
18
SECTION 3.15. ABSENCE OF LITIGATION. Except as set forth in Section 3.15
of the Parent Disclosure Schedule, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of Parent, threatened
against Parent or any of its subsidiaries, or any properties or rights of Parent
or any of its subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that could
have a Material Adverse Effect.
SECTION 3.16. TITLE TO PROPERTY. Parent and each of its subsidiaries have
good and defensible title to all of their properties and assets, free and clear
of all liens, charges and encumbrances except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which, individually or in the aggregate, would not
have a Material Adverse Effect.
SECTION 3.17. INTELLECTUAL PROPERTY. Parent owns, or is licensed or
otherwise possesses legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, computer software
programs or applications (in both source code and object code form), and
tangible or intangible proprietary information or material that are used or
proposed to be used in the business of the Parent as currently conducted or as
proposed to be conducted by Parent, except where the failure to so own, license
or possess would not have a Material Adverse Effect.
SECTION 3.18. POOLING MATTERS. Neither Parent nor any of its affiliates
has, to its knowledge and based upon consultation with its independent
accountants, taken or agreed to take any action, or is aware of any condition,
that (without giving effect to any action taken or agreed to be taken by the
Company or any of its affiliates) would affect the ability of Parent to account
for the business combination to be effected by (a) the Merger, (b) the Merger
and the Upstream Merger, or (c) the Forward Merger, as a pooling of interests.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
MERGER. During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, the
Company covenants and agrees that, unless Parent shall otherwise agree in
writing, and except for the transactions contemplated by the Mastersoft
Agreement, the Company shall 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 the Company shall use reasonable commercial efforts to
preserve substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present 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 as
contemplated by this Agreement, neither the Company nor any of its subsidiaries
shall, 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's Articles of Incorporation or
By-Laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, (i) 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 of the Company, any of its subsidiaries or
affiliates (except for (A) the issuance of shares of Company Common Stock
issuable pursuant to employee stock options under the Company Stock Option
Plans (as hereinafter defined) or pursuant to rights to purchase such
19
shares under the Company Stock Purchase Plan (as hereinafter defined), which
options or rights, as the case may be, are outstanding on the date hereof,
(B) the issuance of options granted consistent with past practices with
prior notice to Parent, to employees, other than officers, hired after the
date hereof, which options shall represent the right to acquire no more than
100,000 shares of Company Common Stock in the aggregate and (C) the issuance
of not more than an aggregate of 1,200,000 shares of Company Common Stock
and options to acquire shares of Company Common Stock pursuant to the
Mastersoft Agreement), or (ii) 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);
(c) except pursuant to the plans or arrangements listed on Section 2.22
of the Company Disclosure Schedule, accelerate, amend or change the period
(or permit any acceleration, amendment or change) of exercisability of
options or restricted stock granted under the Employee Plans (including the
Company Stock Option Plans) or authorize cash payments in exchange for any
options granted under any of such plans;
(d) sell, pledge, dispose of or encumber any assets of the Company or
any of its subsidiaries (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice and (ii)
dispositions of obsolete or worthless assets);
(e) (i) declare, set aside 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 (A) that a wholly owned subsidiary of
the Company may declare and pay a dividend to its parent and (B) for the
payment of dividends pursuant to Section 4.1(t) of the Mastersoft Agreement,
(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 of, repurchase, redeem or otherwise acquire, or permit any
subsidiary to repurchase, redeem or otherwise acquire, any of its securities
or any securities of its subsidiaries, or propose to do any of the
foregoing;
(f) sell, transfer, license, sublicense or otherwise dispose of any
Company Intellectual Property, or amend or modify any existing agreements
with respect to any Company Intellectual Property or Third Party
Intellectual Property Rights, other than nonexclusive object and source code
licenses in the ordinary course of business consistent with past practices;
(g) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof (other than Mastersoft); (ii) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee (other than
guarantees of bank debt of the Company's subsidiaries entered into in the
ordinary course of business) or endorse or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances, except in the ordinary course of business consistent with past
practice; (iii) enter into or amend any contract or agreement other than in
the ordinary course of business; (iv) authorize any capital expenditures or
purchase of fixed assets which are, in the aggregate, in excess of
$3,000,000 for the Company and its subsidiaries taken as a whole; or (v)
enter into or amend any contract, agreement, commitment or arrangement with
respect to any of the matters set forth in this Section 4.01(g);
(h) except pursuant to the plans and arrangements listed in Section 2.22
of the Company Disclosure Schedule, increase the compensation payable or to
become payable to its officers or employees (including, without limitation,
by way of promotion or addition of title), except for scheduled increases in
salary or wages of employees of the Company or its subsidiaries who are not
officers of the Company in accordance with past practices, or grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or other employee (except for officers
or other employees who are terminated on an involuntary basis pursuant to
the Company's severance policy in effect on the date hereof or pursuant to
agreements in effect on the date hereof and set forth on Section 2.11 or
2.22 of the Company
20
Disclosure Schedule) of the Company or any of its subsidiaries, or
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;
(i) take any action other than in the ordinary course of business and in
a manner consistent with past practice with respect to accounting policies
or procedures (including, without limitation, procedures with respect to
revenue recognition, the capitalization of software development costs,
payments of accounts payable and collection of accounts receivable);
(j) make any material tax election inconsistent with past practices or
settle or compromise any material federal, state, local or foreign tax
liability or agree to an extension of a statute of limitations except to the
extent the amount of any such settlement has been reserved for on the
Company's most recent SEC Report, enter into any transaction that would
cause the Company or any of its affiliates to be required to include in
income (i) any amount in respect of any adjustment under Section 481 of the
Code, (ii) any deferred intercompany transaction or (iii) any installment
sale gain, or enter into any transaction that would create or increase any
excess loss account;
(k) commence a lawsuit other than (i) for the routine collection of
bills, (ii) in such cases where the Company in good faith determines that
failure to commence suit would result in the material impairment of a
valuable aspect of the Company's business, provided that the Company
consults with Parent prior to the filing of such a suit, or (iii) for a
breach of this Agreement or the Mastersoft Agreement;
(l) 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 of the Company or incurred in
the ordinary course of business and consistent with past practice;
(m) enter into or commit to enter into any contract, agreement,
arrangement or understanding having a term longer than six months unless
such contract, agreement, arrangement or understanding either (i) may be
cancelled by it without penalty on not more than thirty days' notice or (ii)
does not require the expenditure by the Company of more than $100,000 for
any single contract, agreement or arrangement and $500,000 for all such
contracts, arrangements and agreements;
(n) except as may be required by law, take any action to terminate or
amend any of its Employee Plans;
(o) modify, amend or terminate the Mastersoft Agreement (other than
amending the Mastersoft Agreement as described in Section 6.02(f)), modify,
amend or terminate any other contracts, waive, release, relinquish or assign
any contract or other rights or claims or cancel or forgive any indebtedness
owed to it, other than in the ordinary course of business consistent with
past practice with respect to contracts which are not material to the
Company and its subsidiaries taken as a whole; or
(p) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.01(a) through (o) 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.
SECTION 4.02. NO SOLICITATION. (a) The Company shall not, directly or
indirectly, through any officer, director, employee, representative or agent of
the Company or any of its subsidiaries, solicit or encourage (including by way
of furnishing nonpublic information) the initiation of any inquiries or
proposals regarding any merger, sale of substantial assets, sale of shares of
capital stock
21
(including without limitation by way of a tender offer) or similar transactions
involving the Company or any subsidiaries of the Company (any of the foregoing
inquiries or proposals being referred to herein as an "ACQUISITION PROPOSAL");
PROVIDED, HOWEVER, that nothing contained in this Agreement shall prevent (i)
the Board of Directors of the Company in the exercise of its fiduciary duties
and after receiving the advice of outside counsel, from referring any third
party to this Section 4.02 or from making a copy of this Section 4.02 available
to any third party or (ii) after receiving the advice of outside counsel to the
effect that the Board of Directors is required to do so in order to discharge
properly its fiduciary duties, from considering, negotiating and approving and
recommending to the shareholders of the Company another unsolicited bona fide
Acquisition Proposal which the Board of Directors of the Company determines in
good faith, after consultation with its financial advisors, would result in a
transaction more favorable to the Company's shareholders than the transaction
contemplated by this Agreement (any such Acquisition Proposal being referred to
herein as a "SUPERIOR PROPOSAL").
(b) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal or any request for nonpublic information relating to the
Company or any of its subsidiaries in connection with an Acquisition Proposal or
for access to the properties, books or records of the Company or any subsidiary
by any person or entity that informs the Board of Directors of the Company or
such subsidiary 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 reasonable detail the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact.
(c) If the Board of Directors of the Company receives a request for material
nonpublic information by a party who makes a bona fide Acquisition Proposal and
the Board of Directors of the Company determines that such proposal is a
Superior Proposal and, after receiving the advice of outside counsel to the
effect that the Board of Directors has a fiduciary obligation to provide such
information to such party, then, and only in such case, the Company may, subject
to the execution of a confidentiality and standstill agreement substantially
similar to that then in effect between the Company and Parent, provide such
party with access to information regarding the Company.
(d) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any parties (other than Parent and
Merger Sub) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from any confidentiality or
standstill agreement to which the Company is a party.
(e) The Company agrees to use its best efforts to ensure that the officers,
directors and employees of the Company and its subsidiaries and any investment
banker or other advisor or representative retained by the Company are aware of
the restrictions described in this Section.
SECTION 4.03. CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Parent covenants and agrees
that, unless the Company shall otherwise agree in writing, Parent shall conduct
its business, and cause the businesses of its subsidiaries to be conducted, in
the ordinary course of business, other than actions taken by Parent or its
subsidiaries in contemplation of the Merger, and shall not directly or
indirectly do, or propose to do, any of the following without the prior written
consent of the Company:
(a) amend or otherwise change Parent's Articles of Incorporation;
(b) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other person, or agree to dispose of a
material portion of its assets, which, in each case, would materially delay
or prevent the consummation of the transactions contemplated by this
Agreement;
22
(c) take any action other than in the ordinary course of business and in
a manner consistent with past practice with respect to accounting policies
or procedures (including, without limitation, procedures with respect to
revenue recognition, the capitalization of software development costs,
payments of accounts payable and collection of accounts receivable);
(d) 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 Parent
may declare and pay a dividend to its parent and except that Parent may
declare and pay cash dividends of $0.05 per quarter consistent with past
practice; or
(e) take or agree in writing or otherwise to take any action which would
make any of the representations or warranties of Parent contained in this
Agreement untrue or incorrect or prevent Parent from performing or cause
Parent not to perform its covenants hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As
promptly as practicable after the execution of this Agreement, the Company and
Parent shall prepare and file with the SEC preliminary proxy materials which
shall constitute the Proxy Statement of the Company (the "PROXY STATEMENT") and
the Registration Statement of the Parent with respect to the Parent Common
Shares to be issued in connection with the Merger. 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, the
Company and Parent shall file with the SEC a combined proxy and registration
statement on Form S-4 (or on such other form as shall be appropriate) (the
"REGISTRATION STATEMENT") relating to the approval of the Merger and the
transactions contemplated hereby by the shareholders of the Company and shall
use all reasonable efforts to cause the Registration Statement to become
effective as soon thereafter as practicable. The Proxy Statement shall include
the recommendation of the Board of Directors of the Company in favor of the
Merger, subject to the proviso in Section 4.02(a).
SECTION 5.02. COMPANY SHAREHOLDERS' MEETING. The Company shall promptly
after the date hereof take all action necessary in accordance with California
Law and its Articles of Incorporation and Bylaws to convene the Company
Shareholders' Meeting. The Company shall consult with Parent as to the date of
the Company Shareholders' Meeting and shall not postpone or adjourn (other than
for the absence of a quorum or, after consulting with Parent, to comply with the
disclosure requirements of the 1934 Act) the Company Shareholders' Meeting
without the consent of Parent. Subject to the proviso in Section 4.02(a) and
5.01(a), the Company shall use its best efforts to solicit from shareholders of
the Company proxies in favor of the Merger and shall take all other action
necessary or advisable to secure the vote or consent of shareholders required by
California law to effect the Merger.
SECTION 5.03. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Upon reasonable
notice and subject to restrictions contained in confidentiality agreements to
which such party is subject (from which such party shall use reasonable efforts
to be released), the Company and Parent each shall (and shall cause each of
their subsidiaries to) afford to the officers, employees, accountants, counsel
and other representatives of the other, reasonable access, during the period
prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, the Company and Parent each
shall (and shall cause each of their subsidiaries to) furnish promptly to the
other all information concerning its business, properties and personnel as such
other party may reasonably request, and each party shall make available to the
other party the appropriate individuals (including attorneys, accountants and
other professionals) for discussion of such party's business, properties, tax
situation and personnel as the other party may reasonably request.
23
(b) Each party shall keep such information confidential in accordance with
the terms of the Confidentiality Agreement, dated June 7, 1995, between Parent
and the Company (the "CONFIDENTIALITY AGREEMENT").
SECTION 5.04. CONSENTS; APPROVALS. The Company and Parent shall each use
their best efforts to obtain all consents, waivers, approvals, authorizations or
orders (including, without limitation, all United States and foreign
governmental and regulatory rulings and approvals), and the Company and Parent
shall make all filings (including, without limitation, all filings with United
States and foreign governmental or regulatory agencies) required in connection
with the authorization, execution and delivery of this Agreement by the Company
and Parent and the consummation by them of the transactions contemplated hereby.
Each party's use of best efforts shall not include any obligation to divest
assets or enter into consent or similar decrees. The Company and Parent shall
furnish all information required to be included in the Proxy Statement and the
Registration Statement, or for any application or other filing to be made
pursuant to the rules and regulations of any United States or foreign
governmental body in connection with the transactions contemplated by this
Agreement.
SECTION 5.05. STOCK OPTIONS; EMPLOYEE BENEFITS. (a) At the Effective
Time, each outstanding option to purchase shares of Company Common Stock (each a
"COMPANY OPTION") under the Company's Dual Stock Option Plan, 1991 Directors'
Stock Option Plan and 1994 Directors Stock Option Plan (the "COMPANY STOCK
OPTION PLANS"), whether vested or unvested, will be assumed by Parent. Each
Company Option so assumed by Parent under this Agreement shall continue to have,
and be subject to, the same terms and conditions set forth in the applicable
Company Stock Option Plan immediately prior to the Effective Time, except that
(i) such Company Option will be exercisable for that number of whole shares of
Parent Common Shares equal to the product of the number of shares of Company
Common Stock that were purchasable under such Company Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, rounded down to the
nearest whole number of shares of Parent Common Shares, and (ii) the per share
exercise price for the shares of Parent Common Stock issuable upon exercise of
such assumed Company Option will be equal to the quotient determined by dividing
the exercise price per share of Company Common Stock at which such Company
Option was exercisable immediately prior to the Effective Time by the Exchange
Ratio, and rounding the resulting exercise price up to the nearest whole cent.
(b) It is the intention of the parties that the Company Options assumed by
Parent qualify following the Effective Time as ISOs to the extent the Company
Options qualified as ISOs prior to the Effective Time. Parent shall take all
corporate action necessary to reserve for issuance a sufficient number of Parent
Common Shares for delivery pursuant to the terms set forth in this Section 5.05.
(c) Parent shall file and cause to become effective not later than the
Effective Time a registration statement under the Securities Act of 1933 with
respect to the assumption by Parent of the Company Options referred to in
Section 5.05 and with respect to the issuance of Parent Common Shares upon
exercise of those options and to keep such registration statement effective
throughout the term of such options.
(d) Parent shall take such reasonable actions as are necessary to allow
eligible employees of the Company to participate in the benefit programs of
Parent, or alternative benefit programs substantially comparable to those
applicable to employees of Parent on similar terms, as soon as practicable after
the Effective Time (with credit, where appropriate for prior service with the
Company).
(e) From and after the Effective Time, Parent and the Surviving Corporation
will adopt and implement the arrangements listed on Exhibit A hereto with
respect to the individuals listed on Exhibit A hereto.
SECTION 5.06. COMPANY EMPLOYEE STOCK PURCHASE PLAN. (a) The Company shall
take such actions as are necessary to cause the Exercise Date (as such term is
used in the Company's 1991 Employee Stock Purchase Plan (the "COMPANY STOCK
PURCHASE PLAN"), applicable to the then current
24
Offering Period (as such term is used in the Company Stock Purchase Plan), to be
the last trading day on which the Parent Common Shares are traded on the NNM
immediately prior to the Effective Time (the "FINAL COMPANY PURCHASE DATE");
PROVIDED, THAT, such change in the Exercise Date shall be conditioned upon the
consummation of the Merger. On the Final Company Purchase Date, the Company
shall apply the funds credited as of such date under the Company Stock Purchase
Plan within each participant's payroll withholdings account to the purchase of
whole shares of Company Common Stock in accordance with the terms of the Company
Stock Purchase Plan. The cost to each participant in the Company Stock Purchase
Plan for shares of Company Common Stock shall be 85% of the lower of the closing
sale price of Company Common Stock on the NNM on (i) the first day of the then
current Offering Period or (ii) the last trading day on or prior to the Final
Company Purchase Date.
(b) Employees of the Company as of the Effective Time shall be permitted to
participate in Parent's Employee Stock Purchase Plan commencing on the first
enrollment date following the Effective Time, subject to compliance with the
eligibility provisions of such plan (with employees receiving credit, for
purposes of such eligibility provisions, for service with the Company).
SECTION 5.07. AGREEMENTS OF AFFILIATES. The Company shall deliver to
Parent, prior to the date the Registration Statement becomes effective under the
Securities Act, a letter (the "AFFILIATE LETTER") identifying all persons who
are, or may deemed to be, at the time of the Company Shareholders' Meeting,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its best efforts to cause each person who is identified as
an "affiliate" in the Affiliate Letter to deliver to Parent, prior to the
Effective Time, a written agreement (an "AFFILIATE AGREEMENT") in substantially
the form of Exhibit B hereto.
SECTION 5.08. INDEMNIFICATION. (a) The Articles of Incorporation of the
Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Articles of Incorporation of the Company, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at the Effective Time were directors,
officers, employees or agents of the Company, unless such modification is
required by law.
(b) The Company shall, to the fullest extent permitted under applicable law
or under the Company's Articles of Incorporation or By-Laws and regardless of
whether the Merger becomes effective, indemnify and hold harmless, and after the
Effective Time, Parent and the Surviving Corporation shall, to the fullest
extent permitted under applicable law or under the Parent's or the Surviving
Corporation's Articles of Incorporation or By-Laws, indemnify and hold harmless,
each present and former director, officer, employee, fiduciary and agent of the
Company or any of its subsidiaries (collectively, the "INDEMNIFIED PARTIES")
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, to the extent arising out of
or pertaining to any action or omission in their capacity as a director,
officer, employee, fiduciary or agent of the Company occurring prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement) for a period of six years after the date hereof. In the event of
any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) any counsel retained by the Indemnified
Parties for any period after the Effective Time shall be reasonably satisfactory
to the Surviving Corporation and Parent, (ii) after the Effective Time, the
Surviving Corporation and Parent shall pay the reasonable fees and expenses of
such counsel, promptly after statements therefor are received and (iii) the
Surviving Corporation and Parent will cooperate in the defense of any such
matter; PROVIDED, HOWEVER, that neither the Surviving Corporation nor Parent
shall be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld); and PROVIDED FURTHER, that, in the
event that any claim or claims for indemnification are asserted or made within
such six-year period, all rights to indemnification in respect of any such claim
or claims shall continue until the disposition of any and all such claims. The
Indemnified Parties as a group may retain only one law firm
25
to represent them with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties.
(c) The Surviving Corporation and Parent shall honor and fulfill in all
respects the obligations of the Company pursuant to indemnification agreements
with the Company's directors and officers set forth on Section 5.08 of the
Company Disclosure Schedule and existing at or before, and as in effect on, the
Effective Time.
(d) For a period of three years after the Effective Time, Parent shall cause
the Surviving Corporation to use its best efforts to maintain in effect, if
available, directors' and officers' liability insurance covering those persons
who are currently covered by the Company's directors' and officers' liability
insurance policy (a copy of which has been heretofore delivered to Parent) on
terms comparable to those applicable to the then current directors and officers
of Parent, or (ii) those now applicable to directors and officers of the
Company, whichever is more favorable to such directors and officers; PROVIDED,
HOWEVER, that in no event shall Parent or the Surviving Corporation be required
to expend in excess of 150% of the annual premium currently paid by the Company
for such coverage, and provided further, that if the premium for such coverage
exceeds such amount, Parent or the Surviving Corporation shall purchase a policy
with the greatest coverage available for such 150% of the annual premium.
(e) This Section shall survive any termination of this Agreement and the
consummation of the Merger at the Effective Time, is intended to benefit the
Company, the Surviving Corporation and the Indemnified Parties, and shall be
binding on all successors and assigns of the Surviving Corporation.
SECTION 5.09. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company, Parent or Merger Sub, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
SECTION 5.10. FURTHER ACTION/TAX TREATMENT. Subject to Section 5.04
hereof, upon the terms and subject to the conditions hereof, each of the parties
hereto shall use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, to obtain in a timely manner all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and to otherwise satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement; PROVIDED, HOWEVER,
that the withdrawal by the Board of Directors of the Company of its
recommendation of the Merger after receiving the advice of outside counsel to
the effect that the Board of Directors is required to do so in order to
discharge properly its fiduciary duties, shall not constitute a breach of this
covenant by the Company. Each of Parent, Merger Sub and the Company shall use
its best efforts to cause (a) the Merger, (b) the Merger and the Upstream Merger
and (c) the Forward Merger to qualify, and will not (both before and after
consummation of such merger or mergers) take any actions which could prevent
such merger or mergers from qualifying, as a reorganization under the provisions
of Section 368 of the Code. Each of Parent, Merger Sub and the Company shall
report the Merger, the Merger and the Upstream Merger, or the Forward Merger, as
applicable, as a reorganization under the provisions of Section 368 of the Code
and, to the extent permitted, on all state and local Tax returns, filed after
the Effective Time. In the event that the Company has not acquired Mastersoft
prior to the Effective Time, Parent shall execute the amendment to the
Mastersoft Agreement referred to in Section 6.02(f) upon execution and delivery
thereof by the Company and Mastersoft.
SECTION 5.11. PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the
26
Merger or this Agreement and shall not issue any such press release or make any
such public statement without the prior consent of the other party, which shall
not be unreasonably withheld; 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 National
Association of Securities Dealers, Inc., if it has used reasonable efforts to
consult with the other party.
SECTION 5.12. POOLING ACCOUNTING TREATMENT. Each of Parent and the Company
agrees not to take any action that would adversely affect the ability of Parent
to treat the Merger, the Merger and the Upstream Merger, or the Forward Merger,
as a pooling of interests under GAAP.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. 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 shall
have been initiated or threatened by the SEC;
(b) SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the shareholders of the
Company;
(c) HSR ACT. The applicable waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated;
(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 (an
"Injunction") preventing the consummation of the Merger shall be in effect,
nor shall any proceeding brought by any administrative agency or commission
or other governmental authority or instrumentality, domestic or foreign,
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) ACCOUNTANTS' POOLING LETTERS. Each of the Company and Parent shall
have received letters dated as of the Effective Date from Ernst & Young LLP
and KPMG Peat Marwick to the effect that whichever is effectuated of (i) the
Merger, (ii) the Merger and the Upstream Merger and (iii) the Forward Merger
qualifies for pooling of interests accounting treatment if consummated in
accordance with the Agreement; and
(f) TAX OPINIONS. Parent and the Company shall have received written
opinions of Shearman & Sterling and Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, respectively, in form and substance reasonably
satisfactory to them to the effect that whichever is effectuated of (i) the
Merger, (ii) the Merger and the Upstream Merger and (iii) the Forward Merger
will constitute a reorganization within the meaning of Section 368 of the
Code. In rendering such opinions, counsel may rely upon representations and
certificates of Parent, Merger Sub and the Company.
27
SECTION 6.02. 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:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
material respects on and as of the Effective Time, except for changes
contemplated by this Agreement, and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as
if made on and as of the Effective Time, except, in all such cases, for such
breaches, inaccuracies or omission of such representations and warranties as
do not have a Material Adverse Effect, and Parent and Merger Sub shall have
received a certificate to such effect signed by the President and Chief
Financial Officer of the Company;
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate
to such effect signed by the President and Chief Financial Officer of the
Company;
(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or 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;
(d) GOVERNMENTAL ACTIONS. There shall not have been instituted,
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 authority or administrative agency before any governmental
authority, administrative agency or court of competent jurisdiction, nor
shall there be in effect any judgment, decree or order of any governmental
authority, 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 or any of its
subsidiaries of all or a material portion of the business or assets of
Parent or any of its subsidiaries, or seeking to compel Parent or any of its
subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of Parent or any of its subsidiaries, as a result of
the Merger or the transactions contemplated by this Agreement;
(e) AFFILIATE AGREEMENTS. Parent shall have received from each person
who is identified in the Affiliate Letter as an "affiliate" of the Company,
an Affiliate Agreement, and such Affiliate Agreement shall be in full force
and effect; and
(f) MASTERSOFT AMENDMENT. The Company and Mastersoft, in the event
that the Company has not acquired Mastersoft prior to the Effective Time,
shall have executed and delivered to Parent an amendment to the Mastersoft
Agreement, in form and substance satisfactory to Parent, providing for each
holder of shares and options of Mastersoft to receive that number of Parent
Common Shares or options to receive that number of Parent Common Shares,
respectively, equal to the product of (i) the Exchange Ratio and (ii) that
number of Shares or options to purchase that number of Shares, as the case
may be, that such holder would have received pursuant to the Mastersoft
Agreement (assuming that the "Average Price" (as defined in the Mastersoft
Agreement) exceeded $20).
SECTION 6.03. 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. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and
correct in all material respects on and as of the Effective Time, except for
changes contemplated by this Agreement and except for those
28
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date), with the same
force and effect as if made on and as of the Effective Time, except, in all
such cases, for such breaches, inaccuracies or omission of such
representations and warranties as do not have a Material Adverse Effect, and
the Company shall have received a certificate to such effect signed by the
President and Treasurer of Parent;
(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 on or prior to the Effective Time, and the Company shall have received
a certificate to such effect signed by the President and Treasurer of
Parent; and
(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by Parent and Merger Sub for the authorization, execution and
delivery of this Agreement and the consummation by them of the transactions
contemplated hereby shall have been obtained and made by Parent and Merger
Sub.
ARTICLE VII
TERMINATION
SECTION 7.01. 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; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by October 31, 1995; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 7.01(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); or
(c) by either Parent or the Company if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall
have issued an order, decree or ruling or taken any other action, in each
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger; or
(d) by Parent or the Company, if (i) at the Company Shareholders'
Meeting (including any adjournment or postponement thereof), the requisite
vote of the shareholders of the Company shall not have been obtained and
(ii) in the case of the termination of this Agreement under this Section
7.01(d) by the Company, the Company shall have paid to Parent all amounts
owing by the Company to Parent under Section 7.03(b); or
(e) by Parent or the Company, if (i) the Board of Directors of the
Company shall have resolved to accept, accepted or recommended to the
shareholders of the Company, a Superior Proposal, and (ii) in the case of
the termination of this Agreement under this Section 7.01(e) by the Company,
the Company shall have paid to Parent all amounts owing by the Company to
Parent under Section 7.03(b); or
(f) by Parent, if (i) the Board of Directors of the Company shall have
withdrawn, modified or changed in a manner adverse to Parent its
recommendation of the Merger or shall have resolved to do so; (ii) the Board
of Directors of the Company shall have taken a "neutral" position with
respect to an Alternative Transaction (as defined in Section 7.03(c)); or
(iii) a tender offer or exchange offer for 40% or more of the outstanding
shares of Company Common Stock is commenced (other than by Parent or an
affiliate of Parent), and within 10 business days of such commencement the
Board of Directors of the Company shall not have recommended that the
shareholders of the Company not tender their shares in such tender or
exchange offer; or
29
(g) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or
if any representation or warranty of Parent shall have become untrue, in
either case such that the conditions set forth in Section 6.03(a) or Section
6.03(b) would not be satisfied (a "TERMINATING PARENT BREACH"), PROVIDED,
THAT, if such Terminating Parent Breach is curable by Parent through the
exercise of its reasonable best efforts and for so long as Parent continues
to exercise such reasonable best efforts, the Company may not terminate this
Agreement under this Section 7.01(g); and
(h) by Parent, upon breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.02(a) or Section
6.02(b) would not be satisfied ("TERMINATING COMPANY BREACH"), PROVIDED,
THAT, if such Terminating Company Breach is curable by the Company through
the exercise of its reasonable best efforts and for so long as Company
continues to exercise such reasonable best efforts, Parent may not terminate
this Agreement under this Section 7.01(h).
SECTION 7.02. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 7.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except (i)
as set forth in Section 7.03 and Section 8.01 hereof, and (ii) nothing herein
shall relieve any party from liability for any willful breach hereof.
SECTION 7.03. FEE AND EXPENSES. (a) Except as set forth in this Section
7.03, 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 and the Company shall share equally all fees and expenses, other than
attorneys' fees, incurred in relation to the printing and filing of the Proxy
Statement (including any preliminary materials related thereto) and the
Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) The Company shall pay Parent a fee of $18,000,000 (the "FEE") upon the
earlier to occur of the following events:
(i) the termination of this Agreement by Parent pursuant to Section
7.01(f) or, if and only if the Company shall have breached Section 4.02,
Section 7.01(h);
(ii) the termination of this Agreement by Parent or the Company pursuant
to Section 7.01(d) (if, at the time of termination, an Alternative
Transaction shall have published, or sent or given to the holders of the
Shares and not publicly withdrawn or a proxy statement and/or consent
solicitation recommending an Alternative Transaction shall have been
published, or sent or given to the holders of the Shares and not publicly
withdrawn) or Section 7.01(e); and
(iii) at any time on or before April 30, 1996, an Alternative Transaction
shall have been consummated or the Company shall have entered into an
agreement contemplating an Alternative Transaction, in either case with a
per Share consideration having a greater nominal value than the per Share
consideration (determined as of the date hereof) to be received by holders
of Shares pursuant to the Merger.
(c) As used herein, "ALTERNATIVE TRANSACTION" means either (i) a transaction
pursuant to which any person other than Parent or its affiliates (a "THIRD
PARTY") acquires more than 40% of the outstanding Shares, whether from the
Company or pursuant to a tender offer or exchange offer or otherwise, (ii) a
merger or other business combination involving the Company pursuant to which any
Third Party acquires more than 40% of the outstanding equity securities of the
Company or the entity surviving such merger or business combination or (iii) any
other transaction pursuant to which any Third Party acquires control of assets
(including for this purpose the outstanding equity securities of subsidiaries of
the Company, and the entity surviving any merger or business consideration
including any of them)
30
of the Company or any of its subsidiaries having a fair market value (as
determined by the Board of Directors of the Company in good faith) equal to more
than 40% of the fair market value of all the assets of the Company, and its
subsidiaries, taken as a whole, immediately prior to such transaction.
(d) If the Fee is payable pursuant to Section 7.03(b), then the Fee shall be
paid (i) concurrently with any termination of this Agreement by the Company
pursuant to Section 7.01(d) (if the Fee is payable pursuant to Section
7.03(b)(ii)) or 7.01(e) or (ii) within one business day after the first to occur
of (A) the termination of this Agreement pursuant to Section 7.01(f) or 7.01(h)
(if the Fee is payable pursuant to Section 7.03(b)(i)), (B) the termination of
this Agreement by Parent pursuant to Section 7.01(d) (if the Fee is payable
pursuant to Section 7.03(b)(ii)) or 7.01(e) and (C) the events described in
Section 7.03(b)(iii), as the case may be.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. Except as otherwise provided in this Section 8.01, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except that the agreements set
forth in Article I, Section 5.05, Section 5.06 and Section 5.08 shall survive
the Effective Time indefinitely and those set forth in Section 5.03(b) and
Section 7.03 shall survive termination indefinitely.
SECTION 8.02. 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 as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
change of address) or sent by electronic transmission, with confirmation
received, to the telecopy number specified below:
(a) If to Parent or Merger Sub:
Adobe Systems Incorporated
1585 Charleston Road
Mountain View, California 94043
Telecopier No. (415) 960-0359
Attention: President
With a copy to:
Shearman & Sterling
555 California Street, Suite 2000
San Francisco, California 94104
Telecopier No. (415) 616-1199
Attention: Michael J. Kennedy, Esq.
(b) If to the Company:
Frame Technology Corporation
333 West San Carlos Street
San Jose, California 95110
Telecopier No. (408) 975-6799
Attention: President
31
With a copy to:
Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Telecopier No. (415) 493-6811
Attention: David J. Segre, Esq.
SECTION 8.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATES" 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 Company (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
beneficially owns, directly or indirectly, (ii) which such person or any of
its affiliates or associates (as such term is defined in Rule 12b-2 of the
Exchange Act) 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 consideration rights, exchange rights, warrants or options, or
otherwise, 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 person 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 day on which banks in San
Francisco 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;
(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); and
(f) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be, (either alone
or through or together with any other subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
SECTION 8.04. 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 Merger 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; PROVIDED, HOWEVER, that, prior to the Effective
Time, Parent may, by an instrument
32
signed only by Parent, amend this Agreement to remove the Upstream Merger or to
cause the acquisition of the Company by Parent to be effected solely by means of
a forward merger of the Company with and into Parent (the "FORWARD MERGER").
SECTION 8.05. WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 8.06. 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 8.07. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.08. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Agreement), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
SECTION 8.09. 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 affiliate provided that no such
assignment shall relieve the assigning party of its obligations hereunder.
SECTION 8.10. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 5.08 (which is intended to be for the
benefit of the Indemnified Parties and may be enforced by such Indemnified
Parties).
SECTION 8.11. 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 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 8.12. GOVERNING LAW. This Agreement shall governed by, and
construed in accordance with, the laws of the State of California.
SECTION 8.13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.14. WAIVER OF JURY TRIAL. EACH OF THE PARENT, MERGER SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
33
BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
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.
ADOBE SYSTEMS INCORPORATED
By /s/ JOHN WARNOCK
-----------------------------------
John Warnock
Chairman of the Board and
Chief Executive Officer
J ACQUISITION CORPORATION
By /s/ M. BRUCE NAKAO
-----------------------------------
M. Bruce Nakao
President
FRAME TECHNOLOGY CORPORATION
By /s/ L. GEORGE KLAUS
-----------------------------------
L. George Klaus
Chairman of the Board,
President and Chief Executive
Officer
34
EXHIBIT A
I. COVERED EMPLOYEES: (a) The term "Covered Employees" means L. George Klaus,
William R. Pieser, Thomas F. Kelly, Harold E. Julsen, Robert F. Donohue,
Steven J. Sherman, Charles N. Corfield and Noreen G. Bergen.
The term "performance options" means the non-qualified stock options
granted to Messrs. Klaus, Pieser, Kelly, Julsen, Donohue and Sherman on
6/8/93 (1660), 10/11/93 (2347), 9/9/93 (001742), 9/10/93 (1744), 12/31/93
(2375) and 7/1/94 (2476), respectively.
(b) CONSULTING/EMPLOYMENT AGREEMENTS. On or prior to the Effective
Time, Parent and the Surviving Corporation shall offer to enter into with
each Covered Employee a consulting (employment, for Mr. Klaus) agreement
which shall (i) provide that such Covered Employee will provide consulting
and transition services to Parent and/or the Surviving Corporation through
March 31, 1997 or such earlier time as all but 25% of the remaining
performance options of such Covered Employee shall have vested (or, in the
case of Mr. Klaus and Mr. Kelly, until June 30 and September 30, 1997,
respectively), (ii) be in consideration of the payments referred to below,
(iii) contain a non-compete provision for the term of the
consulting/employment agreement and other mutually acceptable provisions and
provide that vesting of such covered Employee's stock options (other than
performance options and the options held by Mr. Klaus and Mr. Kelly) shall
cease twelve months after the termination of such Covered Employee's
full-time employment with the Company subject to Section IV hereof in the
case of Mr. Klaus and Mr. Kelly. During the term of the
consulting/employment agreement, each Covered Employee will be free to
render services to third parties so long as the rendering thereof does not
violate the non-competition clause of such agreement or interfere with the
level of service agreed to by such Covered Employee. If a Covered Employee's
full-time employment with the Surviving Corporation and/or Parent terminates
within the twelve-month period following the Effective Time (or at any time
in the case of Mr. Klaus, Mr. Kelly or Mr. Donohue) (other than, except for
Mr. Klaus, Mr. Kelly or Mr. Donohue, (i) voluntary termination (which shall
exclude termination by the Covered Employee as a result of (A) a salary
reduction, (B) a significant diminution in such Covered Employee's status,
responsibilities or duties and (C) constructive termination) or (ii)
termination as a result of death or disability of such Covered Employee),
THEN such Covered Employee shall be entitled to receive consulting payments
equal to twelve (12) months base salary, calculated at the Covered
Employee's monthly rate of compensation in effect immediately prior to the
Effective Time and one year's targeted bonus in effect immediately prior to
the Effective Time (not pro-rated for prior partial periods). The payment
referred to in this subsection shall be in lieu of any other severance
benefits (excluding COBRA) of Parent, the Surviving Corporation or the
Company and, in the case of Mr. Kelly or Mr. Klaus, severance benefits
contained in existing agreements (other than the medical continuation
provided for in Section 1(d) of Mr. Klaus' employment agreement). The
payment shall be, at Parent's option, in a lump sum or twelve monthly
installments (except that such payment shall be made to Messrs. Klaus and
Kelly in twelve monthly installments) and shall be net of all applicable
withholding and similar taxes.
II. SEPTEMBER 9, 1993 EMPLOYMENT LETTER WITH MR. THOMAS KELLY. On or prior to
the Effective Time, Parent will consent to an amendment to Mr. Thomas
Kelly's September 9, 1993 employment agreement with the Company to provide
for the consulting payments referred to in I above, which shall replace the
severance payments set forth in paragraph (a) of such agreement.
III. PERFORMANCE SHARES: All unvested performance shares shall be assumed by
Parent as provided in Section 5.05 of the Merger Agreement; PROVIDED, THAT,
on or prior to the Effective Time mutually acceptable changes to the
performance criteria (designed to take into account the Merger) shall have
been agreed to by Parent and each respective optionholder.
IV. KLAUS AND KELLY OPTIONS: Pursuant to Section 2(e) of Mr. Klaus' June 8,
1993 Employment Agreement, as amended, and Section (e) of Mr. Kelly's
September 9, 1993 Employment Agreement, as
A-1
amended, each with the Company, and each of which will be assumed by Parent
or the Surviving Corporation (other than certain provisions thereof which
are superseded by the provisions hereof), each of Mr. Klaus and Mr. Kelly,
respectively, agrees to defer acceleration of a portion of his Company
Options that would otherwise be accelerated upon a "change of control" so
that such options continue to vest during the term of their respective
employment and consulting agreements in accordance with their terms.
V. 1995 BONUS: Parent agrees that, immediately prior to the Effective Time,
the Company shall be entitled to pay 75% of the amounts which have (if the
Effective Time is after September 30, 1995) or would have (if the Effective
Time is before September 30, 1995) been earned under any bonus plans for the
Covered Employees, including any applicable accelerators as applied to such
nine month period PROVIDED, THAT, the Company will give Parent prior notice
of the amount thereof.
VI. GENERAL: Parent and the Company agree that (i) they shall, subject to
Section 2(e) of Mr. Klaus' employment agreement and Section (e) of Mr.
Kelly's employment agreement, modify the arrangements specified in I through
V above to the extent that the implementation of any such arrangements would
cause the breach of Section 5.12 of the Merger Agreement or impose an
unanticipated cost or tax on Parent, the Company or the relevant individuals
and (ii) any such modification shall as closely as possible replicate the
economic effects of I through V above consistent with compliance with
Section 5.12 of the Merger Agreement and amelioration of such costs.
A-2
EXHIBIT B
FORM OF AFFILIATE AGREEMENT
AFFILIATE AGREEMENT
, 1995
Adobe Systems Incorporated
1585 Charleston Road
Mountain View, California 94043
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger and
Reorganization, dated as of June 22, 1995 (the "MERGER AGREEMENT"; capitalized
terms used herein and not otherwise defined are used herein as defined in the
Merger Agreement), among Adobe Systems Incorporated, a California corporation
("CHIP"), J Acquisition Corporation, a California corporation and wholly owned
subsidiary of Parent ("SUB"), and Frame Technology Corporation, a California
corporation (the "COMPANY"), Parent will acquire the Company through a merger of
Sub with and into the Company (the "MERGER"). Subject to the terms and
conditions of the Merger Agreement, at the Effective Time, outstanding shares of
the common stock, no par value (the "COMPANY COMMON STOCK"), of the Company will
be converted into the right to receive shares of the common stock, no par value
(the "PARENT COMMON STOCK"), of Parent, on the basis described in the Merger
Agreement.
The undersigned has been advised that as of the date hereof it may be deemed
to be an "affiliate" of the Company, as the term "affiliate" is (i) defined for
the purposes of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations
(the "RULES AND REGULATIONS") of the Securities and Exchange Commission (the
"COMMISSION") under the Securities Act of 1933, as amended (the "ACT"), and/or
(ii) used in and for purposes of Accounting Series Releases 130 and 135, as
amended, and Staff Accounting Bulletins 65 and 76, of the Commission.
The undersigned understands that the representations, warranties and
covenants set forth herein will be relied upon by Parent, shareholders of
Parent, the Company, other shareholders of the Company and their respective
counsel and accounting firms.
The undersigned represents and warrants to and agrees with Parent that:
1. The undersigned has full power to execute and deliver this Agreement
and to make the representations and warranties herein and to perform its
obligations hereunder.
2. The undersigned has carefully read this Agreement and the Merger
Agreement and, to the extent the undersigned felt necessary, discussed its
requirements and other applicable limitations upon its ability to sell,
transfer or otherwise dispose of Parent Common Stock with its counsel or
counsel for the Company.
3. The undersigned shall not make any sale, transfer or other
disposition of Parent Common Stock in violation of the Act or the Rules and
Regulations.
4. The undersigned has been advised that the issuance of shares of
Parent Common Stock to the undersigned in connection with the Merger has
been or will be registered with the Commission under the Act on a
Registration Statement on Form S-4. However, the undersigned has also been
advised that, since, at the time the Merger was submitted for a vote of the
shareholders of the Company the undersigned may be deemed to have been an
affiliate of the Company and the distribution by the undersigned of any
Parent Common Stock has not been registered under the Act, the undersigned
may not sell, transfer or otherwise dispose of Parent Common Stock issued to
the undersigned in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale, transfer or
other disposition is made in conformity with the requirements of Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to Parent, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
B-1
5. Parent is under no obligation to register the sale, transfer or
other disposition of Parent Common Stock by the undersigned or on its behalf
under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
6. Stop transfer instructions will be given to Parent's transfer agents
with respect to the Parent Common Stock and that there will be placed on the
certificates for the Parent Common Stock issued to the undersigned, or any
substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
[ ], 1995, BETWEEN THE REGISTERED HOLDER HEREOF AND ADOBE
SYSTEMS INCORPORATED, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF ADOBE SYSTEMS INCORPORATED."
7. Unless the transfer of the undersigned of its Parent Common Stock
has been registered under the Act or is a sale made in conformity with the
provisions of Rule 145, Parent reserves the right to place the following
legend on the certificates issued any transferee of the undersigned:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE
HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
8. The legends set forth in paragraphs 6 and 7 above shall be removed
by delivery of substitute certificates without such legend if the
undersigned shall have delivered to Parent a copy of a letter from the staff
of the Commission, or an opinion of counsel in form and substance reasonably
satisfactory to Parent, to the effect that such legend is not required for
purposes of the Act.
9. The undersigned is the beneficial owner of (I.E., has sole or shared
voting or investment power with respect to) all the shares of Company Common
Stock and options to purchase shares of Company Common Stock indicated on
the last page of this Agreement (the "COMPANY SECURITIES"). Except for the
Company Securities, the undersigned does not beneficially own any shares of
Company Common Stock or any other equity securities of the Company or any
options, warrants or other rights to acquire any equity securities of the
Company.
10. Any other provision of this Agreement to the contrary
notwithstanding, the undersigned has not at any time since June 22, 1995 or
in contemplation of the Merger engaged, and will not after the Effective
Time and until such time as results covering at least 30 days of combined
operations of the Company and Parent have been published by Parent, in the
form of a quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-K, 10-Q or
8-K, or any other public filing or announcement which includes such combined
results of operations, engage, in any sale, exchange, transfer, pledge,
disposition of or grant of any option, the establishment of any "short" or
put-equivalent position with respect to or the entry into of any similar
transaction intended to reduce the risk of the undersigned's ownership of or
investment in, any of the following:
(a) any shares of Parent Common Stock which the undersigned may
acquire in connection with the Merger, or any securities which may be
paid as a dividend or otherwise distributed thereon or with respect
thereto or issued or delivered in exchange or substitution
B-2
therefore (all such shares and other securities being referred to herein,
collectively, as "RESTRICTED SECURITIES"), or any option, right or other
interest with respect to any Restricted Securities;
(b) any Company Securities; or
(c) any shares of Company Common Stock or any other equity securities
of the Company which the undersigned purchases or otherwise acquires
after the execution of this Agreement.
11. As promptly as practicable following the Merger, Parent shall
publish results covering at least 30 days of combined operations of the
Company and Parent in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the Commission
on Form 10-K 10-Q or 8-K, or any other public filing or announcement which
includes such combined results of operations; PROVIDED, HOWEVER, that Parent
shall be under no obligation to publish any such financial information other
than with respect to a fiscal quarter of Parent.
12. The undersigned currently intends to vote all Company Common Stock
held by the undersigned in favor or the Merger.
13. The undersigned will not exercised dissenters' rights in connection
with the Merger.
Number of shares of Company Common Stock
beneficially owned by the undersigned:
Number of shares of Company Common Stock subject to
options beneficially owned by the undersigned:
Very truly yours,
--------------------------------------
(print name of shareholder above)
By
-----------------------------------
Name:
Title:
(if applicable)
Accepted this [ ] day of
[ ], 1995, by
ADOBE SYSTEMS INCORPORATED
By
-----------------------------------
Name:
Title:
B-3